Vodacom is engaged in a legal battle with Absa over the alleged unauthorised use of funds held in a guarantee by the bank’s Tanzanian subsidiary.
According to industry insiders, the mobile network is seeking at least $64.1 million (R1.2 billion) for losses incurred due to an alleged unauthorised payment by Absa Bank Tanzania from Vodacom’s accounts to the Tanzanian tax agency.
It is also suing Absa for the bank’s alleged default on a multi-billion rand guarantee signed between the two companies.
The guarantee concerned funds which Vodacom had moved to the National Bank of Commerce (NBC) in Tanzania, in which Absa has a 55% stake.
When it was invoked as part of Vodacom’s acquisition of the outstanding stake in Vodacom Tanzania in 2019, Absa allegedly did not pay the funds to Vodacom as outlined in the guarantee.
Absa made two payments from the funds to the Tanzania Revenue Authority (TRA) for a total of $64.1 million.
The bank was ordered to pay the funds by the TRA, which said these amounts represented capital gains tax and stamp duty owed by Mirambo Holdings.
Mirambo Holdings was the company which held the shares Vodacom purchased to complete its acquisition of Vodacom Tanzania in 2019.
In its plea to the Pretoria High Court, Absa denied that NBC was obliged to comply with Vodacom’s notice to repay the funds.
“Absa repeats its denial that Vodacom was entitled to instruct NBC to return the Completion Payment,” Absa said.
“NBC was in any event bound under Tanzanian law to make the payments to TRA and was accordingly permitted to do in terms of clauses 2.4 and 11.7.2 of appendix A to the Engagement Letter.”
Absa stated that pursuant to the implementation for the share purchase agreement, Vodacom accepted the sale shares and the completion payment was paid to Mirambo or to the TRA for its credit towards the settlement of the purchase price of the sale shares.
“Vodacom accordingly no longer has a claim against NBC or Absa for return of the Completion Payment,” Absa said.
Absa asked the court to dismiss Vodacom’s claim with costs.
Vodacom has suffered no loss – Absa
“Absa denies Vodacom’s claim that it is indebted to it in respect of a guarantee provided by Absa to Vodacom, in respect of certain funds held by Absa’s Tanzanian subsidiary, the National Bank of Commerce,” Absa told MyBroadband.
“These funds were held by NBC pursuant to an escrow-type arrangement in respect of the purchase consideration payable by Vodacom to Mirambo Limited, in relation to a share acquisition.”
Absa said it has various defences to this claim, including the fact that the relevant trade of shares had been consummated on the Dar es Salaam Stock Exchange within the contractual period specified, which resulted in it not being legally competent for Vodacom to demand repayment by NBC or Absa for funds paid to the TRA.
“Furthermore, Vodacom proceeded with the transaction, notwithstanding the tax payments referred to above, Vodacom is now the holder of the relevant shares,” Absa said. “Vodacom has accordingly suffered no loss and has received what it contracted for.”
“Absa believes that Vodacom’s claim is without merit, and will vigorously defend it in court.”
Vodacom seeking damages
Vodacom confirmed to MyBroadband that it is seeking to recover damages from Absa.
“Vodacom Group confirms that it has filed court papers in the High Court whereby it seeks to recover damages from Absa in relation to a transaction completed in Tanzania last year,” the company said.
“This transaction saw Vodacom Group increase its stake in Vodacom Tanzania to 75% following the acquisition of 588 million Vodacom Tanzania shares from Mirambo on 1 November 2019.”
“The matter is ongoing and we have not yet reached the point in the court process where we have been allocated a hearing date,” Vodacom said.
The company added that the matter is before the courts and it is not in a position to comment on the specifics of the proceedings.