Hazel Friedman
A bitter battle over ownership of shares threatens to rip the black empowerment community apart
Former political prisoners are starting to feel the fallout from the battle between the Makana Trust, set up to improve their lives, and Safika, the empowerment company Makana accuses of appropriating for itself millions of rands in shares they were to have jointly owned.
Makana v Safika is a tale of lucre that is getting filthier by the day. It’s been dubbed the “clash of the comrades” and it threatens to rip the black empowerment community apart. The conflict involves Makana Trust and Safika Investment Holdings, which are embroiled in a bitter battle over ownership of M-Cell shares worth millions.
Makana trustees claim these shares rightfully belong to them. They say the shares would be used to assist destitute former prisoners some of whom have started grumbling that they have seen no benefit from Makana, set up in their name.
Safika currently owns the shares. It insists that the dispute is really a vendetta conducted against the company by a disgruntled business partner. The high court has ruled that Safika be investigated by the Department of Trade and Industry, looking at, among other things, the disputed shares and a disputed payment by Makana to two of its directors.
The court order was the first major victory for Makana, but Safika says it will appeal and is also in the process of suing the Makana trustees for defamation. The first of these actions is scheduled to be heard in court in the next few months. It says that Makana, not Safika, must get its house in order.
Ultimately the casualties of the clash are not only the combatants but the thousands of Robben Island prisoners waiting to receive money from the Makana Trust. “When the trust was founded we were overjoyed,” says a former inmate who asked not to be identified. “Now we seem to have been forgotten. We don’t know where the money is. All we know is while a few of our former comrades now live like fat cats many of us are destitute.”
The Makana Trust was established in 1996. Another organisation, the ex-Political Prisoner’s Fund, still operates under the chairmanship of former Robben Island prisoner Ahmed Kathrada. To date about R3-million has been raised for the fund by Suzanne Weil Associates an events management company. This money has been used to help finance the funerals of former prisoners.
“The fund is totally separate from the Makana Trust,” says Kathrada. “But many ex-prisoners don’t know that and they sometimes ask me when they will start benefiting from the trust.”
More than 5000 former political inmates and their families are supposed to be represented by the Makana Trust. Its two founding trustees are stalwarts of the anti-apartheid struggle and former Robben Island prisoners themselves: Peter Paul Ngwenya (who is also a director of M&G Media, the owner of the Mail & Guardian) and Sothomela Ndukwana. Former Gauteng premier Tokyo Sexwale heads the trust, which owns 51% of Makana Investments (Pty) Ltd. The other 49% of Makana Investments belongs to Web Wire (Pty) Ltd, which is 100% owned by the trustees.
The official deed of the Makana Trust gives the founding trustees discretionary powers to administer donations to the trust, as long as this is deemed “advantageous to the trust”.
But to date the trust is empty. There have never been any donations, says Ndukwana. And no assets either. Except, that is, for radio stations P4 and Khaya FM.
“P4 International in Norway put their radio station in the name of Makana Trust because Makana investments did not yet exist,” explains Makana spokesperson David Selvan. P4 International also injected millions into its South African counterpart to get the radio station up and running.
P4 has since been running at a loss. But Selvan says Makana Trust will not be held liable for the loan repayments to P4 International.
“Presently there’s no cash flow into Makana Trust but there’s an accumulation of capital value to the benefit of the trust, which will ultimately become extremely valuable. The assets that accrue to Makana Investments through various ventures will ultimately pay dividends to Makana Trust.
“What we’ve done is unprecedented,” says Ndukwana, “developing Makana without a single donation and gearing it up to provide poverty alleviation as well as educational, social and financial assistance to former prisoners.”
But several of the 5000 future beneficiaries still query the manner in which the trust is being managed.
Fuelling the concerns of former prisoners are questions concerning Makana Trust’s registration with the Receiver of Revenue prior to this year.
Sources within the South African Revenue Services (Sars)say Makana Trust applied to be registered with the Receiver of Revenue a few weeks ago six years after it was first established. Makana’s tax consultants insist they first applied in 1998. But they admit they did not follow up their application until September last year, when they were called in by Makana to do an audit. “When we realised the application had not gone through we reapplied last September, November and in January this year.”
Sources at Sars say they have no record of an application prior to April this year. It usually takes days, not months, for a tax reference number to be provided.
In terms of South Africa’s tax laws, a trust is obliged to:
Register with the Receiver of Revenue for the purposes of either paying or being exempt from tax;
Declare its assets to the Receiver, even if they are not reaping profits;
Open a bank account separate to that of individual trustees and holding companies; and
Submit audited financial returns to the Receiver.
Makana only opened a bank account last year.
Ndukwana apologises for the registration oversight. But he believes the focus should not be on Makana but on Safika’s alleged “theft” of money that should have gone into the pockets of former prisoners. “Safika was in debt until it started selling shares that rightfully belong to Makana,” says Ndukwana. “What they have done is illegal and immoral.”
“A lot of money has been generated from these shares, to the tune of about R160-million,” says Selvan. “And none of that money has flowed to Makana.”
In 1997 Safika and Makana joined forces to bid for a slice of the 15% in MTN that became available to empowerment groups when United States telecoms giant SBC offloaded its interest. Safika’s two largest shareholders are Vulindlela Wilson Cuba one of the heavyweights in the black business community and Moses Moss Ngoasheng, whose roots lie deep in liberation politics. Ngoasheng has also served as economics adviser to President Thabo Mbeki. Each shareholder indirectly controls a 38% interest in Safika. The company also has a substantial interest in Phaphama the entity that controls New Africa Investments Limited (Nail). Saki Macozoma, who is CEO of Nail, is also a shareholder and director of Safika. He is a former political prisoner and is related to Ndukwana by marriage (Ndukwana is a cousin of Macozoma’s wife).
The empowerment companies believed they would have a better chance of acquiring the shares if they were broadly based. Safika would therefore bring greater experience to the table while Makana would add popular value because its beneficiaries are former political prisoners.
MTN Holdings was succeeded by M-Cell. In 1998 it awarded about 1% of its shares to the Safika-Makana joint venture, which was called Safika Wireless. Safika and Makana would each obtain a 50% interest in Safika Wireless, which would house the MTN interest. Another 1,5% was awarded the following year.
But Makana decided to bid for the third cellphone licence at the time, a potentially more lucrative endeavour than the MTN shares. According to letters allegedly sent by Makana to Safika, Makana renounced its interest in Safika Wireless in 1999. Safika says it agreed to reconsider Makana’s shareholding, should the trust’s cell bid fail.
Makana believes that Safika never intended to honour its word. But Safika denies this.
“The true situation is that Makana relinquished its claims to these shares, against the advice of Safika,” says Safika spokesperson David Barritt. “Makana has no legal claim over any M-Cell shares owned by Safika because it voluntarily surrendered them.
“Makana walked away from something that was showing negative value at the time, so Safika was prepared to assume all the risk.”
And the rewards. Safika has become one of the titans of empowerment, thanks to its M-Cell shares.
The Makana trustees instituted a civil action claiming 50% of the share pool. In order to avoid a public fight, Safika offered Makana R12,5-million. This offer was rejected.
Ndukwana has gone so far as to accuse Safika of fraud and theft. At issue is R4-million, which Ndukwana says was an “irregular payment” made to Cuba and Ngoasheng during 1998. Safika insists there was nothing untoward about the payment and that it was approved at a board meeting in July 1998.
Ndukwana has a 4% shareholding in Safika and is a non-executive director. “If my shareholding suffers because I’m making a stand, so be it,” he says. In fact Ndukwana’s minor shareholding in Safika has yielded attractive returns. In 1996 Safika gave the shares to him. They were almost worthless. In 1999 he had them transferred first into Makana Trust’s name, then back into his own. Since then, the shares have soared. Safika’s share register shows that in August 2000 Ndukwana was paid R1,5-million in dividends. This might be a mere drop in the Safika pool. But it’s the kind of cash most ex-prisoners can only dream of.