The involvement of Tinley Leisure Women Investments (TLWI) in the
R2.1 billion Club Med deal has drawn the ire of Chief Jiba Magwaza of the Magwaza Royal Trusts in KwaZulu-Natal. He says the transaction has failed to benefit the rural community.
An audit report commissioned by the Industrial Development Corporation (IDC) confirmed that its R130 million financial support to TLWI to acquire a 14% BEE equity in the Tinley Leisure Club Med project was tabled before the board audit committee (BIC) for review.
But questions on the criteria used in awarding the deal to TLWI linger.
Concerned parties say the all-women grouping, led by Zibusiso Kganyago, the wife of South African Reserve Bank Governor Lesetja Kganyago, was “parachuted from Gauteng to KwaZulu-Natal” — a charge Kganyago has denied.
Other TLWI shareholders are Nomagugu Manci, Mpho Hlala and Thobile Ngcobo.
In an interview with the Mail & Guardian (M&G), Magwaza said he had called for an investigation.
“We want answers on how 14% shares were given to TLWI because we do not know the women heading the company; they are not local. The 10% government set aside for locals is something we know — even before talking about a BEE component.
“A meeting we had with the IDC did everything to shift our focus from questions on how TLWI was awarded the 14%. The developer did not know the BEE partner awarded 14%. The community was supposed to be part [of the process] to identify the BEE partner, which never happened. It is as if we do not have capable local women to drive the venture, when we do have,” Magwaza said.
The IDC has failed to respond to requests by the M&G for an explanation on how the deal was funded.
In correspondence between Magwaza and IDC CEO Mmakgoshi Lekhethe, the state-owned entity conceded that the deal required further examination.
While Lekhethe said the transaction was assessed and approved through the IDC’s governance, credit and compliance processes — “implemented within a broader multi-lender project financing framework” — she said there were challenges.
“Transactions of this nature are complex and matters of community representation, benefit flows and governance arrangements are vital to their success. We believe these need to be addressed clearly and transparently — in a way that allows us to hear your concerns first-hand … Accordingly, together with the Tinley Leisure Board, we would propose a workshop with you to discuss these matters and the measures in place to accommodate local communities. “
Lekhethe said it was “important to note that the project was structured to include black economic empowerment (BEE) participation and a distinct broad-based community benefit component”.
Magwaza challenged the intended purpose of IDC’s financing, meant to ensure a 14% broad-based BEE equity allocation to benefit the Magwaza community. He describing it as “a misalignment of broad-based BEE funding for Magwaza Community Trusts”.
“I have serious concerns based on information reported in connection with this matter — that IDC’s governance, empowerment structuring and transaction implementation, may have resulted in the benefits not being secured for the intended rural community,” Magwaza said.
“Our core concern is that the empowerment opportunity for 14% broad-based BEE shareholding or finance support was intended for the Magwaza Community Trusts, yet the payment or equity arrangement was allegedly routed through TLWI. This has raised questions about whether the original intent and beneficiary selection processes were followed.
“It is also understood that governance reviews, including internal audit considerations, raised concerns related to the transactions. This has included matters such as compliance or reputational risk and warnings that were allegedly not fully resolved to the satisfaction of beneficiaries.”
Magwaza said the community required transparency, accountability and assurance that proper controls were applied.
He questioned the timing of TLWI as a broad-based BEE partner.
“There is also a lack of local and rural economic alignment in the deal. I am further concerned that the empowerment or investment partner introduced for the 14% broad-based BEE equity or finance support, appears to be based in Gauteng, rather than being a local rural-based entity that would directly strengthen the local economy, benefiting the Magwaza community.
“Please explain the rationale for using a Gauteng-based partner and how the IDC ensured that the intended development objectives for rural communities were preserved.”
Another issue confronting IDC governance committees is whether governance, disclosure and reputational risk processes were handled early and rigorously enough in a politically sensitive deal involving African Bank and one of the country’s most prominent public office bearers.
IDC records the M&G reviewed show that governance committees flagged the matter for scrutiny because Kganyago was classified as an “Immediate Family Member of a Domestic Politically Exposed Person” and because of African Bank’s role in the broader transaction structure.
African Bank became linked to the development after acquiring Grindrod Bank, which had long-standing ties to the Collins consortium behind the project.
IDC memoranda show that governance sensitivities arose because the SARB holds a 50% stake in African Bank Holdings Limited. The matter was escalated to the IDC’s Board Social and Ethics Committee and Board Investment Committee.
Committee records indicate that some board members were concerned that Kganyago and the TLWI consortium’s involvement had not been fully highlighted earlier in the approval process and that certain reputational concerns surfaced only when the transaction reached board-level committees. The documents further indicate that TLWI was not included in the original September 2023 debt and equity commitment structure signed by funders.
However, Kganyago said TLWI’s involvement dated from 2022 and arose through an adviser-led process, involving a non-disclosure agreement — an exclusive expression of interest, due diligence processes and engagement with DFIs.
Kganyago said TLWI and its advisers engaged multiple financial institutions and DFIs, including the IDC, as part of the project’s evolving funding and empowerment structure.
“My involvement in the transaction dates back to August 2022 when I participated in this transaction’s structuring and capital-raising phases,” she said. The project, she added, could also be located in a longer history of North Coast land conversion and resort development.
In a later engagement with M&G, Kganyago said the Community Trust’s 10% shareholding formed part of the empowerment structure.
“Tinley Leisure Women Invest-ments (TLWI), together with the other shareholders, contributed proportionately towards the establishment of the Community Trust’s shareholding. TLWI contributed approximately 1.6% of its own equity interest, together with a cash contribution.
“It is therefore incorrect to suggest that an equity allocation intended for the Magwaza Community was diverted to TLWI or that TLWI benefited at the expense of the community. On the contrary, TLWI diluted its own economic interest and made a financial contribution to facilitate the Community Trust’s participation in the project.”
Tongaat Hulett’s 2014 portfolio identified Tinley Manor South Banks as a 270 hectare resort opportunity north of Ballito. Long-standing property and development relationships involving Murray Collins, Patrick Sokhela and Grindrod Bank formed part of the wider North Coast development corridor.
Kganyago described Sokhela as a close relative, with relationships linked to the consortium, predating the final IDC-approved funding structure. All politically exposed person declarations had been properly made and governance and reputational concerns linked to her participation had been assessed by the IDC and its committees.
Kganyago also rejected suggestions that she lacked experience relevant to the transaction, saying she had spent more than 25 years in hospitality and property development, including in senior executive roles.
She said TLWI had fulfilled its obligations under the transaction, including satisfying conditions, making its equity contribution and appointing nominated directors.
However, IDC documents confirm that management was required to prepare additional submissions dealing with conflict-of-interest and reputational concerns arising from Kganyago’s involvement.
Records further showed that the Board Social and Ethics Committee debated whether the governance safeguards were sufficient to manage sensitivities linked to the participation of the Reserve Bank governor’s spouse in a transaction involving African Bank.
Internal memoranda submitted to IDC committees said African Bank had implemented governance measures intended to avoid conflicts of interest, including not directly funding the BEE structure.
The transaction also drew scrutiny because of concerns relating to project risk, debt structures and the long-term viability of the broader development model.
IDC committee records show directors raised questions around projected cash flows, debt servicing assumptions and repayment structures linked to BEE funding.
While the IDC has defended the transaction structure and its governance processes, the matter has raised questions about how state development financiers manage politically sensitive transactions where empowerment objectives, reputational risk, public money and private commercial interests are concerned.
Tinley Leisure (Pty) Ltd chairperson Moses Tembe said the company was “aware of concerns that have been raised regarding the empowerment structure of the Club Med South Africa project and in particular, the participation of Tinley Leisure Women Investments”.
“The board’s position is that the shareholding and empowerment structure of the project was developed through an extensive process involving shareholders, financiers, regulators and other stakeholders.
“The participation of TLWI was not a substitution for community participation, nor was it intended to displace any community beneficiary. TLWI’s participation arose from its role in originating, championing and advancing the project over a number of years. TLWI mobilised support for the project, engaged with funding institutions, participated in the development process and contributed capital and resources towards bringing the project to fruition.
“Importantly, the question was never whether TLWI or the Magwaza community should benefit from the project. The empowerment structure contemplated a number of empowerment participants and objectives … These objectives were intended to be complementary rather than mutually exclusive.
“The Board is therefore not aware of any decision in terms of which an allocation intended for the Magwaza Community Trust was transferred to or replaced by TLWI. To the contrary, discussions regarding community participation have historically been treated as a separate component of the broader empowerment framework and have been the subject of engagement between the relevant stakeholders.
“The Community Trust’s shareholding was not created at the expense of any single shareholder. All shareholders, including TLWI, diluted their own economic interests and contributed proportionately towards the establishment of the Community Trust’s 10%.”