PIC board rebukes CEO over Ayo deal
Public Investment Corporation (PIC) CEO Abel Sithole was taken to task by the board of Africa’s largest asset manager for keeping it in the dark over the deal to settle the legal dispute with Ayo Technology Solutions.
Led by deputy finance minister David Masondo, the board took a hard line against the fund manager’s executives for striking a settlement deal with Ayo without informing the board.
The PIC held an ordinary board meeting on Monday — the first since the Ayo settlement was announced in March — where it reprimanded management. Sithole was given a formal warning over his conduct.
In a statement issued on Thursday, the board expressed concern that the management team had neglected “to timeously inform the board of its intention to settle in line with the PIC governance processes”.
“The PIC board, in executing its fiduciary duties, remains responsible for sound corporate governance, promoting and safeguarding effective management towards the long-term success of the PIC. Good governance, appropriate transparency, accountability and integrity should be principles embedded in every decision the PIC makes. This is more important in the light of the findings of the Mpati commission chaired by the former president of the Supreme Court of Appeal,” Masondo said in the statement.
However, the board found Sithole and his team had not acted in bad faith.
“The company’s delegation of authority affords management the discretion to settle disputes with defaulting investee companies. In doing so, the PIC’s management has a duty of care to
protect the company’s integrity and reduce the risk of reputational damage,” the PIC said.
“This includes the responsibility of management to timeously inform the board of intended settlements. While deeply concerned about management’s handling of the governance processes, the board believes that the Ayo settlement, an order of the court, is justified as a good commercial decision. This settlement seeks to recover money from a questionable investment, salvaging value for its client and beneficiaries, while ensuring that Ayo Technologies remains a going concern.”
Earlier in April, Ayo confirmed some of the terms and conditions of its settlement deal with the PIC in terms of which it will repurchase R619m in Government Employees Pension Fund (GEPF) shares.
The terms of the initially secretive deal were first reported by the Daily Maverick in March. Ayo said it would repurchase 17,202,756 ordinary shares in issue from the GEPF for R619m. It said subsequent to the initial repurchase the GEPF would retain a minimum stake of 25.01% in the company.
“The GEPF has the option, after a period of three years from the date of the initial repurchase, to sell up to a further 5% of the Ayo shares that it holds at the higher of R20 per Ayo share and the prevailing 90-day volume weighted average price of Ayo shares traded on the JSE, subject to JSE regulatory approvals and the solvency and liquidity of the company,” Ayo said.
Another condition is that the GEPF will, for every 10% of the shares it holds in Ayo, be entitled to nominate one director to the board and will have to approve of the appointment of the chair.
Ayo said in a statement it was happy that the PIC ratified the settlement agreement.
“Ayo further supports the reinforcement of good governance processes at the PIC and whilst acknowledging that the PIC’s management has the delegation of authority to negotiate settlements, such as that concluded with Ayo, Ayo was not in default of any agreement of any kind in relation to the PIC’s original investment,” it said.
Business Day reported three weeks ago that a legal opinion sought by the PIC advised it to settle its long-standing dispute with Ayo. It said the prospects were grim of recouping the R4.3bn investment made via the PIC’s participation in Ayo’s initial public offering through a private placement in December 2017, which valued the firm at R14.8bn.
Ayo is now valued at R1.5bn on the JSE.
Attorneys told the PIC several obstacles hampered the chances of success in a lawsuit it brought against Ayo, which is indirectly controlled by Independent Media owner Iqbal Survé.
The PIC alleged that the funds in Ayo were used to settle the outstanding liabilities of certain of Ayo’s related companies.
The PIC and Ayo surprised many observers in March when they announced they had abandoned litigation and reached an out-of-court settlement, the details of which they said would not be made public.
The settlement was made an order of the high court.
Ayo on Tuesday appointed Henry Fourie as interim independent nonexecutive chair after the death of Wallace Mgoqi.