Absa, Grindrod Bank reject funding to Nova - Sharemax was a Ponzi Scheme according to Noluntu Bam

Special Investigations

Author: Ryk van Niekerk|
October 2014

Absa, Grindrod Bank reject funding to Nova (




Board blames negative media reports and Sarb for failure to secure finance.

Continued negative media reporting about the Nova Property Group has caused Absa and Grindrod Bank to withdraw funding lines to the group, the Nova board said in a recent communiqué to debentures and shareholders of its various investment schemes.

In the communiqué the Nova board does not pull any punches and blames the media for creating a perception of “reputational risk” which led the banks not to extend funding to the group.

The board also lashed out at the South African Reserve Bank (Sarb) for not supporting the Nova Group when Grindrod Bank approached it with concerns that its reputation may suffer if it did business with the Nova Group.

The Nova board did not elaborate on the potential impact Absa and Grindrod’s decision would have on the group. Nova did state that the funding from Absa would have been used to upgrade unnamed shopping centres. Nova also does not state whether it has received funding from other sources.

Background

This attack on the media follows a similar notion by Connie Myburgh (pictured), Chairman of the Nova Group, during the group’s annual general meeting in November last year.

The Nova Group was established through the restructuring of the Sharemax property scheme. Nova is controlled by four directors, two of whom: Dominique Haese and Dirk Koekemoer, played important roles in the promotion of Sharemax investment products.

The scheme was recently placed under the spotlight when the Financial Advisory and Intermediary Services ombud Noluntu Bam stated that Sharemax was nothing more than a Ponzi scheme and that its directors should also be held liable for investors’ losses.


The directors are appealing this determination.

Grindrod Bank

In the recent quarterly update, the Nova board revealed that Grindrod Bank withdrew a possible funding line, following the publication of alleged “inaccurate” and “misleading” media reports.

The board said discussions between Nova and Grindrod had been at an advanced stage when the bank withdrew from the process last month. “The sole reason advanced by Grindrod for not perusing a business relationship with the Nova Group, was the possibility that Grindrod might suffer so-called ‘reputational risk’, should Grindrod lend funds to the Nova Group,” the communiqué reads.

The board added that Grindrod Bank approached Sarb in this regard, but that the Reserve Bank did not allay these fears.

Grindrod Bank declined to comment on these allegations. A spokesperson said it is the bank’s policy not to reveal reasons for credit application refusals or to comment on said refusals to third parties.

Absa

According to the Nova board, Absa also declined to extend further funding to Nova due to negative media reports. The board was “surprised” when it was informed about the bank’s decision.

In the communiqué, Nova alleges that Absa sent the following correspondence to Nova: “I regret to inform you that after much deliberation and consultation with our Head Office it was decided that Absa cannot proceed with entertaining any further transactions linked to the Nova Group. Today again, there was media reporting around this which does not pose well.”

It is not clear who sent this correspondence on behalf of Absa and to what media reports it referred to.

The Nova Board also said it has subsequently terminated its business relationship with Absa and that it settled its previous loan before the due date.

Absa did not want to respond to the allegations. An Absa spokesperson did however state that Absa couldn’t comment on the allegations due to client confidentiality.

“In so far as public statements have been made in respect of Absa's relationship with the particular client, Absa reserves the right to answer in the appropriate forum and at the appropriate time.

“Generally speaking, in making decisions of this nature Absa will consider a number of factors such as quality of existing property portfolio, lease expiry profile, group cash flow, group structure and the manner in which investors receive funds post sale of properties."

Reserve Bank

It is also clear that the Nova board is not impressed with Sarb’s failure to dispel the notion that Grindrod would suffer “reputational risk” if it conducted business with Nova.

The board said Sarb played an intimate and active role in the restructuring of the Sharemax syndications in 2010 and the subsequent creation of the Nova Group, and that one of the purposes of the new structure was to remove the historical negative perceptions of the old Sharemax structure. “…When asked for clarification as to the continued existence of ‘reputational risk’, the Sarb unfortunately appears to be unable to assist, notwithstanding the aforesaid role of Sarb in the restructuring proves and the creation of the Nova Group,” the communiqué reads.

The board went on to say:

“This is indeed an extremely sad state of affairs, when members of the Banking Fraternity and its regulator, the SARB, are unwilling to assist the Nova Group in acting in the best interests of the very “Pensioners” who’s plight the Media continues to lament, under circumstances where it is the SARB, who imposed the Directives on the historical so-called “Sharemax Group” (some 3 years ago), whilst, afterwards, actively assisted in terminating the existence of such historical “Sharemax Group”, and withdrawing the Directives, as a consequence, on 8 February 2012, so as to remove any impediment on and in regard to the historical business of the restructured “Sharemax Group”, constituting, to the best benefit of Shareholders and Debenture Holders, the new Nova Group.”

Sarb did not respond at the time of publication.

Topics: NOVA, CONNIE MYBURGH

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Special Investigations

Author: Ryk van Niekerk

18 September 2014

Sharemax complaints surge after Bam determination

Sars applies for liquidation of Sharemax and termination of the business rescue process.

The South African Revenue Service (Sars) has applied for the liquidation of Sharemax Investments and for the business rescue proceedings of the company to be terminated.

This follows a lengthy tug of war since 2012 between Sars and the directors of Sharemax and the Nova Group of Companies for the payment of R15.7 million of outstanding taxes.

Sars filed the application in June 2014, as it does not foresee the company being able to pay the debt.

Sars names, amongst others, business practitioner Dawie van der Merwe, former Sharemax directors Willie Botha, André Brand, Dominique Haese, as well as Nova Property Group chairman Connie Myburgh as respondents.

Affidavit

In a strongly worded affidavit Elle-Sarah Rossato contends on behalf of Sars that that the sole reason for placing Sharemax Investments into business rescue was to abuse the mechanism prescribed by the Company’s Act not to pay creditors.

“The inescapable inference is that creditors of Sharemax Investments were misled with a promise that R40 million would be coming their way, whilst the controllers of the first respondent had already decided to abuse the Company’s Act business rescue provisions.”

The R40 million refers to the amount earmarked to be paid to Sharemax Investments shortly after restructuring the investments, and was to be used to pay creditors.

Siegrist Determination

Rossato said in the affidavit that the directors abused the Siegrist Determination as the reason for not paying the outstanding taxes.

Fais Ombud Nolantu Bam handed down the Siegrist Determination last year. Of all the determinations she handed down, it is the most controversial one, that not only held Siegrist’s financial advisor liable for his losses, but also the individual Sharemax directors.

The directors are appealing this judgment.

Rossato contends that Myburgh, the chairman of the Nova Group of Companies, said Sharemax couldn’t pay the amount to Sars due to approximately 500 new complaints lodged at the Ombud following the Siegrist Determination and because the appeal process against the determination has not been completed.

Rossato labeled this position as a “disingenuous abuse of the Siegrist Determination as a reason for the non-payment of the first respondent’s (Sars) debt.”

In total, approximately 2000 of the total 33 000 investors have lodged complaints against their financial advisors regarding investments in Sharemax.

Termination of rescue proceedings

As part of the liquidation process, Sars also applied for the termination of the rescue proceedings for Sharemax Investments, as the requirements for business rescue had not been fulfilled. Van der Merwe was appointed as the rescue practitioner in December 2011 and has since not filed a rescue plan, which according to the Companies Act should have been done within 25 days of his appointment.

Van der Merwe also used the Siegrist Determination as a shield for his non-compliance. Rossato said that this approach was “equally disingenuous”, as the Siegrist Determination was handed down on January 29 last year, more than a year after Van der Merwe’s appointment.

Response

Sharemax and the directors have still not filed their answer to the liquidation application but instead filed a notice for joinder of Siegrist, alleging that Sars failed to include Siegrist as a respondent in their application. They contend that the application is “defective”, as Siegrist’s claim would be prejudiced if Sars’ application is successful. At most Siegrist will be a future creditor in the liquidation of Sharemax.

Topics: South African Revenue Service, Sars, Sharemax, Nova Group, business rescue