Numbers at NEF don’t add up for ‘invalid’ board

2015-03-01 17:00

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The board of the multibillion-rand National Empowerment Fund (NEF) is “invalidly constituted”, a Western Cape High Court judge has ruled.

This means it cannot legally make simple decisions such as whether to pursue overdue debts.

The state-owned empowerment funder went to court in Cape Town to claim R300?000 outstanding on a loan it gave four Capetonians to buy a Primi Piatti franchise.

Instead, it was ordered to pay for wasted legal costs and return with arguments that prove its board is valid and able to make decisions.

The invalidity stems from apparently having more board members than is legally allowed – 13 instead of the maximum of 11 allowed for in the National Empowerment Fund Act.

The NEF told City Press in response to detailed questions that the matter was sub judice. But it did confirm it would return to court and argue that Judge Ashley Binns-Ward misunderstood the act and got the number of existing trustees wrong.

The NEF claims it actually has fewer trustees than the law allows. NEF spokesperson Moemise Motsepe told City Press there were only 11 trustees and the law allowed for 12. “We maintain that the NEF board has always been properly constituted,” said the fund in a statement.

In court, however, the NEF’s lawyers inexplicably “admitted that the board consisted of 13 persons and this was more than the maximum number provided in terms of the statute,” according to Judge Binns-Ward’s judgment.

The NEF argued in court it was irrelevant that the board was overpopulated. This was rejected by the judge.

The NEF Act prescribes the composition of the NEF board in careful detail, including the size limit.

“One must assume that the legislature had some rational object in view when it adopted it,” read the judgment.

“The scheme prohibits the appointment of more than 11 trustees. Accordingly, any board comprised of a greater number of trustees is invalidly constituted,” Binns-Ward said in his judgment.

According to the NEF’s annual reports, the real number of board members is neither 11 nor 13 – it’s 12.

Now the NEF will return to court to “set the record straight”, it told City Press.

The franchisees, who have since lost their restaurant, are blocking the NEF with a variety of technical arguments, including the one about its board numbers.

The judge said this was a “well-made technical point”.

But he suggested that if the board was numerically valid, it could go ahead and challenge the former franchisees in court.

Primi franchises weren’t ‘viable’

The NEF is pursuing a R300?000 debt owed by Cape Wave Trading 26, a shelf company owned by husband-and-wife team Faizel and Nerosha Dawray.

That’s the balance of a R1.2?million loan they got from the NEF to buy a Primi Piatti franchise.

The loan was part of a cooperation agreement between the NEF and Primi to fund up to 15 black-owned franchises to the tune of R50?million. An identical plan for 15 Nando’s franchises was launched at the same time in 2008.

The case has revealed that the Primi Piatti scheme never really took off.

Peter Castle, co-founder of Primi Piatti, says his company hasn’t had any dealings with the NEF for “several years” and is in no way involved in the current dispute between the funder and the former franchisee.

Castle says the cooperation “didn’t get anywhere near” the R50?million mark.

“They funded maybe three or four stores. It was many years ago,” he told City Press.

When the Dawrays lost their restaurant, Primi Piatti sold it to a new franchisee.

Part of their debt comes from Primi apparently getting less than it should have in that resale.

Primi paid the R650?000 consideration to the NEF to offset the Dawrays’ debt.

However, the NEF claims that the amount should have been R700?000 – and is making this the Dawrays’ problem.

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