The department of trade, industry & competition (DTIC) has continued to pay millions of rand in rebates to a film company under investigation by the Broad-Based BEE Commission for allegedly misrepresenting its empowerment status.
The Sunday Times understands that payments made by the department amount to more than R150m. They were made after a legal opinion by the state attorney in March gave the department the go-ahead to pay.
However, the state attorney also warned that the DTIC could not ignore the advice or views of the commission on the status of Moonlighting Films, a subsidiary of eMedia Holdings owned by Hosken Consolidated Investments (HCI).
The B-BBEE commission declined to confirm HCI’s empowerment status last year, saying the company did not meet requirements. It advised that HCI's majority shareholder, the South African Clothing & Textile Workers Union (Sactwu), should amend its constitution to adopt a broad-based ownership scheme.
This was after a case of B-BBEE misrepresentation and fronting was opened against Moonlighting with the commission, which launched an investigation.
In June, Moonlighting approached the Pretoria high court to stop the investigation and force the commission to disclose what complaints had been made. However, Moonlighting’s case was dismissed with costs and the investigation is still under way.
In January, the Sunday Times reported the HCI had for more than a year been battling the DTIC over R117m that the department was withholding from Moonlighting Films because of the allegations against it. Both HCI and Moonlighting denied the accusations of fronting and misrepresentation.
In documents relating to Moonlighting’s representations to the DTIC, which the Sunday Times has seen, the company maintains it is B-BBEE compliant based on HCI’s status.
“[The] position adopted by the DTIC is entirely unsustainable, both legally and factually. Legally, the evidentiary nature of the B-BBEE verification certificates, particularly in the absence of credible evidence against it, is indisputable,” said the company. It has worked on several Hollywood blockbusters shot in SA, including Invictus, starring Morgan Freeman; Blood Diamond, starring Leonardo DiCaprio; and Safe House, starring Denzel Washington and Ryan Reynolds.
In March, the state attorney advised that since Sactwu, on which HCI bases its black ownership status, had amended its constitution to reflect a broad-based ownership scheme, the DTIC could go ahead with payments to Moonlighting.
However, it added that “the approval of Moonlighting’s participation continues to have legal consequences until set aside [by a court of law]”.
The company’s shareholders could not be verified, whether they were black South Africans there were no shareholder agreements in place
— State attorney
The DTIC sought legal opinion after a year-long battle with HCI and Moonlighting over payments the film company believed it was entitled to under the department’s film & TV incentives scheme. The DTIC unit that controls the payments ruled in 2020 that Moonlighting did not qualify for them because it was not B-BBEE compliant.
The state attorney said the DTIC’s incentives unit had been correct to decline to pay Moonlighting for three productions — Bulletproof 2, Monster Hunter and Jim Button and The Wild 13 — because the company did not meet B-BBEE requirements.
Moonlighting was conditionally approved for the incentive based on its assertion that it was a B-BBEE level 2 company with 75% black ownership through eMedia Holdings subsidiary Silverline Three Sixty.
Earlier this year, HCI executive Yunis Shaik dismissed allegations that Moonlighting was fronting and said the group disagreed with the commission on its B-BBEE status. However, he had agreed that Sactwu would adopt a new constitution with a broad-based ownership scheme and that the DTIC had undertaken to pay Moonlighting Films.
However, the state attorney's legal opinion stated: “On the strength of the findings or the views of the BBBEE Commission ... we are of the view that Moonlighting did not qualify for incentives ... The DTIC would have been justified to suspend payment of any claim and referred the matter to the BBBEE Commission for investigation of possible fronting.”
The state attorney also said that in some of the productions shareholders were “admittedly white and prima facie non-compliant”.
It further found in some instances that the level of black ownership could not be determined and that Moonlighting’s failure to furnish information had raised red flags.
“The company’s shareholders could not be verified, whether they were black South Africans ... there were no shareholder agreements in place,” said the state attorney.
The DTIC did not respond to requests for comment.
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