PIC CIO suspended on whistleblower claims, not AYO
Analysis
Suspended PIC chief investment officer Kabelo Rikhotso.
Image: Instagram
SPECULATION has incorrectly linked the Public Investment Corporation’s (PIC) suspension of its chief investment officer (CIO), Kabelo Rikhotso, to its investment in AYO Technology Solutions.
These matters are quite distinct, and this is a deliberate strategy to use AYO as a distraction.
Rikhotso, CIO in Africa’s largest asset manager since May 2022, was placed on precautionary suspension following a whistleblower report alleging misconduct within the PIC. The suspension stems from internal governance concerns raised in that report and makes no reference to AYO.
According to an official PIC statement, the suspension is interim, procedural, and effected under applicable labour legislation and internal policies to ensure a fair, objective, and independent investigation.
“Rikhotso’s suspension follows allegations of misconduct that were levelled against him through a whistleblower report. Effected in line with applicable labour legislation and internal PIC policies and procedures, the suspension is intended to ensure a fair, objective and independent investigation into these allegations.
“The suspension does not, in any way, constitute a finding nor is it a pronouncement of any wrongdoing on the part of the CIO. In the interim and to ensure continuity, August van Heerden, chief risk officer, has been appointed as acting chief investment officer. The PIC remains firmly committed to the highest standards of accountability and corporate governance and to serve the best interest of its clients,” the PIC said.
The AYO investment has nothing to do with Rikhotso’s suspension. This investment, initiated before his tenure, involved a private placement in AYO’s 2017 initial public offering (IPO).
Following legal processes and negotiations, the PIC reached a court-sanctioned settlement with AYO in 2023 under which AYO repurchased shares from the Government Employees Pension Fund (GEPF) for R600 million and shareholder protections were implemented.
The PIC Board described the settlement as prudent and commercially sound for recovering value and safeguarding public funds, while noting concern over delayed management communication to the board. The board reiterated its commitment to fiduciary standards.
“The Board expressed its concern to the PIC management team for neglecting to timeously inform the Board of its intention to settle in line with the PIC governance processes. While deeply concerned about management’s handling of the governance processes, the Board believes the AYO settlement, which is an Order of the Court, is justified as a good commercial decision.
“Informed by its deliberations on the implications arising from this situation, the Board has cautioned the PIC management, and the Board will continuously engage the management team to improve the governance processes,” the PIC Board said after the settlement.
The PIC’s investment in AYO Technology Solutions, which has been the subject of debate for several years, is a matter entirely separate from Rikhotso’s suspension. This investment, initiated before Rikhotso’s arrival, involved a private placement of shares in AYO’s 2017 initial public offering (IPO).
After complex legal proceedings and thorough negotiations, the PIC entered a court-sanctioned settlement with AYO in 2023. This agreement saw AYO repurchase shares from the Government Employees Pension Fund (GEPF) for R600 million and included shareholder protections going forward.
Central to the debate on the AYO investment was its valuation. The PIC’s investment decision flowed from its own meticulously developed internal valuation frameworks, employing discounted cash flow (DCF) models and EV/EBITDA multiples aligned with standard investment practice.
Valuations at the time indicated a fair value of AYO shares as high as R45.29 per share. The PIC, acting on its own expertise, undertook its due diligence and risk assessment before committing public funds to AYO.
Meanwhile, AYO has never been found guilty of fraud or corruption by any court.
News24, among others, has wrongfully and deliberately conflated Rikhotso’s suspension with the AYO investment, diverting attention from genuine governance challenges and unfairly tarnishing parties not implicated in the whistleblower allegations. Such attempts distract from necessary oversight within the PIC.
As Africa’s largest sovereign asset manager, overseeing more than R3 trillion in public sector pension funds, the PIC is under constant scrutiny and should uphold the highest standards of transparency and governance.
Rikhotso’s suspension follows due process based on a whistleblower report unrelated to AYO. The AYO investment was based on established valuation methodologies, and the subsequent settlement was deemed commercially sound by the PIC Board.
Through clear communication, the PIC underscored its commitment to protecting public resources with rigour and accountability, reaffirming that no wrongdoing has been identified regarding either Rikhotso’s suspension or the AYO investment.
This clarity is vital for public confidence and the integrity of institutions entrusted with South Africa’s public funds.