BEE shareholders lost their investments

The release of the Myburgh report could strengthen the case brought by empowerment shareholders against the directors of African Bank Investments Limited (Abil), the holding company of the defunct unsecured lender, African Bank.

This is according to Desmond Lockey, the chairperson of Hlumisa, one of the two empowerment companies that are suing Abil’s directors and the auditors, Deloitte.

Unlike many fully funded black economic empowerment deals struck in the industry, usually featuring high-profile black figures, Abil’s 13 000 black shareholders put in R268-million of their own equity to finance the deal, reinvesting the dividends over the years, Lockey said.

Under the terms of the empowerment deal, only natural persons — essentially individual black investors — could be participants, and the Abil board had extensive veto rights over the decisions of the empowerment companies.

In a submission to the Myburgh commission, it was revealed how the empowerment companies repeatedly requested permission to redeem preference shares in a bid to repay outstanding debt on the transaction to keep it intact and protect shareholder value. These requests were made in early 2014 after sharp declines in the Abil share price but were refused by Abil’s board.

Following the placement of Abil into business rescue and African Bank under curatorship and its unbundling into a new “good bank”, the BEE shareholders have been left with very little, Lockey said.

“These were people who took their last little bit of money and ploughed it into this transaction in the hope that they could send their children to university one day,” he said. “All of that has now been squandered.”