The Development Bank of Southern Africa (DBSA) has dismissed concerns that it is awarding millions of rands in loans to companies linked to its directors.
While the DBSA says the related party transactions do not represent any conflict of interest, both the Inkatha Freedom Party and Parliament's Standing Committee on Public Accounts (Scopa) have criticised the bank's decisions.
The DBSA reported in its 2008/9 annual report that several of its directors had been involved in related party transactions. The report revealed that the bank had granted loans worth over R500 million to companies linked to directors Brian Figaji, Wendy Lucas-Bull and Lulu Gwagwa, who all serve on the DBSA's board.
Of the total, R369 million was allocated to companies linked to non-executive director Lulu Gwagwa. One of the businesses includes local pay-TV newcomer On Digital Media (ODM), which was granted R200 million.
Gwagwa is currently chief operating officer of Lereko Investments, which partially owns Lereko Media. Lereko Media is part of a consortium of black-owned businesses, which owns 60% of ODM. Gwagwa represents another 6.66% of ODM's shareholding through a broad-based women's group of shareholders in the business.
Despite the shareholding and her relationship with the DBSA, ODM says there is no conflict of interest, because she was only appointed director of the DBSA after ODM applied for and was granted the loan by the bank.
However, Gwagwa was appointed to the DBSA in 2004 and ODM applied for its licence in 2007 and it was officially awarded in July 2008.
ODM head of regulatory affairs Dimitri Martinis says Gwagwa conducted all her business above board. “She declared all of her assets and made all of her stakes known,” he explains.
Above board?
The state-owned DBSA, which is primarily supposed to fund infrastructure projects, is expected to be summoned by Scopa to explain loans granted to hotel groups and broad-based black economic empowerment investment funds.
The DBSA, however, maintains that everything was above board as her interests were reported to the Corporate Credit Committee, in August 2008, and to the Credit and Investment Committee, in October 2008.
The DBSA says that, as required by the Act and Governing Policy of the DBSA, any financing of investments in 2008/9 that have some interest by members of the DBSA board of directors are fully disclosed in the annual financial statements concerned.
“All directors declare their interests upfront. None of the concerned directors (as declared) have direct influence on the projects as they do not participate (recused) in the meetings where these projects were considered and approved,” says Snowy Khoza, executive manager of communications at the DBSA.
The DBSA has been heavily involved in the financing of local ICT projects. Last year alone, the bank invested more than R1.2 billion in the industry, including loans to partially fund the $235 million (R2.27 billion) East African Cable System. It also financed iBurst's network worth R50 million.
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