“Black industrialists” sued by IDC after losing almost R200 million

Johannesburg – The Industrial Development Corporation (IDC) is a step closer to recouping millions of rand siphoned by “black industrialists” from the developmental finance institution under false pretences.

The IDC hauled Energy Fabrication, Southern Palace and their directors – Harvey Buthelezi, Lefu Tseki, Matjanyana Matitoane and Sello Mahlangu – to task for fleecing it of nearly R200-million.

Tseki is Southern Palace CEO.

The IDC funding to Southern Palace and Energy Fabrication took the form of a R125-million loan and a separate R60-million revolving credit facility granted to the two companies to purchase Genrec in 2018.

Lefu Tseki

Murray & Roberts in late 2017 announced it had sold its Genrec steel engineering and fabrication business to black-owned and managed Southern Palace Group for R185-million.

Buthelezi, who is a director of Energy Fabrication, was appointed as a managing director in May 2018. Genrec has since gone into business rescue.

The IDC alleges in its papers the money was never used for its intended purpose, namely the acquisition of immovable property related to the Genrec transaction, working capital and operational expenses.

The entity in its summons said only R20-million of the loan agreement was used for its intended purposes, while R80-million was instead used to settle Southern Palace’s debts and a further R6-million was paid to Southern Place’s account for unknown reasons.

Harvey Buthelezi

The IDC further alleges that R1.6-million was paid to an entity called Acutucel, which it claims is owned by Southern Palace directors Matitoane and Mahlangu. Mahlangu died in July.

Money from the revolving credit facility was also not spared.

Some funds were used to purchase a Bentley

According to IDC’s documents, R17-million was paid to Acutucel, some funds were used to purchase a Bentley and R6-million to Mahlangu.

The Joburg High Court ordered that the IDC could proceed and attach the two companies’ properties to recoup its money.

“I find that the second defendant [Southern Palace] has not raised any triable issue nor bona-fide defence in resistance of the summary judgment as claimed in the plaintiff’s pleaded case.

The defences, which it has raised, are both bogus and bad in law.”

The court ruling and evidence provided by the IDC deal a significant blow to the reputation of Southern Palace, which over the years styled itself as an exemplary empowered group.

In 2019, state-owned freight logistics utility Transnet named a consortium led by Southern Palace as the preferred bidder for a 20-year concession to build and operate a new R2.5-billion inland container terminal in southern Gauteng.

However, the concession agreement failed before work even began for reasons that were never made public.

Tshepo Ramodibe, the IDC spokesperson said:  “It is the IDC that obtained a summary judgement against Southern Palace Group as it continues to enforce its rights against those that contravened the finance agreements.

The IDC has opened criminal proceedings against individuals implicated in the matter.”

Southern Palace, in written responses, denied it had used any proceeds from the IDC loan.

“On legal advice, Southern Palace Group of Companies will be appealing the summary judgment ruling handed down because we are of the view that the judgment is factually and legally incorrect.

“Our attorneys have filed an application to appeal the ruling,” the company said.

“Our attorneys have identified numerous grounds why the granting of the summary judgment by the learned acting judge is incorrect in fact and law.”

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