Deaths expose troubled business at Basileus Capital

The empire of slain businessman Julian Williams appears poised for collapse, following the announcement that his Basileus Capital group has initiated "business rescue proceedings".

Business rescue is an alternative to liquidation provided for under the updated Companies Act.

Also at risk are investors in the JSE-listed BK One, a capital-raising vehicle for Basileus.

Williams was shot dead at the Basileus offices on July 26, apparently by former business partner Herman Pretorius, who apparently then turned the gun on himself.

At the time, Williams's colleagues said he was leaving behind "a strong team of nearly 50 experienced people" who would continue to run Basileus projects. But an investigation by the Mail & Guardian suggests that Williams's business, mostly run in partnership with former ANC heavyweight James Ngculu, was teetering at the time of his death.

There is a trail of related party trans­actions, comprising intercompany investments, loans and write-offs, which raise questions about how much of the cash Basileus was able to raise from investors actually made its way into the project "pipeline" of which it boasted.

Pretorius raised similar concerns earlier this year about investments in a Basileus subsidiary, SA Superalloys, a shareholder in specialised alloy producer Avalloy. He wrote to Williams in June to complain that money invested in SA Superalloys had been intended as working capital to ramp up Avalloy's operations, but the money had been funnelled into Basileus.

Pyramid scheme
Pretorius ran an unorthodox invest­ment scheme and there are suggestions it was a pyramid scheme – new investors' money was used to pay interest to earlier investors and create the impression of high returns.

It appears the collapse of the Pret­orius scheme's investments in SA Superalloys – Williams's company stopped paying interest to its investors – was going to cause a chain reaction for Pretorius, which led to his fatal confrontation with Williams.

Following Pretorius's death, one of his investment schemes, the Relative Value Arbitrage Fund, was placed under curatorship, owing a staggering R1.8-billion to about 3000 investors, it has been reported.

It appears that Basileus is similarly vulnerable and there are likely to be knock-on effects. According to a well-placed source, aeroengine builder Rolls-Royce, which has a 13% shareholding in Avalloy and is the alloy-maker's primary customer, stopped taking the company's product in March. This could not be independently confirmed and Basileus declined to answer questions this week, pending the business rescue proceedings.

An Avalloy representative confirmed the Rolls-Royce supply was "on hold" while the companies "renegotiate their long-term agreement".

Institutional investors
The Industrial Development Cor­poration also invested R35-million in Avalloy for a 10% share.

BK One raised about R200-million when it listed on the JSE in December last year, but nearly all of that came from institutional investors, who took up shares in an initial public offering ahead of the listing.

The money has gone into Basileus subsidiaries, according to the BK One annual report issued at the end of February, but there are questions about both the source of the R200-million and how it has been spent. For example, of the R65-million purportedly invested by BK One in Avalloy, almost nothing appears to have gone into Avalloy itself.

The February report discloses that R52-million was used to buy shares in Avalloy from SA Superalloys and from a mysterious Mauritian investment fund called Four Elements. A further R11.6-million was spent in taking over a loan to Avalloy that Four Elements had extended. Part of the loan had been converted into shareholding, meaning BK One had bought an effective 10.5% shareholding in Avalloy at a cost of R65-million. In contrast, the Industrial Development Corporation got its 10% in effect for free – a bonus for providing a R35-million loan.

Even more curious is that an associate of Four Elements was the major subscriber to shares in BK One, accounting for nearly half of the R200-million raised. The second-biggest shareholder in BK One, with 17%, is another Mau­ritian entity, Two Seasons, which shares the same management team as Four Elements: Ken Maillard and David Cosgrove of Belvedere Management, Mauritius. A message left on Belvedere's automated answering service went unanswered.

Unsecured loans
The rest of the cash BK One raised went into other companies controlled by Basileus, mainly in what appears to be unsecured loans.  

According to the BK One report, the listed company used R56-million to take over a shareholder loan in fish-farming start-up Pure Ocean East London. The shareholder is not disclosed, but Pure Ocean is in effect a subsidiary of Basileus.

BK One also provided a loan of R35-million to construction firm Tor Holdings and a loan of R33-million to Cash Connect Management Services, both Basileus subsidiaries.

BK One chief executive Dean Richards said he was reluctant to comment on the Basileus business rescue before he had spoken to investors, but added: "We are applying our minds and working really hard to ensure our shareholders' interests are looked after."

* Got a tip-off for us about this story? Email [email protected]

The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See for our stories, activities and funding sources.

Sam Sole Author
Guest Author
Sam Sole
Sam Sole works from South Africa. Journalist and managing partner of the amaBhungane Centre for Investigative Journalism. Digging dirt, fertilising democracy. Sam Sole has over 17731 followers on Twitter.

Workers’ R60m ‘lost’ in banks scam

An asset manager, VBS Mutual Bank and a Namibian bank have put the retirement funds of 26 000 municipal workers in South Africa at risk

‘Judge President Hlophe tried to influence allocation of judges to...

Deputy Judge President Patricia Goliath accuses Hlophe of attempting to influence her to allocate the case to judges he perceived as ‘favourably disposed’ to former president Jacob Zuma

SAA grounds flights due to low demand

SAA is working to accommodate customers on its sister airlines after it cancelled flights due to low demand

Lekwa municipality won’t answer questions about why children died in...

Three children are dead. More than a dozen homes have been gutted by fires in the past six months. And, as...

Press Releases

Mint Group unveils Finance and Operations business

ERP specialist Andre Pearce will spearhead the Mint ERP business.

MTN unveils TikTok bundles

Customised MTN TikTok data bundles are available to all prepaid customers on *136*2#.

Marketers need to reinvent themselves

Marketing is an exciting discipline, offering the perfect fit for individuals who are equally interested in business, human dynamics and strategic thinking. But the...

Upskill yourself to land your dream job in 2020

If you received admission to an IIE Higher Certificate qualification, once you have graduated, you can articulate to an IIE Diploma and then IIE Bachelor's degree at IIE Rosebank College.

South Africans unsure of what to expect in 2020

Almost half (49%) of South Africans, 15 years and older, agree or strongly agree that they view 2020 with optimism.

KZN teacher educators jet off to Columbia University

A group of academics were selected as participants of the programme focused on PhD completion, mobility, supervision capacity development and the generation of high-impact research.

New-style star accretion bursts dazzle astronomers

Associate Professor James O Chibueze and Dr SP van den Heever are part of an international team of astronomers studying the G358-MM1 high-mass protostar.

2020 risk outlook: Use GRC to build resilience

GRC activities can be used profitably to develop an integrated risk picture and response, says ContinuitySA.