Johannesburg - Government-owned lender, the Industrial Development Corporation (IDC), is facing two audacious lawsuits from a Johannesburg businessman, Joe Modibane, who is demanding R7.2bn and R277m from the funder.
Modibane, who is a former chairperson of the IDC's phosphate subsidiary, Foskor, is suing the lender for R7.2bn for allegedly reneging on a deal to sell him 35.3 million shares it held in steel producer Iscor in 2002.
The lawsuit will once again train a spotlight on Modibane's controversial one-time close friend, Khaya Ngqula, who was chief executive of the IDC when the repudiation of the agreement occurred.
In court papers, Modibane argued that the IDC - which was once a major shareholder in Iscor - made a U-turn on selling the Iscor shares to his special-purpose vehicle company, Basfour 2581.
The shares were worth R400m when the deal was struck in April 2002. But when Modibane launched the lawsuit in September 2008 the value of the shares had climbed to over R7bn, thanks to a runaway share price appreciation triggered by high global steel prices.
"In consequence of the defendant's (IDC's) repudiation of the agreement, the plaintiff (Basfour) suffered damages in an amount of R7.2bn," the court documents read.
In an interview this week, Modibane said he was shocked to learn that the Iscor shares, which were initially earmarked for black investors, were sold to global steelmaker LNM Holdings, a company founded by Indian billionaire Lakshmi Mittal.
Iscor, whose present-day name is ArcelorMittal South Africa, is part of a steel empire that produces approximately 10% of the world steel output. In 2008 ArcelorMittal had a gross turnover of $124.9bn worldwide. The company has a controlling stake in its JSE-listed South African operations, while the IDC holds about 8.8% of ArcelorMittal SA.
Modibane has questioned why ArcelorMittal SA, a company built with South African taxpayers' money, was sold to a foreign investor who has ignored calls for a black economic empowerment (BEE) deal with local investors.
"The family jewels (Iscor) were sold to Mittal for a few pieces of silver," he said.
The matter will be heard on May 20 this year at the South Gauteng High Court.
Demise of friendship
Modibane said the IDC's repudiation of the Iscor transaction led to the demise of his close friendship with Ngqula, with whom he had shared a room in 1981 when both men were trainees at global IT giant IBM in New York.
"We are no longer friends and I have not spoken to him for six years," he said.
Attempts to reach Ngqula, who was the IDC boss between 1997 and 2004, had not borne fruit at the time of going to press.
IDC spokesperson Kesebone Maema said the lender was confident of successfully defending itself against Modibane's lawsuit.
"The matter is being defended as the IDC had no such agreement with Modibane, as he had failed to comply with the terms and conditions attached to the proposed transaction," she said.
This lawsuit stems from a contract they signed in April 2001 with the IDC in which they pledged their 51% shareholding in IT firm MrPrepaid Group as security in return for a R2.5m loan from the lender.
The Modibanes are exploiting a clause in the contract which instructs the IDC to pay them an amount equal to the value of the stake minus the R2.5m loan in the event of their defaulting.
"We have defaulted, so they must take the shares and pay what is due to us. The pledge of shares agreement said the IDC must pay the difference between the value of the shares and our indebtedness to it," said Modibane.
He said MrPrepaid was worth R280m, based on a tender the company won in the Democratic Republic of Congo (DRC) to roll out hardware and software for pre-paid devices for the country's national lottery, which is going to be run by that county's parastatal, Sonal.
MrPrepaid rolled out the lottery equipment but Sonal has not paid, leading them to default on their loan with the IDC.
The DRC lottery is still not operational.
Maema disputed that the financier was indebted to Modibane and said his R277m claim was outrageous and amounted to a thumb-suck.
- City Press