Capitec blocks State Capture payback

A Transnet pension fund has accused Capitec Bank of setting itself up to benefit from State Capture abuses by blocking a major settlement for Transnet pensioners. Capitec says it is defending its empowerment credentials, but the pension fund says it is trying to take unfair advantage.

Banking group Capitec is trying to block the R500-million settlement signed in August which would see Regiments Capital reimburse the Transnet Second Defined Benefit Fund (TSDBF) for the hundreds of millions it pillaged from the fund with help from the Gupta family network.

The payback would be funded by the sale of Capitec shares indirectly held by Regiments pursuant to a 2006 empowerment deal.

The settlement would see Regiments effectively transfer 810,230 Capitec shares to the pension fund (at a 10% discount to their market price) to extinguish the TSDBF claims.

Regiments owns 60% of a company called Ash Brook Investments 15, which in turn owns 100% of a company called Coral Lagoon Investments 194, which in turn owns the Capitec BEE shares.

Capitec now asserts that this 13-year-old BEE deal allows the bank to block the shares from being sold because it would dilute the bank’s empowerment.

Capitec has gone as far as to threaten invoking a “mandatory acquisition option” in the 2006 BEE deal to buy back the shares worth R1,100 each for R30 each (plus some interest) if Ash Brook directors or shareholders authorise the settlement.

Both the TSDBF and Coral Lagoon (which is majority-owned by Regiments) have gone to court this week attacking the bank’s attempt to veto the settlement, which requires Capitec’s consent.

They are effectively asking the court to order Capitec to approve. Capitec has yet to file its answer.

Coral Part 1_notice of Motion and Founding Affidavit-ocr

The TSDBF’s principal officer, Petrus Maritz, as well as Regiments director Litha Nyhonyha have, in affidavits, accused the bank of making a mockery of BEE legislation by enforcing unreasonably strict control over the sale of BEE shares.

They accuse Capitec of using its BEE concerns as a smokescreen to hide a more cynical motive: seizing control of the BEE shares at a massive discount to current market prices.

In his affidavit, Maritz provides a fiery summary of the fund’s view of Capitec’s veto:

In short, it evidenced an attitude on the part of Capitec that it preferred to maintain its relationship with Regiments Capital, a primary agent of State Capture, until such time as it could exploit the opportunity created by the Fund’s litigation… to force Coral Lagoon to sell its shares to a purchaser of Capitec’s choosing or otherwise to orchestrate a commercial advantage to Capitec from the situation.”

TSDBF Answering Affidavit (Signed) 020919-OCR

The fund has been trying to extract damages from Regiments in court since 2017, claiming that Regiments acted as an agent for state capture.

The wrangling over the settlement highlights the dire state of the TSDBF and its members.

Maritz, in his affidavit, says the fund’s 46,955 members get R2,683 per month on average. The R500-million settlement would amount to the equivalent of four months’ payment for every beneficiary.

The TSDBF has long been a scandal. A decision by Transnet in 2002 fixed the annual increase of pensions at a mere 2%. This means that, after inflation, they get less money every year.

A class action by these pensioners resulted in a settlement in 2019 that will give the pensioners a 13%, 9% and 6% increase in 2019, 2020 and 2021 respectively. They also get lump sums of R10,000 in each of these years.

The applications against Capitec from Coral and the TSDBF have made public the frantic correspondence between them after the R500-million settlement was signed on 8 August when Capitec’s consent became the major stumbling block to it being carried out.

The TSDBF even approached Capitec chair Santie Botha, with a plea to make a presentation to the Capitec board.

She came back with a letter claiming that the fund is “not a Qualifying Black Person” meaning that the settlement would dilute Capitec’s black shareholding and allegedly contravene the 2006 empowerment agreement.

The TSDBF disputes that this wording appears in the 2006 BEE deal – and also disputes it being branded non-qualifying. Maritz argues that the fund would qualify as “mandated investments” in terms of BEE codes governing empowerment in the financial sector.

Capitec has responded to amaBhungane questions by reiterating that the shares must stay in black hands.

Capitec chief financial officer Andre du Plessis told amaBhungane that Capitec was being asked “to pay the price for Transnet’s mistakes”.

Should Capitec support the disposal by Coral of its Capitec shares to Transnet, Capitec would be waiving its contractual rights under its agreement with Coral, effectively resulting in Capitec agreeing to a forfeiture of the direct black ownership of these Capitec shares. This would be contrary to the rationale for the issue of the Capitec shares to Coral in 2007…

The effect of Transnet and Coral’s court actions is that persons and entities involved in State Capture will improperly benefit, since the settlement amounts to a significant discount to Transnet’s claims against Regiments, and related parties implicated in State Capture – at the cost of Capitec’s contractual rights.

There are other solutions to enable Regiments, an undesirable shareholder, to dispose of its Capitec shares without Coral breaching the terms of its agreement with Capitec”, the bank told amaBhungane. (read Capitec’s full response below and here)

Capitec Response


In its papers, Coral sets out to portray the bank’s alleged opportunism.

Nyhonyha, a Coral Lagoon co-director, points out in his affidavit that the 2006 empowerment deal was done at R30 per share: above the market price of R28,78 at the time of the acquisition.

He argues: “In other words, despite that the Black investors were not offered any discount, and they remained committed to their investment for three years longer than any B-BBEE scheme in the financial services sector, Capitec Holdings refuses to permit them to deal freely with this shareholding, treating these shareholders like second class citizens and demanding that they only sell their shares to other Black investors, in respect of which a significant discount is imposed and the identity of which Capitec Holdings has the final say.”

Nyhonyha adds: “As a matter of fact, Capitec Holdings recently and opportunistically attempted to acquire the same shares we are now asking consent to sell at a 50% discount.”

He is referring to a November 2018 offer by Capitec (detailed in the papers) to buy all the Coral Lagoon shares at an effective 50% discount. Coral made a counter-offer of a 20% discount, but this was rejected.

Nyhonyha also points out that in July 2017 Capitec had allowed Coral Lagoon to sell some of its Capitec shares to up-and-coming empowerment player Lebashe. This was, however, at less than 50% of the then-market price, Nyhonyha asserts.

Nyhonyha accuses Capitec of refusing to permit the settlement precisely because it is still trying to squeeze out a discounted buyback of the shares.

He says: “I therefore consider that their refusal to consent is part of Capitec Holdings’ plan to hold out until Coral Lagoon and Ash Brook have to sell their shares in the form of a fire-sale when Regiments entities are being liquidated.”


In its own account of its interaction with Capitec, the TSDBF sets out what it clearly believes were stonewalling tactics by Capitec.

The settlement agreement with Regiments was concluded on 8 August 2019.

On 13 August the fund’s legal advisers held a meeting with Capitec executives to explain the structure and the background to the settlement agreement.

The fund’s Maritz says they expected Capitec to jump at the chance “to terminate its relationship with Regiments Capital which is publicly recognised as a prominent agent of State Capture”.

They were mistaken.

On 14 August they followed up with an email, to which there was no response. By 21 August, the fund had not heard back from Capitec so it wrote to formally request an opportunity to make submissions to the Capitec board in this regard.

In response, Capitec’s lawyers forwarded letters they had already sent to Coral Lagoon declining to approve the sale of its shares to the TSDBF.

The letters cited Capitec’s empowerment collar that it claims it holds over the shares and its concern that its BEE standing would be diluted by sale.

Maritz then wrote personally to the Capitec chair on 23 August, repeating the request to address the board.

By 27 August, the fund had still not heard back from Capitec and addressed a further letter to Capitec’s lawyers, without response.

Instead, on the same day Capitec wrote under its own letterhead to Ash Brook’s minority shareholders, threatening them with legal action and the R30 “Mandatory Acquisition Option” if they approved the TSDBF settlement.

On 30 August, Capitec chair Botha declined the fund’s request to make representations to the board and set out Capitec objections to the deal, including the concern that “the beneficiaries, in part… will be the very individuals who according to the TSDBF have been implicated in State Capture”.

In his affidavit, Maritz counters that Botha’s offer of continued engagement to find an alternative buyer for the Regiments shares gives the lie to Capitec’s expressed concern about who will benefit.

He notes: “Capitec clearly does not object to a sale that may benefit to Regiments Capital, only to one that may benefit Regiments Capital without affording Capitec a commercial advantage in addition to the reputational advantage of freeing itself from its 12-year relationship with Regiments Capital…

I invite Ms Botha to explain whether the Capitec board believes that its shareholders would want Capitec to frustrate a settlement agreement that will compensate Transnet pensioners living on less than R3,000 per month for hundreds of millions of rands of losses visited on their pension fund by agents of State Capture.”

The case is scheduled to be heard in the Johannesburg High Court on 10 October. DM

* Disclosure: Michiel le Roux, a Capitec non-executive director and shareholder, is the founder of the Millennium Trust, one of amaBhungane’s funders.


The amaBhungane Centre for Investigative Journalism, an independent non-profit, produced this story. Like it? Be an amaB Supporter to help us do more. Sign up for our newsletter and WhatsApp alerts to get more.


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