Smuts says Bosasa Youth was BEE front
Court stops mining millions going to Gavin Watson estate
● Investor and SA’s ambassador to Japan, Smuts Ngonyama, has obtained an interim interdict to stop the payment of about R6.8m in dividends to a company in the Bosasa group that he has accused of BEE fronting.
Johannesburg high court judge Thifhelimbilu Mudau on Friday ordered that the money be kept in a separate account while Ngonyama and the estate of the late Gavin Watson battle it out in the appeal courts over who should rightfully own the lucrative shares from which the dividend is derived.
The shares are in Ntsimbintle Holdings, in which Saki Macozoma’s Safika group is the largest shareholder. Ntsimbintle owns, through a subsidiary, an interest in a part of the largest manganese mine in SA, Tshipi Borwa mine.
According to the court papers, for the year ended February 2020, Tshipi declared and paid dividends of R2.015bn. The recent dividend declared to all shareholders of Ntsimbintle on February 19 was R400m, according to the court papers. The R6.8m in the court order is a portion of the dividend that was payable to the Bosasa Youth Development Centres company, now in liquidation.
Ngonyama went to court urgently ahead of last week’s dividend payout, saying that, though Bosasa Youth was still registered as the holder of the shares in Ntsimbintle, he was the beneficial owner of the shares. He said in his founding affidavit that anyone involved in the payment to Bosasa Youth would be an accomplice to the crime of broad-based BEE (BBBEE) fronting.
Mudau said in his judgment that his order was an interim one, but that allegations of criminal conduct could not be “simply ignored by any court since it is an affront to the promotion of the rule of law”.
Ngonyama’s claim stems from a 2019 judgment of the Johannesburg high court, which found that Bosasa Youth had only come to own the shares — donated by Ngonyama — via a “material misrepresentation” by Watson that Bosasa Youth was a BBBEE company. In fact, said judge Fayeeza Kathree-Setiloane in 2019, it was Watson — “motivated by greed and dishonesty” — and his family, and not black youths and women, who were the real beneficial owners in Bosasa Youth.
“Mr Watson acted dishonestly and reprehensibly by taking benefits allocated by the parties, under the agreement, to a BBBEE entity and appropriating them to himself and his family,” said Kathree-Setiloane in her judgment. She ordered Watson to immediately take steps to restore the shares to Thunder Cats Investments, Ngonyama’s investment vehicle.
At the time Watson was still alive and appealed the judgment to the Supreme Court of Appeal, but that appeal is still to be heard. However, the appeal application has suspended Kathree-Setiloane’s judgment so Bosasa Youth still sits as the registered owner of the shares on Ntsimbintle’s securities register.
Meanwhile, the dividends have been rolling in. In court papers, Bosasa Youth’s provisional liquidators said that since the appeal was launched, and before the dividend was in dispute, there had been three dividend payments to Bosasa Youth, totalling over R59m.
When Ngonyama demanded Ntsimbintle not pay the latest dividend to Bosasa Youth, but rather to keep it in escrow, Ntsimbintle said it could not do that; it was constrained by law to pay the dividend to the registered shareholder in its securities register, unless there was an agreement with the liquidators or a court order.
“It is not for us to decide on the merits of the dispute between you. It is for your client to follow appropriate legal avenues to enforce its alleged right,” said a letter from Ntsimbintle’s attorneys, Webber Wentzel. The liquidators did not agree.
They said Bosasa Youth was in the earliest stages of liquidation and their job as provisional liquidators was only to find and preserve its assets.
They had kept the earlier dividend payouts safe and would do the same with the one in dispute, they said. Then, when it came time to pay creditors — way down the line — Ngonyama could put in his claim, along with everyone else.
In their court papers, the liquidators said Ngonyama was seeking to “disturb the operation of the law of insolvency” by preventing the assets of Bosasa Youth from being distributed as insolvency law required.
Mudau said that if there was a conflict between the company law on the payment of dividends and the BBBEE Act, the BBBEE Act would prevail.
“The language of the statute as well as the intention of the legislature in this regard is clear,” he said.
“If the liquidators prove to be entitled to the dividends issued by [Ntsimbintle] no harm will have been suffered by the liquidators if they wait for the appeal(s) to be decided,” he said. For now, the funds would be in the hands of “a neutral and financially sound party” — Ntsimbintle.
He also ordered that any further dividend payment should be treated in the same way until the appeal courts had finally determined the case.
Mr [Gavin] Watson acted dishonestly and reprehensibly Judge Fayeeza Kathree-Setiloane in a 2019Johannesburg high court ruling