Former Delta Executives Confront Delinquency Claims Amid Allegations of Misconduct

The Johannesburg High Court is currently examining serious allegations of mismanagement and breaches of governance against former executives of Delta Property Fund in South Africa. The case, brought forward by creditor Vantage Capital Fund Management, targets ex-chairman Johannes Magwaza and former CEO Sandile Nomvete in a delinquency application, suggesting that their actions while at Delta were detrimental to the company and its stakeholders.

This legal battle stems from a complex property transaction involving Somnipoint, a now-liquidated entity related to Delta Property Fund. Vantage Capital alleges that it provided a R200 million credit facility to Somnipoint almost ten years ago for the purchase of Absa Towers in Pretoria. The mortgage bond registered over the building and a cession of the rental income were intended as security for the loan.

Vantage Capital is claiming a staggering R371 million from Magwaza and Nomvete, including another ex-Delta executive, over what they argue was more than just a typical default on a debt. They accuse the directors of using Delta's influence to prevent Vantage from exercising its rights as a creditor, thus causing material financial harm.

Nomvete has opted not to comment on the ongoing legal matter, whereas Magwaza's bid to prevent the creditor from amending its application to invoke public interest grounds was unsuccessful. His notable history on various company boards is now overshadowed by the question of his conduct at Delta, which he departed from in September 2020 along with other executives.

Delta Property Fund, which is listed on the Johannesburg Stock Exchange (JSE), had previously reported findings from a forensic investigation to its shareholders. The investigation highlighted "unsubstantiated payments, procurement irregularities, and other unethical business dealings,” further raising concerns about the governance practices of Delta's past executives, including the dealing around Absa Towers.

The controversial building was intended to be acquired by Delta from Somnipoint, marked with a R45 million refundable deposit. When the transaction fell through, the refund failed to materialize according to Delta, a claim contested by Nomvete. The unraveling of the event has been complex, with newfound information at the Somnipoint liquidation inquiry contradicting earlier assumptions about the deposit repayments.

The ties between Delta and Somnipoint have sparked conflict-of-interest debates, with Nomvete defending the integrity of the transaction. Despite the Absa Towers deal appearing in Delta's prelisting statement through another entity, Mesidox, the lack of mention of Somnipoint raised eyebrows. Nomvete asserts that the formation of Somnipoint was a strategic response to a potential risk to Delta's portfolio and did not signify any wrongdoing.

Delta's spokesperson has refrained from commenting on the merits of the case due to its active status in court, asserting that the outcome will eventually become public knowledge.

As the Johannesburg High Court considers the evidence presented by Vantage and the former executives' counterarguments, the corporate governance of South African public companies remains under scrutiny. This case highlights the potential pitfalls of executive management and the repercussions that can follow years after their tenure has ended.