The former directors of the investment arm of the South African National Civics Organisation (Sanco) face possible legal action over missing assets and investments worth millions of rands.
It has emerged from various sources, including documents filed this year in the Johannesburg High Court, that more than R50-million-worth of assets and investments belonging to Sanco Investment Holdings (SIH) have vanished.
SIH was formed in 1996 as an empowerment wing of Sanco, and subsequently embarked on ambitious business projects involving Sanco and outside investors. The plan was that profits from Sanco’s business operations and the investment company would ultimately flow back to development projects and black empowerment schemes.
But rampant mismanagement and power struggles within Sanco led to the collapse of the company, sources say. The company was wound up in 2002 after the liquidators of the old African Bank brought an action against it for failing to repay a R300 000 loan for the hire of office equipment.
A Johannesburg firm, IL Investments, bought the rights to SIH’s assets from the liquidators, who also initially sought to recover missing funds. IL Investments has since embarked on a probe to trace SIH’s shares, which were sold without board approval or dividends being accounted for. Their search is complicated by the fact that the SIH lost investment records, financial reports and cash-flow statements relating to several investments.
Sanco’s portfolio included shares worth R14-million in technology company WBS; R24-million in Emerald Casino; and R8-million in oil firm Excel, now part of Sasol. While Sanco was a preferred empowerment partner because of its mass base, there are indications that not one rand reached communities it claimed to represent.
IL Investments has brought a series of legal actions against companies that bought these shares from former directors of SIH. The company has asked the court to force the companies to disclose their shareholding details.
Sanco president Mlungisi Hlongwane said this week that his organisation welcomed the court actions, as they would shed some light on the affairs of SIH.
He said that he and Sanco’s national executive committee had long been concerned about how the company was managed by former CEO Moss Mayekiso.
SIH has been hit by a series of scandals. Two major insurance schemes, which provided Sanco members with life insurance if they paid a small yearly fee, collapsed after being hit by fraud and mismanagement.
Hlongwane said Sanco was also concerned about the transfer of some of the organisation’s investments to Mayekiso and other Sanco leaders.
Mayekiso this week admitted acquiring shares that once belonged to Sanco, but said he had done so legally and in line with SIH’s policy.
However, Hlongwane denied this, saying Mayekiso had transferred shares held by SIH in a company called Hlano Investments without Sanco’s approval. SIH used to own 19% of Hlano, which is listed as one of South Africa’s top 300 companies, and has an annual turnover of R100-million.
It appears that Sanco now holds less than 5% of Hlano, with the rest of the shares being transferred to Mayekiso and two other Sanco leaders, named by Hlongwane as national organising secretary Bonisile Malindi and the late Sandi Mgidlana, the organisation’s former head of housing.
Mayekiso said the shares were allocated to him and the other Sanco leaders as part of their remuneration. ”Everyone who was allocated shares was working on the projects,” he said.
He added that SIH’s policy allowed for the transfer of the shares to himself and the other two Sanco leaders. Hlongwane admitted this, but said the policy limited the transfer of shares to 10% of any investment held by Sanco.
Hlongwane is also at the centre of a row involving another Sanco investment. He serves as CEO of WBS, in which Sanco used to hold R14-million worth of shares. The proceeds from the sale of these shares are also unaccounted for.
Hlongwane said that Mayekiso presided over the sale of the shares to a company called Vula Investments. Mayekiso denied this, saying he quit SIH before the sale was concluded.
A director of Vula Investment said this week that it appeared that Sanco had used the proceeds to pay debts.
Hlongwane said he did not benefit from the sale of the shares in WBS and that his appointment as CEO had nothing to do with the sale.
”I am a telecommunications specialist, and actually introduced Sanco to WBS. My understanding was that Moss Mayekiso and Eugene Ruiters [a former SIH director] signed the deal with Vula,” he said.
Two years ago, the Sanco leadership suffered an ugly split. Treasurer Godfrey Jack and two other officials were suspended, then resigned, after Jack levelled allegations of corruption against three Sanco leaders, including Hlongwane.
Hlongwane said certain people within Sanco had tried to dethrone him by spreading false information about him.