Johannesburg - Former executives at AltX-listed microlender African Dawn (Afdawn) have been ordered to repay more than R5m in bonuses, after it was discovered the awards were based on inflated performance figures.

Based on their performances for the year to end-February 2008, former CEO Marius van Tonder and former financial director Connie van Nieuwkerk were paid R4.4m and R1.3m respectively for exceeding operational targets and financial growth of more than 100% in earnings per share.

In 2008, Afdawn posted earnings per share growth of 169%. This figure was restated on Tuesday to a loss of 19%, when the group posted its interim results to end-August.

Van Tonder and Van Nieuwkerk were asked to resign. They were replaced in October at Afdawn's annual general meeting (AGM) after concerns were raised about alleged irregularities at Allegro, one of its subsidiaries.

"Letters of demand for repayment of the bonuses in full were issued to Van Tonder and Van Nieuwkerk," the company said.

However, the board and Van Tonder have agreed to set off the company's claim against termination payments due to Van Tonder. In terms of his employment contract, he is entitled to a salary until February 2010.

Van Tonder's bonus payments are puzzling, because he told Fin24.com in August 2008 that the company's significant participation in the single stock futures (SSF) market was driven by a lack of formal reward schemes for outperformance. At the time, the firm banked on continued gains in Afdawn's share price.

Late in 2008, the Afdawn share price tumbled in line with global markets. The directors were unable to meet their margin obligations in terms of the SSFs and as a result sought a loan from Nedbank, backed by these directors' individual stakes in Afdawn.

Nedbank called in this surety prior to October's AGM, making it the major shareholder and backer of the executive clean-out at the firm.

More murky goings-on

Still, problems at Afdawn appear to have gone far beyond poor remuneration governance.

"We report that we have identified certain unlawful acts or omissions committed by persons responsible for the management of African Dawn Capital Limited which constitute reportable irregularities in terms of the Auditing Profession Act, and have reported such matters to the Independent Regulatory Board for Auditors," the company advised shareholders.

Irregularities include unfiled tax returns, multiple sets of account records for one subsidiary, "unsubstantiated journal entries" as well as "possible fraudulent activities".

It also emerged that one of the group's subsidiaries - African Dawn Renovations - had signed surety for R10m in favour of the National Housing Finance Corporation, without the knowledge of the Afdawn executive.

The audit also questioned the ability of Afdawn to continue as a going concern.

On Tuesday, Afdawn shares traded unchanged at 40c.

- Fin24.com