A complaint of BEE fronting has been launched against medical giant Netcare Limited at the BEE Commission for what an empowerment company feels is a breach of contract.
Milagros Social Development (Pty) Ltd, 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 beneficiaries have to the income or assets of a trust – in the months of November in 2014, 2015 and 2016.
This was after Milagros were awarded 2 million trust units linked to a corresponding number of Netcare shares at R12.76 a share with a loan of over R25 million provided by the medical giant, where 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 for interest, among other deductions.
Milagros said they received the vesting for 2012 and 2013, but not for the succeeding three years, which is why they allege fronting.
According to the Broad-Based Black Economic Empowerment Act, fronting loosely means the proceeds of a transaction do not flow to black people in the ratio specified in the relevant legal documentation.
Milagros founder Masingita Masunga told The Star that trouble started when MCT head Peter Warriner allegedly changed the conditions stipulated in the letter of award, where Milagros were 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 or 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 chief executive Richard Friedlander for them to get their money, but he allegedly kept referring them back to Warriner.
“And this person (Warriner) just keeps on giving us a run-around, saying we’ll meet and discuss a settlement, but when we send an email, he says (we’ll only get) the settlement once we do the project the trustees want us to do,” she said, adding 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 the emotional distress and hardship they’ve endured”.
Milagros’s biggest shareholder, according to Masunga, is My Confidence Trust, an NPO involved in projects to uplift rural women – especially those with disabilities, child-headed households and various educational projects.
One of these projects, Masunga added, involved paying fees for schoolchildren, which she said could not be done anymore as they had not received money she said was due to them.
“We haven’t been able to pay for one of the children we sponsor, who has cerebral palsy and is in a private school, for the past two years. He won’t be able to get his report this June,” she said of a boy in high school.
Milagros has 32 individual shareholders and two companies that are shareholders, one of which is Masingita Masunga Media.
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.