SA summons Mozambican group over alleged fraud

South Africa's National Prosecuting Authority (NPA) has summoned Mozambican consortium RGS to court over an allegedly fraudulent Absa bank letter that seems to have killed its chances to buy bankrupt sugar giant Tongaat Hulett. ‘Summons was issued and we will comment further once the matter is in court,’ the NPA said, according to a News24 report. No arrests have been made yet. The matter comes two years after a rival bidder for Tongaat, the Vision Consortium led by Robert Gumede, opened a case in Randburg. It requested an investigation into RGS, alleging that the company committed fraud by claiming to have R2bn in funds to assuage the concerns of those voting on its business rescue plans. RGS Group, owned by Mozambique’s wealthy Gulamo family, pulled its plan at the last minute in 2024. It claimed bias in the process against it, which was vehemently denied by Tongaat’s business rescue practitioners, but it was also clear that lenders had some concerns after it turned out RGS’ proof-of-funding letter was highly irregular, given the funds were not in its Absa Mozambique account. In legal papers, RGS said it ‘regrets this unfortunate incident’, but argued that senior management would have known that Absa would catch on to the irregularity during its check. RGS also argued it was not the fault of senior management, who only became aware of the issue when it was flagged by Absa. ‘A junior manager of RGS who had been instructed to make the deposit into an Absa Mozambique account had reservations about doing so, given the interest that would be forgone if the funds were moved to the Absa Mozambique account,’ RGS said. ‘This junior manager, without the knowledge of RGS senior management, took it upon himself to arrange for an Absa Mozambique official to be provided with evidence of the funds held by RGS in other bank accounts and to issue the Absa Mozambique letter on that basis alone.’

Ian Small-Smith, who represents the Vision Consortium in criminal matters related to Tongaat, which is also subject to several civil lawsuits, said his client had serious doubts regarding RGS’ claimed version of events. Small-Smith said RGS had opted not to respond to a ‘warning statement’ by investigators, even though it had already provided details of the events in legal papers. ‘The police have conducted a thorough and detailed investigation. We are relieved that after a two-year period, the NPA has decided to prosecute the suspects,' he said. Legal representatives of RGS on Friday said their client would not be commenting. Vision had initially put forward a plan that would have seen Tongaat potentially remain listed on the JSE, though a debt-for-equity swap transaction was rejected by shareholders in 2024. This kicked off an alternate asset sales process – essentially when the entire business is transferred to Vision in parts – but this, too, has now seemingly failed. RGS also launched several legal battles challenging Vision’s rescue plan, which both Vision and the business rescue practitioners repeatedly described as ‘vexatious’ and ‘frivolous’. The seeming failure of the Vision plan and the recent move for liquidation has faced opposition in many quarters, including from government. News24 notes that a formidable coalition, including the SA Cane Growers Association, the Minister of Trade, Industry & Competition, RGS group, and the Industrial Development Corporation, opposed liquidation during a hearing on 27 February. The KZN High Court has set down two days from 16 April, for a new hearing related to the liquidation.

Full News24 report