BEE dream goes bad

July 2, 2018

FIN24 / 01 JULY 2018 -  06:02 / LESETJA MALOPE  

 

 

A multimillion-rand black economic empowerment (BEE) deal that was meant to be a good story across racial lines has gone terribly wrong.

 

Thapelo and Tshepiso Mothibinyane risked all to pursue their dream of being pioneers in the niche sector of raise boring but, a few months after buying a minority stake in one of the few companies in that sector, with the help of the Industrial Development Corporation (IDC), it seems their dream is turning into a nightmare.

 

A raise borer is a vast machine used to excavate a circular hole in the ground, from a higher to a lower mining level, thus avoiding the use of explosives.

 

 

The Mothibinyanes bought a 40% stake in Atlantis Group of Companies (AGC), a previously wholly owned family multinational mining contracting company, specialising in raise boring, blind boring and other drilling services, based in Randfontein on the West Rand.

 

However, relations between the shareholders soured and the majority owner, Sarel Smit, who was also the CEO, was fired in the process.

 

Speaking to City Press, Thapelo Mothibinyane said the problems started when there was resistance from the company to have a board and governance structure, as required by the IDC funding agreement.

 

“We were all very excited about this opportunity, given that we are the first black South African youths to enter into the raise boring industry,” he said, adding that nothing could have prepared him for the challenges he is facing as a black industrialist.

 

“There was no sincere buy-in and support from the majority shareholder to do so, from the beginning. In fact, there were instances when, in our view, there was a deliberate attempt to frustrate the corporatisation of the company. As such, it took longer for us to set up these structures.

 

"In December 2017, the newly formed board arranged corporate governance training for us.

 

However, the majority shareholder [Smit] was not overly enthusiastic about having a board to which he would be accountable and following good governance processes. It was clear that he wanted to retain the status quo where he made all the decisions without needing approval from anyone,” Mothibinyane said.

 

The board found that there was a culture of not separating company from personal expenses and had to introduce internal controls, but the changes were not welcomed, he said.

 

“Some members of the majority shareholder’s family, who also worked for the company, have repeatedly used intimidation as a tactic to bulldoze everyone, to continue to get things done their way. For example, there was bugging in three offices belonging to black senior management with no staff member willing to testify as they were threatened not to disclose any information in this regard,” Mothibinyane said.

 

Matters came to a head and the board was forced to institute a disciplinary hearing against the CEO.

 

“What followed was his dismissal after he was found guilty on three serious charges, and since then members of staff including ourselves as shareholders and senior executives have been subjected to intimidation. In fact, the majority shareholder has contacted AGC’s suppliers and customers in what appears to us like an effort to turn them against the company. He also instructed our bankers to freeze the company’s bank account,” he said.

 

Mothibinyane explained that he has opened a fraud case against Smit after monies totalling over a million rands were transferred to his personal account from the company’s Brazil and Zambia subsidiaries.

 

Another case of intimidation was opened after an employee was allegedly threatened and even called the k-word by a Smit family member.

 

Gauteng police spokesperson Captain Mavela Masondo confirmed that both cases were opened at the Randfontein Police Station and were under investigation.

 

However, Smit denied that he had resisted change, saying that he had in fact cooperated throughout.

 

“At no stage did I resist any changes. In fact I even voted for the changes in the company, together with the other board members. All these are reflected in the board meeting minutes. At no point did I resist or frustrate any processes towards good corporate governance. I knew exactly what the IDC requirements entailed and the executive cooperated with the board towards the establishment of same. A difference in opinion is not strange in any boardroom, however, these differing opinions are discussed and resolutions are made.”

 

Smit added that there were instances when he was even outvoted and resolutions carried out.

 

Smit admitted that throughout the 20 years of the family business, there were instances when there was no clear separation of personal and business expenses and the IDC was made aware of the matter, thus the recommendation for a board.

 

“Adherence to corporate governance is not an event; it’s rather a process that takes time and continuous training to be implemented comprehensively. The company’s financial position at the time that some of these changes – which had a huge financial bearing on the company – were to be implemented, raised concerns rather than discontent. I established this business 20 years ago as a family business and it has enjoyed continued success. Before the board was appointed I, together with some members of my family, managed the business to the best of our ability,” he said.

 

Smit further pointed out that he advised Mothibinyane to take action against whoever was alleged to have been intimidating.

 

“Upon being made aware of managers’ offices being bugged, I personally called the police to open the case. I am not aware of anyone who has ever been called to testify and then been intimidated.

 

My obvious advice to the current acting CEO is to investigate those involved and take appropriate action,” he said

 

Smit also denied that he was involved in any form of sabotage or colluding, despite some people within the company not welcoming his removal as CEO, and there was also never an instruction to the bank to freeze the company’s account.

 

“A letter which was shared with management clearly states that, since I had taken personal surety for the company, overdraft accounts should be revised, as I am no longer in charge of the day-to-day operations of the company. A subsequent meeting with the bank was held, which the minority shareholders chose not to attend, and a resolution was taken by the bank to look into an alternative and fair suretyship arrangement,” Smit said.

 

On the payments to his personal account, Smit said: “I have no access to Zambia and Brazil bank accounts. The R95 000 paid directly to me is as per initial agreement that I be paid a management fee in this deal. AGC has records of this payment into my account from when the contact started.

 

The R1 million received from Brazil is a repayment of a personal investment that I had made and now recalled.”

 

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LINK : https://www.fin24.com/Companies/Mining/bee-dream-goes-bad-20180701-2

 

Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER

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