Top executives set to score in BEE front companies
Brimstone trio in line for fishing rights worth billions
● Top executives of a JSE-listed company are doubling up as directors of black empowerment front companies used to score fishing rights potentially worth billions.
The managing executive, chief operating officer and company secretary of Brimstone Investments are also directors of a consortium that has partnered with Sea Harvest — a Brimstone-owned company and one of the largest empowered companies in its sector — to secure fishing rights from the Viking Fishing Group.
The deal, given the green light by the Department of Agriculture, Forestry and Fisheries, is being opposed by one of the trade unions operating in the fisheries sector.
The purchasing consortium comprises Sea Harvest and its empowerment partners: SeaVuna Fishing Company, Nalitha Investments and the South African Fishing Empowerment Corporation.
Brimstone managing executive Takula Tapela and chief operating officer Iqbal Khan are the sole directors of the South African Fishing Empowerment Corporation. Khan and Brimstone company secretary Tiloshani Moodley are directors of SeaVuna.
Brimstone, which owns 85% of Sea Harvest and has a stake in Oceana, another major fishing company, has vehemently denied allegations that it is using front companies to score the fishing rights.
If the Competition Tribunal approves the merger with Viking, the merged entity will have around 40% of South Africa’s hake market. But the National Certificated Fishing and Allied Workers Union wants to stop the deal.
The union’s lawyer, Richard Brown, has raised red flags over Brimstone executives being in the empowerment component of the deal. “They are not new entrants, it’s really just Brimstone fronting,” he said.
The union was also concerned about the effect the deal would have on ordinary fishermen who are quota holders in the Viking Group, he said. “This is going to create a monster, it’s going to be too big.
“If what we understand is correct, they will control upwards of 40% of the hake market, let alone other species. We are just putting too many eggs in that one basket. The only way to squeeze out any more profits from this deal is to cut workers.”
On April 9, the department said it had approved the merger. But this was a month before the Competition Commission recommended approval to the tribunal.
The department said it would “continue to support investments of this nature in the South African fishing industry which seek to bolster BEE, competition among rights holders, and employment security for fish workers, while balancing the economic challenges faced by smaller quota holders in these capital-intensive offshore fishery sectors”.
Brown accused the department of approving the merger without consultation. “How is that possible that [it] approves the deal without any input from anybody? It’s a mega-merger. If my client can see the potential pitfalls of such a merger controlling so much of our fishing stock, we wonder what the department had in front of them.”
The Competition Tribunal acknowledged receipt of the union’s submission opposing the deal. Competition Commission spokesman Sipho Ngwema said its investigation found the deal was not likely to result in a substantial prevention or lessening of competition. However, it had advised Brimstone to eliminate concerns arising from its crossshareholding in Oceana and Sea Harvest.
Speaking for Brimstone, Moodley said she and Khan were directors of SeaVuna “as a result of the indirect shareholding interest Brimstone holds in SeaVuna”.
Tapela and Khan had been listed as directors of the South African Fishing Empowerment Corporation solely for purposes of registering it as a new entity to which Brimstone would offer governance support, she said.
“I deny that Brimstone is using any individual to front as black empowerment components in respect of the transaction with Viking. Furthermore, the Department of Agriculture, Forestry and Fisheries investigated the risk of fronting in great detail and found that this is not the case when it approved the consortium’s acquisition of Viking’s fishing rights,” Moodley said in written responses.
Shareholders of the empowerment entity were community empowerment consortiums “based in the west coast, east coast, and KwaZulu-Natal; as well as a charitable trust”, she said, but did not name them.
Moodley said Brimstone would argue its case before the tribunal. “NCFAWU will have a further opportunity to raise its concerns with the Competition Tribunal, where Sea Harvest and the commission will also be provided with an opportunity to explain why the transaction does not raise any competition or public interest concerns.”
Khaye Nkwanyana, spokesman for Fisheries Minister Senzeni Zokwana, said information about possible fronting by directors of empowerment entities bidding for fishing rights was not relevant in the decisionmaking process.
The only way to squeeze out any more profits from this deal is to cut workers
Richard Brown
Union lawyer