Home | News | AUCTIONEER, CEO FACE-OFF OVER E1.1M REFUND

AUCTIONEER, CEO FACE-OFF OVER E1.1M REFUND

08/11/2020 00:45:00 BY WELCOME DLAMINI

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MBABANE – The failed E27.5 million purchase of assets belonging to Spintex - one of the country’s oldest and biggest textile companies - continues to haunt ENIDC.

The assets, which the Eswatini National Industrial Development Corporation wanted to purchase, included land, buildings and machinery on plot 516, Matsapha Industrial Sites.

However, the deal collapsed and put the corporation at risk of losing a sum of about E1.9 million; these being a deposit of E1.1 million that has already been made, and E853 875 commission in respect of 2.7 per cent (plus Value Added Tax) of the purchase price that was due to the auctioneer.

ENGAGED

ENIDC Chief Executive Officer Muzikayise Dube informed the corporation’s Board of Directors that this money would be refunded to the institution and even engaged the services of a reputable law firm to pursue the matter.

The Times SUNDAY has seen correspondence between Dube and well-known auction house, Swazi Auctioneers, in which the latter informed the CEO that there was no way ENIDC was going to get back such monies.

On June 10, 2020, Dube wrote to Swazi Auctioneers, which is under the directorship of Principal Auctioneer Sakhile Ndzimandze, and sought to be refunded the E1.1 million deposit and also contested the auctioneer’s right to the commission and retention of same.

The CEO wants to be given the E1.1 million refund less the 2.7 per cent commission that the auctioneer is entitled to.

In response through a letter dated June 18, Ndzimandze told the CEO that he saw no basis upon which Dube would be entitled to the refund.

He said this was particularly so because of clause 11.1 of the Conditions of Sale of Immovable and Movable Property that Dube signed on October 17, 2019.

The agreement states that in the event the sale is cancelled and the assets are old to another purchaser for a lesser amount, ENIDC would have to pay the accruing difference.

“It is an indubitable fact that ENIDC breached the conditions of sale, resulting in the cancellation of the sale,” Ndzimandze told the CEO.

purchase price

The auctioneer said his understanding of the clause referred to in as far as the purchaser being liable to the seller in respect of damages in the event of breach include, but not limited to, the amount that constitutes the difference between the purchase price that Dube signed for on October 17, 2019 and the eventual purchase price that was paid by the subsequent purchaser; as well as the losses incurred (including the loss of opportunity) as a consequence of Dube’s breach.

“There was a time lag between your breach and the conclusion of the subsequent sale; interest and the costs associated with the cancellation of the sale; re-advertising and re-auctioning of the immovable property,” Ndzimandze further informed Dube.

The assets were subsequently bought by businessman Mohammed Daud for E25 million, which, as per the agreement, meant ENIDC would have to pay the E2.5 million difference in order to bring the total to the E27.5 million it had committed itself to pay.

Initially, the reserve price for the assets was E25 million but they made a successful bid to purchase the property for a figure that was E2.5 million more. The main reason that caused ENIDC’s failure to honour the conditions of sale was that the corporation could not secure finance for the project, which led to the agreement being cancelled and the public enterprise being liable for the damages resulting thereof.

The ENIDC Board was only informed of the purchase during a meeting that took place on October 28. This was after Board subcommittees had also sat to discuss the bid win and it was resolved that same should be endorsed by the joint Board meeting.

As reported by this publication before, neither was the Minister of Commerce Industry and Trade, Manqoba Khumalo, told the truth regarding the acquisition of the Spintex assets.

consultation

According to Section 10 (1) (b) of the Public Enterprises Unit (PEU) Act of 1989, “No Category A public enterprise shall undertake any major investment without the approval in writing of the minister responsible acting in consultation with the Standing Committee on Public Enterprise.”

For purposes of this, the Standing Committee shall, in consultation with the PEU, determine what is ‘major’ in relation to each Category A public enterprise.

fixed assets

In 2018, the PEU issued Circular No.1/2018, which put ‘major’ at 5.25 per cent of total capital employed or 5.25 per cent of fixed assets.

As a result of the breach, not only does ENIDC stand to lose the E1.1 million deposit and the E853 875 commission, but is also liable to pay the E2.5 million difference, which bings the total potential loss to E3 353 875.

With regard to the commission, Ndzimandze has told Dube that in terms of Clause 5 of the conditions of sale as read with Clause 11.1, the auctioneer’s commission ‘was agreed at the rate of 2.7 per cent plus VAT and such commission is not refundable’.

Ndzimandze, quoting the agreement, said there was no way out for Dube: “Clause 16.1 of the conditions provide that the written agreement is the whole agreement between the parties. It cannot be supplemented.”

He said he had since referred the matter to the joint liquidators for their consideration and response, but maintained his stance on the non-refund.

“In the circumstances and subject to what the joint liquidators may wish to state, we deny that you are entitled to any refund and certainly are not entitled to the refund of E1.1 million. Any action that may be instituted by yourself in respect of this matter will be strenuously defended,” the auctioneer added.

MANNER

This publication has it in authority that the ENIDC Board has discussed this matter with the CEO after employees of the corporation wrote a number of concerns regarding the manner in which Dube runs the organisation.

Among the concerns raised to the Board by the employees was the failed purchase of Spintex.

“The decision to buy Spintex was highly risky, impulsive and irregular as it was not in the procurement plan nor in the strategy, the Board was also not consulted prior to the transaction, which should be the case for capital expenditure. The decision forced the corporation to dig deep into its pockets and utilise its already limited financial resources, which would have been better utilised in well-thought out projects.

The decision cost the corporation over E1.2 million,” reads part of the concerns submitted to the Board.

Bongiwe Simelane, the recently-appointed Chairperson of the ENIDC Board, confirmed that they had received the list of grievances but could not talk about it outside the organisation.

“We are aware of the grievances and are sorting them out as a Board. That’s all I can say,” she said.

leading eateries

It has also been ascertained that the Board called the employees to a meeting held in one of the leading eateries in the capital city, where they were asked a number of questions regarding the corporation’s operations.

“I can’t disclose anything but my thinking is that whatever we have done is geared towards addressing issues at the corporation. The meeting was fruitful but may I not say anything at the moment. Please give me some time and we can talk once all has been addressed. We are on it at the moment,” Simelane said.

She also confirmed that the Board was preparing to meet with the House of Assembly Portfolio Committee on Commerce, Industry and Trade following that the employees have also engaged the legislature on their grievances.

“We have a meeting with the committee, but because we have just assumed office, we will meet them again, hence we are making preparations,” she added.

RESPOND

Efforts to get hold of Dube did not yield any fruit because he did not answer his mobile phone when called and did not respond to questions forwarded to him through WhatsApp and Short Message Service.

Besides the Spintex issue, the employees also submitted at least 10 other matters they want the Board to attend to.

One of these is a project that ENIDC entered into with an Israel company known as AquaMoaf.

The Israel company is looking at constructing an indoor plant for the production of salmon fish in Eswatini - a project that is set to cost about E1 billion. The employees are questioning this project and view it as a waste of limited financial resources.

This publication has reported on the matter before but can no longer get into the financial implications of the agreements that were entered into because of an interim order of the High Court baring the Times SUNDAY from publishing contents of the contract.