Tag: assets

By Mikael Holter for Bloomberg

Norway plans to draw a record 382-billion kroner (R685-billion) from its wealth fund, forcing the world’s biggest sovereign investor to embark on an historic asset sale to generate cash.

The unprecedented withdrawal, revealed in Norway’s revised budget for 2020, is more than four times the previous record set in 2016. The development exposes the scale of the economic damage done by the twin crises of Covid-19 and a collapse in global oil markets, with western Europe’s biggest crude exporter now facing its worst economic slump since World War II.

For the first time, Norway’s government is set to withdraw considerably more than the $1 trillion fund generates in cash flow from dividends and interest payments. That income is assumed in the budget to be 258 billion kroner this year, meaning asset sales could reach 124 billion kroner, or around R222 billion.

“It’s obviously an historic event,” SEB Chief Strategist Erica Dalsto said. “But we’re also in a crisis that lacks historical parallels. This illustrates the double-whammy that’s hit the Norwegian economy, with repercussions from both containment measures and the oil-price collapse.”

Bond sales

With asset liquidation now an inevitability, the fund is likely to focus sales on its bond portfolio. That’s because it needs to increase its holding of stocks after the equity portfolio fell below a required 70% target of the total portfolio.

Norway’s government uses its oil wealth to plug budget deficits every year. Until 2016, the so-called structural oil-corrected deficit was covered by the state’s income from petroleum, namely taxes, stakes in offshore fields and dividends from Equinor ASA. As long as the government was generating a surplus, it could deposit money into the fund. In 2016 and 2017, deposits were replaced by withdrawals, as petroleum revenue dwindled due to a slump in prices. But the fund was still able to cover that easily with its cash flow.

In 2020, everything changed. The government now expects to spend a record 420 billion kroner of oil money on crisis packages to prop up its economy, with the collapse in petroleum revenue compounding the shock. The government predicts its net cash flow from petroleum activities will drop by 62% to 98 billion kroner, the lowest since 1999.

Norway has a self-imposed fiscal rule stating it should use no more than 3% of the fund’s value each year to plug budget holes. But it’s allowed to stray from that limit to help the economy during downturns. At 4.2% this year, spending will exceed the cap for the first time since the financial crisis in 2009.

By Warren Thompson for Business Day 

The South African Reserve Bank painted a grim picture on Monday that suggests as much as 75% of VBS Mutual Bank’s assets may have been stolen by its executives and directors.

“It’s a travesty that the failure of management put so many depositors at risk,” said Bank governor Lesetja Kganyago, at a media conference on the curatorship of VBS.

“Institutions such as banks rely on the governance processes, but when it’s the people responsible for the bank that are the ones perpetrating the crime, no amount of regulation can prevent that,” he said.

VBS, which was formed as a building society in the former Venda homeland, came to national prominence in 2016 when it gave former president Jacob Zuma a R7.8m loan after he was ordered to repay the state for upgrades made to his Nkandla home.

The bank’s failure may yet have grave consequences for municipalities in some of the poorest parts of the country, which stand to lose almost all of the R1.6bn they deposited with VBS, increasing the risk of budget shortfalls and violent protests that could result from a lack of service delivery.

Curator Anoosh Rooplal’s timing of the action he instituted on Friday to recover more than R1.5bn from the bank’s largest shareholder, Vele Investments, as well as from the bank’s executives and directors, was done to prevent further “dissipation of assets”.

But the amount of money stolen relative to the bank’s total assets is harder to establish, partly because the bank deliberately misled the regulator and also due to problems with the quality of its audit, which led the bank to withdraw its 2017 financial results.

Rooplal did not rule out seeking damages from the bank’s external auditor, KPMG, and the bank’s internal auditor, PwC, when the forensic report is completed towards the end of August.

According to the bank’s last available annual financial statements to end-March 2016, the bank had total assets of just more than R1bn.

By the end of January 2018, according to data provided by VBS to the Reserve Bank, the bank held total assets of R2bn, meaning it had doubled its balance sheet in the space of two years.

When asked what, if any, part of VBS’s loan book was performing, the curator said that the home loan mortgage book of about R400m was behaving consistent with credit extended under arms-length credit agreements.

The performance of the vehicle finance book was mixed, with the curator noting a deterioration in the credit quality in the months leading up to the intervention by the Reserve Bank.

Based on a balance sheet of about R2bn, and with the curator seeking to recover R1.5bn from the “perpetrators of the fraudulent scheme”, it seems possible that as much as 75% of the bank’s balance sheet has disappeared.

Retail deposits

But there was relief for small depositors, with the Reserve Bank announcing that it has obtained a guarantee of R330m from the Treasury should it fall short in recovering the money owed to them.

The Bank announced last week that retail deposits, which include individuals, burial societies and stokvels, would be guaranteed to a maximum of R100,000 per customer.

This means that 97% of all depositors at the bank will be refunded their entire savings.

The Asset Forfeiture Unit (AFU) is hoping to seize at least R50bn in 17 cases it is currently investigating related to state capture, acting head of operations advocate Knorx Molelle said on Tuesday.

In an interview with eNCA, Molelle said his team had already prioritised six matters which were before the courts, awaiting preservation orders.

“The matters are before the court and hopefully in the next couple of weeks we will have court orders,” he said.

The AFU has already taken action against two Gupta-linked companies – Trillian and McKinsey – hoping to recoup R1.6bn in assets related to consultancy work done by the companies for Eskom and Transnet.

Through their engagements, Trillian had indicated a willingness to co-operate, Molelle said.

“We are quite confident that, in the next day or two, we would have recovered the funds that have been taken away.”

Assets would only be attached as a last resort, he said.

“If there is willingness with those that we are dealing with that they are prepared to make good, the actual physical removal will be a last resort.

“An engagement that we having is absolutely critical. We are sitting and resting with the comfort that should that not bare any fruits, we also identified the relevant assets from which we can recover.”

Mollelle said the matter should be finalised within the next two days.

The AFU was investigating six other matters in which they were hoping to recoup money in the current financial year, he added.

‘We are working at our utmost best’

The money would be deposited into the Criminal Asset Recovery account and reinvested into fighting crime or to the state, where needed.

Acting head of the Specialised Commercial Crimes Unit, advocate Malini Govender, could not clearly say when individuals would be prosecuted in cases related to state capture, only commenting that it was a complicated matter that needed time for thorough investigation.

“We have only been dealing with this since March, so you cannot expect that in a month or two months we are going to take something to court. We are working at our utmost best and hardest in ensuring there is sufficient traction to get this matter to court,” she said.

The NPA – together with National Treasury, the Financial Intelligence Centre, the Companies and Intellectual Property Commission and the AFU – had an 18-man team dedicated to the “eight legged” state capture investigations, she added.

Seven of the investigation’s “legs” came from former Public Protector Thuli Madonsela’s report into state capture, while the eighth stemmed from a separate complaint.

Both officials denied any interference by the National Director of Public Prosecutions Shaun Abrahams.

“At no stage did he give any instruction that we do not proceed. In fact, at some stage he was… anxious at what he perceived to be a slow pace,” Molelle said.

14 Gupta-linked companies and individuals to have their assets frozen

At least 14 people and entities linked to the alleged corruption by Gupta-linked company Trillian and international consultancy firm McKinsey have been identified in a preservation order obtained by the Asset Forfeiture Unit.

The AFU is going after the big shots at Trillian and McKinsey. The people named in the court order include Eric Wood, who is Trillian CEO; Trillain CFO Tebogo Leballo; Prakash Parbhoo, a partner at McKinsey; and Jean Pierre Goerges Desvaux, who is a senior partner and managing partner at McKinsey.

The court order also identifies Trillian property in the high-end business precinct Melrose Arch in Johannesburg.

Others named in the order include: Veronica Magwentshu, Thabiso Legoete, Johannes Faure, Daniel Roy, Trillian Capital Partners, Trillian Finanical Advisory, Trillian Management Consulting, Trillian Properties, Trillian Securities, McKinsey and Company Africa, and “any other person who becomes known to the applicant as having an interest in the property.

By Lizeka Tandwa and Mahlatse Mahlase for News24

What can SA sell?

A Cabinet committee has changed its tune regarding a plan to sell its full R13-billion stake in Telkom to fund the recapitalisation of South African Airways (SAA) and the SA Post Office, it was revealed at the mini budget last Wednesday.

By selling state-owned assets, Treasury aims to avoid breaching its expenditure ceiling by R3.9bn. This comes after its decision to bail out SAA with a R10bn appropriation and R3.7bn recapitalisation of the Post Office.

The change in tune follows Cabinet’s realisation that the opportunity cost of losing its 39.75% stake in Telkom would be too great.

Now, Cabinet is looking at selling departmental assets and expects a cash windfall from its release of 2.6MHz broadband frequency.

Treasury director general Dondo Mogajane told media on Wednesday that they can’t simply ditch all their Telkom assets. “Telkom is a well-performing share, contributing R900m to R1bn in dividends every year,” he said. “It is important that we hold on to that as much as we can.”

Later, Finance Minister Malusi Gigaba revealed in his mini budget speech that government has “decided to dispose of a portion of government’s Telkom shares, with an option to buy them back at a later stage”.

Hang on to Telkom

In an interview with Fin24 following the speech, Mogajane said government owns many assets which are not being used, which can be sold to limit the amount of Telkom shares they sell.

“We are currently looking throughout the whole of government,” he said. “We are engaging with Public Works, we are engaging with the Department of Rural Development in terms of assets that we have.

“Once we have identified all of those, we will make recommendations to the (Cabinet) committee, which will make these hard decisions to sell based on the quantum of what’s needed.”

This Cabinet committee comprises Gigaba, Economic Development Minister Ebrahim Patel, Public Enterprises Minister Lynne Brown, Telecommunications Minister Siyabonga Cwele and Science and Technology Minister Naledi Pandor.

“Our ceiling, as the books indicate, will be breached by R3.9bn, so we will be looking for assets that will clear that by March 31, so that we remain within the ceiling, even for the current year,” said Mogajane.

“For the MTF (medium-term fiscus), we have confirmed that we will not breach the ceiling and that is the commitment we have made.”

Regarding the release of broadband frequency, Treasury said in its mini budget that “the bulk of additional spectrum is ready to be allocated immediately, without requiring the migration of existing spectrum users to digital television”.

“The delay in allocating telecommunications spectrum constrains growth across the economy. Lack of radio frequency limits the ability of businesses to deploy new technologies and contributes to the high cost of broadband,” it said.

“A well-designed spectrum auction can promote transformation and improve competition as new participants enter the market.

“Universal service conditions can improve access for low-income households. And a competitive auction can sharply reduce data costs.”

By Matthew le Cordeur for Fin24

Growing in the shadows of the once formidable Independent Media is an opaque company, seemingly controlled by Iqbal Survé, that claims it is defying the generally accepted narrative of a struggling media industry.

This company, Africa Media Group (AMG), has swooped out of nowhere to buy Independent Media’s profitable community newspaper division, and is also thought to have become the recent proud owner of other “business units” that were formerly part of the media company.
In early February, staff of the community newspapers were told at a meeting that the division had been sold to a company with a “long history” in media — AMG.
Apart from Sandy Naudé, previously head of Independent’s Cape division and now set to head the new entity, and group executive Howard Plaatjes, none of the staff at the meeting knew anything about the media company with the “long history”.
The parties who financed the R2bn acquisition of Independent appear unaware or unconcerned about the asset restructuring going on
No detail was provided about the price paid for the only newspaper division within Independent Media making any profit. In fact, the only thing staff were told was that AMG’s majority shareholder was Sekunjalo.
However, this would suggest a related-party deal, as the colourful businessman Survé is the executive chairman of both Independent Media and Sekunjalo.
Yet the apparent sale of the community newspaper division to one of Survé’s own companies has deeper implications for Independent Media’s other shareholders, which include government pensioners.
As far as anyone knows, Independent Media is 55% owned by the Sekunjalo Independent Media consortium (led by Survé’s Sekunjalo Investment Holdings), the Public Investment Corp (PIC) holds 25%, and a Chinese consortium 20%.
If Survé is stripping out the profitable arms of Independent, this would seem to be detrimental to the other shareholders, including the government employees, who remain saddled with the less-profitable parts of the business.
Sekunjalo also owns a company called African News Agency (ANA), which was launched in March 2015 after the demise of the SA Press Agency (Sapa).
Last week, Independent Media reported that ANA had raised US$80m from unidentified sources in China, the US and the Middle East.
ANA describes itself as “Africa’s first content-syndication service” and it claims, as of three months ago, that it has reached more than 1bn users. That it can make such outlandish claims is largely due to partners with which it has reciprocal arrangements, including China’s Xinhua News.
The dramatic (though unaudited) pace of its alleged growth seems all the more incredible, given a revolving door in key management positions. In recent times, ANA founding chairman Ladislas Agbesi has been replaced by Arthur Mutambara and founding CEO Chris Borain has been replaced by Grant Fredericks.
“With this [$80m] investment ANA has in total raised $165m since its inception,” Independent Media said last week. The media company then went on to report how Sekunjalo is now one of the most valuable media investors in the country.
“The total placing has resulted in 15% of the shareholding now held by international investors and 85% of shares belonging to the Sekunjalo Group.”
This puts the value of the Sekunjalo Group’s stake in ANA at just under $1bn — an immensely steep valuation. It is puzzling, given that Sapa had little value when it closed shop three years ago.
However, even though government pensions are on the line at Independent Media, there is little communication about what is going on at the company.
No detail has been publicly disclosed about the price paid for Independent’s community newspapers, and Naudé did not respond to requests for comment.
The value of the Sekunjalo Group’s stake in ANA is puzzling, given that Sapa had little value when it closed shop three years ago
At the same time, reports have emerged that Independent Media’s 50% share of Allied Publishing (a joint venture with Times Media, which owns this publication) has also been stripped out of Independent Media and is now part of Sekunjalo.
Allied distributes newspapers and magazines for both media companies.
Industry sources told the Financial Mail that pivotal functions within Independent — such as editorial, subediting and IT — have been organised into self-contained business units.
These business units are now charging Independent’s newspaper titles for those services. However, it is unclear whether the business units are still part of Independent or have also been stripped out and are now part of the Sekunjalo Group.
All of the restructuring means it’s now impossible to know what assets are left in Independent Media, which was valued at R2bn as recently as 2013.
Remarkably, the parties who financed that R2bn acquisition of Independent appear to be either unaware or unconcerned about the asset restructuring going on within the company.
The largest provider of funding was the PIC, which means it has the most to lose. If the assets are being sold, not only does this leave a cloud over the current value of the PIC’s initial R166m investment in Independent, but it also raises questions over the media company’s ability to repay the loans taken out to buy the company, which stood at R1bn a year ago.
The PIC has a representative on Independent Media’s board of directors. Despite a number of approaches, the PIC had not provided comments by the time the Financial Mail went to press.
The SA Clothing & Textile Workers’ Union (Sactwu) is thought to have paid more than R100m in 2013 for a stake in Independent Media, as part of the Sekunjalo Independent Media consortium. But Sactwu also seems unaware of the restructuring.
In one of the more intriguing aspects of this battle, another party that could be hard-hit by the restructuring is Oakbay Investments, which is owned by the equally controversial Gupta family.
Oakbay has taken Survé to court, demanding 27.5% in Sekunjalo Independent Media consortium, which it says Survé agreed to give it back in 2012. The two parties are due to go head-to-head in the high court next month.
In early 2013, Oakbay apparently handed cash to Survé to secure a stake in the Byzantine Independent Media control structure, as he was negotiating to buy the company from the former Irish owners, the Independent Group.
The plan at the time was that Oakbay would get 50% of the Sekunjalo Group’s stake in Independent Media. From the outside, it is impossible to say if Survé ever had any intention of completing that transaction or whether Oakbay was just one of the many parties corralled into his hastily constructed consortium.
In June 2013, when the list of shareholders in the consortium (which would own 55% of the media company) was disclosed, Oakbay wasn’t among them.
Instead, that list included Sekunjalo Investment Holdings, Cosatu investment company Kopano ke Matla, Sactwu Investments, the Food & Allied Workers’ Union (Fawu) and a special-purpose vehicle housing a 10% stake for employees. These various parties would hold a combined 63% of the Sekunjalo Independent Media consortium.
The other 37% supposedly comprised “a number of broad-based value-adding partners”, including the Black Business Chamber (Western Cape), Mandla Mandela’s Mvezo Trust, the Western Cape Development Trust, Umkhonto we Sizwe Military Veterans Association, various unnamed “women’s business community organisations” and prominent entrepreneurs Sandile Zungu and Groovin Nchabeleng.
However, some of those members of the consortium have told the Financial Mail they have no idea what happened to their promised shares.
Says Fawu general secretary Katishi Masemola: “I haven’t heard anything about it since we were offered a very small stake years ago. We still haven’t signed any papers …
we had no intention of paying anything and felt if we were getting it for free, there was no harm to us.”
Another group that was offered shares says it was impossible to know exactly what was going on back in 2013, because the names of the companies being used by Survé’s consortium kept changing. “There were companies within companies so it was impossible to know who was being offered what,” a source at that group says.
At the time, Independent Media’s staff were also promised great wealth by incoming chairman Survé at various staff meetings. Since then, the staff numbers have been pared back by retrenchments and there has been no sign of shares.
One of the companies offered shares at the outset says the only thing that can be said with any certainty is that Sekunjalo looks set to score by feeding off the demise of the print media industry.

By Ann Crotty for www.businesslive.co.za

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