Bitter battle as sweet Shoprite deal goes sour

Cape Town businessman Mohamed Amien Mukadam is dwarfed by heaps of sugar after a deal with a supplier of Shoprite Checkers soured.

Mukadam is pulling out all stops to force the retail giant and Pearl Island, a company that provides packaging and warehousing services to Shoprite, to pay for the thousands of tons of imported sugar he is now stuck with.

The fallout and the details of the agreement are playing out in the High Court in Cape Town, and there seems to be no end in sight to the costly and bitter litigation.

Mukadam's company, Starways, concluded a deal with Pearl Island in 2014 to supply 50,000 tons of white refined sugar, which would be delivered in consignments from October 2016 to May 2017.

story_article_left1

The deal was sweet until an import-duty reduction from R2,395 a ton to R318.90 a ton threw a spanner in the works.

Pearl Island demanded that Mukadam also reduce the price of his sugar. When he refused, it imported cheaper sugar from Brazil.

Mukadam hauled Pearl Island and Shoprite before court to urgently enforce the "contract" in December.

He told the court that 25,000 tons had already been delivered and that he was paying R400,000 a month for storage and had to extend the hedge on the rand/dollar exchange rate for a further three months at a cost of R500,000 a month.

Shoprite distanced itself from the deal.

"All the negotiations leading up to the conclusion of the sugar contract were done on the basis that the entire transaction would be funded by [Shoprite]. [Pearl Island] does not, as far as I am aware, possess the assets that would enable it to fund such a large contract, and [I] would not have concluded the contract otherwise," Mukadam said in court papers.

But Irmo Rapsch, director of Pearl Island, said Mukadam had himself to blame.

"The deal was put at risk as [Starways] refused to reduce the price in accordance with the reduction in the duty as it was contractually obliged to do," Rapsch said in papers.

Judge Dennis Davis dismissed Mukadam's application with costs last month.

"The refusal by [Starways] to take into account the possible deduction in the price to be paid by [Pearl Island] caused by the lower duty constituted an act which justified the cancellation of the sugar contract," Davis ruled.

Mukadam's lawyer, Ashraf Roomaney, said he would appeal. "Obviously I can't discuss the merits of the matter. My concern is that a judge might say we are trying to litigate this in the media."