South Africa’s largest retail lender, Absa, is facing a R31.5 million lawsuit from a Johannesburg businessman who is aggrieved by the bank’s involvement in a transaction that went awry.
Thapelo Setilo, whose purchase of a meat wholesaler for R3.7 million in 2006 was financed by Absa, is suing the bank for “repudiating a subscription agreement and wrongfully excluding him from operating” the business 15 months after he had bought it through his investment vehicle, Renvst Trading Enterprise.
In court papers filed at the South Gauteng High Court, Setilo claims that Absa turned “a blind eye” to the alleged siphoning off of R7 million by Jabir Kardamey, the previous owner of the meat store, who had been hired to stay on for 12 months after the conclusion of the sale agreement.
Setilo said Absa kicked him out of the Midrand-based meat wholesaler after it was hit by a cash flow crisis due to the alleged pilfering of the R7 million by Kardamey, who has vehemently denied any wrongdoing.
Setilo said he had taken over the running of the business from Kardamey, but he too was ousted by Absa as the losses mounted and the business failed to meet its debt obligations.
The lender is defending itself, but has declined to comment on the litigation.
The head of Absa’s legal unit, Marthinus van Rensburg, said: “Owing to the fact that the matter is sub judice, Absa will not be able to offer comment.”
Setilo is attempting to recoup from Absa an amount equal to yearly net profit before tax that he would have made from January 2007 to November 2012. He is demanding R27.3 million plus 15.5% he claims he would have earned during this period had Absa not excluded him from running his business – trading as Mama Shes Meat Wholesalers.
A due diligence done by accounting firm Haroon Takolia & Company in 2005 concluded that the meat wholesaler would make a net profit of R3.2 million in the 2006 and 2007 trading years.
Gavin Tonks of small business turn-around specialist firm Elective Investments was appointed by Absa in February 2008 to rescue the sinking company.
However, the turnaround strategy failed to bear fruit and the business has since been liquidated.
Tonks said Setilo left the business after he had allegedly embezzled R350 000 that was meant to be paid to a supplier.
“When he could not explain what had happened to the money, he picked up his things and left.
“What is he suing Absa for? The bank is not in the business of running businesses; it lends money to businesses. When he was in trouble, the bank lent more money to him to bail him out,” Tonks said.
Kardamey said Setilo did not want him to run the business from the beginning.
“I am not a gangster. Setilo did not want me there and that’s why I left the company,” he said.
Kardamey said he had sold Setilo the business, but remained the owner of the building, and that Renvst paid rent to him.
“I took possession of the building because they were not paying the rent. My son is now running the business.”