In a legal tussle that is gripping corporate South Africa, former Dimension Data execs have announced they intend to appeal a recent blistering high court judgment that found they constructed a camouflaged transaction to buy the company’s corporate headquarters, The Campus, in Bryanston, pretending it was a BEE deal.
The group said in a statement that the perception that this was no more than a surreptitious conspiracy by “six white males” to wrest control of The Campus property “to feather our own nests at the expense of empowerment is just plain wrong and deeply distressing to us”.
The group said judge Denise Fisher made findings which are “unjustified and unfair”, and would be fully canvassed in the notice of application for leave to appeal and in the ensuing argument before the court.
Fisher’s judgement, handed down last week, ruled the executives “deliberately subverted” empowerment laws, putting together “an illegal scheme designed to appropriate for themselves a secret financial benefit which placed them in conflict with their boards”.
The executives are Dimension Data co-founders Jeremy Ord and Bruce Watson, former Didata CEO Jason Goodall, former Middle East and Africa CEO Grant Bodley, former head of strategy Saki Missaikos, and Steven Nathan, Didata’s former head of corporate finance.
Boosted BEE rating
In contrast to the court’s findings, the group said in its statement that the deal to sell The Campus for R1.4bn took place in the context of NTT, the Japanese owner at the time of Didata, looking to sell its African business through a management buyout.
NTT needed to boost its BEE rating, and it opted for The Campus transaction to achieve its objectives, “despite the protestations of South African management and the executives who thought a sale of shares achieved a more sustainable form of empowerment”.
In July 2019, the Campus was sold to a wholly owned subsidiary of a financial services group (“Propco”), whose principal person with BEE credentials was a non-executive director of Dimension Data, Sonja de Bruyn, the statement said. De Bruyn’s company was 87% owned by Black women. “A sale to any other party would not have been more optimal in the context of what NTT sought to achieve.”
In November 2019, Propco was transferred to a fund established by De Bruyn’s group. In terms of the relevant BEE codes, the BEE result flowed from the fund being managed by a Black fund manager regardless of who invested in the fund. “This is so because the purpose of the code is to transform the fund management industry, and that purpose cannot be achieved by allowing Black fund managers to only manage money invested by Black investors”.
“NTT decided, of its own volition, to vendor fund the acquisition with surplus cash from Japan, sidelining local bank funding that could have been used. It was the decision of NTT (and not the executives) to provide vendor funding.”
The executives argue that there was nothing “sinister or inappropriate” about the structure that was used to facilitate and house The Campus transaction. “The structure is a normal private equity fund structure used for investments of all kinds”. The fund structure that was used for The Campus transaction was the product of advice received by NTT from Eversheds and Webber Wentzel, two leading law firms, and a commercial bank.
“NTT took its cue to sell The Campus to achieve its BEE objectives from a similar Barloworld BEE transaction in which De Bruyn’s group had previously participated, and Webber Wentzel had been the advisers.”
A scathing judgment
This rendition of the issues is in stark contrast to the judgement itself. The judgement noted that when it was announced in December 2019, Bodley, then CEO, lauded this deal as struck in the “pursuit of a sustainable South Africa”. It helped vault Didata’s empowerment rating two levels to level 2, one from the highest.
But in reality, The Campus would end up being owned by a sub-fund under the Identity Property Fund, which was started by De Bruyn. But its only investors were the six businessmen concerned. The six only invested R65m themselves, and NTT vendor funded most of the rest of the R1.4bn deal.
Fisher was particularly scathing of how neither Ord nor any of the “secret investors” told NTT about their involvement in the fund, even though section 75 of the Companies Act says if a director has “a personal financial interest” in a matter, he must disclose this, and not be part of considering it. Fisher said this was a clear conflict of interest, as they worked for the seller, and the buyer.
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