THE court battle to force Msunduzi Municipality to cancel its R27 million sponsorship of Royal AM FC might have received some traction following two court judgments against the team and its owner, Shauwn Mkhize, for not being tax compliant.
The Sunday Independent has seen Durban High Court orders revealing that both the team and its multimillionaire tenderpreneur owner combined owed the SA Revenue Service (Sars) about R50m in outstanding tax payments.
The first order identified the defendant as Mabong Flora-Junior Mkhize in a case brought to court by the Sars commissioner.
The court delivered the warrant of execution against the Royal AM president on August 21, ordering the sheriff or deputy sheriff to “attach and remove the movable property of MABONG FLORA-JUNIOR MKHIZE.” The Sunday Independent established that these were Mkhize’s official names.
The court document revealed that Mkhize, who was estimated to have a net worth of R300m, owed Sars a “sum of R12 749 232.62” plus “interest on the sum claimed at the applicable rate per annum from September 1, 2023 to date of payment”.
Another warrant, which was dated October 16 stated Royal AM owed the taxman R37 915 549 77 plus interest.
While Mkhize has not responded to any of the questions sent to her, Msunduzi spokesperson Nontobeko Mkhize said the municipality would seek legal opinion with regard to the court’s tax orders.
When contacted to confirm the authenticity of the copies of the court rulings, Sars spokesperson Siphithi Sibeko said: “I can only confirm that SARS is aware of the aforementioned court process and its outcomes.”
He did not say whether or not Sars would lay criminal charges against Mkhize and her team.
The court left it to Sars to determine the interests and the date on which Mkhize and Royal AM would pay them. “NOW THEREFORE you are directed to attach and remove the movable property of ROYAL AM (PTY) LTD (Registration No. 2018/027217/07),” read the judgment.
The court directed the sheriff to go to three of Mkhize’s properties in La Lucia, Umhlanga, and two in Gauteng to attach movable properties. Royal AM’s movable properties would be found in Umhlanga and Umshwathi outside Pietermaritzburg.
Msunduzi council approved the three-year sponsorship on July 19 ahead of the tax-related court orders. The team was set to receive R9m per annum.
Tax expert Willem Oberholzer said a person found to be a tax offender could not do business with the state and municipalities were elements of the state.
“The government is now requiring any state-owned entities (SOEs) or any of its corporations to get tax clearance from the suppliers.
“You cannot get a tax certificate if your taxes are not in order, but it all depends on the offence and whether it has been crystallised or not.
“In principle, if you don’t have a tax clearance people (including government) should not do business with you and that is the rule,” Oberholzer said.
It remained unclear why Mkhize and the team were owing Sars such a huge amount. It was also unclear whether or not they would be prosecuted for this.
Oberholzer said if Sars was successful in getting the court order to seize the assets, Mkhize and the team would not have tax clearances. “She cannot have a tax clearance because her taxes are outstanding.”
DA leader at Msunduzi, Councillor Ross Strachan, filed papers at the Pietermaritzburg High Court on August 5 to stop the municipality from continuing with sponsorship or even reversing any money that might already have been given to the team.
Strachan was concerned that the municipality did not have enough money in its budget to deliver basic services yet it was spending ratepayers’ money funding the team.
The concern was that the KwaZulu-Natal capital city’s CBD was filthy and some of its streets have had uprooted pavements for years.
When informed about the Durban High Court order, Strachan said: “This is Long overdue … our legal team has ensured that our challenge is well documented and informed.”
However, Executive Mayor Mzimkhulu Thebolla justified the sponsorship saying it was a decision taken by the majority of councillors to boost the local economy.
“Let us agree that it is untrue that Pietermaritzburg is filthy. Yes, we must agree that it was previously dirty, but it is not true that this is still the case and I’m challenging you and anybody else who says it is filthy to come with me unannounced to walk the streets to check if it is still dirty.
“Of course, I agree that pavements are not okay,” Thebolla said.
Thebolla said the sponsorship was constitutional, although the deal’s spin-offs would not be realised sooner.
Currently, the city is under the administration, which according to Thebolla, the administrator was to “condone or not to condone the council’s decision”.
“Without anything that says ‘no’ it means that it (administrator) is agreeing with the decision since the administrator sits in council meetings and has the right to speak and veto,” Thebolla said.
Thebolla said he could not discuss the details of the sponsorship since it was being legally challenged by the DA.
When asked how the city benefited from sponsoring Maritzburg United FC, which was previously sponsored by the city before Royal AM, he said: “It is not everything that we do that benefits the city directly.
“The city and its economy benefited a lot (from the Maritzburg United deal), we know that and we still believe that this decision is not political but an economic decision. The decision was not about a football club.”
The municipality could not say whether or not the deal entailed that Mkhize should account for each and every cent to be spent by her team.
The SA Municipal Workers Union (Samwu) has accused Msunduzi of keeping the workers’ representatives in the dark when deciding to sponsor Royal AM and previously Maritzburg United.
Union’s Midlands regional secretary Linda Gcabashe said: “We are of the view that it was and is still the duty of the Council to do consultations with all stakeholders to make sure that they hold hands of those of us who do not understand the reasoning behind this decision, for all of us to see a bigger picture.”
The municipality was expected to come out of many years of administration on October 31.
Provincial Cooperative Governance and Traditional Affairs spokesperson Siboniso Mngadi said the department did not have authority over decisions taken by the municipality.
Municipal manager Lulamile Mapholoba told SAfm Sunrise this week that people who were against the sponsor were obsessed with Mkhize whereas the city needed a PSL team to boost its economy.
He said the sponsorship had been designed based on socioeconomic factors “that the PSL team is likely to contribute to the municipality”.
He said many municipalities who were keen on uplifting their local economies see PSL team sponsorship as one of the preferred choices.
Legal expert Mpumelelo Zikalala said ordinarily the government would not enter into a business deal with tax defaulters but when it comes to sponsors it would depend on an agreement signed. “So we cannot be sure that if you are not tax compliant you cannot get sponsorship (from the government).”