Regrets all round as Regiments’ Gupta association finally forces shutdown

● Regiments Capital, which found itself at the centre of the state capture narrative through its links with Gupta-linked Trillian, is set to close its doors, 14 years after its formation, through an unbundling process that began in earnest at the start of the year.

The advisory firm has had to retrench staff and divide and sell off the business in parts, culminating in the exit of its remaining founders, Litha Nyhonyha and Niven Pillay.

“For the country it’s a sad chapter. It’s a sad chapter for me as a person in terms of the vision I had,” Nyhonyha said in an interview with Business Times.

On conclusion of the restructuring Nyhonyha plans to retire and Pillay will move into academia. While not continuing to trade as Regiments, the company will exist as a legal entity to pursue the court cases and testify in the state capture inquiry.

“With hindsight, we should not have entered into the partnership with McKinsey because that’s the nexus of all of this,” Nyhonyha said.

In December 2012, Regiments entered into a partnership with US advisory firm McKinsey, which provided advisory services to state-owned companies Eskom and Transnet.

Regiments became embroiled in the state capture saga when President Jacob Zuma’s family friends, the Guptas, tried to buy the firm three years into the contract. Pillay was offered the opportunity to become a dollar billionaire by one of the brothers, Tony, if he agreed to the buyout.

After it was rejected, Eric Wood, one of three directors at Regiments, who headed the unit that was tied to the McKinsey partnership, joined Trillian Capital Partners, owned by Gupta associate, Salim Essa.

Trillian’s relationship with McKinsey eclipsed that of Regiments’ and was subsequently used as the vehicle through which the Guptas allegedly profited from Eskom and Transnet largesse. Regiments has been shut out of further business with the parastatals, with its advisory business suffering. This unit had historically contributed between R200-million and R300-million to group revenue.

A report released last year about Trillian’s involvement in state capture showed Eskom had paid more than R200-million to the company between April and August 2016 without contracts. The state-owned power utility also gave the Wood-led firm R152-million in management fees in the same year.

Former Eskom CEO Brian Molefe had appointed McKinsey in a closed tender process, just as he had done when he headed Transnet before being seconded to Eskom in mid-2015.

Molefe and Anoj Singh, former Transnet and Eskom chief financial officer, featured prominently in a report on state capture released by the public protector last year.

Regiments has retrenched just more than a quarter of its 66 staff members, and more cuts are possible.

It intends to cluster its existing businesses into three holding companies, each with three subsidiaries. These businesses will be rebranded and sold through a vendor-finance deal to teams currently managing these companies. In time these businesses are expected to attract strategic equity funders.

Nyhonyha said the new businesses had been restructured to succeed with leaner overheads but they would have ongoing contracts and mandates with other state-owned companies and government departments.

Investments such as its 2% stake in Capitec would be hived off into a special purpose vehicle to be listed on the ZAR-X stock exchange this year, where it hopes to raise between R50-million and R150-million.

“We felt if we don’t take this tough action, these other businesses that have the chance to succeed, we’ll jeopardise their chances to succeed because of, among others, their association with the Regiments brand given state capture issues,” he said.

Legal proceedings are continuing to declare former business partner Wood a delinquent director after he was implicated in plans to sell Regiments to the Guptas.

Regiments is also in dispute with Transnet’s pension fund, which dismissed Regiments in September 2016, about 25 months into its three-year contract to manage the fund. This is after Transnet claimed Regiments had paid itself and Trillian fees for the advisory work from fund monies.

Regiments last year also filed court papers to overturn Transnet’s subsequent appointment of Old Mutual and is demanding outstanding advisory fees worth millions.

Transnet spokesperson Molatwane Likhethe said this week: “The fund has issued summons and awaits a court date. The Transnet Second Defined Benefit Fund is awaiting court papers.”

It’s a sad chapter for me as a person in terms of the vision I had Litha Nyhonyha Co-founder of Regiments Capital