Zungu derails Transnet

2009-09-19 14:12

SANDILE Zungu looked extremely relaxed on Friday morning, two days after agreeing to a R60 million to R70 million out-of-court settlement with Transnet.

“The matter is sorted. I can now direct positive energy towards the future and nurturing the businesses I have,” says ­Zungu.

He says that half of his time has been taken up by the case over the last five years.

So, where might that energy take Zungu to?

“Transnet has a large capital expenditure programme which entrepreneurs can participate in. I can look at opportunities with a clear conscience because we are no longer in a fight,” says Zungu.

And his optimism may not be misplaced.

“Mr Zungu and his company are free to do business with ­Transnet,” says John Dludlu, the parastatal’s spokesperson.

This is an interesting turn of events. For the past four years Zungu, through the Umthunzi Consortium that he leads, and Transnet have been engaged in an acrimonious legal battle over the sale of 5% of MTN shares that Transnet used to own.

Early in 2004 with Mafika Mkhwanazi as chief executive, Transnet had wanted to sell the shares to an empowerment company and Zungu’s consortium emerged as the preferred bidder with a price of R29.51 a share.

Later that year, with Maria Ramos at the helm, Transnet wanted to review the purchase price as the MTN shares were by then valued much higher on the JSE.

There was a disagreement and Transnet cancelled the deal. It later sold the shares at R65 each on the open market, raising R5.3?billion.

The Umthunzi consortium felt aggrieved and launched a legal challenge.

“Transnet did not have to admit liability and the engagements were approached in good faith,” says Zungu of the process that yielded the settlement.

Both parties refused to say how much the settlement was worth but City Press understands that it was between R60 million and R70 million.

Malesela Phukubje, a partner at commercial law firm Phukubje Pierce Masithela Attorneys, says settlements just before trial are common.

“A lot of cases get settled on the door step of the court because the parties have reconsidered the impact of legal costs, a protracted litigation and avoiding to put some information out there in the public domain. Information that could be used by the competition, enemies and friends,” says Phukubje.

On Friday, both Zungu and Transnet remained convinced of the merits of their claims.

“The fight was inspired by my total conviction that I had justice to fight for. I was prepared to stand my ground every step of the way,” says Zungu, who is clearly a man who believes in the high stakes.

His boardroom sports two slot machines because one of his companies has the right to roll out the slot machines in Gauteng. Zungu is also the executive chairperson of Zico Investments.

Zungu says he went the settlement route because he got a sense that there was a willingness to let bygones be bygones during the three meetings it took to clinch the deal.

On the other side, Dludlu says the settlement was made despite Transnet believing in the merits of its defence.

“Pragmatic considerations relating to, among other things, the need to focus management’s time on Transnet’s core business and strategy were overriding considerations as to why an out of court settlement was reached,” he says.

Having decided to settle, Transnet now finds itself having to find the money to effect the payment.

“We did not budget for this amount because we held a view in 2007 – as we do now – that the claim was unlikely to succeed. Like any other unforeseen expenditure the company incurs in the ordinary course of business, it will be settled from available cash resources,” he says.

Zungu says the manner in which this battle ended has reinforced his belief in the independence of the judiciary.

“The case may not have been resolved by a judge but I would have accepted whatever decision a court made. People can rely on the courts as the final arbiters of justice in legal disputes,” he says.

With the court case behind him, Zungu says there are opportunities to do business with ­government across many different sectors.

“Government is a major player in the economy. As an entrepreneur, you can’t afford to shy away from offering services to government,” he says.

“The past five years have weakened my ability to participate more meaningfully in that space. There were people who were uncomfortable doing business with me because I was viewed as suing government,” says Zungu.

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