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South African Black industrialist sues department of trade over R14m grant

Mar 03, 2019
The only successful applicant for the Black Industrialist Programme in Limpopo is taking the department of trade and industry to court because he didn’t receive his promised R14.2 million grant.
Murendi Properties was listed in the department’s annual incentive report up to March last year as the only beneficiary of the scheme in Limpopo.
Murendi’s project was an expansion of a building supply retail company and manufacturing plant for roof tiles, for which the Industrial Development Corporation (IDC) had also approved a R30 million loan.
IDC loans, together with grants from the department, have been the bedrock of the much-publicised Black Industrialist Programme.
The owner of Murendi, Mphendziseni Makhesha, said in an affidavit that the department’s behaviour, which he termed “dilatory” – meaning that it was an act intended to cause delay – had threatened the whole project and could result in 34 retrenchments out of total staff of 90.
He applied to the department for the grant in 2016 and it was initially approved in October 2017.
Makhesha claims that the department has stopped talking to the company altogether after initial hiccups with its BEE certificate, an issue Makhesha says was rectified.
According to his affidavit, he had procured certificates from two different unregistered verification agencies – effectively getting defrauded – before getting a certificate from a proper agency.
The court application is targeted at Trade and Industry Minister Rob Davies and the director-general of the department, Lionel October. The relief demanded is that the department be forced to pay the R14 million grant it had approved.
The IDC has already paid out “almost all the amounts it approved”, the state-owned funder told City Press.
“This is to enable the company to commission its new plant, albeit at a reduced scale in the absence of the department of trade and industry’s grant. This was done to enable the company to start servicing its obligations to the IDC once the repayment obligations kick in.”
Makhesha has also already put down R7 million of his own money to settle an earlier debt owed to the National Empowerment Fund.
The department’s deputy director-general: incentive development and administration, Malebo Mabitje-Thompson, told City Press the industrialist scheme worked better than most incentives the department had deployed.
Mabitje-Thompson, however, implied that there was something wrong with the Murendi grant and the department was opposing the case.
“As part of our commitment to zero tolerance to corruption, we will defend any action against the department in court where we believe that governance processes have been breached,” said Mabitje-Thompson.
The department has already filed notice that it would oppose the application, implying that it believed there was a breach of governance of some sort.
The department did not elaborate beyond generic terms.
“Once an application is approved and the investment is under way, inspectors are dispatched to verify the investment and performance information submitted for any claim. In the event that misleading information is submitted, the project is cancelled,” Mabitje-Thompson said by email.
There had been no suggestion that the department intended to cancel the project, said Makhesha. However, it did have Murendi investigated to establish the veracity of its BEE credentials.
The agency tasked with the investigation, the SA National Accreditation System, however, applied the newer codes of good practice for the construction industry.
Makhesha said that this was absurd because his company was not a construction company and, even if it was, the construction codes did not even exist when he applied for the funding.
“There can be absolutely no lawful basis on which the department can avoid its obligation to honour the grant,” said Makhesha.
Mabitje-Thompson said that the programme as a whole had shown a “remarkable conversion rate from investment decision to start of production”.
“To date, 130 projects have been approved; R1 billion has been disbursed.”
The IDC said that it had funded “close to 300 deals involving 291 black industrialists” since the programme was launched in 2014.
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