Standard Bank closed the bank accounts of the Nova Property Group, the rescue vehicle of the failed Sharemax investment scheme, late last year.
Moneyweb has seen the minutes of a Nova board meeting held in November last year. It was disclosed that two Standard Bank representatives visited Nova in July and informed it that the bank was “no longer interested in doing business with NPG [Nova Property Group] and all NPG accounts will be closed on 3 September 2018”.
The deadline was later extended to mid-December.
It is not clear why Standard Bank, which has been Nova’s bank for many years, decided to terminate the relationship.
It is also apparent from the minutes that Nova commenced with the drafting of legal papers to stop the termination of the relationship. “Nova is presently preparing an urgent application to court, if Nova so decides, to stop the bank from closing Nova accounts and that they have no legal basis to do so, or to get a declarator to give Nova 24 months to migrate Nova’s circa 160 bank accounts to another bank,” the minutes read.
The minutes also state that Nova was already investigating the option to move the accounts to Absa.
Moneyweb has learnt that the group managed to migrate its accounts to Absa before the closure of the Standard Bank accounts.
Ross Linstrom, spokesperson for Standard Bank, did not confirm or deny the closure of Nova’s accounts. In an emailed statement, he said: “Standard Bank declines to comment based on client confidentiality be it current or previous clients.”
This is not the first incident of banks not wanting to do business with the Nova Group. In 2014 Absa and Grindrod Bank refused to provide funding to Nova, citing potential reputational risk. At the time, Nova lashed out at media coverage and blamed the creation of the perceived reputational risk on continued negative reporting.
No response from Nova board
Moneyweb emailed questions related to the closure of the bank accounts and other developments to Dominique Haese and Connie Myburgh, Nova’s CEO and executive chairman, as well as to the company’s non-executive directors: advocate Jan Smit, Nigel Adriaanse, Jane Phiri and Lazarus Mbethe last week.
Haese and Myburgh did not respond, while Smit acknowledged receipt of the questions on behalf of the non-executive directors but declined to respond, citing Nova’s policy of refusing to engage with Moneyweb.
Moneyweb also sent questions to the two court-appointed receivers of the Section 311 Scheme of Arrangement. They are attorney Hans Klopper of auditing group BDO and Myburgh. The receivers are tasked to ensure that the 19 000 debenture holders are repaid their original Sharemax investments in terms of the scheme.
Myburgh did not respond to these questions. Klopper acknowledged receipt of the questions but declined to provide answers. He wrote: “As previously stated, due to the nature of business at BDO, it is irregular to, nor do we, discuss any of our matters.”
Resignation of Charles Rembe
Moneyweb can also confirm the resignation of Charles Rembe from the Nova board. Rembe was the chairman of the audit committee. He confirmed his resignation to Moneyweb but declined to provide reasons for it.
Rembe’s resignation occurred during the audit process of Nova’s 2019 financial statements. Nova’s financial year ended on February 28, 2019, and the audit process should be well on its way, but Moneyweb was unable to establish whether there is any link between the two events.
Nova’s 2018 financial statements were qualified by Nexia SAB&T, the group’s auditor. Nexia questioned whether the company could continue to operate as a going concern.
Despite Rembe’s resignation on April 15, his name has been removed from the Nova website, his resignation does not reflect on a WinDeed company report accessed on May 24. The report still lists Rembe as an ‘active’ director. This may however be due to delays in updating the CIPC database.
Rembe was appointed to the Nova board in 2017 after Moneyweb sent a letter to auditing group BDO in November 2016, stating that the composition of Nova’s audit committee was in contravention of the Companies Act. BDO, which was the auditor at the time, then filed a reportable irregularity with the Independent Regulatory Board for Auditors (Irba) regarding the composition of the audit committee. Several non-executive directors, including Rembe, were subsequently appointed, which rectified the situation.
Nova also seems set to continue with the auctioning off of five properties from the portfolio on Thursday (May 30).
Nova has apparently not communicated its intention to dispose of the properties to debenture holders, and that may well create uncertainty as to how the proceeds to are intended to be spent.
Nova’s 2018 (qualified) financial statements revealed significant cash flow problems.
When Nova was formed in 2012, it inherited 28 properties valued at R1.9 billion from Sharemax. In Nova’s 2018 financial statements, only 19 properties valued at R2.2 billion are listed in the portfolio.
According to Moneyweb’s calculations, only 11 properties valued at around R1.9 billion will remain in the portfolio if the five properties are auctioned off and the other properties that were previously earmarked for disposal are indeed sold.
Two of the properties remaining in the portfolio are the half-built Villa Retail Park and Zambezi Mall in Pretoria. They are collectively valued at R950 million, which would represent nearly 50% of the total value of the remaining portfolio.
Forensic auditor André Prakke believes the sales should not be allowed to continue. “Given Nova’s financial state and possible insolvency, it is an ideal opportunity to approach a court to put the company into business rescue,” he says. “This can ensure that properties are not needlessly sold, while a business rescue practitioner can also take control of the company.”
Details of the auction can be found here.
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