NEF in battle over R50m failed dealComment on this story
Polokwane - The National Empowerment Fund (NEF) is embroiled in a bitter battle with a black businessman over the collapse of a R50 million black empowerment deal.
The fund, which sponsored businessman Motsile Rahube to the tune of R50 million to purchase the lucrative Goseame Open Market in Polokwane, Limpopo, has been involved in court battles to remove Rahube from the R1 million-a-day operation that sells fruits, vegetables, meat and flowers in the province and Botswana, Zimbabwe and Malawi.
The businessman has in turn accused the NEF of fraudulently wrestling the business away from him, making serious allegations of widespread corruption in the top management of the fund.
According to Rahube, there was an attempt by the fund to hijack the company from him and sell it to their preferred buyer, citing this as highly irregular and corrupt.
The transaction was lauded as a victory for the empowerment of black entrepreneurs when it was first approved in 2012, but it has fallen through, with both parties making counter-allegations against each other.
The fund was earlier this year thrown into controversy when it transpired that wealthy businesswoman Khanyi Dlomo had been funded to the tune of R34 million to establish luxury boutique Luminance in Hyde Park, Johannesburg.
The NEF was criticised for funding Dlomo with public money to establish an elite luxury brand while there were thousands of poverty-stricken people who needed the money the more.
The fund defended its decision, saying Dlomo’s loan was a prudent and perfectly legitimate investment as the retail sector was largely white-owned even though most consumers were black, and that Dlomo would be among the first black women to tap into the sector.
According to the funding contract with Rahube, the previous owners of the business would stay on a further 12 months after the sale of the business for skills transfer and what would be a smooth transition.
But Rahube claims after he took control of the business it came to his attention that the previous owners were stealing money from the business, and instituted a forensic investigation which confirmed his suspicions.
Speaking to The Sunday Independent, Rahube claimed the business had improved its performance during the period that he was in charge, and claimed NEF ignored the findings of the forensic report and failed to take action against the previous owners.
“I’m convinced that there is something sinister about the way things were done, and it points to corruption high up in the NEF. How was the NEF able to remove me from my company and insert other people without my consent when I was the sole director?
“A tactic they have used is to let the matter drag in the courts so that I should be financially exhausted and not be able to fight them back.
“The idea was never to ensure the business is successful but to do what they are doing now, which is basically hijacking the company,” said Rahube.
He denied allegations of financial mismanagement levelled against him by the fund, saying it was all part of attempts to wrestle the company away from him.
But the NEF has hit back, saying Rahube had committed significant breaches of the funding contract, which had a pledge and cession agreement according to which the NEF could remove the owner to protect its investment if he/she failed to abide by the contract.
It claimed that audited financial statements showed that more than R50 million of company funds were unaccounted for during the 12 months that Rahube was in charge.
Among its allegations are that Rahube failed to maintain reserve funds to pay the balance of the purchase price of the business to the sellers, exposing the NEF to the risk of the business being taken back by the sellers.
He is also accused of doubling his salary within a short space of time without consent from the NEF as required, and failing to distinguish between business and personal funds.
According to NEF spokesman Moemise Motsepe, Rahube had increased the staff complement of the business without consent, which more than doubled the wage bill.
In some instances, according to Motsepe, there were security guards who were earning more than R20 000 per month.
The fund also accused Rahube of buying luxury vehicles for personal use with company funds, syphoning funds to family members under the pretext of loans and “placing relationships with key stakeholders under severe strain resulting in the business losing significant suppliers and customer channels”.
“As a publicly funded entity the NEF has a legal, moral and patriotic obligation to take the necessary action when material breaches to its funding agreements are in evidence.
“Further, Rahube was removed legitimately from the business following internal corporate governance processes, and has no claim to the ownership of the business,” said Motsepe.