ANC bigwigs in dodgy Land Bank loan deal

QUESTIONS have been raised over a massive loan made by the Land Bank to fund a BEE purchase with lofty political connections at a time when rural community projects were battling to get access to funds.

The state-owned Land Bank funded the buyout of a food empire for a company in which ANC secretary-general Kgalema Motlanthe and presidential adviser Manne Dipico have a stake.

The Land Bank provided R800-million to Pamodzi Investment Holdings, enabling the company to buy the remaining 49% it did not already own of Foodcorp, one of Africa's largest food firms - and one whose core business is not agriculture.

The Pamodzi deal was the first large empowerment deal to be financed by the Land Bank - and was questioned by the bank's own auditors, Ernst & Young, the Sunday Times has established.

The firm was concerned about the bank having overexposed itself by lending such a large amount to a single entity.

The R800-million constituted more than 40% of the bank's reserves. The norm is for the bank to limit its exposure at between 15% and 20% of its reserves per client.

After concerns were raised, the Land Bank's board issued a directive to the bank's management to review its prudential limits and to approach some of its clients to reduce the amounts of loans made.

The bank confirmed this week that in January this year its operations department had told Pamodzi it intended renegotiating the deal with a view to reducing its R800-million exposure. The money was repaid last month.

Pamodzi, however, says it was never approached to repay the money earlier, but had done so - after the Land Bank raised the red flag - because it had obtained cheaper finance elsewhere.

At the time of the deal Motlanthe and Dipico had a stake in Pamodzi through the Pambi Trust, which owns an 8% stake in the company through a "special purpose vehicle" called Shady Grove.

The two men are beneficiaries of the trust, and not trustees; Pambi's trustees are either executives or directors of Pamodzi.

Pambi Trust had its share of financial woes during the Pamodzi transaction. In 2000, Pambi paid a 10% deposit for 15.8% of Pamodzi, valued at R17-million at the time.

But by May this year, Pambi was about to lose its stake, having failed to come up with the balance.

Rand Merchant Bank came to their rescue, buying Pambi's entire stake in Pamodzi - then worth about R22-million - and transferring an 8% stake in Pamodzi to Pambi as fully paid-up shares.

Motlanthe, Dipico and other beneficiaries of the trust in effect increased their ownership of the initial holding from 10% to 50%, without spending any more money.

Pamodzi, founded in 1996 by a group of black entrepreneurs, said this week that Motlanthe and Dipico were "not actively involved in any Pamodzi business".

Speaking through its lawyers, Werksmans Attorneys, Pamodzi said there was nothing wrong with the funding transaction.

The company also said that "neither Motlanthe nor Dipico knew of the transaction while it was taking place".

The company's lawyers also added that the beneficiaries had not yet received "any dividends or benefit from their indirect shareholding".

Yesterday, the bank said it "rejects any suggestion that it was unduly exposed at the time the loan was granted or that there was undue risk involved".

The bank funded Pamodzi's deal at the time when hundreds of desperate farmers were battling to get funding for tractors, seeds, shovels, and fertilizer.

The Sunday Times has found that at least one community farming project suffered as a result of not getting funding from the bank.

The Mathebula Communal Property Association in Mpumalanga applied for a R110000 loan from the Land Bank in April last year - the same month that Pamodzi received its funding.

Approval for funding for this community project eventually came 11 months later, in March this year - and the community has still not received a cent.

"The project needs the money to buy, among other things, chicken stock, and feeding trays," said Ida Mathebula, chairman of the project.

The Land Bank is a public entity responsible for rural development and financing of established and emerging farmers. It reports to Minister of Land Affairs Thoko Didiza.

Pamodzi's acquisition, Foodcorp, makes Dogmore, Glenryk Pilchards and Yum Yum peanut butter.

Neither Motlanthe nor Dipico responded to several requests for comment. - Additional reporting by Dumisane Lubisi and Dominic Mahlangu