A $106m (R1.87bn) grant by the philanthropic arm of global payment and technology group MasterCard is in peril after SA-based outfit Africa Founders Ventures (AFV) allegedly misused the funds in a case that casts SA in a bad light internationally.
Some of the funds were meant for African start-ups. According to MasterCard Foundation, it had already disbursed $42m in 2023/24, which it says AVF mismanaged, prompting legal action and a forensic audit.
To this end, the Johannesburg high court granted the foundation a court order freezing dozens of bank accounts and permission to appoint an independent liquidator.
Daniel Hailu, executive director, impact, research & learning at MasterCard Foundation, confirmed the entity was in dispute with AFV.
“While a provisional judgment and order was granted in favour of the MasterCard Foundation on July 4, there are still matters in dispute so no additional information can be provided…,” Hailu said.
The two entities concluded an agreement in December 2022 in terms of which the foundation was to provide total grant funding of $106.5m.
Under the agreement, the payments were to be made in a series of periodic tranches to AFV, lead by CEO Bongani Sithole, for exclusive use in specific charitable activities that further the foundation’s charitable purposes, until the expiry of the agreement in 2028.
To give effect to the agreement, the foundation transferred $19m to AFV for the purpose of carrying on specified activities during the 2023 calendar year, followed by $23m more last year.
MasterCard became uneasy when it learnt in August last year that AFV had used some of the proceeds to rebrand into “54 Collective”, an exercise that cost just less than $700,000 (R12.3m).
“In these circumstances, the grant funding had been applied by AFV for the rebranding to ‘54 Collective’ but was not approved by the foundation,” Hailu said in his affidavit before court.
“The rebranding is being used for the benefit of third parties. The for-profit company Founders Factory Africa and Utopia appear to be using the same 54 Collective brand and benefiting from the grant funding applied to the rebranding.
“This raises concerns that the foundation’s grant has been used for purposes that are not consistent with the grant agreement. While other remedies may also exist, the foundation has a contractual claim against AFV for recovery of the rebranding cost unlawfully expended by it, which AFV admits.”
To add to MasterCard’s concerns, AFV has failed to produce audited financial statements for the 2023 and 2024 fiscal years.
A forensic audit by Deloitte revealed certain suspicious transactions in some of the bank accounts held by AFV, including about $4.59m transferred by AFV from the bank accounts to a related for-profit entity.
MasterCard says after the Deloitte investigation commenced, AFV passed almost 2,000 adjusting journal entries in its books of accounts, including more than 700 debits and credits posted to the accounts of AFV between March 12 and March 14.
The foundation in January delivered to AFV a notice of termination for convenience of the grant agreement.
A few months later, AFV management decided to go into business rescue, a process the court said was not done in good faith and denied MasterCard its full rights as a major creditor of AFV.
Under the envisioned business rescue launched by AFV, MasterCard stood to recoup just $1m after the process.
About $400,000-$500,000 was set to go to business rescue costs including the business rescue practitioner’s (BRP’s) fees and professional fees.
In his judgment acting judge Johann Gautschi said: “I am of the view that the conduct of the BRP in persisting with business rescue proceedings constitutes an abuse and blatant disregard for the law, given, among other things, what was conveyed to him by senior counsel at the April 17 2025 meeting and what was further conveyed to the BRP by DLA Piper in its April 22 2025 letter.”,
“There was ... no justification for the BRP attempting a so-called ‘quasi-liquidation’, that is an informal wind-down by the sale of assets,” Gautschi said.
“Moreover, given knowledge of AFV’s acknowledged liability for repayment of the rebrand costs and of the January 30 2025 notice of termination of the grant ... it is incomprehensible how the directors could have thought that the business had reasonable prospects of being rescued, such as to justify the resolution to commence business rescue proceedings taken on March 26 2025,” the judgment reads.
The Mastercard Foundation is one of the world’s largest foundations, with offices in Toronto, Kigali, Accra, Nairobi, Kampala, Lagos, Dakar and Addis Ababa.
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