The co-founder of Sakhumnotho Group Holdings, in his testimony at the Public Investment Corporation (PIC) commission of inquiry on Monday, denied claims that the PIC “forced” a rival bidder to merge with his company in a R1.7 billion deal to buy a BEE stake in Total SA.
Sipho Mseleku, who is also the executive chairman of Sakhumnotho, was responding to submissions made by director of Kilimanjaro Capital (KiliCap) Lawrence Mulaudzi.
KiliCap had sought to secure R1.7 billion from the PIC to buy the BEE stake in Total SA. Mulaudzi previously told the commission that, at an advanced stage of the bidding process, he became aware that his company, KiliCap, was not the only one to have received funding support from the PIC.
He testified that he had found it strange because KiliCap had signed a “binding engagement letter”, which “implied exclusivity”. In a meeting with former PIC chief executive Dan Matjila to get clarity on the issue, Mulaudzi said Matjila had informed him that Sakhumnotho was the other interested party and in order for him to issue final approval on the loan, Mulaudzi would have to meet with Mseleku and form one consortium.
This meant the two companies would split the transaction and the fees in half when the deal was approved.
Mseleku told the commission on Monday that Mulaudzi’s version of events was “wholly untrue”.
According to Mseleku, the decision to form a merger was “a mutual business decision” that both parties had made “without any external influence” because both parties wanted to increase their chances of succeeding in the bid.
Conflicting versions of events
Mulaudzi had testified that he met with Mseleku after arranging to meet him at the Sakhumnotho offices to discuss the prospects of a merger following Matjila’s directive to form a single consortium.
However, Mseleku said that he was introduced to Mulaudzi by Matjila at the PIC offices.
In July 2015, when Sakhumnotho received a letter stating that it had been selected to participate in the second phase of the bid, Mseleku said he arranged a meeting with Matjila to secure a binding offer. But Matjila had made it clear that he would only engage with the preferred bidder or the entity that had secured exclusivity on the transaction.
Directly after the meeting, Mseleku said Matjila had indicated that he would be meeting with Mulaudzi on the same issue. Mseleku, without invitation, followed Matjila to the boardroom where Mulaudzi was waiting for Matjila.
“Dr Matjila introduced us to each other just as a courtesy and told Mulaudzi what he had told me – that the PIC was not prepared to engage with any of the bidders, only the winners,” said Mseleku.
Mseleku said he did not find it strange or inappropriate that he was taken into a meeting with a competitive bidder, saying he was spurred by his “curiosity”.
Dr Matjila left the room, said Mseleku, and at that moment, he said, he and Mulaudzi came to an understanding that there would only be one winner in the process and that they would have better prospects of securing the transaction if they formed a merger.
“I think you need to be a little more frank than this,” said commission assistant Gill Marcus, adding that by leaving the room Matjila was giving the pair “a message”.
“Did you not realise that you were given a message? You came to that conclusion [to merge] yourselves out of that message,” challenged Marcus.
But Mseleku said he didn’t “take it that way”. Sakhumnotho’s prospects of success on its own were good and the company had 15 years’ experience as opposed to KiliCap, which was a start-up. “At the time I didn’t think about that [the perception], there was just this curiosity and the time procedure to close the transaction.”
Commission assistant Emmanuel Lediga wanted to know why Mseleku and Mulaudzi had different versions regarding how they met, to which Mseleku responded: “My memory is correct. I remember most of the meetings. I do trust my judgement.”
Mseleku also sought to clarify the perception that the PIC did not conduct a due diligence on Sakhumnotho. He said that a “confirmatory” due diligence was done because it was not a first-time client of the PIC and its past transactions with the had PIC involved “a lengthy process of due diligence which took not less than a year”.
Mulaudzi previously told the commission that when he raised the issue of Sakhumnotho and due diligence with Matjila “a response was not forthcoming in this regard”.
Mseleku said he was “shocked and puzzled” by Mulaudzi’s statement that Sakhumnotho was imposed on KiliCap. He said the insinuation was that there was a corrupt relationship between the company and Matjila, which was “unfounded and defamatory”.
“It takes years to build a career, a business and a good name,” said Mseleku. “One would not trade honesty, integrity and good reputation for a short-lived gain.”