DON'T get me wrong – as an entrepreneur who has cut more
than his fair share of corners in trying to get a business off the ground, I
understand that there is a very fine line between “risk taking” and “rule
breaking”. However, what Wendy Machanik did was break the rules and it is
fundamental that South African entrepreneurs understand why.
Writing an opinion piece for Business Day, Machanik
apologised and took some responsibility for her actions.
Basically she said that she dipped into the company Trust account
to the tune of R17m, but it was okay because the primary reason was to secure
jobs for her employees as the business faced a downturn.
Noble I’m sure but she is either delusional, a liar or
If you read her opinion piece, she says she accessed the
Trust account 90 times over a three-year period and she also put her own money
into the business over this period of time. In mitigation she argues that she
actually returned all the money by 2010 and there was a surplus of R1.2m in the
Trust account. Notably she said that at the peak of her business, Wendy
Machanik Properties (WMP) was turning over R130m a month and employed over 300
These are the only numbers you need to understand.
- R130m in
turnover divided by 300 employees implies the “cost” per employee is R433 000.
Assuming that those employees are actually agents, she argues the whole reason
she had to take money is because the property industry was collapsing. That
cost would have been a variable cost in line with actual property deals done.
Admittedly, this calculation is very simplistic and doesn’t reflect the real
position of the business – what it should reflect though is a company that
didn’t plan during the good years. I can guarantee that 300 employees were not averaging
R430 000 a month.
- A billion
rand a year business should have no issue approaching its financiers for R17m
in short-term funding.
dipping into the Trust account 90 times in a three-year window implies that WMP
couldn’t plan its cash flow by more than 13 days at a time? Surely they jest.
It is absolutely impossible that a board of directors and
the auditors (reportedly Darryl Sklar & Associates) could have missed 90
transactions in three years. If the company needed money every 13 days, then
surely it had to have been trading recklessly?
Either the directors or auditors
should have flagged something along the way.
This is wrong on so many levels of corporate governance.
Machanik argues: “Looking back now I know what I should have
done. I should have allowed the company to fold, declared bankruptcy, and
walked away. But I couldn’t allow myself to do that. I felt it was my responsibility
to my employees and their families they were supporting. So I did the
unthinkable. I accessed the trust account in order to save the business.”
Rubbish – the property market didn’t suddenly boom again in
2010 and give you breathing space to put a surplus back in the Trust account.
Based on the numbers Machanik put into the public domain in
this opinion piece we can only conclude that this is a business that was
pillaged and defrauded. There were no management controls put in place, the
business (and Trust) accounts were treated as a personal piggy-bank and
ultimately Machanik burnt the very stakeholders she claims to have been
*Marc Ashton is the editor of Finweek. Follow him on Twitter @zamarcashton