Transformation Clash: Afro-Map took Actom, the IDC and Eskom to court, challenging the controversial rescue
of transformer producer SGB-Smit Power Matla. Photo: File photo
Local company Afro-Map has filed papers at the South Gauteng High Court challenging the recent acquisition of transformer producer SGB-Smit Power Matla (SSPM) by electrical infrastructure firm Actom, claiming bias by the business rescue practitioners involved in the deal and bad-faith conduct by the Industrial Development Corporation.
Both the rescue practitioners and the IDC, however, have denied any wrongdoing.
In court papers seen by the Mail & Guardian, Afro-Map claimed Ian Fleming and Warren Castle, who were appointed business rescuers for SSPM in September 2023, had applied “flawed reasoning” in recommending the acquisition and acted in a manner that was “irrational, unreasonable and procedurally unfair”.
An affidavit by Afro-Map managing director Martin Ntuli cited Fleming, Castle, Actom, SSPM, the IDC — which is involved in the matter as a senior secured creditor — and state power utility Eskom as respondents.
The clash comes as South Africa emerges from a power crisis that had plagued the country for decades, with experts stressing the importance of strengthening local transmission manufacturing to stabilise the national grid.
They said the domestic manufacture of components such as transformers and high-voltage cables is essential for the power utility building the required new transmission lines — an estimated 1 400 km annually over the next decade.
In the Afro-Map affidavit, Ntuli said SSPM’s business rescue practitioners (BRPs) had acted in a manner that was “irrational, unreasonable and procedurally unfair”.
“The conduct of the BRPs, IDC and Eskom, perpetuates the disadvantages experienced by the majority of black South Africans in participating meaningfully in the national economy,” he said.
“This undermines the constitution, achievement of equality and transformation of sectors dominated by a few players, who are largely white.”
Ntuli said when Afro-Map showed interest in bidding for SSPM, the business rescue practitioners had encouraged the company to present an offer “because the offers they had received were not satisfactory and were not accepted by creditors”.
“We were told we were the only bidder. SGB-Smit Germany held 49% in this business and owned the backbone technology. Besides being the shareholder, SGB-Smit Germany licensed its technology to SSPM,” the affidavit states.
“SGB-Smit Germany agreed to enter into a technology licensing agreement that would include all technical support and know-how. We were given till June 2024 to make an offer, which we did.”
But in May 2024, BRPs issued another business rescue plan for Afro-Map, Ntuli said.
“The business plan by the BRPs suggested that SSPM business be broken into two and sold separately as Pretoria and as Cape Town – a view we did not share or agree with. Our intention was to buy this business as a going concern — save jobs and turn it around,” he said.
“They (BRPs) tried to persuade us further to only buy Pretoria and leave Cape Town, citing a particular American client who had an active running transformer order being produced at the Cape Town factory. We were told that the American client was not willing to continue doing business if black people owned the company,” he said.
“We said that did not make sense and was not acceptable — refusing to be dictated on our ownership structure by a client, regardless of where they were from. The BRPs then suggested and presented the deal’s financial structure to package our offer, which did not make sense to us. It was also not beneficial to us, and we rejected it, presenting a simple, straightforward offer as a going concern.”
Ntuli said Afro-Map was also concerned when the BRPs expressed interest in managing and running SSPM, in exchange for a 5% to 7% equity stake.
“It was at this point becoming clear that as an interested buyer, we had conflicting interests with BRPs, who had interests far beyond their professional, ethical, legal and constitutional perimeters,” he said.
“Although we submitted our offer to the BRPs to table it to creditors for consideration, we never got any feedback on whether it was tabled to creditors or not.”
Despite Afro-Map having presented a solid bid to acquire SSPM and offering R175 million, Fleming informed him that he required “conclusive proof of funding in the form of a letter from bankers stating that the applicant has in excess of R175 million available under its existing facility”, Ntuli claimed.
Asked to respond, the business rescue practitioners said despite claiming to possess the potential and liquidity to drive the transformer industry through the acquisition of SSPM, Afro-Map could not provide sufficient proof of funds.
“Afro-Map gave no guarantee that the funds would in fact be made available to support the acquisition,” Castle told the M&G.
“The BRPs duly considered and assessed the offers received, including the final Afro-Map consortium offer, which was not R175 million, only coming to R107 million, which did not benefit creditors. The preferred offer would make R150 million available for creditors on transaction close.
“The Afro-Map offer was dependent on implicit funding from the IDC and unsecured creditors, due to the manner in which it was structured. To expect the IDC and creditors to accept equity-like loans with no real commitment to repayment is disingenuous and could not be included in any distribution calculations,” Castle said.
He said SSPM’s profit-making Cape Town plant already had a lucrative deal with a US company.
“The reason for the Cape Town plant’s viability was that SGB-Smit Germany remained involved, with the plant producing transformers for overseas customers. Contracts for the production of these transformers stemmed from deals granted to SGB-Smit Germany,” Castle said.
“Without their continued involvement, the viability of this plant would be impacted. Afro-Map did not have the available pipeline of work to cater for this loss, which would have a hugely detrimental impact on employees.
“It was made clear to Afro-Map that the customer would not continue with the contracts if SGB-Smit Germany was not involved — the party to whom the customer was contracted to.”
He insisted that the business rescue practitioners had ensured “full transparency and context in terms of the legal process”, in line with the country’s business rescue regime, governed by the Companies Act.
“With a successful conclusion of the rescue process, a key national asset has been protected — together with the preservation of over 200 jobs,” Castle said.
“This has also allowed for the protection of a critical component within South Africa’s dwindling manufacturing capacity, which will no doubt play a crucial role in the country’s grid development in the future.”
In addition to slamming the business practitioners, Ntuli also suggested the IDC, as creditor, had acted in bad faith, claiming that “at no point did they ever disclose that they had asked BRPs to consider running this very business post business rescue – in exchange for a 5% to 7% equity”.
The IDC, however, denied having interfered in the business rescue process. The state entity did not manage or interfere in the business rescue process, “which is the responsibility of the appointed BRPs”, head of corporate affairs Tshepo Ramodibe told the M&G.
“We expect all parties to act in accordance with legal and ethical standards. The IDC participated as a senior secured creditor in the SSPM business rescue proceedings and voted in favour of the approved business rescue plan at the creditors’ meeting on 31 March 2025,” Ramodibe said.
“We recognise the importance of transparency, fairness and transformation in all our engagements. Throughout the process, the IDC engaged with all parties, including Afro-Map, in good faith and in line with our mandate to support industrialisation, job preservation and meaningful participation by previously disadvantaged individuals.”
In recommending the acquisition in August, the Competition Commission — one of three independent statutory bodies tasked with ensuring market fairness in the country — said it was of the view that the deal was unlikely to lessen or prevent competition in the market substantially.
“In addition, [Actom] will develop and implement a procurement programme to identify and support firms owned or controlled by historically disadvantaged persons in the transformer manufacturing value chain,” the commission added.