The battle for the soul of empowerment group Foundation of African Business and Consumer Services (Fabcos) moves to the Johannesburg High Court on Friday.
The court battle is the latest chapter in a month-long battle over allegations of breaches in corporate governance. It follows a disputed resolution, which endorsed Fabcos’s investment arm Fabvest’s sale of 15,5-million shares — 19% of gaming and hotels owner Tsogo Investment Holdings — to Hosken Consolidated Investments.
According to papers filed with the court, the Fabcos Trust, which owns 91% of Fabvest, wants the Monday meeting declared null and void and its resolutions overturned.
At the meeting, some members of the trust moved a motion that the meeting be adjourned and the Fabvest board step down. The meeting chairperson and Fabcos trustee, Raymond Mallach, ruled that the gathering was not meant to discuss whether to sack the Fabvest directors. The trustees want the court to rescind this decision.
Though the court has been asked to rule on alleged breaches of corporate governance issues by the Fabcos board, the courtroom was the latest theatre to which Fabcos officials have been to air in-house tensions. These include accusations and counter-accusations of attempts to “loot” company assets by some shareholders and directors.
Premier Foods is the crown jewel of the group and is South Africa’s largest, 100% black-owned and operated food company. Some of its better-known brands include Iwisa Maize Meal, Blue Ribbon Bread and Snowflake Flour.
Last week, Premier Foods chairperson Mxolisi Zwane accused a Judge, Willie Seriti of the Pretoria High Court, of using his wife, Nomvuyo Seriti, to get close to Fabcos’s assets to be in a position where he can influence the transacting of shares and placing associates in key positions.
Nomvuyo Seriti is the Fabcos Trust chairperson and, by virture thereof, Zwane’s indirect boss. The trust controls Fabvest, which holds a 100% stake in Premier Foods.
The drama started on May 30 when Nomvuyo Seriti sent a memo demanding that Zwane account for contracts entered into and explain certain corporate governance issues such as why Premier Foods needed an executive chairperson and a CEO, as well as allegations that Zwane was imposing his decisions on the board. She gave Zwane and the board seven days to respond.
They did not. Instead, Zwane argued that his board was not accountable to Seriti and, if she had issues to raise, she ought to have gone to Zwane’s employers, Fabvest.
Zwane has been under fire from snipers, some of whom he says are on his board, accusing him of poor corporate governance. Last week he told a media briefing that some of his board members were “not as trustworthy as I thought”, and said he would table the effects, and what steps to take as a result of the leaks, at the next board meeting.
Some Fabcos officials and shareholders have told the Mail & Guardian that they are unhappy that Fabcos has lost its empowerment focus.
They say an inordinate number of senior and middle managers are white. They also accuse the organisation or its subsidiaries of paying no more than lip service to black economic empowerment because it procures from white companies when there are capable black entities.
They point to the alleged appointment by Premier Foods of white-owned financial engineering company Quorum Financial Engineering to help procure a loan of between R300-million and R700-million.
They say Zwane and his board entered into a deal with another white logistics company, DNI, to distribute the company’s products. DNI’s proposal is that it would reduce Premier Foods’s R315-million annual logistics expenditure by R65-million and earn 36% of whatever amount it would have helped Premier Foods save.
Furthermore, according to Fabcos insiders, the decision to mandate Bravura Equity Services to set up a management share incentive scheme not only flew in the face of empowerment commitments, but Fabcos had not approved of such a scheme.
Zwane last week denied, as per his detractors’ accusation, that these were done deals, saying that they were proposals that were still to be ratified by his board.