INDUSTRIAL Development Corporation boss Geoffrey Qhena announced falling profits last week, but perhaps more damaging in the long run is the persistent suspicion that some of its investment decisions are influenced by political rather than business considerations.
In an interview after announcing the state-owned development funder's annual results, Mr Qhena, 47, a chartered accountant who began his working life as an administrative clerk for the Soweto council in 1984, strongly denied this.
"We won't do something unless we're convinced there is economic merit. We won't do anything for political reasons if there is not a good business case," he says.
He has never come under political pressure, he says, to extend a loan which the IDC feels cannot be justified on purely business grounds.
Which is not the same as saying he has never been influenced by political pressure, is it?
"I'm probably very lucky, but I have not had an instance where I was put under pressure to approve something because politically it was the right thing. Maybe my luck will run out one day, but I have been CEO for eight years and not even once have I approved something because there has been pressure."
What about his decision first to fund and then to bail out a supposedly well-connected construction company owner and former teacher who was awarded a contract by the Department of Public Works for work on President Jacob Zuma's private estate at Nkandla?
Thandeka Nene's track record could not have had anything to do with it. She was so incompetent that the department cancelled her contract after she repeatedly missed its deadlines. When her company, Bonelena Construction, was liquidated, the IDC gave her a further R10m, on top of its original R20m loan, to keep her afloat.
How did this one-woman construction company qualify for a R20m loan in the first place?
"We were approached by the client, who said she had a contract and needed to perform in terms of that contract, so we provided the finance," says Mr Qhena.
She did not fulfil the contract and reneged on her repayments. So the IDC gave her another R10m in the name of doing good business?
"Some of her other contracts were in jeopardy," he says. "We assisted her to ensure she could execute those contracts."
This was to "enhance" the IDC's chances of recovering its money. If it had pulled the plug on her, it would have been "a lose-lose for everybody".
Her political connections had nothing to do with it, he says. It was a sound business move because, as it happened, the department changed its mind about her contract and paid her R7m.
It only changed its mind because she threatened to go to court. The department was warned that details about Nkandla would come out with unpleasant political consequences.
A senior department official suggested her behaviour was fraudulent, but instead of taking her to court, the IDC stepped in to help her. Much to the relief of the department. "She's executing her contracts now and hopefully we'll get our money back," says Mr Qhena.
It does not look good, though, does it?
The IDC was following a well-established practice, he says.
"This is not the first time we've done this. Companies go into distress; we give them more money to enhance their chances of survival and of us getting our money back.
"Sometimes it works out, sometimes it doesn't. We have to take a long-term approach, but we do our homework."
The quality of its "homework" is again in question after it lent the late Jeff Wiggill, corporate crook and chairman of First Strut, R123m, which Mr Qhena admits they will probably never see again.
"They crooked us," he says. "They lied. We are R123m poorer because of that."
It is, of course, the South African taxpayer who is R123m poorer.
The IDC did "our normal due diligence", he says, which does not necessarily inspire much confidence. "We don't just disburse money. We get our external lawyers to do the checks."
As Mr Qhena points out, it was not just the IDC whose due diligence was found embarrassingly wanting. Big commercial banks were also taken for a ride.
"This is the kind of thing you can't anticipate. You can do as much homework as you like. I'm not saying we're 100% foolproof. We're not, otherwise we wouldn't be in the business of finance."
What has he learnt?
"Maybe we could have spoken to the other financiers more. We lost this money too quickly."
The IDC's internal auditors have told him that what happened could not have been foreseen, but he is clearly not convinced. "Maybe we could have spent more time with the other financiers than we did."
At least there was no politics involved this time? Mr Qhena laughs heartily.
Of course, being a state institution, the IDC is expected to carry out government policy. Whatever he says, there is no doubt that he has political masters, the most immediate being Economic Development Minister Ebrahim Patel.
The latest political agenda he might have to deal with is the purchase of Russian steelmaker Evraz's 85% stake in Evraz Highveld Steel by black economic empowerment company Nemascore.
Not happening, says Mr Qhena.
"We looked at it a while ago but didn't see it as something we should participate in. The price issue was one problem."
The Russians reportedly want $320m, which is close to 60% less than the stake has been valued at. And the Russians have been schmoozing Zuma in St Petersburg, where he has been attending the Group of 20 heads-of-state meeting.
Mr Qhena chuckles. "We have not been approached and hence we're not looking at it." Watch this space.
He insists again that IDC decisions are entirely divorced from matters of political influence.
And yet it is hard not to compare its soft-handed treatment of the Guptas, for instance, with its unforgiving -some might say extremely damaging -treatment of the politically unconnected white guys who used to own low-cost carrier 1Time.
When Zuma's friends, the Guptas, didn't stick to their agreement with the IDC to repay the loan they got for their Shiva uranium mine, the IDC rolled it over and rescheduled the payment terms to make it as easy for them as possible.
"When we gave them the loan, the uranium price was a lot higher," explains Mr Qhena.
Again, he says, the IDC's primary interest was in keeping a business going rather than letting it fail.
But it happily contributed to the failure of 1Time, according to the airline's founders. First, it effectively financed the takeover of the board by a completely inexperienced BEE consortium. This, say the original directors, led to the airline's swift demise. Then, they say, it reneged on the terms of the BEE deal by refusing to allow the money to be used for a new, more fuel-efficient fleet.
"The people who said that are being disingenuous," says Mr Qhena. "We wanted them to use the money to buy new planes, but they used it to pay existing creditors, which was not what we wanted."
Which is pretty much what Ms Nene did with the R20m the IDC gave her.
Yet the IDC gave Ms Nene another R10m, whereas in the 1Time case the state-owned funder took the airline's founders to court.
Double standards?
• This article was first published in Sunday Times: Business Times
CLEAN HANDS: IDC CEO Geoffrey Qhena says he has never been placed under political pressure to grant a loan. Picture: SUNDAY TIMES
INDUSTRIAL Development Corporation boss Geoffrey Qhena announced falling profits last week, but perhaps more damaging in the long run is the persistent suspicion that some of its investment decisions are influenced by political rather than business considerations.
In an interview after announcing the state-owned development funder's annual results, Mr Qhena, 47, a chartered accountant who began his working life as an administrative clerk for the Soweto council in 1984, strongly denied this.
"We won't do something unless we're convinced there is economic merit. We won't do anything for political reasons if there is not a good business case," he says.
He has never come under political pressure, he says, to extend a loan which the IDC feels cannot be justified on purely business grounds.
Which is not the same as saying he has never been influenced by political pressure, is it?
"I'm probably very lucky, but I have not had an instance where I was put under pressure to approve something because politically it was the right thing. Maybe my luck will run out one day, but I have been CEO for eight years and not even once have I approved something because there has been pressure."
What about his decision first to fund and then to bail out a supposedly well-connected construction company owner and former teacher who was awarded a contract by the Department of Public Works for work on President Jacob Zuma's private estate at Nkandla?
Thandeka Nene's track record could not have had anything to do with it. She was so incompetent that the department cancelled her contract after she repeatedly missed its deadlines. When her company, Bonelena Construction, was liquidated, the IDC gave her a further R10m, on top of its original R20m loan, to keep her afloat.
How did this one-woman construction company qualify for a R20m loan in the first place?
"We were approached by the client, who said she had a contract and needed to perform in terms of that contract, so we provided the finance," says Mr Qhena.
She did not fulfil the contract and reneged on her repayments. So the IDC gave her another R10m in the name of doing good business?
"Some of her other contracts were in jeopardy," he says. "We assisted her to ensure she could execute those contracts."
This was to "enhance" the IDC's chances of recovering its money. If it had pulled the plug on her, it would have been "a lose-lose for everybody".
Her political connections had nothing to do with it, he says. It was a sound business move because, as it happened, the department changed its mind about her contract and paid her R7m.
It only changed its mind because she threatened to go to court. The department was warned that details about Nkandla would come out with unpleasant political consequences.
A senior department official suggested her behaviour was fraudulent, but instead of taking her to court, the IDC stepped in to help her. Much to the relief of the department. "She's executing her contracts now and hopefully we'll get our money back," says Mr Qhena.
It does not look good, though, does it?
The IDC was following a well-established practice, he says.
"This is not the first time we've done this. Companies go into distress; we give them more money to enhance their chances of survival and of us getting our money back.
"Sometimes it works out, sometimes it doesn't. We have to take a long-term approach, but we do our homework."
The quality of its "homework" is again in question after it lent the late Jeff Wiggill, corporate crook and chairman of First Strut, R123m, which Mr Qhena admits they will probably never see again.
"They crooked us," he says. "They lied. We are R123m poorer because of that."
It is, of course, the South African taxpayer who is R123m poorer.
The IDC did "our normal due diligence", he says, which does not necessarily inspire much confidence. "We don't just disburse money. We get our external lawyers to do the checks."
As Mr Qhena points out, it was not just the IDC whose due diligence was found embarrassingly wanting. Big commercial banks were also taken for a ride.
"This is the kind of thing you can't anticipate. You can do as much homework as you like. I'm not saying we're 100% foolproof. We're not, otherwise we wouldn't be in the business of finance."
What has he learnt?
"Maybe we could have spoken to the other financiers more. We lost this money too quickly."
The IDC's internal auditors have told him that what happened could not have been foreseen, but he is clearly not convinced. "Maybe we could have spent more time with the other financiers than we did."
At least there was no politics involved this time? Mr Qhena laughs heartily.
Of course, being a state institution, the IDC is expected to carry out government policy. Whatever he says, there is no doubt that he has political masters, the most immediate being Economic Development Minister Ebrahim Patel.
The latest political agenda he might have to deal with is the purchase of Russian steelmaker Evraz's 85% stake in Evraz Highveld Steel by black economic empowerment company Nemascore.
Not happening, says Mr Qhena.
"We looked at it a while ago but didn't see it as something we should participate in. The price issue was one problem."
The Russians reportedly want $320m, which is close to 60% less than the stake has been valued at. And the Russians have been schmoozing Zuma in St Petersburg, where he has been attending the Group of 20 heads-of-state meeting.
Mr Qhena chuckles. "We have not been approached and hence we're not looking at it." Watch this space.
He insists again that IDC decisions are entirely divorced from matters of political influence.
And yet it is hard not to compare its soft-handed treatment of the Guptas, for instance, with its unforgiving -some might say extremely damaging -treatment of the politically unconnected white guys who used to own low-cost carrier 1Time.
When Zuma's friends, the Guptas, didn't stick to their agreement with the IDC to repay the loan they got for their Shiva uranium mine, the IDC rolled it over and rescheduled the payment terms to make it as easy for them as possible.
"When we gave them the loan, the uranium price was a lot higher," explains Mr Qhena.
Again, he says, the IDC's primary interest was in keeping a business going rather than letting it fail.
But it happily contributed to the failure of 1Time, according to the airline's founders. First, it effectively financed the takeover of the board by a completely inexperienced BEE consortium. This, say the original directors, led to the airline's swift demise. Then, they say, it reneged on the terms of the BEE deal by refusing to allow the money to be used for a new, more fuel-efficient fleet.
"The people who said that are being disingenuous," says Mr Qhena. "We wanted them to use the money to buy new planes, but they used it to pay existing creditors, which was not what we wanted."
Which is pretty much what Ms Nene did with the R20m the IDC gave her.
Yet the IDC gave Ms Nene another R10m, whereas in the 1Time case the state-owned funder took the airline's founders to court.
Double standards?
• This article was first published in Sunday Times: Business Times
