The investment of about $ 2 billion from the Public Investment Corporation in Independent News and Media was considered to be high risk, with concerns that it would have "politically exposed clusters," said a witness investigating the affairs of Africa's largest fund manager on Monday -market.
In 2012, a consortium led by businessman Iqbal Survé approached the PIC for financing the purchase of the country's largest newspaper group from its former Irish owners.
High risk "evident"
Benedict Mongalo, who worked as a senior credit risk analyst for the duration of the deal, said there were worries that the print media would be an "evening industry" with declining circulation and that Survé had no prior print experience. or any media company.
There were also concerns that Independent Media was "from time to time involved in litigation," with investigations by competition authorities for anticompetitive practices that entailed the possibility of heavy fines and could have a detrimental effect on profits.
"It is evident from the risks and potential mitigators raised in the risk report that the transaction was considered to be high risk," said Mongalo.
In December, the Government Employees' Pension Fund (GEPF) reported a reduction of R $ 1.06 billion in loans from Independent News and Media SA, after the company did not pay interest on end of August.
According to Mongalo, the GEPF investment committee indicated its discomfort with the Independent Media transaction with the PIC; however, it became apparent that "the PIC had a totally discretionary mandate" to make the transaction or not.
After a series of risk assessments, former PIC chairman Nhlanhla Nene had invited the CEOs to vote on the deal.
Mongalo said that "all board members approved the transaction" except for one person.
PIC's investment in Independent Media led it to hold 25 percent of the company, which produces major newspaper titles like The Star, Pretoria News and Cape Times.