Legal View

Incubator SmartXchange at loggerheads with ICT lobby group

Read time 4min 40sec
Leon Rolls, president of PBICT.
Leon Rolls, president of PBICT.

Durban-based incubator SmartXchange is at loggerheads with lobby group the Progressive Blacks in ICT (PBICT), which is accusing it of being more of a “landlord” than an incubator.

However, SmartXchange has vigorously denied the allegations, arguing that the PBICT president, Leon Rolls, is using the lobby group to advance his own personal agenda.

PBICT is a lobby group that represents the interests of black- and women-owned small, medium and micro-sized enterprises (SMMEs) in the local ICT sector.

The allegations came after SmartXchange was last week awarded at least R120 million by the Department of Small Business Development to enable it to act as a funder to commercialise top innovations.

According to an IOL report, SmartXchange chief executive Jonathan Naidoo said the business incubator, which develops and promotes entrepreneurs in the media, information, communication and technology sector had attracted attention when small business development minister Khumbudzo Ntshavheni visited the new KwaMashu incubator the hub is busy establishing.

War zone

However, the PBICT is not happy with how the incubator is treating SMMEs at the Durban facility.

In an e-mail sent to ITWeb, Rolls, president of PBICT, says: “The PBICT has been in a war zone with the Durban SmartXchange that claims to be incubating or developing SMMEs yet is operates more as a landlord rather than an incubator.

“I am talking both from experience and on complaints received by many of our SMMEs.”

Rolls alleges that the SmartXchange has “destroyed many of our SMMEs and to date, we as SMMEs, have judgements and court orders to sell our personal properties so we can pay the rent we owe to SmartXhange.

“I was in the SmartXhange programme and won their award for best SMME twice and at that time I was paying rent of R50 000 per month. Like many others, they didn’t contribute anything towards the development of my business I was just paying rent.”

He claims that SmartXchange evicted many SMMEs and most has shut down and others are operating from home.

“Government continues to fund failures and celebrates the success for these failures. Our people are the ones that suffer when money is being thrown into programmes like the SmartXchange programme just to pay big salaries and possible looters.

“Our SMMEs are suffering and money is being wasted into failure. We challenge the SmartXchange to publish a list of SMMEs that have been through their programme,” says Rolls.

Private agenda

However, Naidoo flatly rejected these allegations saying Rolls is using the PBICT platform to facilitate his own private agenda.

In an e-mail to ITWeb, Naidoo says the management and the board of SmartXchange are not aware that they are engaged in any “war” with the PBICT, or any other entity, and unequivocally refute this allegation.

“Instead, it appears that Mr Rolls is using the PBICT as a platform to facilitate his own private agenda. Mr Rolls is the sole director of an entity known as Sigma IT, against whom SmartXchange have judgment for unpaid rentals.

“Mr Rolls is correct in his assertion that SmartXchange acts as something of a landlord in that renting office space is one of our service offerings within our incubator programme. However, leasing of office space is not the only service we offer.”

Naidoo explains that the SmartXchange building, as it is colloquially known, does not belong to SmartXchange or any government organisation but it is privately-owned.

According to Naidoo, SmartXchange entered into a lease agreement with the landlord in 2004 and continuously extends the lease agreement every three years.

“Rentals have to be paid and collected so that we can satisfy our debt to the landlord. It is important to note that rentals are the only costs incurred by the incubated SMME’s. All other services offered within the incubator are free.”

Furthermore, he notes, the rentals referred to by Rolls are what he owed post-graduation from the SmartXchange Incubation Programme, when Sigma IT decided to remain in the building and make use of the premises as well as all the utilities and services offered therein.

“At this point Sigma IT was not an incubate and its rental was pegged at a market determined rate, unlike those for incubates who are allowed vastly discounted rental rates. This was discussed with Mr Rolls before he signed the lease agreement and he was fully aware of these details. The rental owing to SmartXchange by Sigma IT as an incubate was paid up fully before his decision to rent more office space.

“It is only when Sigma IT chose much larger premises (post-incubation) and overreached in its ability to cover its costs that they were unable to pay rentals owed.

“Unfortunately, Mr Rolls simply ignored further correspondence from ourselves, and later our attorneys regarding this issue and failed to make good on his various undertakings to settle this debt. At this point SmartXchange was forced to intervene and put processes in place to recover rentals. (This was purely a landlord – tenant relationship at this point and had no connection with the Incubation Programme).”

Click here to read SmartXchange’s full response.

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