PIC ‘dealmaker’s’ attempts to extort R45m from SA Home Loans

PIC ‘dealmaker’s’ attempts to extort R45m from SA Home Loans

SA Home Loans CEO Kevin Penwarden testified before the PIC commission of inquiry on Wednesday. Picture: Moneyweb

The Inquiry heard of loose agreements, side letters, and requests to ‘regularise’ fees in the tale of alleged extortion by a businessman introduced by the PIC on Wednesday.

Businessman Kholofelo Maponya is legally challenging the Public Investment Corporation (PIC) and SA Home Loans for R45 million in origination transaction fees linked to a deal that he didn’t initiate after failed attempts to questionably extract the money from the two entities.

Maponya has been trying to wrestle the transaction fees out of SA Home Loans since 2016. They relate to a R9 billion loan that was extended by the PIC to mortgage funding company SA Home Loans. The loan was meant to provide home financing opportunities for members of the Government Employees Pension Fund (GEPF).

In 2014 the PIC, on behalf of the GEPF, acquired a 25% stake in SA Home Loans and assisted Bolatja Hlogo Consortium, represented by Maponya, in acquiring another 25%.

Maponya did not initiate transaction

The collective 50% equity had belonged to JP Morgan, which had initiated talks with the PIC to dispose of its shareholding to a party that had enough liquidity and the will to assist the company if necessary. The remaining 50% is held by Standard Bank South Africa.

SA Home Loans chief executive Kevin Penwarden on Wednesday provided the PIC commission of inquiry with a timeline of events showing how the R9 billion loan facility came to be. He explained that it was one of the items covered when JP Morgan presented the business case for the PIC to acquire its 50% equity stake in the company to former PIC chief executive Dan Matjila in June 2012.

The discussions carried on for the rest of that year, with Penwarden stating in his testimony that it was “clear” that JP Morgan and SA Home Loans were the first parties to make this proposal to the PIC.

Maponya would only come into the picture in 2013, when the PIC introduced him as the black economic empowerment partner whose consortium would share the JP Morgan shareholding with the PIC.

When the equity transaction was concluded in June 2014, Maponya was appointed as a non-executive director on the SA Home Loans board on behalf of the consortium while Matjila’s assistant, Wellington Masekesa, represented the PIC.

‘Loose agreement’

Penwarden told the commission that in December 2014, while the company was negotiating the terms of the loan funding, Maponya informed him that he and Matjila had agreed that he was entitled to R45 million in transaction fees, which translated to 0.5% of the R9 billion.

“I was taken aback by the suggestion,” said Penwarden. “I could not understand the commercial logic or rationale for such a payment to Mr Maponya as a third party.”

But in February 2016 Maponya invoiced the mortgage company for the transaction fees. Penwarden then informed him that the contract stipulated that the fees be paid to the lender, the PIC. Maponya said this was a “mistake”.

According to Maponya, the full agreements should have captured raising fees of 1%, of which 0.5% would go to the PIC while 0.5% was for MMI (Matome Maponya Investment Holdings, another of his consortiums).

“I was placed under immense pressure by Mr Maponya,” said Penwarden.

Maponya’s demands were followed by a phone call from the PIC’s Masekesa, who told Penwarden that there was a “loose agreement” of a 1% raising fee to be split between MMI and the PIC. Because SA Home Loans was not a party to the agreement, Masekesa indicated that the PIC would provide the company with a “side letter”.

“It surprised me that there could be any claim that there was such a loose arrangement as the term sheets had been tabled to the board of directors and this was never raised,” Penwarden told the commission.

When SA Home Loans failed to act, the PIC sent a cession letter signed by Matjila stating that they would cede the rights to the R45 million to MMI.

This letter was withdrawn by the PIC when Standard Bank chief executive Sim Tshabalala intervened.

SA Home Loans told to ‘regularise’ the R45m

“In March 2017, Mr Maponya verbally mentioned to the company secretary that the matter of arranging fees was in fact not concluded and that he would raise it again,” Penwarden said.

When SA Home Loans applied to the PIC for a second loan of R10 billion, Maponya and Masekese arranged a meeting with SA Home Loans director Zakheni Dlamini. They informed him that the main reason the loan had not yet been approved by the PIC was because they had not paid Maponya for the fees associated with the previous loan.

Penwarden testified that the pair said Matjila was “open to supporting the payment of the arranging fees if a way could be found to ‘regularise’ such fees,” said Penwarden. Masekese allegedly placed a condition that Matjila not be contacted about the ultimatum until a proposal to ‘regularise’ the fee was drafted by SA Home Loans.

How the ‘regularising’ was to have been done

The process of ‘regularising’ would involve charging fees of 0.95% on the R10 billion loan – with the R95 million comprising a 0.5% fee (R50 million) on the new loan as well as the longstanding R45 million.

Penwarden said SA Home Loans “would never accede to such a request”.

Instead, Penwarden reported the matter to the SA Home Loans board, auditors and the chair of its audit, risk and compliance committee.

He said the issue has also been referred to the Hawks, who have acknowledged receipt of the complaint.

Maponya has instituted his own legal proceedings against the PIC, SA Home Loans and Penwarden on the issue of the initial R45 million arranging fees.

Penwarden told the commission that Maponya would not be entitled to the fee “by any stretch of the imagination”.

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