Too much murk in dealings by the PIC

First published in City Press (May 27, 2018)

Are Cosatu-affiliated trade union investment companies, under the umbrella of Cosatu Investments, in line to be helped by Pubic Investment Corporation (PIC) to a R15 billion debt funded share deal? Or is this merely wishful thinking on the part of the unions? Or perhaps an elaborate hoax?

These are all valid questions in the light of documents I have seen that relate to the formation of a Rothe Consortium set up to purchase Vodacom shares. Internet searches unearthed no reference to such a consortium, but a 16-slide Power point presentation, apparently produced by Cosatu Investments, does exist. I have a copy.

According to the presentation, the debt funded deal “has been pre-arranged between the PIC, which manages the Government Employee Pension Fund (GEPF) of nearly R2 trillion and Vodacom”. Details of a possible “BEE [Black Ecponomic Empowerment] discount” would be agreed “by the incumbent seller and the incoming consortium”.

The Johannesburg Securities Exchange and other authorities are likely to take a rather jaundiced view if such collusion is shown to exist. And they would regard the claim that the transaction is “in line with the strategic projects that Vodacom wants to implement with a specific BEE shareholder profile” in much the same light.

While neither the PIC nor Cosatu responded to emailed requests for clarification, Vodacom replied promptly, noting that share dealings between buyers and sellers did not involve Vodacom. The company had also not heard of the Rothe Consortium.

According to the Rothe slides, the consortium comprises five partners, headed by Cosatu Investments with a 60% share. Private company, Phatsima Afrika Holdings, has 26% followed by union based Workers Health with 20%, Architects of Democracy, 10% with the remaining 4% going to the Rothe Youth Development Trust.

Workers Health, controlled through the Tshedza Trust, is the majority owned investment vehicle for the National Education Health and Allied Workers’ Union. Like Cosatu Investments, also controlled via a trust, it lists a variety of investments ranging from financial services to infrastructure and housing.

Significantly, given allegations about too cosy a relationship between Cosatu unions and government, Workers Health admits on the slides to employing “conventional investment principles but align (sic) to government policy and directive”.

Phatsima Afrika Holding, first registered as a private company in 2002, seems to have begun a deregistering process which was stopped in 2011. It is described as a “100% black owned and managed investment holding company” that is “Driven by professionals with diverse skill sets”.

Although Architects of Democracy is listed in the Rothe slides as (pty) ltd, it does not seem to be a registered company. According to the slides, Architects is the “Investment vehicle for former pre-independence presidents of the ANC (from Pres Dube to Pres Tambo)”. Beneficiaries are “foundations and family trusts of these stalwarts…established to restore and uphold the legacy of these leaders”.

The Rothe Youth Development Trust is described as a non-profit “trust for public benefit” aimed at “Black young people up to age 25”. Income would be channelled into education and training “aligned with the country’s NDP (National Development Plan)”.

The power point presentation seems to have been prepared to show the advantages of such a consortium linking a Cosatu based “labour investment company” to the GEPF and the PIC. Word of this should increase fears already expressed by public sector workers about their pension money.

Clearly, some explanation is necessary. As the PSA (Public Servants Association) has already noted, there is too much murk surrounding dealings by the PIC. The union has now given the PIC until month end to come clean or face court action.