South African financial company Absa Group (ex-Barclays Africa) is being sued by Vodacom and could lose $286 million if the complainant wins. The information was given by the local media Techcentral.
The case is about an alleged unauthorized merger-acquisition payment by Absa’s Tanzanian subsidiary from Vodacom’s accounts to Tanzania’s tax agency last year. In November 2018, the shareholders of Vodacom Tanzania approved the sale of 26.25% of the share capital of the company held by Mirambo Holdings to Vodacom Group.
One aspect of the transaction concerns the financial services provided by Absa Group through The National Bank of Commerce (NBC), one of its subsidiaries in Tanzania. According to data presented to the judge, the banking group guaranteed the transaction and undertook to pay, on-demand, the sum of $221.6 million to Vodacom in the event of the occurrence of financial risks inherent in the transaction.
NBC is accused of having paid $64 million to the Tanzanian Treasury. It is not clear whether this was done directly by the transferring company, which is Mirambo Holdings, or in the form of withholding tax by the acquiring company. Absa Group claims to have acted following Tanzanian law while Vodacom said this constitutes a risk of the transaction and that the protective guarantee for which it had subscribed must now come into play unless the amount paid to the Tanzanian Treasury is returned to the company. According to Absa's management, once the transaction has finally been closed, as has been the case since September 2019, there is no longer any guarantee to be activated, as the purpose of the cover no longer exists.
Absa Group's annual report does not mention this case as a potential risk of loss in future financial years. On 25 March 2020, the value of its shares fell to $3.52, its lowest level since the end of November 2002. It has since started to rise again and gained 20% during the week of March 30, 2020.
Idriss Linge
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