Sactwu’s counsel advocate Leon Kuschke SC (left) and Independent Media’s counsel advocate Eduard Fagan SC. Pictures: Supplied
THE poverty plea by the SA Clothing and Textile Workers Union (Sactwu) is highly misleading as the union is one of the country’s richest unions with a multimillion-rand investment with Sekunjalo companies and an even bigger investment in Hosken Consolidated Investments (HCI), with about R4 billion in shares.
Also, claims by Sactwu general secretary Andre Kriel that he was misled into signing a subordination agreement, may hold no water as Kriel repeatedly told the court that he did not read the documents in thorough detail.
The general secretary, all but admitted in court last week that he had signed off on a R150 million subordinate agreement without fully understanding what the repercussions would be.
Testifying before Acting Judge Michelle O’Sullivan at the Western Cape Town High Court, Kriel said he relied largely on the interpretation of ex-unionist Kevin Govender of Hosken Consolidated Investments (HCI) and the Independent Media chief financial officer Takudzwa Hove.
The union’s investment arm Sactwu Investment Group (SIG), ran to court in a bid to obtain an order that its R150 million loan into Independent Media Consortium (IMC) – initially an investment – and interest repaid, amounting to a claim of about R300m.
IMC, formerly Sekunjalo Independent Media (SIM), a subsidiary of Sekunjalo Investment Holdings (SIH), is the majority owner of the Independent Media group. IMC argued that the R150 million loan was swopped for shares in another company in 2017.
IMC also produced a subordination agreement signed by Kriel in 2017, which states that the R150 million loan would only be paid back when IMC’s assets exceed its liabilities.
A subordination agreement is defined as a legal document that establishes one debt as ranking behind another in priority for collecting repayment from a debtor.
Under examination by Sactwu’s counsel advocate Leon Kuschke SC, Kriel said there were talks of a possible swop of the loan for shares in another Sekunjalo-related company, Sagarmatha Technologies, which was set to be listed on the Johannesburg Stock Exchange (JSE).
Kriel said Sagarmatha’s listing was expected to be a game-changer, with its value expected to grow significantly upon its planned offshore listing. He said all parties were confident that Sagarmatha would be listed and Sactwu’s plan was to recover its money potentially through the sale of its shares in Sagarmatha.
Kriel submitted that to his understanding the subordination agreement was needed for the listing or audit purposes and was expected to terminate or expire seven days after the scheduled listing.
Sagarmatha was subsequently not listed due to some technicalities raised by the JSE the day before the listing.
Kriel further said he was told that the Public Investment Corporation (PIC) among other creditors had also signed the same agreement and that gave him comfort in signing the subordination agreement.
However, during cross-examination, Independent Media’s counsel advocate Eduard Fagan SC put it to Kriel that the communique was that other creditors were offered similar documents to sign. Kriel stated that he was speaking to the best of his memory, to which Fagan responded that this submission would be challenged.
In his testimony Kriel repeatedly referred to his conversation with Hove, stating that at the time the entities – SIG and IMC – had a healthy relationship and he had no reason not to sign as he believed this was routine to enable the listing of Sagarmatha.
Fagan later put it to him that agreements are generally signed to protect certain interests in case relationships soured.
Notably the relationship between Sactwu and Sekunjalo soured with the uncovering of the R2m donation to the CR17 campaign by the head of HCI Johnny Copelyn.
Fagan also referred Kriel to certain documents that he signed that clearly stated the terms of the subordination agreement, to which Kriel responded by stating that he did not read the documents in thorough detail. Kriel insisted that he relied on his communique with Hove.
When questioned on why he did not take time to read the document, he said it would have taken too much time to read the entire document, indicating that he had other commitments. Grilled further Kriel admitted that nothing really stopped him from taking more time to scrutinise the document in detail.
Indy Counsel Fagan put it to Kriel that he acted carelessly when signing the agreement, which he refuted, insisting that he had acted reasonably by making calls regarding the agreement, also making claims that he was misled. Kriel said the purpose of the subordination agreement was never fulfilled and it should therefore fall away.
Meanwhile, Hove testified that he never pressured Kriel into signing the subordination agreement, saying that he did not find it unusual that Kriel had called him seeking clarity on the agreement.
Hove said nothing had prevented Kriel from consulting with an attorney about the agreement. He told the court that to the best of his knowledge, Kriel had the designated signing authority to enter into any and all contracts on behalf of the union.
In 2013, Sactwu requested to join IMC to purchase Independent Media with an investment of R150m. IMC included Cosatu’s investment arm Kopano, the military veteran’s association, MKVA, and various women’s groups and back business groups.
While the consortium had already raised the R2 billion needed to finance the transaction, Sactwu believed that an investment in IMC plus an additional R250 million to establish a workers’ publication, would be in line with its other investments in the media sector.
A special purpose vehicle (SPV) was created for the R150m investment for 8% of IMC. When the final agreement was signed, Sactwu requested to change the equity into a loan of R150m, having recently suffered a severe setback as a result of a failed investment in Trilinear where they lost R400m.
With the listing of AYO Technology Solutions in 2018, Sactwu also received 12 million shares at R1.50 per share at a cost of R18m, initially funded by Sekunjalo. These shares had a value of more than R500m, almost three times the investment in IMC. Recently Sactwu requested their dividends from AYO which amounted to nearly R40m.