Businessmen Litha Nyhonhya and Niven Pillay are accusing investment holding company Lebashe of reneging on a 2018 settlement agreement to hand over 687 016 Capitec ordinary shares worth about R1.4-billion by close of business on Friday.
Lebashe, which is owned by Tshepo Mahloele, Jabu Moleketi and Warren Wheatley, currently holds nearly nine million Capitec shares worth more than R17-billion,
making it one of the lender’s largest shareholders.
Nyhonhya and Pillay argue that their company, Coral Lagoon Investments is due to transfer ownership of Capitec shares by Tuesday.
The two rely on a 2018 arbitration award handed down by retired judge Robert Nugent.
The arbitration award, which we have seen, states that “on or about the end of February 2022, the Capitec shares will no longer be subject to the restrictive provision (restrictive end date), and from the first business day following the restrictive end date, the Capitec [shares], which are the subject of the settlement benefit, shall be transferred to Coral Lagoon”.
The agreement was signed by Nyhonhya and Mahloele on April 17 2018.
However, Nyhonhya, in his urgent application to compel Lebashe to surrender the shares, said he was made aware of Lebashe’s intention not to honour the agreement.
“It was brought to my attention by a reliable source during the latter part of last week (i.e, the week of 24 January 2022) that the respondents (Mahloele and Lebashe) did not intend complying with their obligations to transfer ownership of 687 016 Capitec shares (the
Coral shares) to Coral in terms of clause 4.4 of the award and that they ‘will do everything to frustrate the transfer’.”
Wheatley, responding on behalf of Lebashe, scoffed at Nyhonhya’s assertions.
“The respondents intend complying with their obligations in terms of the agreement. The applicants cannot suffer any harm… Lebashe owns, inter alia, approximately 8.5 million Capitec shares, which since 2018-2019 have been pledged to Absa Capital and Standard Bank until July 2023 as security for new loan facilities to finance its shares and settle the original loan facilities,” the affidavit reads in part.
Lebashe announced in 2018 that it had undertaken a debt and balance sheet reorganisation. One of the purposes of the restructure was to “repay current debt and replace with longer term debt instruments to match the asset and cash flow profile of the group”.
Lebashe then tapped Absa Capital to restructure its debt.
Nyhonhya also took issue with Lebashe having encumbered the Capitec shares to Absa and Standard Bank until 2023 “without Coral’s knowledge”.
“This fact on its own demonstrates that the respondents never intended complying with the award,” he said.
The matter was struck off the court roll on Tuesday for lack of urgency. Capitec has been arguably the biggest South African business success story of our time. The bank, which made its entry in 2000 was not seen a serious competitor to the ‘big four’ (Standard, FNB, Nedbank, and Absa).
However, 22 years later it has more than 15 million clients and about 800 branches. Capitec’s growth is reflected in the dispute between Coral and Lebashe.
The 10 million Capitec shares Coral bought in 2006 at R30 a share for around R300-million, would be worth just over R20-billion today.
The genesis of the dispute:
- In 2006, Coral bought 10 million Capitec shares at a price of R30 a share. Coral was a special purpose vehicle established to buy the bank shares on behalf of a broad-based black economic empowerment consortium. Mahloele was appointed as director of Coral and its parent company Ashbrook.
- According to Nyhonhya, Mahloele pushed for a transaction with the Public Investment Corporation (PIC). In January 2012, Coral sold 5.2 million Capitec shares to the PIC at R156 per share. Part of the agreement was that the shares would be sold after five years to a “black purchaser”.
- In 2015, the PIC announced that it had sold the 5.2 million shares to Petratouch, now called Lebashe at R461 per share. The profit made by the PIC was, therefore about R1.7-billion.
- This saw Coral in 2016 launch arbitration proceedings, infuriated that the shares were sold to Lebashe, of which Mahloele is a co-founder.
- The parties, Coral, Lebashe and Mahloele resolved the dispute in April 2018 and agreed that Coral would be given the shares that it now says Lebashe is no longer willing to do.
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