BEE partner takes company to court
16 January 2007

An Eastern Cape fleet management giant faces court action by its black economic empowerment partner for allegedly using them as a front in a state contract. The Dispatch online reported on Monday that the contract with the Eastern Cape government amounted to about R731-million.

The BEE partner, Kei Fleet Solutions, had lodged an urgent application seeking court intervention on several issues. These related to alleged fronting, management interference and non-compliance of contract. The respondents are FleetAfrica, FleetAfrica Eastern Cape (FAEC) and the MEC for transport Thobile Mhlahlo.

Accused of ‘sidelining’ Kei Fleet In an affidavit, KFS's director Mkululi Pakade accused FleetAfrica of sidelining KFS and taking control of all management functions within FAEC. "(KFS) has been disregarded as a meaningful and active business partner in (FAEC) with the result that finds itself in a position where it operates as a front to meet black economic empowerment requirements."

Pakade also claimed that "poor administrative support" rendered by FleetAfrica to FAEC had "materially compromised" the quality of service to the Eastern Cape government. FleetAfrica indicated it would oppose the matter and lodged an application for security of R180 000 from KFS to cover legal costs if KFS lost. FleetAfrica said it believed KFS would not be able to pay costs because all dividends paid to KFS were paid to shareholders and not retained by KFS.

The matter of security was to be argued in the Grahamstown High Court on Monday. Black-owned KFS holds a 25 percent stake in FAEC, which was formed in 2003 to manage and maintain the Eastern Cape government's 3000-vehicle fleet for five years. The remaining 75 percent of FAEC is held by FleetAfrica, a wholly-owned subsidiary of the JSE-listed Super Group.

The awarding of the contract has been steeped in controversy since 2004 when it emerged that no specific provisions were made to govern the management, servicing or ownership of the province's ambulances.

Sapa, www.business.iafrica.com