There are sound reasons why the notion of (yet another) state-owned bank might strike anxiety and fear in the hearts of many taxpayers based on the bizarre episode involving the Industrial Development Corporation (IDC) and an investment company, NMT Capital, in which Peter Moyo is a substantial shareholder.
The matter resurfaced last week when we reported that the IDC has made zero progress in pursuing its claim against NMT Capital. The state-owned industrial financier confirmed that no settlement negotiations had been conducted with NMT, nor had any court action been instituted to recover the R157m it says it is owed by the investment company.
The purported double dealing by Moyo came to the fore in 2019 as the long-running saga between Moyo and his erstwhile employer played out in the courts and the media. At the core of the conflict was the payment of an ordinary dividend to the shareholders of NMT before a preference share dividend that was first owed to Old Mutual who had provided funding to the company.
According to Old Mutual, the manner in which Moyo managed the episode caused it to lose confidence in its CEO, leading to an irreversible breakdown in trust between employer and employee that ultimately resulted in the life assurer dismissing him.
Evidently seeing this play out in the full glare of the public led the IDC, which had also lent NMT money to make investments, to review the settlement agreement it had concluded when the company declared it did not have the means to repay its loan in 2018. The settlement caused the IDC to extinguish a large portion of NMT’s debt.
The IDC subsequently claimed NMT had misrepresented its true financial position when requesting the write-off.
But since then, nothing. To think that any lending institution would do nothing to recover money it believes it is owed over more than a year at best represents incompetence, and at worst might be considered to be professionally negligent.
The context is important too. In its most recent financial year the IDC was hardly awash with cash. For the financial year ending March the institution incurred an operating loss of R3.7bn largely due to a R4.3bn charge for “expected credit losses”.
As the IDC has a lending book of about R30bn, an impairment of that size represents a major dent on its balance sheet.
Actual cash flow from operating activities fared marginally better — positive to the tune of about half-a-billion rand, but a sharp fall from the nearly R5.4bn generated in the prior year.
This all begs the question: why the lack of urgency on the NMT matter? Besides just the fiduciary responsibility incumbent on the financier to recover money it believes is lawfully owed to it, the IDC’s deteriorating financial position would indicate that every last penny that can be scrounged should be expedited as soon as possible.
As far as NMT’s public statements go, it believes the 2018 settlement deal struck with the lender is valid and the company will repay every last cent it owes, on time and in full.
The lack of intent from the IDC looks uncharacteristic. As far as large state-owned enterprises go, it has not requested a taxpayer-funded bailout, which makes it exceptional. On the contrary, it has demonstrated how viable state-owned institutions should be run.
So this is no time to start. If, upon legal review, the IDC thinks it has no grounds to recover the money, it should come out and state it. Likewise, if it fancies its odds pursuing the matter via legal avenues, it needs to crack on and do so. This is no time for inertia.
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