Libya’s sovereign wealth fund wants to buy out a top SA hotel group. The deal would be a loss for the country, which needs to protect its strategic assets from shady foreign predators. Regulators and the business sector should not stand by and watch as a foreign entity with dubious credentials tries to snatch Legacy Hotels, a prized SA asset that owns The Leonardo and other prestigious properties.
Ensemble Hotel Holdings, which is owned by the Libya Investment Authority, has approached the high court to order a private auction where it will bid for the shares of SA hotelier Bart Dorrestein and his associates in Legacy Hotels. Dorrestein and his partners are resisting the move and seeking to buy out Ensemble’s shares instead.
The dispute stems from a fallout between the two parties over the management and strategy of Legacy Hotels, which manages a sprawling portfolio of hotels and resorts in SA and abroad, including The Michelangelo, The Commodore and Elephant Point.
Ensemble claims it has the right to trigger a buyout clause in the shareholders’ agreement, which allows any party to initiate a sale of the entire company if there is a deadlock. Dorrestein argues that there is no deadlock and that Ensemble is acting in bad faith and breaching the agreement.
The court will have to decide on the merits of the case, but the bigger question is why a Libyan fund, whose origins and motives are murky, is allowed to own a significant stake in a strategic SA business in the first place. How did the government and the regulators approve such a transaction, and what safeguards are in place to protect the country’s interests?
Ensemble is a subsidiary of the Libyan Investment Authority, which was set up in 2006 by the late Libyan leader Muammar Gaddafi to invest the country’s oil wealth abroad. Under Gaddafi, state institutions, including the sovereign wealth fund, became channels for corruption, theft and illicit money transfer on a massive scale. Oil wealth worth billions of rand went to failed projects, frivolous schemes and the coffers of the privileged political elite.
The fund has been embroiled in legal battles and corruption scandals in several countries including the UK, France and Italy, where it has sought to recover billions of dollars that were allegedly mismanaged or siphoned off by Gaddafi’s cronies. The fund has amassed a portfolio worth more than $68bn. It also included about 550 subsidiaries with obscure structures that, according to a UN panel of experts, are designed “to facilitate the laundering of funds embezzled from the state to personal assets abroad”.
It’s not unreasonable to imagine that running Legacy Hotels is a nightmare for Dorrestein, who has been partnered with a sanctioned and secretive entity for years. The fund may have limited options and flexibility to invest in new opportunities in SA, as it may be subject to restrictions and approvals from the UN, a scenario that has the potential to constrain the growth of Legacy Hotels and reduce its competitiveness and profitability. The group’s flagship property, The Michelangelo, has not reopened since closing its doors in 2020 due to the Covid pandemic.
Now, the fund’s attempt to take over Legacy Hotels is not only a threat to the company’s future but could also taint the image of the hotels, which are frequented by the political and business elite for meetings, events and accommodation.
SA cannot afford to lose control and management of its strategic assets and industries to foreign predators, especially those with questionable backgrounds and agendas. The country needs to attract more foreign investment, but not at the cost of exposing its strategic tourism assets to reputational damage.
• Motsoeneng is Business Day deputy editor
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