DM Scorpio: How a foreign company appropriated R500m of your UIF money
About R530 million of the Unemployment Insurance Fund’s money has been tracked back to Bounty Brand Holdings in the United Kingdom.
- Public Investment Corporation
- Unemployment Insurance Fund
- Gary Shayne
- Bounty Brands
- Coast2Coast Capital
JOHANNESBURG – A new Scorpio investigation reveals how a foreign holding company’s shareholders pocketed more than half-a-billion-rand in public monies that the Unemployment Insurance Fund (UIF) lost on a tanked investment in one of its subsidiaries.
Earlier this year, investigative outfit Scorpio exposed how the UIF had lost a staggering R1.77-billion as a result of two investments in consumer goods group, Bounty Brands. 21,916 is how many unemployed workers the UIF could support at the maximum rate for the maximum period with R1.77 billion.
In late 2018, just months after the second investment, the group found itself buckling under the weight of a massive debt load. This prompted a drastic restructure, which saved it from financial collapse but left the UIF’s shares worth next to nothing.
Now, Daily Maverick‘s investigative unit, Scorpio, has tracked about R530 million of the UIF’s money back to Bounty Brand Holdings in the United Kingdom and unearthed how it was divvied up among shareholders in the weeks after it was received.
- READ THE FULL STORY: Bounty Brands’ ‘dodgy’ dividend: R530m from doomed UIF investment flowed to shareholders’ offshore accounts
As previously reported, the first investment was made by the Public Investment Corporation (which manages the UIF’s investment portfolio) into politically connected businessperson Lawrence Mulaudzi’s Kefolile Consumer Brands Holdings, which had a stake in Bounty Brands.
The second investment, meanwhile, valued at a total of R1.37 billion, was made into empowerment consortium Bright Glacier, which used the funds to buy a 36% stake in Bounty Brands’ direct holding company: an entity known as K659.
Mulaudzi had a role to play in this deal too, having earned a R47.5m advisory fee from it – after which, Scorpio has reported, he paid nearly R6 million towards a townhouse bought by former health minister Zweli Mkhize’s family trust.
Scorpio’s latest report reveals that on 14 May 2018, the same day K659 received the funds from the second investment, it paid out R430 million of them to another entity called Brainspan Ventures as part of a deal to buy back shares Brainspan bought three years earlier for just R2,250.
It also reveals that on the same day, K659 paid out R200 million to yet another entity, Bounty Brands SA, as a “loan settlement repayment”.
The report tracks how both these sums were channelled through a byzantine network of offshore entities linked to Bounty Brands and Cape Town businessperson Gary Shayne’s Coast2Coast Capital. Coast2Coast is Bounty Brands’ founder and equity partner. There was a string of intra-group transactions involving the two entities. R530 million was allegedly paid to the holding company within a week as dividends to the company’s shareholders.
Further, it reveals how the biggest slice of the pie – about R375 million – apparently went to a Malta-registered Coast2Coast entity called Shepstone Capital – an entity that also defaulted on its debt later that year, triggering a series of cross-defaults that sent Bounty Brands into the crisis that torpedoed the UIF’s investment.
South Africa’s official unemployment rate is 34.5%. Against this backdrop, the UIF serves a crucial function in providing a vital lifeline for hundreds of thousands of workers across the country who find themselves out of jobs every year.
It was also the financial backbone of government’s response to the COVID-19 pandemic and the devastating impact on the labour market.
It lost a massive chunk of public monies on these investments.
R1.77 billion represents 15% of the total R11,351,995 the UIF paid out in benefits in the 2018/19 financial year.
The UIF could support 21,916 unemployed workers at the maximum benefit of around R6,730 a month for the maximum period of 12 months with this much money. Or it could support 37,853 women on maternity leave.
The R530 million that was, according to Scorpio, paid out to Bounty Brands’ holding company’s shareholders as dividends alone, could support 6,562 unemployed workers or cover 11,334 women on maternity leave.
LISTEN: Daily Maverick journalist Pieter-Louis Myburgh discusses the explosive investigation.