Khumalo misled Reserve Bank
Court documents show he never revealed the true ownership of R1bn worth of assets
April 6, 2009
By SLINDILE KHANYILE
Mzi Khumalo misled the Reserve Bank in 2002 about the true ownership of assets worth R1 billion that he took out of the country, according to documents in the high court battle between Khumalo and the central bank.
Khumalo won the first round in February, when the court set aside the bank's attachment late last year of Khumalo's investments, which he argued was unconstitutional, draconian and a threat to the survival of several of his investments.
The Reserve Bank has appealed the decision. The matter has been set down for April 23.
The story begins in 2002, when Khumalo told the exchange control department of the Reserve Bank that Efferton, a company based in the British Virgin Islands, was 100 percent owned by a non-South African, according to an affidavit by Alexander Ellis, the assistant general manager and head of investigations at the exchange control (Excon) department.
Later investigations by the bank found that as early as 2001, Efferton had been owned by a trust administered by Stonehage Group for the benefit of an offshore structure to be established to benefit Khumalo and his family.
"Until 26 February 2004 (Khumalo's) interests in Efferton Enterprises Limited and the fact that that entity formed part of an offshore structure created at the instance of (Khumalo) was never disclosed to Excon in any of the applications to Excon or any other communications," said Ellis.
Ellis said Khumalo had transferred more than R1 billion to an overseas structure by setting up Efferton. Efferton was allotted 170 shares at R1 a share at Simane Security Investments.
This was done a few months before Simane concluded the subscription and funding agreement with Harmony and the Industrial Development Corporation (IDC) for a black economic empowerment stake at the mining firm.
Later, the IDC converted its preference shares to ordinary shares in order to sell them.
It then transferred 733 439 shares to Simane, taking its equity to 10.9 million shares, making it the biggest shareholder at Harmony.
There was also R30.5 million that the IDC paid to Simane, representing 60 percent of its "over recoupment" cost. Harmony shares peaked at R186.90 and Simane's shareholding was estimated at R2 billion. Ellis said Efferton's shareholding in Simane (56 percent) at this time was in all probability worth more than R1 billion.
Less than a month later, the entire shareholding at Efferton was sold to Parctola for $1 (R9.05 at current exchange rate) a share. The final shareholding of Parctola was Grandma Trust, a discretionary trust set up for the benefit of Khumalo and his family (98 percent), Steve Bakos (1 percent) and Khumalo (1 percent).
Ellis said: "Thus for a mere $39 829 establishment costs, $100 subscriptions costs and a further R170 subscription costs, (Khumalo) procured the export of more than R1 billion in capital from the Republic. This took place without Excon approval and in fraud of Excon."
He listed many examples of how Khumalo allegedly refused to co-operate with the bank's investigations over six years.
In his replying affidavit, Khumalo said he had on a number of occasions asked the bank for details of how it believed he had contravened exchange control regulations, but the bank never gave him this information.
He said the allegations against him were speculative and unsubstantiated by any evidence or documentary proof, and were characterised by a complete misconstruction of his corporate and commercial affairs, particularly his offshore structures.
He said a substantial number of the attached assets did not belong to him or Mawenzi Resources and Finance.
"The full extent of such contraventions, if indeed there are any, was notional and in any event could never remotely approximate the outrageously alleged R1 billion," he said.
He said the attachment hurt various entities and halted running of the businesses.
How Khumalo moved R1bn offshore:
10 April 2001: Efferton incorporated and equity interest held in trust and administered by Stonehage Group
31 August 2001: Simane Security Investments shareholders resolve to allot 170 ordinary shares, at R1 a share, to Efferton; to appoint Khumalo as a director of Simane; and that no future directors’ resolutions will be passed or approved by the directors unless Khumalo agrees in writing
7 September 2001: Simane concludes a subscription agreement with Harmony and the Industrial Development Corporation (IDC)
25 October 2001: Efferton pays the subscription price of R1.70 to Simane for 170 ordinary shares in Simane
16 January 2002: The IDC starts to sell Harmony shares to recoup its capital outlay
Early February 2002: Harmony shares are trading at R96.50 a share and Simane’s equity is worth an estimated R1 billion
08 February 2002: The IDC converts its Harmony preference shares into ordinary shares to dispose of them
11 February 2002: The IDC completed the sale of the Harmony shares
February 2002: Alberto Bernado allegedly pays Khumalo $40 000 (R362 220 at current exchange rate) for consulting services
15 February 2002: The IDC transfers 733 439 Harmony shares to Simane, making it the holder of 10.9 million shares in Harmony
22 February 2002: The IDC pays Simane R30.5 million, representing 60 percent of its “over recoupment” costs.
22 February 2002: Khumalo allegedly loans $39 000 to the Grandma Trust, a discretionary trust established for his benefit and that of his family. The initial cost of setting up the trust is borne by the Stonehage Group
25 February 2002: The Grandma Trust on-loans $39 829 to Parctola
28 March 2002: Parctola on-loans $39 829 to Efferton
24 May 2002: Harmony shares are trading at R186.89 each and Simane’s shareholding is worth an estimated R2 billion
20 June 2002: Parctola is incorporated. It is recorded in the books of Efferton that $100 is due by Parctola in respect of subscription of shares by Parctola. The equity interest in Efferton is transferred from the Stonehage Group to Parctola
13 July 2002: Parctola’s shareholding structure is finalised as follows: Grandma Trust (98 percent); Steve Bakos (1 percent) and Khumalo (1 percent) – Slindile Khanyile
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