The Public Investment Corporation’s nearly R2bn investment in Independent News and Media was considered high risk, with concerns that it had "politically exposed groupings", a witness told the inquiry probing the affairs of Africa's largest asset manager on Monday.
In 2012, a consortium led by businessman Iqbal Survé approached the PIC for funding to buy the country’s largest newspaper group from its Irish former owners.
High risk 'evident'
Benedict Mongalo, who worked as a senior credit risk analyst during the time of the transaction, told the inquiry there were concerns that print media was a "sunset industry" with declining circulation, and that Survé did not have prior experience in running a print - or any - media company.
There were also concerns that Independent Media was "from time to time involved in litigation", with investigations by competition authorities for anti-competitive practices, which carried a possibility of hefty penalties and could have detrimental effect on profits.
"It is evident in the risks and potential mitigants raised in the risk report that the transaction was considered high risk," Mongalo said.
In December, the Government Employees Pension Fund (GEPF) said it had an impairment of R1.06bn in Independent News and Media SA loans, after the company failed to make an interest payment at the end of August.
According to Mongalo, the GEPF investment committee had indicated its discomfort about the Independent Media transaction to the PIC; however, it was apparent that "the PIC had a fully discretionary mandate" to make or not make the transaction.
Following a series of risk assessments, former PIC board chair Nhlanhla Nene had invited the executive directors to vote on the transaction.
Mongalo said "all members of the board approved the transaction" except for one person.
PIC's investment in Independent Media saw it holding a 25% stake in the company, which produces major newspaper titles such as The Star‚ Pretoria News and the Cape Times.