Business

Probe into Fabcos companies

2019-08-07 13:48

Two high-ranking officials of the lobby group Foundation of African Business and Consumer Services (Fabcos) are accused of hijacking and awarding themselves shares in six entities which received more than R60 million in grant funding from the government.

And now the trade and industry department has launched an investigation into the misappropriation of funds in the six entities which were meant to create jobs in the maize-milling industry.

Among the claims is that Fabcos deputy president Phillip Usiba and treasurer-general Alan Campbell hijacked the entities and made themselves and their associated companies directors and shareholders.

The department gave each of the six maize-milling projects in Gauteng R10.9 million four years ago, but none of the mills is operating.

This week the department’s spokesperson, Sidwell Medupe, after being sent a list of questions which he did not answer individually, said there had been an inquiry into at least six companies linked to Fabcos after millions in grants were approved.

He said: “We are unable to respond to the rest of the questions as the matter is a subject of an ongoing inquiry and thus sub judice.”

The department’s inquiry was convened in terms of section 415 of the Companies Act 61 of 1973. The department was summoned to appear before the inquiry to be questioned in respect of the trade, dealings, affairs or property of these Fabcos-linked companies, authorised by the Master of the High Court. All proposals for funding go through two committees before being approved, Medupe said.

The six companies, all belonging to Fabcos members – Ladosat, Ladogyn, Aztosign, Ladotone, Jamilogix and Eliologix – each received a R10.9 million grant from the Employment Creation Fund for maize-milling projects. The grants were approved in 2015 and payment was made in 2016.

Each of the six companies has three directors, with Usiba and Campbell being the two common directors among the entities. The two are alleged to have used the six companies to apply for the grants, allocated 30% shares for each of their own entities in each of the six companies and ran the companies into the ground without any of the mills operating.

According to two of their co-directors in two companies, Campbell and Usiba managed to get millions from the trade and industry department but had nothing to show for it.

Charles Ngobese, who is Usiba and Campbell’s co-director and co-shareholder in Ladogyn, claimed the two applied for the grant on behalf of the six separate companies. Once the grants were approved, Ngobese claimed, he and the owners of the five other companies were told that the condition of the grants was that both Usiba and Campbell would each take 30% shares on behalf of Fabcos.

“Phillip Usiba took 30% on behalf of [the Homegrown] Farmers’ Trust, which is supposed to belong to Fabcos members. It does not exist. Alan Campbell took another 30%, saying it was on behalf of Homegrown Investment, which is also supposed to be a Fabcos company,” Ngobese told City Press.

He produced copies of the share certificates indicating that he owned 40%, with both Homegrown Farmers’ Trust and Homegrown Investment Holdings owning 30% each. Shareholding certificates showed that Usiba represented the trust while Campbell was behind the latter entity.

Another co-director, Lerato Mogorosi, whose company, Eliologix, was supposed to have an operating milling project, alongside that of Ladogyn, in Sunderland Ridge, an industrial township southwest of Pretoria, corroborated Ngobese’s version and said Eliologix was given R17 000 monthly stipends and told it was part of an incubation programme.

“They [Usiba and Campbell] also told us never to contact the trade and industry department directly and that we must go through them if we wanted anything,” said Mogorosi. She claimed she was owed thousands of rands for using her funds to cover costs when the mills were struggling to pay the salaries of employees who were hired by Campbell and Usiba.

Irene Makgene, who co-owns Ladosat, declined to comment. Attempts to get comment from the other co-directors of the other entities were unsuccessful.

Sipho Baloyi, who is co-director of Ladotone – from which Campbell and Usiba, according to company records, resigned last year – claimed the department appointed another company, Homegrown Investment Holdings, to be the project manager of all the six projects. Usiba is listed as the sole director of Homegrown and Campbell is a former director too.

“The project management company was Homegrown Investment Holdings, which was appointed by the trade and industry department as per the memorandum of agreement. I was employed to execute the implementation of four of the six mills from inception to commissioning,” Baloyi said, adding that he worked on Eliologix, Ladotone, Ladogyn and Ladosat.

Baloyi said that, in all four mills, 40% belonged to the entrepreneurs and 30% each to Homegrown Investment and Homegrown Farmers’ Trust, respectively.

He said the mills were underfunded and that in Ladogyn and Ladosat, communication among directors worsened their legal problems.

“According to the memorandum of agreement [with the trade and industry department], Homegrown Investment Holdings was supposed to provide 100% off-takes to the mills. Unfortunately, this did not happen and it’s also one of the major reasons for the failure on the part of the mills. When the entrepreneurs went to seek commercial loans from financial institutions, the applications were declined because all the mills had two common directors [Campbell and Usiba] who could not provide personal suretyship for each company. The model of having Homegrown Investment Holdings and Homegrown Farmers’ Trust as shareholders in each company proved to be problematic,” Baloyi said.

He pointed out that in Ladotone, the two Homegrown companies each held 14.7% while the majority was held by Xolani Nhlapo. Nhlapo said he did not hold the shares directly but on behalf of another company, which is owed by Ladotone.

“West Street Projects is neither a founding shareholder nor an operationally active one. Thus, the 51% equity is held by West Street Project as security towards the debt,” Nhlapo said.

Usiba denied the claims and disputed the version of his co-directors and said Fabcos, which he claimed did not own any assets, had facilitated a memorandum with the department for the grant on behalf of the companies but the companies had applied separately.

“The companies applied as separate companies and were considered as such and were offered funding based on their respective business merits,” he said, dismissing the allegation that he hijacked the companies.

He said the projects were underfunded by more than 40% and thus “they were bound to experience cash flow challenges”. Further applications for funding were rejected by the trade and industry department.

“Neither I nor Alan Campbell took up 30% in any of the six companies in our personal capacities. Homegrown owned 30% as the founding shareholder. It was the department that insisted on the shareholding as a risk mitigator. Homegrown was expected to relinquish the shareholding once certain conditions had been fulfilled. The approval process can be obtained from the department,” Usiba said.

He confirmed that Fabcos, which once boasted a business portfolio worth more than a billion rands, and which owned Premier Foods, was now not able to generate adequate membership fees to cover its operations. As a result, its lease agreement in Centurion was terminated in 2017. He said the organisation was “undergoing restructuring and repositioning”.

Numerous efforts to get hold of Campbell, including through various contact numbers and emails and a visit to the registered office, proved fruitless.

City Press also paid a visit to the office park address listed as that of some of the six companies and was informed the property, which is fully furnished, was set to be auctioned soon.

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October 13 2019