Political Correspondent

CAPE TOWN Confusion reigned at the weekend over whether JCI funded the purchase of a 16,5% stake in Rand Leases Properties (RLP) by empowerment firm Itsuseng Strategic Investments.

Newspaper reports have cited the financial backing as corroboration that JCI, which is led by Brett Kebble, used Itsuseng as a front for its strategy to buy out RLP's minority shareholders.

Securities Regulation Panel executive director Richard Connellan said the panel was aware that JCI had provided the funds for Itsuseng, owned by leading members of the African National Congress Youth League.

However, Connellan said the forensic audit conducted by the panel into the deal could not establish whether Itsuseng had paid the money back.

JCI chief financial director Hennie Buitendag denied that JCI had paid for Itsuseng's stake in RLP, and accused the Mail & Guardian of "absolutely irresponsible behaviour" in publishing the allegations despite his strong denials beforehand.

Connellan said the panel had a "sneaking suspicion that the relationship (between JCI and Itsuseng) was too close, too cosy, too cuddly", given the short lapse of time between Itsuseng's purchase of the RLP shares and JCI's scheme of arrangement to buy out minority shareholders in RLP in exchange for JCI shares. However, it could not prove that Itsuseng was merely warehousing the shares for JCI.

Itsuseng and JCI jointly owned more than 50% of RLP, which eased the buyout of minorities.

Minority shareholders asked the panel to investigate the relationship, claiming that JCI had used Itsuseng to avoid the legal obligation to make a public offer to all minority shareholders. They alleged they had had to settle for a lower payout.

The Itsuseng purchase was made in July last year, while the scheme of arrangement was announced in October.

Connellan said that if the Itsuseng purchase at 70c a share was made with the foreknowledge that JCI would make an offer to shareholders at R1,12c a share soon afterwards this would constitute insider trading.

The panel was so concerned about the nature of the relationship between JCI and Itsuseng that it urged the high court judge tasked with scrutinising the scheme of arrangement to investigate it further.

Both Itsuseng and JCI have threatened legal action against the Mail & Guardian newspaper.

Itsuseng MD Lunga Ncwana said the allegations that Itsuseng had been used as a front company by JCI were "completely untrue".

Itsuseng is owned by Itsuseng Investments, a company in which ANC Youth League national executive member Andile Nkhulu and Ncwana have 30% and 15% stakes respectively.

Mar 23 2004 07:26:59:000AM Linda Ensor Business Day 1st Edition