During question time after a presentation last night, a guest asked me whether South Africa’s Black Economic Empowerment approach is working. It isn’t. And when you cut through the noise, the business establishment is to blame. After democracy dawned, big business had the ideal opportunity to provide a kick-start for the previously excluded broader population. Many urged them to allocate shareholder funds into educational and infrastructure trusts. Instead, most companies took the easy route. They co-opted carefully selected fellows into a system of privilege, arguing that they were creating black “role models”. This expedience is now backfiring spectacularly. One of most obvious beneficiaries, billionaire Deputy President Cyril Ramaphosa, has no intention of reciprocating. Ramaphosa has now positioned himself as a leading opponent of “white capital” – despite knowing full well that such a politically-charged term refers to something which doesn’t actually exist. Corporate South Africa is controlled by foreigners and retirement funds, not some shadowy melanin-deficient cabal. Similarly, as other early stage “role models” cash in their gifted shares, new politically connected individuals are lining up to demand the same. Hence fresh legislation that abandons the concept of once-empowered-always-empowered. Now a new snake has emerged from this BEE Medusa. Would-be beneficiaries of bankrupt Abil’s BEE schemes are demanding those who managed the business personally reimburse them. The fail to note the irony that their targets are the same people who hand picked them to benefit for undeserved gifts from shareholders. When money is at stake in the new SA, no good deed goes unpunished. – Alec Hogg
By
(Bloomberg) — The former directors of African Bank Investments Ltd., which failed in August 2014, said in court documents that they aren’t liable for a 2.03 billion rand ($142 million) damages claim lodged by black shareholders who held stock in the collapsed lender.
The 10 directors, including former Chief Executive Officer Leon Kirkinis, owed fiduciary duties to the company and not to shareholders, so “a breach of those duties cannot found a claim for damages,” they said in court papers lodged last week in the North Gauteng High Court in Pretoria. Only Abil, as the bank was known, could have suffered a loss, the directors said, denying that a violation of their duties led to the bank’s demise.
Daniel le Roux, an attorney representing the 10 former directors of Abil, confirmed that court papers were filed on April 15 and declined to comment on his clients’ behalf.
Abil set up two ownership plans with black investors, starting Eyomhlaba in 2005 and Hlumisa in 2008. When the lender collapsed 20 months ago amid soaring bad debts and a lack of funding, shareholders were left with nothing. Having held a combined 4.9 percent of the bank, the two shareholder groupings first filed court papers in December, claiming that Abil’s directors acted recklessly and misled investors. No court date for a hearing has been set yet.
Private Report
Following the demise of Abil, the South African Reserve Bank stepped in to save the remaining viable assets. These assets started business again as African Bank Ltd. on April 4. The central bank also asked advocate John Myburgh to investigate Abil’s collapse, and his report was delivered to the Reserve Bank in the first quarter of last year. The report, which was to probe whether there had been any wrongdoing, has not yet been made public.
The court papers filed by the former directors of Abil last week requested that some of the black shareholder’s claims be struck out of Hlumisa’s and Eyomhlaba’s original summons. It was not a full response to all of the allegations made against the former directors of the failed bank.
