South African entrepreneur and ‘capitalist activist’ Rob Hersov discusses Judge Denise Fisher’s judgment against former Dimension Data executives. The case reveals alleged fraud involving a rigged R1.4 billion campus sale, exploiting the BEE framework. Hersov criticises the behaviour as harmful to capitalism, foreign investment, and governance while emphasising the judgment’s importance for upholding the rule of law.
UPDATE: Webber Wentzel has clarified that it did not act for the former Dimension Data executives and had no knowledge of their involvement in the transaction. Webber Wentzel remained on brief in the litigation for the black empowerment entity, Identity Fund Management, owned by Sonja De Bruyn. Identity Fund Management filed an affidavit stating that it had no knowledge of the involvement of the former executives. It also stated that it made repeated requests for information about the identity of the ultimate investors. Judge Denise Fisher accepted this factual position. BizNews has removed references to Webber Wentzel in the interview. Rob Hersov said “Webber Wentzel and Sonja De Bruyn were in the right and if I insinuated anything otherwise, I apologise”.
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Extended Transcript
Alec Hogg (00:09.061)
Capitalist activist Rob Hersov joins us to talk about a story that is certainly occupying the business community in South Africa: the judgment handed down this week by Judge Denise Fisher against the former executives and founder of Dimension Data.
Alec Hogg (00:35.747)
Rob, you know the people involved; you know Dimension Data, the company. We’ve both been around long enough to remember when it was the darling of the stock market before it took a tumble and was acquired by the Japanese company NTT. This judgment by Judge Denise Fisher is not just rattling cages; it’s quite shocking in many respects.
Rob Hersov (01:05.102)
It certainly is. Two days ago, I received this document from two friends who said, “This has just come out; you have to read it.” It’s like a crime novel. I’ve never really read a judgment before, but I started reading it—I don’t know how many pages it is, maybe 75 or 100. It’s a crime novel; I couldn’t put it down. Knowing some of the people involved makes it even more pertinent and sadder.
Alec Hogg (01:22.981)
75 pages.
Rob Hersov (01:34.270)
I read it. Why am I being asked about it? I’m not a lawyer; I’m a businessman. I also received messages from friends, including some prominent Black colleagues, saying, “Rob, this is bad behavior by capitalists and corporate chieftains who were held in high regard. Here you are advocating that capitalism works, and now this?” It does look like they’ve done something wrong. It’s not a good story for South Africa.
Alec Hogg (02:14.287)
Give us the story in a nutshell. What happened?
Rob Hersov (02:17.206)
Assuming the judgment is correct—and Judge Fisher seems to have done a very thorough job—it looks like six prominent businesspeople, all white, all well-known and respected, and some of whom built Dimension Data into one of South Africa’s great success stories, fabricated the acquisition of the Dimension Data campus in Johannesburg (including a data center, a golf club, and an art collection).
The purchase was made at a ridiculously low price of 1.4 billion rand, excluding other potential buyers like Patrice Motsepe’s African Rainbow Capital, which specializes in real estate. They persuaded the Japanese owners that the buyers were a BEE group of mainly women (at least 51% of the group). That wasn’t true. Two members of the buying group were actually sitting on the board of the selling company, advising on the sale and pricing. This is outright fraud.
It’s also amateurish—the kind of fraud you’d expect from Keystone Cops. These are supposed to be sophisticated businesspeople, but this was carried out in a way that leaves you wondering: What were they thinking? It’s an affront to everything.
Rob Hersov (04:40.440)
It’s so sad because I really admired and liked some of these people. This case is troubling on many levels. It’s an abuse of BEE, and I’ve never been a fan of BEE, but this is particularly egregious. It’s an affront to foreign direct investment. NTT Docomo is one of the largest companies in the world, and they’ve been ripped off.
This is dreadful from every angle—for South Africa, for foreign investment, and for the BEE framework. It’s embarrassing.
Alec Hogg (06:28.003)
I notice you haven’t mentioned any names. I presume that’s because there could be an appeal. Perhaps the judge got it wrong; it does happen.
Rob Hersov (06:41.303)
Yes, and it’ll be interesting to see if there’s an appeal. Appeals usually occur when someone feels wronged by a judgment. Let’s wait and see. If there is an appeal, we’ll have to wait for its outcome. But this judgment is damning.
The names are all in the judgment: Jeremy Ord, Stephen Nathan, Grant Bodley, Saki Missaikos, Doc Watson, and Jason Goodall. I know all six of them, and it saddens me to read what has happened.
Alec Hogg (07:33.783)
To provide context, Dimension Data was sold to NTT, a big Japanese firm. The Japanese relied on executives who stayed on after the sale. From the judgment, it appears they tried to pull a fast one. The Japanese are taking a very hard line. Part of the judgment indicates that the executives were willing to walk away, but the Japanese want justice.
Rob Hersov (08:29.006)
It sounds like the executives were saying, “We’re guilty; let us out of this.” But Stephen Nathan’s emails reveal they intentionally excluded external bidders to keep the price low. They paid only 65 million rand upfront, with the remaining 1.4 billion vendor-financed by NTT. The assets were clearly worth much more. It was a steal.
Alec Hogg (09:53.861)
Two perspectives here. First, malfeasance exists everywhere. But as a foreign investor, at least in South Africa, you can get satisfaction through the courts. Is that not reassuring?
Rob Hersov (10:26.158)
Yes, Judge Fisher’s thorough work upholds the rule of law. For foreign investors, this demonstrates that the courts function. However, it’s deeply concerning that six prominent proponents of capitalism and corporate governance have behaved so poorly.
Alec Hogg (11:25.881)
And it’s not like they need the money.
Rob Hersov (11:28.290)
Exactly. Jeremy and Doc, among others, made substantial money when they sold Dimension Data to NTT. Why go back for another bite at the cherry?
Alec Hogg (11:47.875)
It’s worth noting that Dimension Data almost went bankrupt before Johann Rupert stepped in and bailed them out. I wonder how he feels about his friends now.
Rob Hersov (12:06.586)
One wonders. Rupert stepped in at the right time, believed in the company, and deservedly profited when it was sold. He’s not tarnished by this, but he must be disappointed.
Alec Hogg (12:35.567)
The other issue is BEE. It often makes otherwise honest people dishonest. While these executives might have defrauded the Japanese anyway, BEE provides a convenient fronting mechanism. There are likely thousands of similar schemes where the true beneficiaries are not BEE individuals in the spirit of the law.
Rob Hersov (13:30.722)
BEE is a disaster. It’s anti-capitalist and doesn’t work. Transparency would have solved this. If this was an honest transaction, they should have announced the BEE investors. But Stephen Nathan refused. The lawyers should have demanded transparency.
Alec Hogg (14:54.165)
Perhaps the lawyers didn’t know. Fraudulent behaviour leaves a bad taste. This case is significant, though not on the scale of Steinhoff. However, it’s a major issue for capitalism in South Africa. Doesn’t this require an aggressive response from advocates of capitalism, like yourself?
Rob Hersov (15:50.990)
Absolutely. The Steinhoff fraud was incredibly complex, but this case is straightforward. If the judgment is correct, it’s unsophisticated fraud. What was Stephen Nathan thinking? He’s supposed to be a sophisticated corporate financier. This is idiotic.
Alec Hogg (17:06.254)
So what happens next if we presume that NTT is as good as its word, with fraud charges being laid against Jeremy or Doc Watson and Co.?
Rob Hersov (17:15.5)
Yeah, all six, all six are getting charged. This is my reading—just take my view—there’s “guilty” and “very guilty.” The two guys who were sitting on the board of the seller, Jeremy and Jason Goodall (I’ve got those names right), are the very guilty ones because they were on the seller’s board, advising the seller to sell to a consortium in which they were hidden as two of the buyers.
The others were sitting on the buyers’ side, but they clearly would have known what was going on. Then there’s Steve Nathan, who was supposed to give independent advice. He was an independent director and the corporate financier. He was obviously supposed to have gotten the best price possible, wouldn’t you think? I believe there were two or three other interested bidders, including African Rainbow Capital—Patrice Motsepe’s investment company—which has the two Johans, Johan van Zyl and Johan van de Merwe.
They’re two super sophisticated, intelligent guys who like real estate investments. I believe they were very keen to have a look but were, kind of, you know, distanced by Steve Nathan. That’s what it seems like because he didn’t want the price to go above 1.4 billion. It was clearly worth a lot more than that.
Alec Hogg (18:38.478)
You might recall that some years ago, the former chairman of Dimension Data had a go at them over more than a billion rand he claimed he had been cheated out of through the bonus scheme and system, et cetera. It was all over the Sunday Times and South African media, but nothing seems to have come of it. Presumably, this judgment is going to embolden him to return.
Rob Hersov (19:09.304)
Which chairman? Who was the chairman? Was it Moss Ngoasheng or not?
Alec Hogg (19:12.013)
No, it wasn’t Moss. It was the former DG of the Department of Telecoms, who left the department and then went into the private sector to become chairman of Dimension Data for a period of time. His name escapes me now, but I’ll add it to the show notes later.
The point is, he made a very high-profile attack on Dimension Data, claiming money he said was due to him because he’d been excluded from certain deals, et cetera. What I’m saying here is that leopards don’t change their spots, certainly not as you go forward. By the way, I did try to get hold of Jeremy Ord. I got a response from him saying they are working on a statement and will get back to us. When we do get that statement, we’ll certainly either have an interview or cover it further.
Rob Hersov (20:25.792)
Yeah, listen, if they’re innocent, good for them. They should appeal the judgment, and their lawyers should stand up and point out the flaws in the judgment.
Alec Hogg (20:41.465)
Yeah, no, definitely.
Rob Hersov (20:55.926)
Is it entity dogma based on the judgment? And then, is it criminal or civil? I don’t know—a lawyer would have a better answer to that. I just read crime novels and have an opinion. So I hope the lawyers forgive me for not being fully informed on it.
Alec Hogg (21:13.029)
Well, you are better informed than 99% of South Africans, given that you know the people involved and have studied those 75 pages. I’m sure the full judgment is up on BizNews now, so others might also find this “crime novel” of interest.
Rob Hersov, capitalist activist, and I’m Alec Hogg from BizNews.com.
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