Trust and NEF dis­pute heats up

The Star Early Edition - - BUSINESS REPORT - Ka­belo Khu­malo

THE NA­TIONAL Em­pow­er­ment Fund (NEF) is em­broiled in a le­gal tan­gle with a trust set up to ben­e­fit the com­mu­nity of Orange Farm over a R3.5 mil­lion VAT re­fund.

In 2013, the NEF pro­vided a R50m loan to the Orange Farm Com­mu­nity Trust for a 10 per­cent eq­uity stake in the 27 000m² Eyethu Orange Farm mall.

The R500m mall opened amid fan­fare in 2014 and houses 44 stores at an av­er­age rental per m² of R117.17 in its first year of op­er­a­tion.

The other share­hold­ers in the mall are Dip­ula In­come Fund, Stret­ford Land De­vel­op­ers and Flana­gan and Gerard In­vest­ments – all three com­pa­nies hold a 30 per­cent stake each.

On Fri­day the two parties squared off in the South Gaut­eng High Court. How­ever, the mat­ter was struck off the roll as the NEF was found to have brought the mat­ter to the wrong court.

At the heart of the dis­pute is the con­tention by the trust that it had en­tered into an un­favourable loan agree­ment with the NEF, and wanted to ter­mi­nate the re­la­tion­ship as the com­mu­nity had not ac­crued any ben­e­fits from the re­la­tion­ship.

Suzan Mosia, one of the trustees, al­leged the NEF had re­fused the trust’s of­fer to set­tle the loan amount af­ter it had sourced favourable re­fi­nanc­ing fa­cil­i­ties from two banks.

Re­fi­nance

“The trustees de­cided that we could not con­tinue busi­ness as usual, and that we must scour the pri­vate sec­tor to re­fi­nance our stake in the ven­ture. But the NEF re­fused to give us the set­tle­ment amount af­ter we had se­cured back­ing from two banks” said Mosia. She said the trust was in the dark about the fi­nan­cial sta­tus of the mall, as they had not re­ceived fi­nan­cial state­ments to date.

As part of the agree­ment be­tween the NEF and the trust, money owed to the NEF should be re­paid in 156 monthly in­stal­ments.

Some clauses in the loan agree­ment bring into ques­tion the trust’s ar­gu­ment that it was en­ti­tled to keep the VAT re­fund, such as: “The bor­rower shall be obliged to use all monies re­ceived as distri­bu­tions to re­pay the loan fa­cil­ity.”

With re­gard to VAT, the loan agree­ment said: “When the bor­rower re­ceives a VAT re­fund in re­spect of the joint ven­ture, the bor­rower shall utilise all such VAT re­fund/credit to­ward the re­pay­ment of the loan fa­cil­ity within 48 hours of re­ceipt of such VAT re­fund/credit.”

Mosia was on Fri­day adamant that the trustees were not given suf­fi­cient time to go through the loan agree­ment be­fore they signed it. She ac­cused the NEF of us­ing un­scrupu­lous meth­ods.

“The NEF had said it would work­shop us, so that we could un­der­stand the terms of the agree­ment, but they never did. The loan agree­ment favours them at the ex­pense of the com­mu­nity,” she said.

A spokesman for the NEF could not com­ment as he said he was on leave.

The loan agree­ment favours (the NEF) at the ex­pense of the com­mu­nity, claims Orange Farm trustee

PHOTO: SIMPHIWE MBOKAZI

Eyethu Mall at Orange Farm. Mem­bers of the com­mu­nity and in­vestors are in dis­pute over a VAT re­fund.

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