Allegations of ‘cartel’ looting the PIC nonsensical, inquiry hears

A former Public Investment Corporation (PIC) executive who has been accused of being part of a cartel with unfettered access to the PIC’s money has slammed the allegations as nonsensical.

Tshepo Mahloele, chief executive of investment company Harith General Managers, and  former head of corporate finance and the Isibaya Fund at the PIC, told the PIC commission that the allegations of impropriety made against the company by United Democratic Movement (UDM) leader Bantu Holomisa are simply untrue.

The PIC is a government-run fund which manages pensions and other state assets of over R2 trillion, mainly on behalf of public sector employees.  

Harith General Managers was established in 2006 with the sole purpose of managing the Pan-African Infrastructure Development Fund (PAIDF) which was initiated by the PIC in response to former president Thabo Mbeki’s vision of an African Renaissance.

In March 2006, Mahloele resigned from the PIC in order to establish the PAIDF which he says was independent of government control.

Large infrastructure fund

The purpose of the fund was to invest in large infrastructure development projects on the continent. The PIC helped set up the fund with seed capital of R17 million and, by  September 2007, Harith Fund Managers had managed to raise $625 million (R8.7 billion) in investments for the PAIDF.

Mahloele told the commission that $250 million of the total investment secured had come from a direct investment made by the Government Employee Pension Fund (GEPF) through its board of trustees. The rest of the money was raised through private investors such as Old Mutual and Absa.

The deputy finance minister and PIC chair at the time, Jabu Moleketi, was appointed to chair Harith’s board as the PIC had received a 46% stake in the company. When the fund reached closure a second company, Harith General Partners, was established in 2013 to manage a new fund called PAIDF2 with similar objectives. The PIC held a 30% shareholding in the new fund. 

Holomisa previously asked the commission to investigate possible corruption around the fund, as he believed there was a possible conflict of interest saying it appeared that the funds were created as a front to loot money from the PIC.

Read: Lebashe and Harith respond to PIC corruption allegations by UDM

Mahloele told the commission that the PIC’s exposure to Harith was limited to the seed funding which was secured through proper channels. He said the state asset manager greatly benefited from its involvement in Harith “without any risk at all”.

He explained that Harith had repaid the PIC’s facilitation loan with interest and, in addition, the PIC had received total benefits of close to R96 million as a result of its 46% shareholding in the investment company.  

Mahloele said this proved Holomisa’s “conjectures and suspicions” that Harith was involved in corruption and placing the funds of pension workers at risk for the “benefit of an elite cartel within the management team … are entirely nonsensical”.

“Far from our ‘fleecing’ or ‘looting’ the PIC, as Mr Holomisa has irrationally alleged, the PIC has benefitted and continues to benefit by way of its large equity stake in Harith Fund Managers,” he said.

Harith’s favourable returns

Holomisa also questioned the nature and performance of the investments made by Harith.

In his statement to the commission Mahloele provided it with a list of investments and projects that the Harith funds had invested in and what impact they had made.

Mahloele said Harith worked on large scale projects with multiple international financers and government and regulatory stakeholders which meant that a considerable amount of time and money was spent ensuring that their operations were legally compliant and their performance frequently monitored.

“The cavalier allegation by Mr Holomisa that these projects are under performing lacks any factual basis,” Mahloele said.

He added that the projects not only had a marked impact on the continent but are also geared to deliver “favourable returns” to investors.