The Public Investment Corporation's almost R2bn investment in Independent News and Media was considered to be a high risk, with concerns that it had "open political groups", a witness told the inquiry questioning Africa's largest asset manager on Monday.
In 2012, a consortium led by businessman Iqbal Survé contacted the PIC for money to buy the country's largest newspaper group from its former Irish owners.
High risk is obvious;
Benedict Mongalo, who worked as a senior credit risk analyst during the transaction, said there were concerns that print media was a "sunset industry" with circulation declining, and that Survé had no previous experience of running a print or any media company.
There were also concerns that Independent Media "from time to time was involved in litigation", with investigations by competition authorities for anti-competitive practices, which had the potential for significant penalties and could have a detrimental effect on profits.
"It is clear in the risks and the potential mitigation raised in the risk report that the transaction is considered high risk," Mongalo said.
In December, the Government Workers' Pension Fund (GEPF) said they had an impairment of R1.06bn in Independent News and Media SA loans, after the company failed to pay interest at the end of August.
According to Mongalo, the GEPF investment committee said it was uncomfortable about the Independent Media's debate with the PIC; however, it was clear that “the HPW had an optional mandate” to do or not to make the transaction.
Following a series of risk assessments, the former board chair of PIC Thlanhla Nene had invited the executive directors to vote on the transaction.
Mongalo said "all members approved the board of the transaction" except one person.
PIC's investment in the Independent Media resulted in a 25% share in the company, producing major newspaper titles such as The Star ‚Pretoria News and the Cape Times.