PetroSA is finally taking Imvume to court for defaulting on its Oilgate debt – but the oil parastatal will let Imvume off the hook for millions of rands in interest owed. Previous attempts by PetroSA to recover the R18-million debt have been feeble. The parastatal justified its soft approach by saying that if Imvume were liquidated ‘there would be very little proceeds flowing into PetroSAâ€.
The debt arose when Imvume asked PetroSA for an advance on a payment it was due for supplying PetroSA with oil condensate. However, instead of using the advance to pay its own supplier, Swiss-based company Glencore, Imvume diverted R11-million to ANC coffers ahead of the 2004 elections.
Imvume Management, the Imvume group company involved, acknowledged the debt to PetroSA in February 2004 and Imvume Resources, a sister company, signed surety. This was when PetroSA doubled up payments to cover Imvume’s debt to Glencore.
In spite of the acknowledgement of debt, repayments came at a trickle and PetroSA repeatedly put off obtaining judgement. By the time the Mail & Guardian exposed the scandal in May 2005, only R1,33-million had been repaid — well short even of the interest that had accrued by then. In the wake of a public outcry, Imvume made two quick payments, bringing the total repaid to R6-million.
PetroSA then reached a new settlement with Imvume Management, made an order of court in October 2005, which clearly specified that R500Â 000 be repaid per month, with interest accruing at prime plus 2% from December 2003, the date of the original debt. Again Imvume Resources stood surety.
But in May last year the payments stopped again. Of the capital amount, R7,5-million remained outstanding, plus all interest that should have been levied since 2003.
PetroSA finally took off the kid gloves last October, sending the deputy sheriff to attach Imvume Management’s assets at its plush offices overlooking Sandton’s Nelson Mandela Square. Court papers show that the deputy sheriff reported back that he could find assets — furniture and office equipment — to the value of R36Â 200 only.
Next in line was Imvume Resources, which had stood surety. But as the original court order was against Imvume Management, a new court order was needed against Imvume Resources before the deputy sheriff could be sent in again.
PetroSA issued summons in November last year. The matter is due to be heard in the Johannesburg High Court, but it is unclear exactly when. Imvume attorney Barry Aaron has been quoted as saying the company will defend.
An examination of PetroSA’s claim, however, shows that it is millions of rands short. It demands the exact capital amount outstanding — R7Â 547Â 947 — but asks for interest only from the date of default last May. For the preceding two-and-a-half years, no interest is charged.
How much is at stake? A simple calculation, using a formula where interest is not compounded, shows PetroSA’s demand to omit about R4,6-million in interest owed.
This figure is roughly consistent with earlier estimates of outstanding interest given by PetroSA. This means PetroSA itself seems not to have compounded the interest, suggesting that it is still approaching Imvume with kid gloves.
Ordinary commercial practice is to charge compound interest. On that scenario, PetroSA’s demand is about R5,6-million short, according to an M&G calculation.
The attorney acting for PetroSA, Leslie Mkhabela, declined to comment. PetroSA’s choice of Mkhabela to represent it in this matter has been controversial, as Mkhabela was Imvume’s legal advisor when Imvume won the contract that led to all the trouble.