Kwezi- Mixshelf marriage ends in messy divorce

Kwezi- Mixshelf marriage ends in messy divorce October 25, 2009
By Wiseman Khuzwayo

At first it was a marriage made in heaven but now it has gone terribly sour. This describes the divorce between the Kwezi Investment Group and Mixshelf in their engineering relationship.Charges of racism, lack of transformation and a lack of good corporate governance have surfaced. This Friday, they will appear before an arbitrator.Kwezi teamed with V3 in August 2002 to form Kwezi V3 Engineers (KV3). Today, Sipho Mahamba, the chief executive at Kwezi, says V3 was in the red at the time and Kwezi pumped in R40 million as equity.Kwezi had ambitions of being a lead player in Africa in infrastructure development services, and information and communication technologies, while Mixshelf had engineering experience gained over 25 years.By way of a strategy to acquire more business, by November 2004 Kwezi had raised its empowerment stake in KV3 from 40 percent to 70 percent, says Mahamba.

At that time, KV3 chief executive, Francois Jacobs, said that since the partnership annual turnover had risen more than 40 percent to top R200m and assets welled 30 percent. But Mahamba says Kwezi has been kicked out as in the Bible story of a tent owner and a camel.He accuses Mixshelf of blocking the R21m payment as a dividend to Kwezi and alleges that Mixshelf has hugely undervalued KV3 for the purposes of exercising its buy-out option. Mahamba says at the centre of the dichotomy is Mixshelf's resistance to transformation and tolerance of racism.

He quotes an example of MSJ, a 100 percent subsidiary of KV3, accused by staff of racism.In March 2006, Mahamba wrote to the chief executive of Mixshelf, Francois Jacobs, saying: "It is high time the company demonstrably tackles the issue of racism. The legion (of) gripes that several blacks have about their treatment within the firm merits to be treated with seriousness... The report that was compiled on MSJ following an independent investigation was quite damning on the practices of that firm." Mixshelf has tried to exercise its buy-out option as contained in the shareholders' deal but has failed to meet the deadline, says Mahamba. He accuses Mixshelf of blocking the payment of the R21m dividend due to Kwezi, declared by the board in August. The board referred the dividend decision to the annual general meeting of the shareholders for ratification.

There, says Mahamba, Willem Hofmeyer, the chairman of Mixshelf, and Jacobs said they would like to first consult with their constituency.Mahamba alleges that, instead of responding, Mixshelf said Kwezi was no more a shareholder in KV3 and not entitled to a dividend. "The leadership of KV3 cannot even spell the word integrity," he says.KV3's clients include national and provincial government and municipalities. The company is also involved in the Gautrain.

Mahamba says: "It would be interesting to see if they've told their clients that they no longer have an empowerment partner and if they would be open to an independent audit." Mahamba has worked for Wall Street companies and Deutschebank, lectured in law in the US, and has been a consultant for the World Bank.Mixshelf has infrastructure contracts in Sudan and Libya, and Mahamba says he is the one who opened the doors.He values KV3 at R150m but Mixshelf put it at far less.On August 7, Hofmeyer wrote to Mahamba saying Mixshelf was offering R56m for Kwezi's shares in KV3. Prior to this, Kwezi gave Mixshelf six months to February last year to exercise its buy-out option.On March 4, Mahamba wrote to Hofmeyer saying Mixshelf's option lapsed on February 28 but had made a new proposition."Nothing precludes Mixshelf from tabling a commercially sound offer for a portion or the whole of Kwezi's shares in KV3. But this would have to happen on a strictly willing-seller-willing-buyer basis. To this end, we await your response as the ball is squarely in your court.

"Hofmeyer responded by saying this was a one-sided assumption by Mahamba."In Mixshelf's view, your statement of today is not correct and that the option is still valid. We are standing our ground that it would be unreasonable to withdraw the option before 31 August 2009."This rift has now given rise to the arbitration. Jacobs on Wednesday said he did not know of the report on racism that Mahamba referred to and added that KV3 regarded racism as a serious offence.Hofmeyer said he could not discuss the buyout by Mixshelf as the matter was sub judice.

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