A protracted dispute between asset manager Sygnia and a former employee, Lesedi Kelatwang, may end up in the Constitutional Court.
In January, Kelatwang filed an application to the Constitutional Court, seeking to overturn rulings made by the Commission for Conciliation, Mediation, and Arbitration (CCMA) and the Labour Court, which upheld the fairness of his dismissal from Sygnia. He alleges procedural irregularities and bias in the adjudicative process.
In response, Sygnia filed a notice of opposition in February. It argues against granting leave to appeal, characterising Kelatwang’s application as “vexatious” and lacking merit. Sygnia contends that Kelatwang has failed to establish any constitutional issues warranting the Constitutional Court’s intervention and that previous judicial rulings have thoroughly adjudicated the matter.
The origins of the dispute can be traced back to Kelatwang’s recruitment by the asset management firm in 2018. Kelatwang was hired with the expectation that he would spearhead Sygnia’s venture into index arbitrage (IA) trading, leveraging his expertise in this area.
The court papers suggest Kelatwang’s employment terms were predicated on his promises to generate substantial revenue through IA trading. However, discrepancies soon emerged regarding the interpretation and feasibility of the IA trading strategy, particularly concerning the requirement of a unit trust with a minimum of R1 billion in client funds.
While Kelatwang advocated for access to substantial unencumbered working capital to facilitate the success of the IA trading initiative, Sygnia’s leadership had a different understanding of the R1bn unit trust requirement. This discrepancy led to a “fundamental misunderstanding” between Kelatwang and Sygnia.
Despite efforts to raise capital and implement risk management measures, the IA trading business encountered numerous obstacles. By February 2019, it became apparent to Sygnia’s leadership, including chief executive Magda Wierzycka and Sygnia Securities chief executive Max Koep, that the IA trading venture was not sustainable.
This realisation prompted discussions within Sygnia about the future of the IA trading venture. While Kelatwang reportedly proposed to take over as chief executive of the IA business, subsequent strategy meetings recommended shutting down the business.
Sygnia issued a restructuring notice to Kelatwang in April 2019, citing the cessation of IA trading and the need for organisational realignment.
Kelatwang proposed an alternative to retrenchment that centred on increasing black ownership within Sygnia Securities. Specifically, Kelatwang proposed that he would receive 45% ownership of the business, with an additional 6% equally split between another black employee and an empowerment trust. This arrangement would have resulted in Sygnia Securities being majority-owned by black individuals.
Wierzycka rejected this proposal and informed Kelatwang that the decision to close the IA business was final. His employment was terminated in May 2019.
Kelatwang contends that his dismissal from Sygnia was motivated, at least in part, by his stance on BEE and his efforts to promote diversity and inclusion within the company.
According to Kelatwang’s court papers, he claims Wierzycka confronted him in February 2019 about BEE issues he had raised and accused him of calling her a racist. Kelatwang alleges this confrontation resulted in him being retrenched in apparent retaliation for his promotion of BEE.
Kelatwang lodged an unfair dismissal dispute against Sygnia at the CCMA in June 2019, which went against him in an arbitration ruling made in March 2020.
He appealed to the Labour Court, which upheld the CCMA ruling in May 2023.
In September 2023, the Labour Court dismissed Kelatwang’s leave to appeal. The Labour Appeal Court rejected the appeal that he filed with that court in December 2023.
The dispute remains pending before the Constitutional Court, with Kelatwang and Sygnia awaiting a decision on whether the court will grant leave to appeal and review the previous rulings.
