Inside Govt’s N$160m Etale deal breach

• Three N$22m instalments default

• Two other instalments paid in fish

• Investigation launched

By Hilary Mare

WITH the N$20 billion marriage between government-owned Fishcor and African Selection Fishing which brought life to Seaflower Pelagic Processing (SPP) on the rocks, Confidente can reveal that government’s N$160 million contribution to the deal in the form of a fish factory (land) is now in breach with a N$74 million debt pending to Etale Properties.

The JV purchased the factory from fishing industry mogul, José Luis Bastos who owns Etale.

Previously, the lucratively positioned fish factory which was demolished to accommodate the new 14 000 sqm, N$470 million SPP processing factory, belonged to Etale Fishing – a subsidiary of Etale Properties-  which closed shop in 2013, laying off about 700 workers.

“Government through Fishcor has been failing to pay the outstanding debt. They said that they would pay it using fishing quotas but they have gone on to auction the quotas without considering their debt which is now overdue. With the friction between Fishcor and SPP, we might see this case spilling into court soon,” an insider who refused to be named said this week.

Seen by Confidente, the breached N$160 million fish factory purchasing agreement that may attract legal action imminently compelled government to pay N$50 million deposit on January 31 2016 and a further five instalments of N$22 million payable until earlier this year.

While Fishcor managed to pay the N$50 million deposit, the entity could not pay the instalment and offered fish instead to Bastos who in turn only received two of the five instalments in fish (quotas).The two instalments paid using fish only covered N$36 million of the remaining N$110 million.

“Yes they are in breach but they told me that they will pay me when the have the money or the fish. They are late with payments but I am going to try and give them a little more time before I decide what to do about this situation,” Bastos told Confidente this week.

It has been reported that Fishcor which at the time of buying the fish factory was headed by Fishrot duo, Mike Nghipunya and James Hatuikulipi, overpaid by as much as N$50 million for the fish factory.

However, a preliminary forensic investigation conducted at SPP recently found that the purchase price of Etale Properties was based on a valuation certificate from a registered appraiser and found no evidence of overpricing in this regard.

Interim Fishcor board chairperson, Mihe Gaomab II told Confidente this week that there is an investigation launched into this matter and was not at liberty to speak around the matter.

“I will provide more details soon to the public as the developments unfold,” he added.

In the inception of the deal, the capital injection of the project included N$160 million from Fishcor that was used to purchase the fish factory and N$560 million from African Selection Fishing which was used on the factory (N$260 million) and vessels (N$250 million). The equity ratios were 40 percent for Fishcor and 60 percent for African Selection Fishing.

“In terms of agreements Fishcor promised to deliver property unbounded on pro rata basis in our equity sharing. We are not privy to any dealings with Mr Bastos,” African Selection Fishing chairperson Adriaan Jacobus Louw told Confidente this week.

The deal

According to a purchase agreement, a deposit equal to N$50 million was to be paid by January 31 2016 into the trust accounts of Bastos’ attorneys. The balance of the purchase price being N$110 million was to be paid in instalments of N$22 million by the first anniversary of the closing date, N$22 million by the second anniversary, N$22 million by the third anniversary, N$22 million by the fourth anniversary and N$22 million six months later.

Fishcor was also entitled to repay the full portion of the outstanding balance at any time before earlier this year.

“The parties agree that the outstanding balance at any applicable time, shall accrue capitalised interest at a rate of seven percent per annum calculated from the closing date, which interest shall be paid with each instalment,” reads the agreement in part.

The agreement also notes that if a party commits a material breach and fails to remedy such breach within seven days of a written notice requiring it to be remedied, then the party giving the notice shall be entitled, at its option, either to cancel the agreement and claim damages or alternatively to claim specific performance of all the defaulting party’s obligations together with damages, if any, whether or not such obligations have fallen due for performance.

Fishcor, SPP fallout

In what seems to be a relationship strain, Gaomab II recently resigned from the SPP board together with another board member, lawyer Ruth Herunga.

“The decision to resign as directors of the SPP board is due to the conflict of interest that exists because of the ongoing litigation against the National Fishing Corporation of Namibia (Fishcor) by SPP,” Gaomab II said when he resigned.

While this may be, Public Enterprise minister Leon Jooste was quoted by a local daily saying Gaomab II and Herunga will remain board members of Fishcor.

“The reason for their resignation is because SPP is taking Fishcor and the government to court about the auctioning of fishing quotas,” he said.