Spar refutes accusations of misusing BEE loans

While conceding it was rocked by what auditors and its board described as “a reportable irregularity”, Johannesburg Stock Exchange-listed Spar yesterday refuted widespread claims that the grocery chain misused black economic empowerment (BEE) loans to assist white retailers, to the detriment of black franchisors.

Report findings

The Black Business Council (BBC) was angered by reports of the damning findings of an independent investigation pointing to:

-Allegations that Spar used its BEE loans to bail out white retailers.

-Questions around the impending stepping down of chief executive Brett Botten and former board chair Graham O’Connor.

-Manipulation of the value of stores, reported fictitious loans and discrimination against black franchisors.

‘Loan irregularity not misuse of BEE

In setting the record straight, a Spar spokesperson said the company regretted “the anxiety and concern that the recent media coverage has caused”.

“The loan in question happened five years ago and has been reported as a reportable irregularity to the Independent Regulatory Board of Auditors. There were two other loans of a similar nature, with the three totalling R11 million.

“A thorough investigation of loans to retailers over the past five years has revealed no further concerns. A reputational rebuild is under way to restore confidence in the iconic brand,” said the spokesperson.

She said the loan recognised by the auditors and board as a reportable irregularity did not represent “misuse of BEE loans”.

Spar, said the spokesperson, would welcome an engagement with the BBC “to rectify perceived wrongdoing and false allegations”.

BBC chief executive Kganki Matabane said black business was “outraged by the developments at Spar, suspecting that there may be many other private sector companies being involved in such practices”.

“Most private sector companies are not embracing economic transformation in action, but only in words. This is fronting and is a criminal activity punishable by law. Fronting retards progress as the benefits never reach the real beneficiaries.

“A lot of corporates are not implementing the spirit of transformation but engage in ticking boxes, for the sake of gaining BBBEE (Broad Based Black Economic Empowerment) points.”

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Expert weighs in

Policy analyst Dr Nkosikhulule Nyembezi described the widespread reprimand of the Spar group as “the kind of human firework that sometimes briefly illuminates the political sky, before once again falling into obscurity”.

He said: “The revelations of irregularities that subvert economic transformation in this country are shocking and unfortunate, because the country needs business leaders with high ethical standards to attract investment and realise economic growth.

“Stories of personal enrichment of the elite fit snugly into the corrupt side of the dubious commercial transactions that undermine our democracy. The thinking they represent has a more extended pedigree. Our collective message should be that private companies should pull up their socks to fight corruption.”

Alternative Information and Development Centre economist Dominic Brown said the Spar case study showed that “BEE fails to change ownership at the top – from white to black, even on its own terms”.

“The BEE leaves the majority economically poor and insecure. As such, BEE is not leading to true transformation and in general, is an inadequate policy to redistribute ownership in the economy and reduce the concentration of ownership and wealth.

“More importantly, BEE doesn’t transfer ownership of assets in the economy to the majority of people. Instead, it continues the historical inequalities and enriches a handful of blacks who join the elite and wealthy of the country, through using BEE and sometimes through access to the state. Those responsible must be held accountable.”

READ MORE: 30 years into democracy, fronting practices still an issue in SA – BEE Chamber