PIC confirms it owns 30% of new SAA consortium partner

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SAA went into business rescue in December last year following years of losses and repeated state bailouts.
SAA went into business rescue in December last year following years of losses and repeated state bailouts.
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  • The PIC has confirmed that it owns 30% of Harith General Partners, an investment group that's part of a consortium that will own a majority stake in SAA.
  • While still the head of corporate finance at the PIC, Tshepo Mahloele, spearheaded the creation of Harith - which was founded with PIC investments. He later left the PIC to run Harith.
  • The commission that investigated wrongdoing at the PIC found that Harith's conduct "was driven by financial reward to its employees and management" - and not by the investment returns it provided to civil servant pensions.

The Public Investment Corporation (PIC), which manages civil servant pensions, has confirmed that it owns 30% of Harith General Partners, an infrastructure investment group that is part of consortium which will now own the majority stake in South African Airways (SAA). 

Public Enterprises Minister Pravin Gordhan announced on Friday that the Takatso consortium of Harith General Partners and Global Aviation would have a 51% stake in SAA, with the state retaining 49%.

The PIC, which oversees over R2 trillion mostly from the Government Employees' Pension Fund (GEPF), said in a statement on Monday that it "owns 30% of Harith General Partners and some of the individuals involved in Takatso Consortium may previously have been associated with the PIC".

Harith Fund Managers was set up in 2006 to manage the Pan African Infrastructure Development Fund (PAIDF), which eventually raised $630 million, including funding from the PIC. Harith General Partners was established a few years later for the Pan African Infrastructure Development Fund 2, which raised $435 million.

Tshepo Mahloele, then PIC head of corporate finance, spearheaded the creation of Harith. He subsequently resigned from the PIC but continued to run the fund.

"Nonetheless, Harith General Partners and the Takatso Consortium did not involve the PIC in any way in this acquisition," the PIC said of its 30% stake in Harith. 

"Whilst it is a fact that the PIC has shares in Harith General Partners, it must be stated that the PIC is not a member of Takatso consortium, which we understand is a special vehicle established by Harith General Partners and Global Airways."

Harith, and the relationship of its executives with the PIC, has been the subject of intense scrutiny at the Mpati inquiry. The inquiry recommended in its report that the PIC and the GEPF should together appoint an independent investigator into Harith "as soon as possible" – with a mandate to examine the PAIDF. It found that Harith's conduct "was driven by financial reward to its employees and management, and not by returns to the GEPF".

It also found that Harith charged  "significantly high fees", which came to more than 8% per year. Also, if the PIC terminated its contract with Harith Fund Managers, it had to pay 12 months' management fee plus 13% of the market value of all investments. 

"It is the commission's view that there is no question that the approach taken provided easy access to PIC funds, influence and including an enhanced ability to secure additional investment, including from the GEPF," the Mpati inquiry found. 

Mahloele told Fin24 that the Mpati report made "wild references" about Harith’s fees – but they were "standard in the industry".

"There was nothing untoward … We appointed an independent body of lawyers to do a check on Harith and see if anything untoward was done regarding our fees etc. Also, a forensic investigation by an accounting firm confirmed the same. All was above board," he said.

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