The R5.2 billion PIC deal that quietly disappeared

In October 2018, the Public Investment Corporation (PIC) and Pelo Agricultural Ventures announced they bought a majority shareholding in Karan Beef for up to R5.2 billion.

Pelo Agricultural Ventures is a black-owned holding company that operates in the agricultural sector in South Africa and the rest of the continent.

However, this deal never happened, and the Public Investment Corporation never shed light on what went wrong.

Karan Beef, which was founded by Ivor Karan in 1974, operates the largest cattle feedlot and abattoir in Africa.

In 2018, its feedlot accommodated 150,000 head of cattle, and its Balfour-based abattoir could process 2,000 head of cattle daily.

Today, Karan Beef accommodates up to 210,000 head of cattle at the Heidelberg Feedlot, Nigel farm, and its numerous holding stations.

South Africa is Karan Beef’s biggest market. It supplies quality beef to most of South Africa’s best-known food retailers, butchers, beef distributors and wholesalers.

Its beef is also exported internationally to markets including the Middle East, the Far East, the Indian Ocean Islands and the African continent.

Karan Beef is approved to export to UAE, Kuwait, Qatar, Bahrain, Oman, Jordan, Egypt, Mauritius, Seychelles, Maldives, People’s Republic of China and Hong Kong.

It is a global powerhouse in the South African and global meat market, which made it a good investment for the PIC.

“This is a historic deal concluded in terms of our clients’ developmental investment mandate, which will support the much-needed transformation in the agricultural sector,” the PIC said at the time.

“It will bring new entrants into the sector at ownership level and will be instrumental in bringing emerging farmers into the value chain of beef production in South Africa.”

The asset manager said it was happy that the Karan family had decided to sell part of this vital asset to South Africans.

Former PIC CEO Daniel Matjila said the transaction, which ensured Karan Beef’s ownership remains local and in black control, must be celebrated.

Ivor Karan said it was a ground-breaking deal for agriculture in the country, and that it was good news that the company would remain South African.

The deal disappears

The Competition Tribunal approved the acquisition of Karan Beef by a PIC-controlled firm. However, the deal was never concluded.

There was no official statement on why the deal failed. However, in 2019, allegations of corruption related to the R5.2 billion deal between the PIC and Karan Beef surfaced.

Some of the allegations were contained in a report of the Judicial Commission of Enquiry into allegations of impropriety at the Public Investment Corporation.

One of the allegations involved Deputy President Paul Mashatile, who was the ANC’s Treasurer-General at the time.

It was alleged that the deal was constructed to inflate the selling price by R1 billion and pay Mashatile the amount. 

Despite numerous invitations for those with information to present it, no one came forward to substantiate the allegations.

Sello Motau explained that the transaction went through numerous committees and ultimately the Investment Committee, which approved the transaction on certain conditions.

The conditions were met. However, since the resignation of the whole PIC Board on 1 February 2019, the transaction has stalled and ultimately failed.

The reason the deal did not happen was that the long stop date expired before it could be concluded.

That means that Karan Beef remained a family-owned business. Ivor Karan continues to manage the business and is chairperson of the Karan Beef board.

His three sons, Matthew, Justin, and Avron, are all involved in the business, and his wife handles building and maintenance.