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The Public Investment Corporation (PIC) is trying to block a bid by President Jacob Zuma’s friends, the Guptas, to take a dominant stake in Independent Newspapers.
The deal would make the Guptas’ Oakbay Investments the largest shareholder of one of South Africa’s most important newspaper companies. Independent publishes leading regional newspapers like the Cape Times and The Star.
But the Guptas have accused PIC chief executive Dan Matjila of being “biased and ill-advised”.
This seems to indicate a hardening of attitudes around the Gupta family, who have been publicly accused of using their proximity to President Zuma to “capture” the state.
The finance minister appoints the PIC board in consultation with Cabinet. The PIC’s chair is Deputy Finance Minister Mcebisi Jonas. The ministry is widely considered to be the scene of a tense standoff between Zuma and Finance Minister Pravin Gordhan, though the presidency denies this.
The details of the Independent dispute are before the North Gauteng High Court in Pretoria, where the Guptas are suing to wrest control of the group from its chairman, Iqbal Survé.
Survé led a consortium that bought Independent Newspapers from its Irish owners for R2 billion in 2012. Supported with loans from the PIC, Survé’s consortium took 55%. A consortium of Chinese state-owned companies bought 20%, and the PIC bought the remaining 25%.
But it was never disclosed that Survé granted Oakbay an option to acquire half of his consortium, amounting to 27.5% of Independent itself. This would be bigger even than Survé’s stake, as he shares his half with others. This is revealed in court documents.
The sheer size of the once-secret Gupta stake indicates they held substantial power when they negotiated the pact with Survé in November 2012.
Asked about this, Survé’s lawyer, Adam Ismail, said there were two reasons for including the Guptas. The first was that experienced newspapermen Nazeem Howa and Moegsien Williams, who were the key players at The New Age media group, would bring a “value add” at management level.
The second was the Guptas would help Survé to finance the Independent buyout. They never did, he said.
According to documents before the court: “Oakbay duly exercised the option in writing on August 23 2013.”
But Survé kicked back, telling Bloomberg the following month that he had “rebuffed an approach by the Gupta family”.
From there, amaBhungane understands, the Gupta-Survé dispute was argued in a secret arbitration, which Survé lost. But before the Guptas could take up their stake, there remained some legal hurdles.
One was a dispute over how much the Guptas should pay. This decision was handed to an independent expert, who handed down a price tag of R729 million. But the Guptas balked at this and Oakbay sued.
The case is being opposed by Survé, his company Sekunjalo Investment Holdings and Sekunjalo Independent Media. The latter is the consortium that holds Survé’s stake.
The case was heard on Friday and the judge ordered that a late supplementary affidavit by Survé was admissible. The court gave Oakbay time to respond.
A second hurdle is that the Gupta stake is subject to the approval of the competition authorities and the PIC, according to contracts between Oakbay, Sekunjalo and the PIC.
In February, Survé wrote to the PIC’s Matjila to ask whether the corporation would approve of the Gupta stake. Matjila responded in a March 23 letter in which he raised the possibility of “anticompetitive behaviour”, presumably because the Guptas already have extensive media holdings in The New Age and their TV station ANN7.
He also said the PIC had to consider “the best interest of our investment both as funder and equity holder” and “the need to safeguard our expected returns as well as the association we have taken in co-investing with yourselves [Sekunjalo] and Interacom Holdings Limited [the Chinese consortium]”.
He concluded: “Having regard to the above circumstances and the discretion we are required to exercise herein, we do not believe that it would be in the best interest of our investment, the borrower company [Sekunjalo Independent Media], as well as the ultimate asset holding company [Independent] to consider your request favourably.”
In other words, a resounding no to the Guptas.
Survé’s legal team sent this to Oakbay’s lawyer, Gert van der Merwe, asking Oakbay to drop their court dispute over the price tag.
Van der Merwe wrote back, accusing Survé of trying to “derail” the agreement.
Van der Merwe said: “The only actual consequence of the letter received from the PIC’s Dr Matjila is an indication that he is actually biased, ill-advised and not authorised to express an opinion on the contractual rights our client will be entitled to.”
The PIC acknowledged receipt of questions, but did not respond in time for this article.
Van der Merwe and Oakbay chief executive Nazeem Howa could not be reached for comment.
The amaBhungane Centre for Investigative Journalism, an independent non-profit, produced this story. Like it? Be an amaB supporter, sign up forits newsletteror visit amaBhungane.co.za.
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