The South African Reserve Bank (SARB) has loosened its grip on the R9 billion that was raised and later frozen following the successful sale of 500 million Pepkor Holdings shares in June. This move allows Ibex Holdings, formerly Steinhoff, to settle some of its foreign creditor obligations.
This latest development is part of an ongoing legal battle between Ibex and the SARB, which began after the Steinhoff scandal broke in 2017. The scandal was triggered by the resignation of Steinhoff International’s chief executive, the late Markus Jooste, along with accounting irregularities that precipitated a sharp decline in the company’s stock. This incident prompted investigations and lawsuits in various countries.
Details of the legal struggle are outlined in Ibex’s 2023 annual report and its unaudited results for the six months ended 31 March 2024.
Following a major restructuring of Steinhoff International Holdings Proprietary Limited (SIHPL) in 2019, creditors agreed to defer payments related to a SIHPL guarantee, prioritising legal claimants over creditors. This arrangement was finalised during a global settlement, which SARB approved.
However, in March 2023, the SARB prohibited the Steinhoff Group from transferring funds abroad and issued further orders in May 2023, freezing accounts linked to SIHPL, Ibex Investments, and Steinhoff Africa Holdings Proprietary Limited (SAHPL). These accounts collectively held €335 million (R6.7bn) in September 2023.
In September and October of that year, the SARB’s Financial Surveillance Department (FinSurv) authorised SIHPL to withdraw R854.6m (€42m) to repay in part the RSA Holdco loan note.
In December 2023, Ibex initiated review proceedings against the SARB, challenging the orders and seeking the release of a further €38m held in a Nostro Account with Standard Bank. Additionally, the SARB warned Ibex, SAHPL, and SIHPL that some or all of their blocked funds could be forfeited under Exchange Control Regulation 22B. This regulation empowers the SARB to confiscate tainted and untainted assets related to exchange control contraventions that had not been regularised.
At the time, Ibex responded, disputing the lawfulness of such forfeiture.
By March this year, the collective accounts subject to the SARB’s orders held R6.1bn (€298m).
In June 2024, Ibex raised an additional R9bn from the sale of Pepkor shares, with the intention to use the funds to reduce its debt. However, the SARB soon issued a directive holding the expatriation of substantial funds in abeyance, including the proceeds of the placement.
This is despite the SARB’s granting approvals for these expatriations in April this year.
The SARB issued further orders in July 2024, freezing the R9bn raised from the Pepkor sale.
To add insult to injury, just days earlier the SARB had ordered the forfeiture to the state of the R6.1bn, plus interest, held in the collective accounts in terms of Exchange Control Regulation 22.
The deputy governor of the Prudential Cluster of the SARB, Fundi Tshazibana, announced in the Government Gazette of 19 July that she ordered the Steinhoff Group to forfeit these funds to the National Revenue Fund, the government purse. This marks the largest forfeiture by the SARB to date.
Ibex Investments, SAHPL, and SIHPL had 90 days from the forfeiture date to initiate legal proceedings to overturn the SARB’s decisions, and they have expressed their intention to pursue this course of action.
Although the fate of the R6bn remains uncertain pending legal proceedings, Ibex secured a victory last month when the SARB agreed to release the R9bn from the Pepkor share sale.
BusinessLive reports that in a settlement agreement signed last month by Tshazibana and Ibex chief executive Louis du Preez, the SARB agreed to allow Ibex to make R9bn in foreign payments.
However, the agreement also states that the SARB considers the approval granted in April to be “unlawful and invalid in its entirety … on the ground that the SARB official who granted the approval did not have the power to do so”.
The SARB intends to file a self-review application to set aside the approval. The settlement was made a court order, with the SARB required to file an answering affidavit in the main case challenging its blocking order and proceeding with its self-review application.
The rights of the creditors
In the meantime, another party has entered the legal fray: Silver Point Capital (SPC).
In a judgment delivered on 7 October in the High Court in Pretoria (Ibex RSA Holdco Limited and Others v South African Reserve Bank and Others v Silver Point Capital), Judge Sulet Potterill granted SPC leave to intervene as the sixth applicant.
The other five applicants include Ibex RSA Holdco Ltd, Ibex Investment Holdings Limited, SIHPL, SAHPL, and Newshelf 1093 (Pty) Ltd.
SPC is part of a collective of non-South African creditors that, along with a broader group of creditors, agreed to defer payment under the SIHPL guarantee during the 2019 restructuring of SIHPL. In exchange for this deferment, the financial creditors relinquished their right to pursue their claims and execute against the assets to which they would typically have access.
In its application, SPC asserts that the SARB was kept informed and agreed to the global settlement. It claims that the payments made under this settlement were valid and binding, and that SPC relied on these approvals, which impacted their payment.
SPC outlines that it agreed to defer its claims specifically because the SARB had formally granted approval for these payments. It argues that it would never have consented to the deferral if it had known the SARB would withdraw its approvals, preventing it from receiving the payments it is owed.
“Had SARB not approved the payments then SPC would have enforced their existing rights under the SIHPL Guarantee that was approved by the SARB which would have procured SPC with a substantially better position.”
SPC contends that the SARB’s decision in March 2023 to impose a blanket transfer ban on the Steinhoff Group, along with the two orders in May 2023 prohibiting the withdrawal of funds held by entities within the Steinhoff Group at First National Bank, contradicts SARB’s prior approvals.
Additionally, it claims that the SARB’s failure to release €38m (requested in December 2023) has created significant uncertainty regarding the ability of financial creditors to receive payment for obligations that have historically been owed to them.
Ibex endorsed the intervention application and submitted an affidavit in support. In backing SPC’s application, Ibex asserted that the SARB’s failure to release €38 million has granted both the financial creditors and SPC a legal interest in the review.
“The review will determine the rights of the creditors to receive the funds owed to them, and the outcome of the review will affect the creditors’ rights. SPC has its own right to review and is not merely a parasite,” Ibex argued.
Investigation into exchange control policy violations
On 10 October, the SARB, along with the Prudential Authority, presented their 2023/24 annual reports to the Standing Committee on Finance. Among the key points highlighted was the ongoing “Ibex/Steinhoff” matter.
The SARB shared that after Steinhoff’s accounting irregularities came to light in December 2017, FinSurv noted reports which suggested that some of the cross-border transactions undertaken by the Steinhoff Group were not approved and/or were not executed in line with stipulated approval conditions nor in line with prevailing exchange control policy.
An external firm was appointed in 2018 to investigate Steinhoff, its associated individuals, and entities. SARB said the investigation aimed to determine whether Steinhoff had misrepresented information to SARB and if it had adhered to the terms and conditions of its approvals between November 2013 and December 2017. It also sought to identify any off-balance sheet structures that might have violated exchange control policies.
Due to the investigation’s complexity and scope, SARB acknowledged that the process has been lengthy and costly. So far, action has been taken against six individuals and eight entities. SARB estimated that the total value of exchange control contraventions identified runs into hundreds of billions of rand, though not all represent actual funds that left the country.
Regarding enforcement actions, SARB reported that attached and blocked assets total approximately R480 million, with blocked funds held in bank accounts amounting to around R8.9 million. Additionally, there has been a forfeiture of approximately R6.2 billion in assets from three Steinhoff entities, including around R60 million in forfeited assets belonging to Bernadine Odendaal, the former mistress of Jooste.
“Through collaboration with law enforcement agencies, a number of key individuals were arrested or are going to be arrested,” SARB stated.
The bank also mentioned that it has received numerous requests from offshore creditors concerning blocked funds held in the name of Ibex and related entities.
Under the heading “the way forward”, SARB indicated that it would continue enforcement actions against Ibex “and various parties” while maintaining collaboration with law enforcement agencies for the prosecution of various individuals.
“However, the SARB could consider a settlement with Ibex to bring the matter to finality and to avoid protracted litigation,” SARB said.
