Why Tshepo Mahloele’s Lebashe has bought Tiso Blackstar’s media jewels.
Until it became South Africa’s latest media mogul in June, most people outside the fuliginous world of infrastructure project funding weren’t too familiar with Lebashe Investment Group (Pty). So what has propelled this well-heeled “unknown” down the path of print?
The answer, Noseweek can exclusively reveal, is General Bantu Holomisa. Tshepo Mahloele and his co-directors believe that their R1.05-billion purchase of Sunday Times, Business Day and Financial Mail, three of the country’s most iconic titles – not forgetting the rest of the sprawl of Tiso Blackstar’s media division extending into Ghana, Kenya and Nigeria – is their best shot to kill the war of words being waged against them by Holomisa and his UDM. A war that Lebashe director Warren Wheatley says “depicts us as greedy, unscrupulous and uncaring fat cats”; a never-ending campaign of “unfounded allegations” that, he claims, has caused incalculable damage to their reputations in their arena of financial services.
If buying a media empire seems an extreme way of combating an irritant like Bantu Holomisa, well, after its chairman raised $1bn (around R15bn) for trans-Africa infrastructure, what’s a mere billion rand for a few ailing publications?
Holomisa has been on the warpath. In May and June last year he and his United Democratic Movement dispatched three letters to President Cyril Ramaphosa claiming to unmask the fleecing of the Public Investment Corporation (PIC) by Lebashe and its fund-managing company Harith by “double or triple-dipping into the PIC’s funds” in more than a decade’s worth of alleged pillaging. The general repeated his charges to the Public Protector.
Thirteen months ago Judge Vivian Tlhapi in the North Gauteng High Court ordered Holomisa to cease and desist from making or repeating his defamatory allegations. But despite this, says Lebashe’s Warren Wheatley, “the witch-hunt continues. Holomisa is relentless, he won’t stop.”
What has particularly upset Lebashe is the space the media has given to what they describe as Holomisa’s unsubstantiated accusations, without bothering to check the facts. “We were at the butt end of poor reporting.”
Wheatley, who is Lebashe’s 40-year-old chief investment officer, confirms that it was the Holomisa experience that was the catalyst for his company’s June 27 purchase of Tiso Blackstar’s demoralised and retrenchment-hit media division. “Our experience definitely played a role in us making the decision to buy, it was a factor,” says Wheatley.
|Tiso Blackstar employees picket for better wgaes outside the company's offices|
Of course, there’s a financial angle to it. Any situation, these smart money okes believe, can be turned to a profit. Wheatley explains: “What it made us realise is that the quality of reporting in South Africa has left such a gap that there’s money to be made if we can ensure the reintroduction of proper investigative reporting.
“You know, where editors are held to account, where people fact-check, where people read supporting documents, where they take their time and not try to be first to break the story. The reintroduction of quality into this industry we think is of significant value. That’s why we like these particular brands: Sunday Times, Business Day.”
Wheatley tells Noseweek that negotiations with Tiso Blackstar head Andrew Bonamour started in March. It’s no coincidence that it was on March 20 that Holomisa began his testimony to the PIC Commission, naming Lebashe and its chairman Tshepo Mahloele among key players allegedly at the centre of a web of multi-billion-rand self-enrichment and looting from the Public Investment Corporation.
Holomisa struggled to substantiate his charges, admitting they were based on media reports. But for the Lebashe directors, to be hauled before the commission and forced to explain themselves was the final straw.
Lebashe is an extraordinary little company. Very discreet, very shy. Its chairman, and owner of 27% of its shares, is the extremely wealthy Tshepo Mahloele. His and Lebashe’s dosh lies principally in the company’s 7% stake in Capitec Bank, which stems from the fortuitous 2007 purchase of 10 million Capitec shares at R30-a-share by a company called Coral Lagoon.
Mahloele was a director of Coral and the R300m BEE Capitec transaction was funded entirely by the state-owned Industrial Development Corporation.
In 2012 the Public Investment Corporation (PIC) bought 5.3 million of Coral’s Capitec shares at R156/share. And three years later Mahloele established Lebashe and offered to buy those Capitec shares from the PIC, at R325/share.
By the time all the conditions were met, Capitec’s share price had soared to R461, and although the PIC had agreed on the deal at R325/share, it now insisted the sale go through on the higher share price. PIC lent Lebashe R720m to cover the difference, and Investec coughed up R1.7 billion for the rest. All this left the PIC with a profit of more than R1.6bn.
Two years later Lebashe set about buying the remaining 4.7 million Capitec shares held by Coral Lagoon. Again the PIC obliged, with a R1.2bn loan announced in July 2017, a deal which Mahloele estimates will profit the PIC by R700m.
Far from looting and fleecing the PIC, Mahloele gave this history lesson to the PIC Commission to show it was the PIC that profited by their association. On the day of his April 16 testimony Lebashe held 8.4 million Capitec shares – priced that day at R1,387 – to give a value to the Lebashe stake of R11.6bn. Not exactly chump change, and a gold-plated security when it came to raising a billion to snap up Tiso Blackstar’s debt-ridden media empire. There has been much media speculation that the R1.05bn funding for the purchase came from the PIC. In fact, Noseweek can reveal, the funder is Absa Capital.
Lebashe’s chief investment officer Warren Wheatley confirms we’ve got that right, although when we spoke, the legal arrangements had yet to be completed. “Absa Capital is doing the bulk of the funding,” said Wheatley.
As a private company, Lebashe’s finances are not for public consumption. But Wheatley says the media buy-out will leave them with some R13bn of assets on the balance sheet, and total debt of around R7.7bn.
Although Holomisa was unable to present hard evidence of wrongdoing by Lebashe and its directors to the PIC Commission, the Lebashe/PIC/Government Employees Pension Fund relationships do appear a trifle incestuous.
Lebashe’s 52-year-old chairman Tshepo Mahloele, who cut his teeth in corporate finance in a Rand Merchant Bank management programme in the early 1990s, was employed by the Public Investment Corporation (R2 trillion under management) for three years from 2003 as head of corporate finance running the Isibaya Fund.
Isibaya was a sub-fund of the Government Employees Pension Fund (GEPF), managed by the PIC, which allocated funds for the support of infrastructure and BEE investments. Mahloele was tasked to implement the PIC’s BEE policy and between 2003 and 2006 concluded R13bn worth of transactions, achieving annual returns of 40% and 45%.
In 2005 he prepared a memo, signed by then PIC head Brian Molefe, requesting a mandate from the GEPF to invest $250m (R1.65bn) of pensioners’ money in a shelf company he had acquired for the PIC called the Pan African Infrastructure Development Fund (PAIDF). This, as Mahloele explained to the PIC Commission, was envisaged as part of the implementation of then President Thabo Mbeki’s African Renaissance dream to attract private sector investment to fund infrastructure and wealth creation across Africa.
PIC’s own mandate at the time precluded it from investing outside South Africa.
Mahloele resigned from the PIC to get his Pan African Fund going. The PIC assisted with a seed capital loan of R17m to raise $1bn in private sector investments. Mahloele set up a managing company, Harith Fund Managers, to administer investors’ funds. The GEPF came to the party with a commitment of $250m.
Harith’s shares were held by the Public Investment Corporation (46%), Old Mutual and Absa (12% each) and a substantial 30% by an entity named HSIST, a trust enabling Harith’s employees – including Mahloele – to hold an equity share in the management company as an incentive on top of their salaries.
To further counter Holomisa’s “accusations and speculations” of milking the PIC, Mahloele pointed out to the Commission that although the PIC’s exposure was limited to its (repaid) seed capital, it had secured a stake of 46% in Harith for nothing, a stake which by May 2018 had paid the corporation almost R96m in dividends.
“Mr Holomisa’s conjectures and suspicions that Harith Fund Managers is underhandedly engaged in illicitly or frivolously investing the funds of the PIC for the benefit of an elite cartel within the management team is entirely nonsensical,” he told the Commission.
“If anything, the PIC has greatly benefited from its stakes in Harith Fund and [its succeeding] Harith General Partners.”
What excited Holomisa was the fact that then deputy finance minister Jabu Moleketi, who served as chairman of the PIC, also chaired Harith Fund Managers and later Harith General Partners.
And in January 2017 he became a director of Lebashe. Holomisa has accused Moleketi of improperly using his position at the PIC to advance his private commercial interests. Accusations, Moleketi told the Commissioners, that are based on a series of suspicions, speculations and suppositions.
When the first Harith-managed Pan African Infrastructure Development Fund (PAIDF) closed in July 2009 it had raised capital commitments of $630m, making it the first 15-year infrastructure fund of its size and scope in Africa. The investors were GEPF ($250m), Absa ($125m), the Development Bank of South Africa ($100m), African Development Bank, Abidjan ($50m), Old Mutual ($50m), Stanlib ($30m), Ghanaian pension fund SSNIT ($10m), Momentum ($10m), Eskom Pension and Provident Fund ($5m).
Subsequent fund manager Harith General Partners raised commitments of $435m for PAIDF 2, which closed in June 2016. Its investors included the Government Employees Pension Fund, which committed a further $350m.
The ten-or-so infrastructure projects launched across the continent include the flagship Lake Turkana wind farm in Kenya, whose 365 wind turbines provide 17% of the power to Kenya’s national grid; Amandi, a 192 MW dual-fuel power plant in Ghana; the Henri Konan Bédié Bridge in Abidjan, Côte d’Ivoire; a new SADC head office in Gaborone, Botswana; and MainOne, a communications services company providing international connectivity and broadband capacity to West Africa via a 7,000km submarine cable running along the West African coast to Portugal.
Meanwhile, Bantu Holomisa refuses to stay silent. “The proximity of your clients to the PIC is worrisome,” he told Lebashe’s lawyers after giving his evidence to the PIC Commission. “The Commission must investigate my testimony as well as the questions that I have raised in order to verify the allegations.” To which Lebashe has responded by taking the general and his UDM to court again, this time with a R4m damages claim.
As for its newly-acquired media empire, Tshepo Mahloele and his Lebashe co-directors must wait until their deal with Tiso Blackstar becomes commercially effective before they can launch their drive to right the wrongs and reintroduce “proper investigative reporting” in South Africa.
“We don’t have the keys to the business yet, so we can’t say anything about what’s happening to the pensions or the retrenchments,” says its investments chief Warren Wheatley. “We’ve got to be hands-off until the Competition Commission gives their approval.”
Every journalist in the land, however, must have delighted in Lebashe chairman Mahloele’s assurance to Sunday Times’s Chris Barron on July 7: “We’re not going to be pumping this thing with a lot of debt. Getting in there like a private equity player looking at how do you gear this thing up to the hilt, get as much free cash-flow out as you can and after five years, run for the hills.”
A dig at Andrew Bonamour, the asset-stripping chief executive of debt-laden Tiso Blackstar, whose purchase of Times Media was completed in June 2015? “I couldn’t say,” was Warren Wheatley’s poker-faced reply.
Wheatley adds: “We know media is not an easy space. We don’t want ever to be accused of treating people as poorly as he has.”
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