African Bank must pay for 'mess' - BEE partner

8 April 2016

Cape Town - Someone has to pay for the mess at African Bank, one of the beleaguered bank's black economic empowerment partners said on Thursday.

"People can’t get away with this. We can’t create a precedent in South Africa that it’s okay to go about recklessly with shareholders’ money,” Hlumisa Investments chairperson Desmond Lockey told Fin24 on Thursday.

His comment comes a few days after the launch of a new version of African Bank, which will start doing business with an equity base of R10bn and a cash position of about R24bn.

Lockey said Hlumisa is suing the holding company’s former directors and Deloitte for R2.1bn. He told Fin24 that shareholders in Abil suffered immense losses because of reckless business practices by Abil’s board of directors.

“We submitted a charge sheet to the Gauteng High Court last month, stating which parties we are suing. Hopefully we’ll get responses by mid-April.”

According to Lockey, Hlumisa and Abil’s other BEE partner, Eyomhlaba, together have a 5% share in the bank, which has been under business rescue since August 2014.

“Our case is about the recklessness with which the former Abil directors acted with the company’s assets and listed instruments,” Lockey said.

Hlumisa and Eyomhlaba won a court case last year prohibiting Abil’s business rescue practitioners to sell the insurer Stangen (also in the Abil stable) to the “good” African Bank.

At the time, Lockey argued that African Bank’s R1.4bn offer for Stangen had been too low and he took issue with the fact that the business rescue practitioners did not consult with shareholders.

“It’s thanks to Hlumisa that Stangen hasn’t been sold,” Lockey said, “otherwise there would have been nothing left of Abil. So the curator had to step away from the deal.”

A source close to the business rescue process told Fin24 that Hlumisa’s debt exceeds the value of its Abil shares – a claim Lockey refuted.

“This is precisely the reason for this court case. We lost R2.1 bn because we couldn’t trade and we’re claiming that amount in damages so that we can pay back our debt and give money back to shareholders.”

Lockey was adamant that Abil’s former directors have to be accountable for the “mess”.

“Someone has to pay. People can’t get away with this. We can’t create a precedent in South Africa that it’s okay to go about recklessly with shareholders’ money.”

This article first appeared on Fin24, see here.