Battle over Vodacom ‘loans’ to Kabilas
Wrangling focuses on outstanding R250m extended to Congolese telecom firms
Mobile giant Vodacom granted loans of more than R250m to minority partners in Vodacom Congo — including family members of former president Joseph Kabila — that have yet to be repaid more than a decade later.
The loans are among several issues at the centre of legal battles playing out before US and South African courts between various shareholders of Congolese Wireless Network (CWN), which has a 49% stake in Vodacom Congo, the leading telecom company in the Democratic Republic of Congo (DRC).
They relate to the entry of Vodacom in the mineralrich central African country in 2002 when strongman Kabila was president after securing a licence in 2001.
Vodacom has 185-million customers across the continent, including 21-million in the DRC.
In the court papers three US-based shareholders in CWN allege that two loans from Vodacom, amounting to $4m (about R76.8m) and $11.5m (R220.9m) were sent to Swiss bank accounts and not used for their intended purpose — implying the money may have been solicited for other purposes.
In February, the Supreme Court of Appeal in Bloemfontein dismissed an application to have a $100m lawsuit order of a California court, obtained by the US-based shareholders of Vodacom Congo’s minority partners, implemented in South Africa against businessman Allieu Conteh, who is now based in Bryanston, Johannesburg.
Conteh, who suffers from early onset dementia, was declared to be of unsound mind and incapable of managing his affairs by the Johannesburg high court in March 2019 and was represented by his wife, Brigitte van Geesbergen, in legal proceedings.
Conteh’s US-based business partners James R Lindsey, William Buck Johns, and a British Virgin Islands company, Wymont Services Limited, who are shareholders in African Wireless Inc (AWI), obtained a default judgment in May 2014, accusing him of transferring company shares illegally and funds from Vodacom to Swiss banks.
According to court papers, AWI owned more than half of CWN, which in turn holds a 49% stake in Vodacom Congo, while Vodacom International Limited holds 51%.
On Thursday, Vodacom confirmed the two loans, which it said were meant “to be used for CWN’s operational requirements”, had not been repaid.
“The two loans were provided to CWN for their working capital needs and had to be paid within a certain period and when they were not paid within the agreed period, Vodacom initiated arbitration proceedings before AFSA [the Arbitration Foundation of Southern Africa] and an award was issued in its favour,” a Vodacom spokesperson said.
Vodacom declined to provide the award document from AFSA.
“The arbitration commenced in June 2017 and the award was granted on October 30 2019. Given that the AFSA rules require the proceedings to remain confidential, Vodacom is not at liberty to share the award,” the spokesperson said.
Asked why the mobile operator hadn’t attempted to recover the funds, the spokes
person said: “Funds have not as yet been recovered because of shareholder disputes within CWN.”
In court documents, Van Geesbergen said Resotel, shareholders in CWN, “was controlled by the DRC’s [former] first family, the Kabilas”. Jaynet Kabila, a member of parliament, holds a stake through Keratsu Holdings, a company incorporated in the tiny island of Niue in the South Pacific, according to All the President’s Wealth, a 2017 report by Congo Research Group (CRG) at New York University’s Center for International Co-operation and Pulitzer Center on Crisis Reporting.
It states that Keratsu Holdings was incorporated in June 2001, just six months before the creation of Vodacom Congo.
“Incorporation documents from Niue’s corporate registry show that she [Jaynet] owns the company with Firuzi Kalume Nyembwe who has also served as the co-ordinator of the Foundation Mzee Kabila, that Jaynet Kabila runs,” the report says.
Efforts to get comment from DRC government spokesperson and communications and media minister Patrick Muyaya, were unsuccessful this week.
In the court papers before both the SCA and California’s Superior Court, which Business Times has seen, Conteh’s partners allege Nyembwe held 60% of Resotel which “never had any business or operations” but had somehow received a large stake of CWN.
“Resotel received 40% of CWN. Having not paid anything for the stake in CWN, the member of Resotel transferred 51 shares (equating to 51%) of Resotel to AWI on April 5 2000,” the court documents say.
Vodacom refused to be drawn into commenting on the shareholding of its minority partner and the involvement of the Kabilas as the telecom licence was granted during the tenure of Joseph Kabila, Jaynet’s twin brother.
“Vodacom Congo’s license was originally issued to CWN in which Vodacom later acquired a 51% stake. AWI and CWN’s shareholders would be better placed to answer questions relating to its shareholding structure,” Vodacom said.
Conteh, a Gambian billionaire and now a fugitive from justice in the DRC, was once a close ally of the Kabila family and led CWN and Vodacom Congo as manager and chair respectively. He was also chair of AWI.
Though the date that the first $4m loan was advanced to CWN is not known, the papers reveal that the second $11.5m was advanced in 2009 and that a loan agreement indicated that it would be for “general working capital requirements”.
The US partners, in their complaint before the California court, said that the funds “were transferred to Swiss bank accounts” and weren’t used as intended.
Separately, Vodacom filed papers in the Constitutional Court this week, where it is appealing a ruling of the Supreme Court of Appeal in its protracted two-decade legal battle with Please Call Me creator Nkosana Makate.
In its application the mobile telecom giant said the SCA judgment may lead to it being forced to pay Makate about R40bn, which would hit customers and shareholders such as the Public Investment Corporation, which has an 11.6% stake in Vodacom.
Vodacom’s chief officer for legal, compliance and risk, Nkateko Nyoka, said in the founding affidavit that the SCA judgment would “entitle Mr Makate to an amount of something between R29bn and R63bn”.
“The majority judgment, if left undisturbed, will moreover have a profound impact on Vodacom, its shareholders, its suppliers, its customers and the societies in which it operates.”
It also cited the SCA’s minority judgment, which placed Makate’s compensation at about R186m.
“The majority, however, did not merely dismiss Vodacom’s appeal. It went in to set aside the high court’s orders and replace them with all the orders Makate had sought in the high court,” said Nyoka.
However, Makate said the appeal had no basis in law.
“We are working on our replying papers and we intend to show that Vodacom’s case has no merit and that they have failed to advance any constitutional point to get access to the apex court,” he said.
Makate said insinuations by Vodacom about the dire impact of the implementation of the SCA’s ruling were “an attempt to shift the court from a pure commercial dispute matter, which falls outside the ambit of the Constitutional Court”.
Makate has until the second week of May to file his responding papers.