UDM: Treasury must explain where government pension billions went

United Democratic Movement (UDM) leader General Bantu Holomisa has appealed to Finance Minister Nhlanhla Nene for information on an allegedly improper relationship between the Public Investment Corporation (PIC) and companies linked to its former employees involving more than R8bn of state employees' retirement funds.

The request comes as one of the companies, Lebashe Investment Managers, threatened late last week to take the UDM and Holomisa to court based on a letter the UDM wrote to President Cyril Ramaphosa.

The PIC manages nearly R2trn in assets, more than 98% of which belongs to the government or its employees. The bulk of the money it invests is on behalf of the Government Employees Pension Fund (GEPF).

In the letter, the UDM raises questions on Lebashe’s involvement with the PIC, and its relationship with Harith Fund Managers and the Pan-African Infrastructure Development Fund (PAIDF). The letter claims more than R8bn of the GEPF's money, meant to fund the retirement of civil servants, have been invested in the PAIDF.

The PIC's Harith

Harith was established as a wholly owned subsidiary of the PIC on 1 September 2007, according to the PIC’s 2009 Annual Report. It was mainly entrusted with managing the assets of the PAIDF on behalf of the PIC.

Tshepo Mahloele was seconded from the PIC to his new position as the chief executive of Harith. Mahloele was also the chief executive of the PAIDF. At the time, Harith was managing about US$625 million on behalf of the PIC through the PAIDF and this has now escalated to more than US$1 billion.

Mahloele is also a director of Lebashe, along with former deputy finance minister Jabu Moleketi.

The UDM has questioned this relationship between Harith and Lebashe.

"There is clear proof that Lebashe and Harith share the exact same office space i.e. on http://www.harith.co.za it is listed as 1 Chislehurston, 34 Impala Road, Chislehurston, Sandton. On Lebashe’s press releases and correspondence with us the address is listed as the same. Why would this be the case? How much is Lebashe paying to Harith for renting office space. How many persons are employed at Lebashe and how many at Harith, using the same office space?

"Did the Mr Mahloele/Harith get permission from Harith’s investors to bring Lebashe to Harith’s premises? In particular the GEPF?"

In May 2009, the PIC sold off 54% of its stake in Harith. To date this has been reduced to a 30% shareholding, another question raised by the UDM's letter.

"We know the PIC owns 30% of Harith, but it gives rise to other questions i.e. who sold the remaining 70% of the shares to whom, and for how much?"

The UDM also questions the arrangement between Mahloele, Harith and Lebashe. Moleketi is the chairperson of Harith and a former PIC staffer.

"We ask these questions to find clarity on the matters raised, because PAIDF and Harith were established by government. The whole situation is so opaque, and we ask that you lay bare the signed agreements. In our understanding there cannot be a situation where a board chairperson and her/his CEO have an interest in a private company. The PIC seconded Mr Mahloele to run PAIDF/Harith. Later, Mr Moleketi, as former finance minister and PIC board chairman ended up partnering with Mahloele to run Harith."

Off to court

With the legal confrontation between Lebashe and the UDM escalating, the UDM has requested Nene to step in - or warned he will be dragged into the fight anyway. 

"For us to understand what is going on, and for you to find the answers you will be looking for, we suggest that you instruct the PIC to open their investment books. As we are marching to court - as threatened by Lebashe and Harith - best you be warned that you, as finance minister, will be compelled by the court to do so in any event."

Prior to joining the finance ministry, Nene served as chairman of the PIC from 2008 - 2014.

Earlier this week Lebashe approached the North Gauteng High Court on an urgent basis. It has denied the claims of wrongdoing by the UDM, and maintains that its dealings with the PIC are above board.

"Legal counsel is advising the parties in regard to various legal proceedings including laying criminal charges of crimen injuria against the UDM and Mr Holomisa personally and issuing them with a summons for defamation and damages as a result of the reputational and economic harm that the letter has caused."

"We remain committed to our commercial relationships with the PIC, Africa’s largest asset manager, particularly given that there is nothing untoward in regard to these relationships. Our transactions with the PIC are transparent, above board and subjected to the normal vigorous and robust investment processes regulated by the PIC."

National Treasury has confirmed that the letter has been received.

"The Ministry of Finance has received General Holomisa’s letter and is considering its contents."

The GEPF confirmed that it had invested a total of US$600 million in the two PAIDF funds managed by Harith.

"The GEPF committed USD 250 million to the Pan African Infrastructure Development Fund (PAIDF) in 2009. PAIDF raised USD 630 million from ten investors, including the GEPF.

"PAIDF II was a follow-on investment to PAIDF, to which the GEPF committed USD 350 million in 2015. PAIDF II is a 12-year USD denominated fund which also finances infrastructure projects in Africa.

"The GEPF has not been privy to the correspondence between the UDM and the Minister of Finance."

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