Cyril’s cameo in ‘rough diamond’ tax dispute
President's former company was a BEE partner of a 'dubious billionaire' who tried to wrangle a R90m tax deduction
President Cyril Ramaphosa has a walk-on part in a R90m tax dispute stemming from his business relationship with a “rough diamond”.
Ramaphosa’s name cropped up this week in a Cape Town high court judgment centred on the dubious behaviour of billionaire Graham Beck, who died aged 80 in 2010.
Beck’s erstwhile business, Kangra Group, unsuccessfully appealed against a tax court ruling. But Judge Patrick Gamble said: “Mr Ramaphosa is not in any way implicated in this litigation.”The business relationship between Ramaphosa and Beck — said by Gamble to have been dubbed “a bit of a rough diamond” in obituaries — began in 2003 when Kangra Coal wanted a black empowerment partner and sold a R250m stake to the future president’s Shanduka Group.
Gamble said although Beck was better known for his wine, retail and horseracing ventures, his wealth came from coal mines in KwaZulu-Natal.
In 2001 and 2002, Beck sold a total of 1.3 million tons of coal to AMCI Export Corporation, in the US, for between $24.50 and $27.50 a ton. But he reneged on the deal when the international price went up to $40, and sold 373,000 tons of AMCI’s coal elsewhere at the higher price.After arbitration proceedings, Beck paid AMCI damages of R90m in 2007, then claimed the amount as a tax deduction. A Sars assessment in 2012 which rejected the deduction sparked the litigation that ended on Monday with defeat for Kangra Group.
In their judgment, Gamble and two other judges said the payment was not “allowable expenditure”, and therefore tax deductible, because it was not incurred in the production of Kangra Group’s income.“Mr Beck no longer had effective control of Kangra Coal at the time the deduction was claimed — control of the entity then vested in Shanduka — and he was powerless to interfere in its corporate affairs and seek to claim the deduction through that entity,” said Gamble.
“Mr Beck was obviously reluctant to become embroiled in any dispute with Shanduka as that might jeopardise the relationship. His decision to vest the claim in the group was therefore a strategic one.”
In another dispute involving Kangra Group, it was ordered to pay a R50,000 penalty last week for operating a boutique hotel, restaurant and spa in Cape Town’s Constantia Valley without permission.
Steenberg Hotel and its restaurant, Catharina’s, were fined half the amount officials recommended to a city of Cape Town planning tribunal.
Tribunal chairman Dave Daniels said even though the contravention was serious, members had decided on a reduced sanction for two reasons:
“There are approved building plans for all the buildings on the property and therefore there is no risk to public health and safety”; and
“The main dispute between the owners of the hotel and the city officials was about whether the land-use rights were in place. The tribunal’s conclusion was that the conduct of the owners was not a wilful disregard for the law but more of a legal/technical contravention in nature.”
In a report to the tribunal, planning officials said Kangra Group had been a “disingenuous” serial offender since buying Steenberg in 2005...