Net­care in fronting bat­tle

Com­plaint laid over al­leged con­tract breach

The Star Early Edition - - FRONT PAGE - KHAYA KOKO AND KHANYISILE NGCOBO Khaya.koko@inl.co.za Khanyisile.ngcobo@inl.co.za

ACOMPLAINT of BEE fronting has been launched against med­i­cal gi­ant Net­care at the BEE Com­mis­sion for what an em­pow­er­ment com­pany feels is a breach of con­tract.

Mi­la­gros So­cial De­vel­op­ment, a com­pany whose share­hold­ers are all black women, laid the com­plaint on Fri­day against Mother and Child Trust (MCT) – a com­pany reg­is­tered by Net­care in 2005 as part of its BEE scheme, Health Partners for Life (HPFL).

Mi­la­gros was se­lected as the an­chor ben­e­fi­ciary of MCT, one of four BEE trusts reg­is­tered un­der the HPFL trans­ac­tion.

Mi­la­gros al­leges that MCT broke the con­di­tions of the trans­ac­tion by re­fus­ing to pay it the three vest­ings – or the rights that ben­e­fi­cia­ries have to the in­come or as­sets of a trust – in the months of Novem­ber in 2014, 2015 and 2016.

This was af­ter Mi­la­gros was awarded 2 mil­lion trust units linked to a cor­re­spond­ing num­ber of Net­care shares at R12.76 a share, with a loan of more than R25 mil­lion pro­vided by the med­i­cal gi­ant in which the shares were locked from 2008 to 2012.

There­after, 20% of the shares could be dis­posed of through a sale – the ben­e­fi­cia­ries could choose to sell or trans­fer the shares to their per­sonal bro­kers – and the net pro­ceeds of which would be paid out to the ben­e­fi­ciary af­ter a de­duc­tion in­ter­est, among other de­duc­tions.

Mi­la­gros said it re­ceived the vest­ing for 2012 and 2013, but not for the next three years, which is why they al­lege fronting.

Ac­cord­ing to the Broad-Based Black Eco­nomic Em­pow­er­ment Act, fronting loosely in­volves the pro­ceeds of a trans­ac­tion not flow­ing to black peo­ple in the ra­tio spec­i­fied in the rel­e­vant legal doc­u­men­ta­tion.

Mi­la­gros founder Masin­gita Ma­sunga told The Star that the trou­ble started when MCT head Peter War­riner al­legedly changed the con­di­tions stip­u­lated in the let­ter of award, where Mi­la­gros was now ex­pected to bring so­cial de­vel­op­ment projects it was in­volved in be­fore the dis­burse­ments could take place.

“They say we have to bring projects to them so that they may ap­prove the projects. It seems like they will only give us the shares when we bring to them the projects we want to un­der­take. And that is not in the let­ter of award, nor is it in the trust deed,” Ma­sunga said.

The Star has seen a copy of both doc­u­ments.

She added that her com­pany tried to rea­son with Net­care’s chief ex­ec­u­tive, Richard Fried­lan­der, but he al­legedly kept re­fer­ring them back to War­riner.

“And this per­son (War­riner) just keeps on giv­ing us the run-around, say­ing we’ll meet and dis­cuss a set­tle­ment, but when we send an e-mail, he says we’ll only get the set­tle­ment once we do the project the trustees want us to do,” she said, ad­ding that they could not pay share­hold­ers in the mean­time.

She said they were hop­ing for an am­i­ca­ble so­lu­tion, even though their com­plaint states that the directors and “some share­hold­ers want dam­ages for emo­tional dis­tress and hard­ship en­dured”.

Net­care spokesper­son Martina Ni­chol­son said the com­pany could not com­ment last night as the re­quest was re­ceived late. She did, how­ever, say com­ment would be pro­vided to­day.

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