The High Court in Johannesburg has dismissed an application by Hosken Consolidated Investments (HCI) to 'take over' the running of national lottery operator Ithuba. Ithuba had previously described the court application as a "hostile takeover" bid by the back door.
JSE-listed HCI, an investment holding company, had sought an urgent interdict allowing it to access Ithuba's financial statements over claims involving overpayment of fees to Ithuba's management company, Zamani. HCI, in its court papers, had argued that Zamani had been paid management fees of 4.67% of Ithuba's gross revenue, when it was only entitled to 3%. The company had also sought an order directing Ithuba to pay its monthly management fees into an attorney's trust account, and an interdict requiring that the salaries of Ithuba's employees are paid by Zamani, and not by Ithuba.
In 2014 Ithuba won the bid to run SA's lottery operations for eight years. HCI advanced a loan of R341m to Ithuba at the time. HCI argued the loan agreement included certain terms which would kick in if the loan was repaid before its full term, including management oversight and a 1% management fee.
The loan was repaid early, Ithuba CEO Charmaine Mabuza confirmed to Fin24 last week. She said at the time that Ithuba's board decided to repay for the loan before time because HCI did not "want to stay out of Ithuba's business". The early repayment of the loan came up in an earlier arbitration, which found for HCI.
A question of regulatory approval
Judge David Unterhalter on Monday dismissed HCI's urgent application with costs, after two days of hearings the case last week.
He ruled that while HCI may in the future exercise its right of management oversight over Ithuba, which includes the payment of a 1% management fee, the necessary regulatory approvals had not yet been granted.
"I find that since HCI Invest cannot presently exercise its right of management oversight, it has no claim to payment of the 1% fee and no claim upon the management fees that Ithuba is currently paying to Zamani," read the judgment. "There is no need for the fee relief that is sought".
In his ruling, Untehalter stated the lawful operation of the national lottery was "a matter of public importance" given its role in funding charitable projects. But he said HCI had not shown that Zamani was not entitled to the 4.67% fee.
The judge also found that Zamani had already taken over payment of Ithuba's salaries. Ithuba's licence runs until June 2023.
- Additional reporting by Carin Smith