Accusations fly as R68m debt sinks IT firm
CEO says rejecting minister’s husband led to Yekani collapse
● The owner of a multibillion-rand tech company claims his business is going under because he refused to sell a controlling stake to the husband of communications minister Stella Ndabeni-Abrahams.
Siphiwe Cele, owner and CEO of Yekani Manufacturing, which until August last year built MultiChoice’s Explora decoders, says the Industrial Development Corp (IDC) introduced Thato Abrahams to him as an “investor” who would buy a “majority stake” in his business “for R1bn”.
However, he says that after he declined to sell to Abrahams, his business ran into trouble and his pleas for government help — to save his company and the jobs of more than 500 employees — fell on deaf ears.
Ndabeni-Abrahams insists she first learnt about the meeting from the Sunday Times inquiry two weeks ago, and Abrahams denies ever wanting to buy a stake in Yekani.
However, Cele, Abrahams and the IDC all agree the finance institution arranged a meeting at its Sandton offices in April 2018 to introduce Cele to Abrahams so they could “explore synergies”. The IDC acknowledged that it was not “standard practice” for it to arrange such introductions.
Ndabeni-Abrahams was deputy minister of telecommunications & postal services at the time, raising a potential conflict of interest because Yekani, which also made smartphones, fell under her sphere of influence.
Her spokesperson Nthabeleng Mokitimi-Dlamini said yesterday: “It is disingenuous to blame the minister’s husband for the challenges faced by Yekani ... The minister’s husband is at liberty to pursue business interests as long as all is above board.”
Abrahams yesterday said it was “unfortunate that Cele would claim that myself or my wife have anything to do with the liquidation of his company. He should try to find the root causes of this unfortunate development and not use my family as a scapegoat.”
Yekani is now facing liquidation following an application in the high court in East London by Standard Bank, to which it owes R68m. The company did not reopen after the Christmas break.
In an interview with the Sunday Times Cele said an IDC executive based in East London invited him to the meeting in Sandton, where “the IDC informed me that they have R5bn funding for Eastern Cape and R1bn was likely to be secured for the investor. This would have meant I give a majority [stake] to the investor.”
Cele said Abrahams was then brought into the room and they were introduced.
Cele said the deal failed because Abrahams wanted to be appointed CEO, with the right to choose a CFO. Cele himself was offered the role of board chair.
“I took the IDC proposal to my board. Yekani’s former board chairman and another board member were appointed to deal with Abrahams. They looked at his previous employment and experience as CEO and we didn’t go ahead with the deal,” he said.
“We realised that he was not experienced enough.”
The Sunday Times could not independently confirm this and a board member declined to comment.
Cele said that after Yekani turned down the overture from Abrahams, the Eastern Cape government failed to provide the financial help he requested. The provincial government denies this.
IDC spokesperson Patience Mushungwa confirmed the organisation initiated the April 2018 meeting but denied there was an offer of a R1bn investment, as did Abrahams.
“We request that Cele provides you with a term sheet in which we outlined conditions under which we could consider funding his business. There is absolutely no mention of a R1bn offer,” she said.
Mushungwa said Abrahams applied for IDC funding for a separate venture of his own but was rejected because his business proposal was similar to Yekani’s. Abrahams declined to comment on this aspect.
“IDC protocol does not prohibit the facilitation of meetings between companies who made funding applications to it, on condition that such clients consent to such a meeting and the proposed agenda,” Mushungwa said.
“This was a meeting to introduce the two parties … so they could explore possible areas of mutual interest as Yekani had excess manufacturing capacity at its factory and Mr Abrahams was looking to set up a new manufacturing plant [nearby].”
Mushungwa said although the IDC facilitated the meeting, none of its officials was present during discussions between Cele and Abrahams and only those two men could “disclose further how the discussions proceeded”.
“We introduced Yekani to Abrahams even though that is not standard practice. We initiated the meeting for Abrahams to probably acquire a stake in Yekani. Yekani had the infrastructure in East London and needed the funds since they had also applied for funding … That is also not illegal as well,” she said. Abrahams confirmed the meeting.
“I was invited to a meeting arranged by the IDC and met with Yekani once … The reason is that we had similar concepts and both submitted applications for funding,” he said. However, he denied wanting to buy into Yekani with the IDC’s help.
“I didn’t try to acquire a stake. I was invited to a meeting to explore synergies and we couldn’t find any. It was left at that,” he said.
Cele told the Sunday Times he took “full responsibility” for his company’s financial mess because he “defaulted on my agreement with Standard Bank”.
This week, Yekani employees and suppliers accused Cele of mismanagement.
Werner Bendisch, whose company supplied plastic covers for the DStv decoders and electricity meters that Yekani produced, said: “We stopped supplying Yekani with our products in July after we were not paid for months. Our invoices go into millions. We are lucky we had other clients who kept us going … otherwise we would have closed down as well.”
Cele issued a separate statement saying Yekani was doing everything it could to save its employees’ jobs.
One staff member, who asked not to be named, said he did not know how he would feed his three children and extended family.
“I was paid well and I was starting to build myself a house when the company experienced troubles. I was last paid in June and we went to work for nearly three months without pay,” he said.
Baphelele Mhlaba, chief of staff in the Eastern Cape premier’s office, said the provincial government had tried to help Yekani, giving it business rescue advice and an injection of R3.8m from a jobs fund.
Mhlaba said Yekani was also granted free rental of its premises for a year, though Cele disputes this.