Vodacom Group is reportedly suing Absa, formerly Barclays Africa Group Limited, asking to be compensated as much as $286-million on two separate charges.
The first charge involves losses amounting to at least US$64.1-million, which were incurred due to an unauthorized transaction performed by Absa’s Tanzanian subsidiary from Vodacom’s accounts to the country’s tax agency last year, a report from SA’s TechCentral reveals.
Besides, the company is also demanding a payment of $221.9-million from Absa as a result of a multibillion-dollar guarantee signed by the two parties in 2019, that was allegedly breached.
The guarantee was “part of a multibillion-rand acquisition by Vodacom Group of investment company Mirambo’s remaining stake in Vodacom Tanzania last year,” in which Absa failed to pay out the cash required by the guarantee.
From the legal documents, the guarantee governed the funds deposited by Absa in Tanzania ‘s National Bank of Commerce (NBC), in which Absa owns a controlling share (55 percent).
The guarantee binds Absa to pay back the money deposited in NBC accounts in USD within four days of a demand letter, and the bank also agreed to compensate any losses incurred by the Telcom company. Unfortunately, Absa failed to comply with Vodacom’s letter 26 September 2019, demanding disbursement of $221.9-million as agreed in the guarantee.
Instead, NBC paid several million dollars to Tanzania’s revenue collecting agency, TRA. It came upon receiving a letter from the tax authority a day earlier demanding that it should “pay funds from Vodacom’s Tanzanian accounts,” which “purportedly represented capital gains tax and stamp duty due to TRA by Mirambo,” according to Vodacom.
Despite that the said amount was to be paid by Mirambo as tax, it’s not clear why the authority ordered the cash deducted from Vodacom’s accounts.
Absa argues that NBC is bound to make payments to the tax authority.
The transaction costed Vodacom losses of at least $64.1-million, which forced the telecom company to renegotiate the deal on acquisition of Mirambo’s shares.
Vodacom has already applied for an order to compel Absa to pay for both the interest and costs of the legal action in January.
Absa is, however, fighting back, asking the high court to dismiss the claims together with the alleged costs. In its plea, the bank says NBC was not obliged to repay Vodacom the $221.9-million.
Vodacom and Mirambo reached an agreement last year and already acquired the shares and paid the required Mirambo together with the TRA. Because of this, Absa argued in its plea that Vodacom could no longer “claim against NBC or Absa for return of the completion payment.”
The issue remains unsolved to date.
“We have not yet reached the point in the court process where we have been allocated a hearing date,” a Vodacom spokesperson said.
Image/Absa
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