EXCLUSIVE: PwC findings behind the PIC’s Lanseria fight
A confidential draft PwC forensic report obtained by the Mail & Guardian has raised questions about the calculation used to settle the long-running Lanseria Airport dispute, findings that appear to lie behind the Public Investment Corporation’s decision to continue pursuing the matter despite legal advice that the prospects of successfully challenging the arbitration award were limited.
The report identifies what PwC describes as multiple calculation and application issues relating to the debt balance used in the settlement and helps explain why PIC chairperson David Masondo has now referred aspects of the transaction to the Special Investigating Unit (SIU).
The report is marked draft and states that its contents remain subject to amendment or withdrawal pending finalisation.
The Lanseria dispute has become one of the most contentious matters to confront Africa’s largest asset manager in recent years, triggering a whistleblower complaint against PIC chief executive Patrick Dlamini, a R1 billion legal threat from businessman Kagiso Matjila, tensions within the PIC board and intervention by Finance Minister Enoch Godongwana.
The draft PwC report, dated 18 May and marked confidential, examined the PIC’s decision to perfect its security over Acapulco Trade & Invest 164’s shareholding in Lanseria Holdings, the valuation process that followed, the arbitration proceedings and the subsequent settlement.
At the centre of the report is the debt balance used to determine the amount ultimately payable following the arbitration award.
According to PwC, the arbitration award relied on an outstanding debt balance of approximately R629.3 million.
PwC found that the balance was misstated because of what it described as multiple calculation and application issues.
“We compared the amortisation schedules prepared by the Portfolio Management and Valuations team and identified that the loan balance of ZAR629 385 273.81 was misstated due to multiple calculation and application issues,” the report states.
According to PwC, these included the application of interest rates, the treatment of default interest, the timing of interest accrual and the failure to incorporate contractual provisions relating to the required internal rate of return.
The report found that contractual provisions relating to the internal rate of return were not factored into the debt balance used during the process.
The origins of the matter lie in a shareholder arrangement involving Lanseria Airport and Acapulco Trade & Invest 164, a company controlled by Matjila.
After Acapulco defaulted on a PIC loan linked to its 25% shareholding in Lanseria Holdings, the PIC exercised its security rights and ultimately acquired the shares.
Disputes over valuation and the process followed eventually resulted in arbitration.
Matjila has consistently maintained that the arbitration settled the matter.
“The PIC lost on every point of substance and paid,” he said recently.
“Buyer’s remorse is not a ground of appeal.”
The PIC has disputed aspects of that characterisation and has maintained that the subsequent forensic review was intended to determine whether reasonable steps had been taken to protect pension fund investments and the interests of the Government Employees Pension Fund (GEPF).
The PwC report records that the PIC sought legal advice after the arbitration award and was advised that the prospects of successfully challenging it were limited.
The matter was subsequently settled.
But the report shows that the forensic investigation extended beyond the arbitration award itself.
PwC examined the calculations underpinning the settlement, governance approvals, stakeholder reporting and the broader transaction history.
The report also identified discrepancies between certain information communicated externally and information contained in internal PIC records.
In one example, PwC found that a letter sent to the GEPF stated that a draft valuation prepared by BDO was regarded by both parties as fundamentally flawed.
PwC found that concerns regarding the valuation originated from Acapulco and that it did not identify evidence suggesting the PIC held the same position.
The report further identified differences between statements made regarding the perfection process and information reflected in internal PIC documentation.
At the same time, the report appears to support the PIC on several aspects of the transaction.
PwC found that the PIC acted in accordance with the relevant legal agreements when it declared Acapulco in default and exercised its rights under the pledge and cession arrangements.
It also found that approvals obtained during the process generally aligned with applicable governance frameworks.
The report states that PwC did not identify open-source evidence of undisclosed conflicts of interest involving the valuers or the arbitration panel.
The significance of the report became clearer on Friday when Masondo announced that matters arising from the Acapulco transaction would be referred to the SIU following legal consideration of the PwC findings.
In a statement, Masondo said previous legal opinions had pointed to limited prospects of success and potential litigation risks, but that the PwC investigation had produced new findings warranting further legal consideration.
While the PIC has not publicly detailed the basis of the referral, the draft report provides the clearest indication yet of the issues that appear to have persuaded the institution to continue scrutinising a dispute many believed had ended with arbitration.
The referral means the Lanseria matter has entered a new phase.
What began as a commercial dispute over an airport investment is now the subject of a forensic investigation, a whistleblower process, a looming legal battle and scrutiny by one of South Africa’s most powerful investigative bodies.
The arbitration award may have resolved the dispute between the parties.
The draft PwC report suggests the PIC believes there are still questions about how the matter was ultimately settled.
Those questions are now headed to the SIU.
