Business

Katota, the property development saviour that wasn’t

By Phillip De Wet 15 August 2011

When the property market turned sour in 2008, hard-pressed developers were only too eager to talk to a new investor that wanted to pour billions into the market – money that was supposed to come from Mauritius, or Dubai, or maybe Azerbaijan, or was it Amsterdam? It was, in fact, none of the above, even though years later some marks are still believers. By PHILLIP DE WET.

After years of gorging on easy loans and riding the balance sheet benefits of spiralling property prices, many developers found themselves in trouble in 2008. In many ways economies (including South Africa’s) were simply coming to their senses after years of ignoring lending risks, but that was little solace to those who found themselves holding land, or even partially completed developments, but without the means to finish construction. What they needed was a big backer, somebody with a combination of vision and money, and perhaps a pre-2007 appetite for risk.

Enter Katota, an investment company with a counter-cyclical bent and lots of money to spend. Around R50 billion, Ghanaian businessman Joseph Eshun told local developers, and all of it before the World Cup soccer tournament, to cash in on the massive residential demand that spectacle was going to bring with it. Developers flocked to the Katota banner, with many paying a R100,000 fee for the evaluation of their properties.

That was in 2008. As of August 2011, that massive property investment had not materialised. Instead, eager developers have been fed a series of unfulfilled promises that increasingly look like fraud. Especially when the banks supposedly guaranteeing the whole thing turn out to know nothing about it.

Sake24 journalist Elma Kloppers has been tracking Katota for years [http://www.sake24.com/Soek/Nuus?queryString=Katota&pageIndex=0] and has documented a number of dodgy incidents. There was the sentencing of two supposed foreign investors in Mauritius for fraud, after they tried to use a false bank guarantee to obtain a loan of more than R100 million from the Investec branch on that island. There were the claims of a trust account with PricewaterhouseCoopers, which didn’t exist, or the promise that debentures would be launched in Dubai within weeks – early in 2010.

On Sunday Sake24 delivered what should be the coup de grace – unequivocal statements from two banks through which Katota claims to have guarantees that no such deals exist. The documents Katota has been sharing with local investors amount to fraud, according to the Royal Investment Bank of Dubai, while ING Netherlands said documents referring to it were also false.

That still leaves Katota without any apparent source of funding deals it already has on the table, in the middle of a renewed cash crunch that bodes ill for anyone trying to raise money.

And yet at least some local developers still cling to the hope that Katota will come to their rescue, at least those who have not yet been liquidated while awaiting their bailouts. DM


Join the counter-revolutionary expansion movement. iMaverick.


Read more:

Photo: Katota website front page

Gallery

Are You A South AfriCAN or a South AfriCAN'T?

Maverick Insider is more than a reader revenue scheme. While not quite a "state of mind", it is a mindset: it's about believing that independent journalism makes a genuine difference to our country and it's about having the will to support that endeavour.

From the #GuptaLeaks into State Capture to the Scorpio exposés into SARS, Daily Maverick investigations have made an enormous impact on South Africa and it's political landscape. As we enter an election year, our mission to Defend Truth has never been more important. A free press is one of the essential lines of defence against election fraud; without it, national polls can turn very nasty, very quickly as we have seen recently in the Congo.

If you would like a practical, tangible way to make a difference in South Africa consider signing up to become a Maverick Insider. You choose how much to contribute and how often (monthly or annually) and in exchange, you will receive a host of awesome benefits. The greatest benefit of all (besides inner peace)? Making a real difference to a country that needs your support.


DAYS OF ZONDO

Zuma’s nudge nudge, wink wink nuclear meeting with Pravin Gordhan, Lungisa Fuzile

By Jessica Bezuidenhout