Deputy Minister of Economic Development Enoch Godongwana has deepened the controversy about his role in the disappearance of millions of rands of workers’ retirement money this week, insisting he did not know that the company he co-owns borrowed R93-million from clothing factory workers’ provident funds.
This is despite the fact that Godongwana’s family has a 50% stake in the company, Canyon Springs Investments 12, and that he was its chair at the time of some of the loans.
In addition, papers submitted in court this week show that his name appeared on stationery as the company’s chair between August 2008 and March 2009, when the company received R19.8-million that ultimately came from workers’ provident funds.
This week the floundering Canyon Springs was placed under provisional liquidation by Western Cape Judge President John Hlophe in the Cape High Court, escalating concerns about how much of the pension money sunk into the company would be recovered.
A total of R420-million from five provident funds in the clothing and textile industry may have gone up in smoke in various failed investments, potentially affecting the retirement benefits of more than 20 000 workers.
The provident fund money was consolidated in an investment vehicle called Trilinear Empowerment Trust, which is not registered with the Financial Services Board (FSB). It was lent to Canyon Springs with the authorisation of a linked asset management company, Trilinear Capital, allegedly through an unsecured loan agreement that court papers claim remained purely verbal until it was signed in February 2009.
The owner of Trilinear Capital, Sam Buthelezi, denied this and said he would seek proof that the loan agreement was documented from the start.
In an interview this week, Godongwana said: “When I came into the company I was told it was money raised by Trilinear Capital, for which they got a fee. What institution they raised it from was not interesting to me at the time.
“None of the money was drawn by me. I was not operational when I was chairperson. When I joined, funding was intact. Unfortunately I only discovered the funding came from pension fund money when this thing was already becoming a crisis.”
But his version of events differs dramatically from that of Trilinear Capital, which claims Godongwana was involved from the start in the loan agreement with Canyon Springs.
Trilinear Capital’s attorney, Chris Briston, told the Mail & Guardian Godongwana knew that the Canyon Springs loan came from clothing workers’ provident funds. The fact that Godongwana was involved in procuring the loan, and that his family trust had a stake in Canyon Springs, made the loan proposition more attractive to Trilinear Capital, Briston said.
Godongwana confirmed that his family trust owned 50% of the shares in Canyon Springs, while families of alleged loan facilitator Richard Kawie and company director Mohan Patel hold the other half through family trusts. Patel suddenly resigned from Canyon Springs this week.
Godongwana said he supported a full forensic investigation of the meltdown because he and his family had nothing to hide. “My approach throughout all the discussions with the parties was twofold. First, we support a full investigation so that if there are people who have done anything untoward they must face the full might of the law.
“Our second approach is the best option to enhance the value for workers. My sense is that liquidation is not going to enhance workers’ lives. I think a number of people who opposed the liquidation were of the same view.”
The deputy minister recently assured Cosatu that a loan agreement governing the transfer of the provident fund money to Canyon Springs was in place before he joined the company in November 2007. But company records show some of the money was transferred under his watch.
In August 2008, when Godongwana featured on the letterhead of Canyon Springs as chair, Patel requested R8-million in a drawdown from its loan agreement. Documents reveal further amounts of R3.8-million and R8-million were drawn in January and March 2009, while Godongwana was in office.
Court papers show that about R25-million of the pension fund money was sunk into a company he was creating, Pan African Service Benefits, which offered actuarial, administrative and consulting services to pension funds.
Godongwana, his wife Thandiwe and Patel were listed as owners of Pan African until he resigned from his position in this company and Canyon Springs to take up his government post. Thandiwe is shown as the new chair of Canyon Springs in June 2009 in a letter sent by Patel to the Trilinear Empowerment Trust to request another drawdown of R11-million from the provident fund money.
Godongwana correctly pointed out that the first payout of R30-million to Canyon Springs was released from Trilinear Empowerment Trust in March 2007, before he became chair. Trilinear Capital claimed it had urged the trustees of the Trilinear Empowerment Trust to register with the FSB. Court papers reveal further concerns that the loan to Canyon Springs by the trust was unsecured.
“We learnt later about the loans involving pension fund money, and that is something I’ve been trying to find a solution to,” said Godongwana. “The problem is people have been really focusing on me. I’m not really acting on this because I’m in government. I am hands off from it.”
In addition to the R93-million that was lent to Canyon Springs, Trilinear Empowerment Trust invested R100-million in ailing luxury property developers Pinnacle Point. Last year it also bought Absa’s R150-million stake in the development, making it the main shareholder.
Barnabas Xulu, the lawyer representing Trilinear Empowerment Trust trustees, who applied for the liquidation of Canyon Springs this week, said Godongwana’s claim that he did not know where the money came from was “a classic”.
“An inquiry will now show exactly what happened. But it is a classic that a part-owner and chairman of a company that [borrowed] such a lot of money says he does not know that it came from provident funds.”
Godongwana’s relationship with Kawie, a former consultant to the South African Clothing and Textiles Workers’ Union, a Cosatu affiliate, would be examined at the liquidation inquiry because he allegedly facilitated the loan to Canyon Springs, said Xulu.
The M&G has learnt that Patel has been cooperating with investigations and has made statements that could be used in court. He could not be reached for comment.
Godongwana said Patel was involved in organising the loan deal with Trilinear Capital, but was reluctant to say more. “In the light of what is happening, let’s just say it was Patel who struck the deal,” said Godongwana. “But a couple of things have emerged that are worrying.”
Xulu said there would be attempts to salvage some of the pension money, especially if Pan African Service Benefits was sold. Trilinear Empowerment Trust was set up to serve provident funds, including those of the Cape clothing industry, the textile industry and Pep Limited.
Xulu said Godongwana had “pleaded” at a meeting of interested parties last week for more time to find a buyer for Canyon Springs. Yet although the company initially said it would oppose the liquidation application it did not take the matter further.
Trilinear Holdings asked the court for leave to intervene in the winding-up application to pursue an opportunity for Canyon Springs to sell Pan African Benefit Services for R150-million to clear its debts. Trilinear Capital claims it had a willing buyer for the company before Canyon Springs was provisionally liquidated this week, but claims Canyon Springs did not take up the offer. The Textile and Allied Workers’ Provident Fund lodged an urgent application to interdict the liquidation of Canyon Springs.
A draft report on Canyon Springs’s annual financial statements for the year ended February 28 2011, handed in to court, revealed that the company had accumulated losses of R46.6-million.
A former senior executive of the National Union of Metal Workers South Africa, Godongwana now heads the ANC’s economic transformation commission, which is tasked with reviving the fortunes of factory workers.