August 26 embroiled in food fight
25 February 2021 | Justice
The defence ministry and two of its August 26 for-profit companies are suing former Windhoek mayor Matheus Shikongo and his company for breach of contract in an attempt to reclaim sole ownership of August 26 Food Service that was created six years ago to supply food to army bases.
August 26 Food Services No 2 was created early in 2015, shortly after the defence ministry and August 26 Holdings signed a contract with Shikongo’s Broad-Based Network company to launch a pilot project that would “establish food hubs” and supply food to army bases.
The February 2015 deal was centred on an initial pilot project that was slated to start four weeks after the signing of the Service Level Agreement (SLA) and commence in Grootfontein, Otavi and Otjiwarongo.
The SLA, submitted to court, stipulated that should the pilot food hubs prove a success, “the newly designed business model” would be rolled out to the rest of the country.
However, the contract was cancelled in December 2015, for reasons not specified in court documents.
Shikongo was the chairperson of Broad-Based Network at the time, alongside Lloyd Winterbach, the managing director.
The SLA stipulated that a new company would be created, August 26 Food Service No 2, under the sole ownership of August 26 Logistics. Broad-Based Network was expected to register the new company and transfer all shares to August 26 Logistics.
The “funds generated from the supply of food products to the second plaintiff’s (defence ministry) regional hub companies will be for the third plaintiff’s (August 26 Logistics) account,” particulars of the claim state.
However, the three plaintiffs in the case, August 26 Holdings, the Defence Minister and August 26 Logistics, say they turned to the court in October last year after Shikongo failed to transfer the shares in the intervening six years, despite numerous demands. “Contrary to the parties’ agreement and defence ministry’s instructions, on/or about 9 March 2015, Broad-Based Network caused itself and/or the second defendant (Shikongo) to be the registered shareholder of August 26 Food Services No 2 instead of August 26 Logistics.”
After the cancellation of the contract in December 2015, the plaintiffs allege “during 2016 and 2019”, Broad-Based Network said the shares would be transferred but “to this date failed and/or refused to carry out such transfer.”
The court papers show that the contract between Shikongo’s company and the army was cancelled in December 2015, mere months after the SLA was signed. The reasons for the cancellation are not detailed in court documents.
A letter submitted to court however shows the ministry notified Broad-Based Network in December 2015, that “with effect from 1 February 2016, August 26 Logistics would resume supplying food to the NDF bases in Otjozondjupa region as per the existing SLA between August 26 Logistics and August 26 Holdings.”
A ministry of defence letter, signed by the late Petrus Shivute, then permanent secretary of the defence ministry, informed August 26 Holdings CEO Brigadier General James Auala in December 2015, that the pilot project for the supply of food to NDF bases by August 26 Food Services had been terminated.
“I also wish to inform you that while we appreciated the technical expertise of the Broad-Based Network, it should not more involved in the food supply, but rather concentrate on technical advice and training on food preparation,” the letter notes.
The letter said Broad-Based Network should only continue to “provide a proposal focusing on the training of chefs and cooks including provision of balanced menus, if and when needed.”
The letter underlines that “all outstanding legal issues should be sorted out urgently, including the de-registration of August 26 Food Services No 2.”
The lawsuit asks that the court issue an order for Shikongo and his company to transfer all shares of August 26 Food Services to August 26 Logistics, or that Broad-Based Network be ordered to pay the “equivalent value of the shares of August 26 Food Services to August 26 Logistics.”
None of the court papers indicates the value of the shares or the value of the deal to any of the parties when it was signed six years ago.
The SLA stipulated that the defence ministry and August 26 Holdings would “render a monthly payment consideration in arrears to Broad-Based Network at a rate of 15% of the total revenue generated from the food hubs, excluding taxation”.
It was further agreed that a “monthly management fee shall be paid to Broad-Based Network” based on the total turnover of all regional hub companies companied. The payment is fixed for the duration of the SLA.”
On Monday, High Court judge Orben Sebeya postponed the case to 23 March for a status hearing.
Sisa Namandje is acting on behalf of the plaintiff’s while Shikongo, Broad-Based Network and August 26 Food Services are represented by lawyer Petrus Strauss.
Shikongo has notified the court that he intends to defend the matter. However, to date, he has not filed a responding affidavit to the allegations.
The army’s food supply contract came under intense scrutiny in 2013, when it was revealed that the defence ministry had contracted August 26 Holdings to supply food, via August 26 Logistics, to soldiers.
The tender was reportedly worth billions of Namibia dollars.
Six catering companies took the matter to court, but their attempt to change the awarding of the multi-billion food tender was thwarted when their case was dismissed.