In South Africa, Paul Nyathi challenges dismissal in SA Steel Mills case — TimesLIVE
In South Africa, Paul Nyathi, who led the SA Steel Mills deal team, is challenging his dismissal following a disciplinary hearing at the Industrial Development Corporation (IDC). The corporation could incur losses of up to R1.5 billion, including interest, after the steel company entered business rescue proceedings, TimesLIVE reports.
The disciplinary hearing found Nyathi guilty of failing to inform the investment monitoring committee about critical changes to the deal. Nyathi disputes the findings, arguing that the IDC dismissed him before his appeal was heard, misapplied its internal rules and contradicted its own statements in court proceedings concerning compliance with the deal’s terms.
R514 million loan
In 2017, the IDC’s special credit committee approved R514 million in loan financing for SA Steel Mills to expand production in Meyerton, south of Johannesburg. Of this amount, R308 million was intended for equipment, R108 million for partial financing of construction, and a further R48 million as working capital.
Under the terms of the construction loan agreement, the borrower had to acquire land for the project and register a first mortgage in favour of the IDC for R444 million. Instead, the land was acquired and registered by the holding company SA Steel Rolling Mills, known as Sasrom.
In March 2018, Nyathi submitted a memorandum proposing changes to three loan agreements. Among other things, the document envisaged allowing SA Steel Mills to lend all R108 million of the construction loan to Sasrom and replacing the borrower’s original mortgage with a R444 million surety mortgage from Sasrom.
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Positions of the parties
The chair of the disciplinary hearing, Andrew Redding SC, concluded that the memorandum did not inform the committee about a breach of contract. In his view, this deprived the committee of the opportunity to assess the IDC’s right to terminate the agreement and the risks of enforcing the obligations.
The hearing also found that Nyathi had approved equipment tranche payments on the basis of Habib Overseas Bank currency hedging contracts without the borrower’s signatures. Nyathi stated that the relevant conditions for the payments had been cancelled from the outset through formal amendments prepared by the IDC’s legal department.
Nyathi’s representative, Tokelo Moloi, said his client had submitted 12 grounds to challenge the outcome of the disciplinary hearing. According to him, the appeal has not yet been heard, and Nyathi is seeking a proper interpretation of the agreements and application of the IDC’s disciplinary policy.
The IDC declined to comment on information about a possible debt write-off and the lifting of the suspensions of Nyathi and the head of the legal department, Russell Wallace. The corporation said that the issues raised remain subject to confidential internal governance and labour-relations procedures.
