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Nova directors continue to rake in millions, while its financial statements reveal a company not paying taxes or its bills.
The Villa mall in Pretoria – half-built and derelict. Picture: Moneyweb
Nova Property Group, the rescue vehicle of the failed R4.6 billion Sharemax property syndication scheme, is insolvent.
Nova’s annual financial statements (AFS) for the year ending February 2024 reveal a company in severe financial distress, with mounting debt, unpaid taxes and severe cash flow constraints. It is also clear that Nova cannot repay the former Sharemax investors – who have become debenture holders in Nova – in the foreseeable future, if ever.
Despite this, Nova’s board, under the leadership of chair Connie Myburgh and CEO Dominique Haese, insists that the company remains in a “sound financial position” and is capable of continuing as a going concern, as well as having “access to sufficient borrowing facilities to meet its foreseeable cash requirements”.
Meanwhile, Nova’s executives continue to extract millions from the company while failing to repay investors.
The 2024 financial statements contain several controversial disclosures.
Among them, Nova sold a property without collecting the proceeds and significantly increased payments to its property management company – an entity seemingly owned by Nova directors.
Moneyweb sent detailed questions to Myburgh and Haese to clarify these issues, but they failed to respond.
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Financial position
The AFS shows that Nova’s liabilities exceeded its assets by R90.3 million on 28 February 2024 – more than double the R44.5 million deficit recorded the previous year. This means the company is hopelessly insolvent.
The group also posted a loss of R45.8 million for the financial year, pushing its cumulative losses to nearly R100 million over two years.
The cash flow statement reveals an even more dire situation.
Nova ended the year with just R3.7 million in cash in the bank. R3.1 million of this amount appears to be tenant deposits – suggesting the company had access to a mere R600 000 in available funds.
Meanwhile, short-term liabilities have surged to R323 million, significantly higher than the R271 million recorded the previous year.
Tax obligations have become a particular concern.
Nova appears to be delaying tax payments, with outstanding value-added tax (Vat) and corporate income tax liabilities nearing R80 million. The group incurred R8.8 million in penalties and interest for late tax payments during the financial year, an 80% increase from the prior period. Additionally, trade payables ballooned by 44% to R125 million.
| Nova’s AFS reflects significant increases in its short-term liabilities | |||
| Category | 2023 | 2024 | Increase |
| Trade payables | R87,065,343 | R125,062,025 | 44% |
| Vat payable | R9,895,939 | R16,374,398 | 65% |
| Corporate income tax payable | R50,723,085 | R62,003,298 | 22% |
In contrast, Nova’s operations generated cash of only R12.3 million during the period, suggesting that Nova will not be able to generate the cash to pay its tax and creditors if the directors cannot procure funding – something that will be highly challenging since two courts have found Nova guilty of not paying creditors Beneficio and Quatro.
In the Benficio case, the court denied its leave to appeal, and Nova petitioned the Supreme Court of Appeal (SCA) directly. In the Quatro case, Nova has applied for leave to appeal to the most recent judgment.
Jean-Pierre Tromp, trustee of the Nova Debenture Trust, stated in response to Moneyweb questions that he is “deeply concerned about Nova’s solvency”.
“The group’s liabilities currently exceed its assets by R90 million,” he said.
“As trustee, this raises serious questions about its ability to continue as a going concern. There are various areas of major concern in the published AFS. However, I am drafting a memorandum for formal comments for both the board of directors and the external auditors. I will only be able to respond once I receive their respective feedback.”
When asked whether Nova could soon begin repaying outstanding debentures of R2.2 billion, Tromp dismissed the possibility outright. “Not at all. There is no certainty as to when the Companies Tribunal will issue a finding to set aside (if at all) the compliance notice. Nova itself confirms in the AFS that the process is ‘without any attached time frame’ and ‘wide and open-ended’.”
Tromp also revealed that he no longer directly communicates with the Nova board, citing ongoing legal disputes. “I am embroiled in protracted legal proceedings against the group, and as a result, I am not in direct communication with them anymore.”
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Amogela Mall/Liberty Mall
A key revelation from the 2024 AFS is that Nova sold an unnamed property to a third party without collecting the proceeds of the transaction.
The property is Amogela Mall in Welkom in the Free State (formerly Liberty Mall). Nova sold the property on 24 June 2021 to Mystic Blue Trading 259, and the transfer occurred on 13 December 2021. (The transaction occurred before the Companies and Intellectual Property Commission [CIPC] forbade Nova from selling more properties.)
Nova however did not collect the sale proceeds, and Mystic Blue was placed into provisional liquidation in April 2022.
In the 2024 AFS, Nova discloses that it is owed “an outstanding debt that originated from the sale of an investment property”.
It explains: “A covering bond was issued in favour of the company. The debtor entered liquidation after the sale. The liquidators are marketing the property. Unforeseen events have impacted the marketability and, as a result, also the value of the property.”
Nova does not disclose why it allowed the property transfer without receiving the transaction’s proceeds.
Nova impaired the value of the amount due from R21.5 million to only R5 million, reportedly due to the deteriorating condition of the centre.
It also reduced the value of outstanding debenture linked to the property from R21.6 million to R5.6 million.
However, it is unclear whether the covering bond was in favour of investors, as Nova claims, as it was used as surety as part of a settlement agreement with a former service provider, Quatro.
Quatro, which provided security and cleaning services to several Nova properties, applied for the liquidation of 12 Nova companies in 2023 after Nova failed to pay it for services it had rendered.
Quatro subsequently withdrew the applications after reaching a settlement agreement, under which Nova was to pay Quatro around R12 million by 15 January 2024. However, Nova failed to settle the full amount by the due date, prompting Quatro to approach the courts again. In November 2023, the court ruled in Quatro’s favour and ordered Nova to pay Quatro R7.4 million plus interest and legal fees.
Ian Labuschagne of Quatro confirmed to Moneyweb that, as part of the initial settlement agreement, “surety and cession were taken over the existing bond registered over the Amogela Mall as collateral for the payment of the outstanding debt”.
He also confirmed that Nova has not yet paid Quatro the amount due yet has not reinstituted liquidation proceedings, as Nova has applied for leave to appeal the November 2023 judgment.
Nova did not respond to questions about why the property transfer was allowed without receiving the sale proceeds.
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Frontier Accounting and Secretarial Services
Another concerning revelation in Nova’s 2024 AFS involves Frontier Accounting and Secretarial Services, a long-standing subsidiary responsible for the group’s administrative and secretarial functions.
Nova sold the company in March 2021 for R900 000 to related parties – ostensibly one or more of its own directors. However, the financial statements provide minimal disclosure regarding the transaction, including the related party identities.
A CIPC company report reveals that Haese and Matthew Osterloh, Nova’s third executive director, are Frontier’s directors.
Concerningly, the 2024 AFS shows that Nova increased its payments to Frontier by 72% or R5 million to R11.9 million, while the total rental income it received rose by only 9% to R51.5 million.
Frontier does not make its financial statements publicly available, and it remains unclear if Haese and Osterloh, or other related parties, receive additional salaries or dividends from Frontier on top of their Nova remuneration.
The Nova directors earned handsomely, with their remuneration accounting for 14% of total operating expenses and employee wages. Haese and Myburgh earned R4.4 million each during the year. They have collectively earned R100 million since 2012 (Myburgh R49.4 million and Haese R50.4 million), representing nearly 60% of the R176 million Nova has returned to debenture holders over the same period.
Nova did not respond to Moneyweb’s questions related to Frontier.
Moneyweb also submitted a formal request under Section 26(2) of the Companies Act – to Haese and Osterloh in their capacity as directors of Frontier – to access the company’s shareholder register. To date, they have not responded.
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CIPC directives
It is equally concerning that the CIPC appears to have stalled its enforcement actions against Nova.
The CIPC initiated its investigation in 2021 when it issued directives requiring Nova’s board to prove that Nova was not trading recklessly, fraudulently, or under insolvent conditions. Nova’s subsequent responses were rejected, and in July 2022, the CIPC escalated its intervention by forbidding Nova from selling any additional fixed assets.
Nova appealed the directive to the Companies Tribunal in August 2022, yet nearly three years later, the matter hasn’t been heard.
It seems as if the CIPC’s process has ground to a halt, as the commission has broadened its investigation to also examine why Sharemax and other property syndication schemes failed in the first place. This means the CIPC has delayed taking action against Nova while the company’s financial position deteriorates rapidly.
Moneyweb sent questions to the CIPC regarding the status of its investigation into Nova but had not received a response by the time of publication.
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Unqualified audit opinion
Nova’s auditor for the 2024 financial year was ARC Chartered Accountants Incorporated. ARC was appointed auditor in the 2023 financial year, making it Nova’s fifth auditor in seven years at the time.
It gave the 2024 AFS an unqualified audit opinion, which means it believes the statements fairly reflect the company’s financial position.
ARC noted a material uncertainty regarding Nova’s ability to continue as a going concern if it is required to start repaying debentures in the short term.
However, the auditor did not state that Nova would be unable to continue operating if it were not required to repay the debentures.
The Companies Act prescribes that all companies must prepare audited financial statements within six months of their year-end, which in Nova’s case was 31 August 2024. Nova only published its AFS on 31 January 2025, five months late and contravening the act.
This marks the seventh consecutive year that Nova has published its financial statements beyond the legally prescribed six-month deadline.
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The delay ensured that Nova, a high-profile company tasked by the high court to repay investors of the largest failed property investment scheme, could hide the disclosure of its dire financial position to debenture holders, creditors and other stakeholders for five months.
ARC did not report the late publication of the AFS to the Independent Regulatory Board for Auditors (Irba) as a Reportable Irregularity (RI), stating that it wasn’t under an obligation to do so.
“In line with IRBA’s guidelines, we used our professional judgement and discretion to consider whether the late ‘publication/preparation of the 2024 AFS’ that you referred to met the definition of a Reportable Irregularity. In our opinion, it was not necessary to file an RI,” said Theo Rautenbach, a director at ARC.
He also stated that ARC is “well aware of the extent of public interest in Nova”.
This contrasts with Nova’s previous auditors, who, between 2017 and 2022, filed no fewer than eleven RIs related to Nova and group companies, mostly related to the late publication of financial statements. Irba referred four cases to the CIPC and the South African Revenue Service (Sars).
ARC also did not report an RI related to Nova being technically insolvent for a second consecutive year.
Trading insolvently is a serious transgression of the Companies Act.
ALSO READ: Nova teetering on the verge of insolvency
No communication with debenture holders regarding repayments
Nova has not issued any communication to debenture holders regarding when they can expect to be repaid since 2022, when it failed to do so. Nova did not respond to questions about when it foresees repaying investors.
This article was republished from Moneyweb. Read the original here.
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