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Tšepong shareholders’ fight intensifies

  • as consortium resolves to terminate Netcare’s contract
  • orders forensic audit as shareholders’ fight over dividends intensifies 

Pascalinah Kabi

TŠEPONG Consortium is said to have resolved to terminate the contract of Netcare Hospital Group (Pty) Ltd to manage Queen ‘Mamohato Memorial Hospital (QMMH) on behalf of the government.

Netcare, a South African company, is the majority shareholder in the Tšepong Consortium which operates the QMMH on behalf of the government. Well-placed sources said minority shareholders resolved to terminate Netcare’s contract along with that of Botle Facilities Management who are contracted to maintain the QMMH facilities. The sources said the decision to terminate Netcare and Botle Facilities’ contracts was taken at the consortium’s special board meeting in Maseru on Friday.

Should the resolution be implemented then the consortium will lose its majority shareholder. But the sources said the majority shareholders are unfazed by the prospect of going it alone without the consortium’s biggest shareholder, saying the QMMH, the country’s biggest referral hospital, can still go on as it has its complement of doctors and other staff who can still be paid by the government.

“QMMH has its own staff and resources to run the hospital,” a source said, adding, “Netcare doesn’t do much and it is always waiting for payments from the government and it transfers them to its own accounts in South Africa leaving Tšepong dry”.

Tšepong Consortium board chairperson, Mokutu Makara, yesterday confirmed that the special meeting was held on Friday but refused to say whether or not Netcare’s contract had been terminated and a forensic audit ordered.

“It is true that there was a board meeting yesterday (Friday),” Mr Makara said adding he could not reveal the decisions of the board meeting.

But the sources are adamant that the meeting resolved to terminate Netcare and Botle Facilities Management’s contracts. The sources said the consortium’s junior shareholders, who recently accused Netcare of failing to pay them dividends, also resolved hat there should be a forensic audit of the consortium as well as to open a criminal case against the directors of Netcare Hospital and Botle Facilities Management for allegedly syphoning money out of the consortium.

The junior shareholders allege that Netcare has not paid them any dividends since QMMH opened its doors to patients in 2011.

The junior shareholders – Excel Health, Afri’nnai Health, Women’s Investment and D10 Investments – allege that Netcare has not paid dividends on the grounds that the consortium was not making enough profits. They however, allege that the company is making a killing by paying itself about M200 million in management fees in 2018.

Netcare is the majority shareholder with 40 percent shares followed by Excel Health and Afri’nnai Health with 20 percent each while Women’s Investment Company and D10 Investments each hold a 10 percent stake.

The four allege that Netcare is unilaterally benefiting from the 18-year Public-Private Partnership (PPP) agreement the government signed with Tšepong Consortium in 2008 to manage the hospital.

The agreement was signed after Netcare was awarded the contract in December 2007 and formed the Tšepong Consortium with the four junior partners.

The Ministry of Health pays the consortium millions of maloti to manage QMMH, the biggest referral hospital in the country.

Confidential Tšepong Consortium financial statements seen last week by the Sunday Express’ sister Lesotho Times publication indicate that the government paid the consortium M597 777 890, 36 between February and September 2018.

The money paid by the government to Tšepong in the 2018/19 financial year could be more as the financial statement seen by this publication does not cover the period after September 2018.

But sources within the consortium allege that Netcare and Botle were the only ones who benefitted from the government payments. The sources said each time the government paid money into the consortium’s account, Netcare would transfer some of the money into its own account.

In total, Netcare was paid M201 399 701, 15 between January and September 2018 and this has angered the junior shareholders. Botle was paid a total of M28 355 111.

And on Friday, the junior shareholders resolved to terminate Netcare and Botle’s contracts.

According to a source, “the special board meeting resolved to terminate Netcare and Botle’s contracts, to order a forensic audit (of Tšepong Consortium) and to lay criminal charges against Netcare and Botle, and against directors/executives of those entities”.

The special board meeting was held to vote on the junior shareholders’ proposal for the adoption of a board resolution authorising a forensic audit of the consortium.

Netcare, who vehemently opposed the proposal, abstained from voting at the Friday meeting.

According to a confidential email addressed to Tšepong shareholders by Netcare General Manager of Finance, Chris Smith, Netcare resolved to abstain from voting on the proposal because they were “unsighted as to the reasoning behind this proposal”.

The email was written to the shareholders on Thursday 10 October 2019, a day before the special board meeting.

“Dear members of the board, we address this email to you specifically in response to the proposal for the adoption of a board resolution authorising a forensic audit of the company.

“We are unsighted as to the reasoning behind this proposal because the directors who were nominated to the company (Tšepong Consortium)’s board by Netcare were asked to recuse themselves from previous meetings where this proposition was discussed,” part of Mr Smith’s email reads.

He also alleges that the Tšepong Consortium was financially distressed and the board could not say with certainty that the consortium would be able to pay the forensic auditors and other creditors when their accounts fall due for payment.

“In fact, other creditors have already suspended their engagements with the company for reasons of non-payment.  The board members who resolve to authorise such a forensic audit of the company may accordingly be acting recklessly and in breach of their fiduciary duties,” Mr Smith said.

Should the board members insist on the forensic audit, Mr Smith said the shareholders who those board members represent would have to pay the costs instead of the consortium.

“We caution, and as you are no doubt aware, directors who act recklessly can be held personally liable by the company’s creditors for payment of the debts of the company. In the circumstances, Dr RH Friedland, C Smith, Ms L Bagwandeen, G Maduna (directors who represent Netcare on the consortium) will not be voting in favour of any such proposed resolution,” Mr Smith wrote in his email.

Meanwhile, the sources said the decision to lay criminal charges against the directors of the two companies was influenced by fears among the junior shareholders that the two were working together to syphon money out of the consortium.

On 13 June 2019, Netcare and Botle penned similarly worded letters to Mr Makara saying the consortium owed them substantial amounts of money dating as far back to the start of the hospital project in 2011.

“We write with reference to substantial amounts due to Botle Facilities Management (“Botle”), some dating back to the start of the project in 2011. Amounts due for the 2019 calendar year to date currently exceed M8, 4 million. Furthermore, we have been informed that Tšepong is experiencing unprecedented cash flow strain which is impacting its going concern status and ability to trade as such,” part of the letter signed by Botle Facilities chairperson P. Petlane states.

Mr Smith also wrote to Mr Makara on behalf of Netcare.

“We write with reference to substantial amounts due to Netcare Hospitals Lesotho (“NHL”), some dating back to the start of the project in 2011. Amounts due for the 2019 calendar year to date currently exceed M73 million. Furthermore, we have been informed that Tšepong is experiencing unprecedented cash flow strain which is impacting its going concern status and ability to trade,” Mr Smith states in his letter.

Both letters are titled Demand: Rectification Plan Going Concern and the junior shareholders suspect that Netcare and Botle could be in cahoots to milk the Tšepong Consortium.

Tšepong General Manager, ‘Manthuntšane Mohapi, recently said she was not in a position to comment on the matter as it was specifically about shareholding issues.

Netcare Group Company Secretary and General Counsel, Lynelle Bagwandeen, recently they could not respond to inquiries because the dispute over dividends had been referred to an expert on the issue.

“Thank you for your interest in this project.  Regrettably we are not in a position to answer any of your questions at this juncture as the issue of dividend payments is being reviewed pursuant to an expert dispute resolution procedure.  The matter remains subject to a ruling by the expert following which Tšepong would be able to issue a collective response if necessary,” Ms Bagwandeen said.

 

 

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