BLSA’s David and Goliath battle

BLSA Connect, a platform designed to connect big corporate customers with small business suppliers and launched with much fanfare by President Cyril Ramaphosa in March 2019, has been derailed by infighting.

The developer of the platform has been served papers by legal firms representing Business Leadership SA (BLSA), and separate papers from a firm that represents BLSA Connect, which is registered as a limited company.

The papers from BLSA, represented by Africa’s biggest law firm, ENS, accuse the platform developer, Neil Felix, of using the BLSA Connect trademark illegally and without permission, and of appropriating the web addresses blsaconnect.com and blsaconnect.co.za illegally and without permission. In a nutshell, they imply that he is a rogue, operating without the knowledge or sanction of the BLSA.

The papers from BLSA Connect, represented by Bate Chubb & Dickson Inc, acknowledge that Felix was contracted to develop the trading platform by BLSA Connect, but argue that he is in breach of contract and as such must transfer ownership of the website domain names as well as a R50,000 loan advanced to him to pay developers.

There was no reference, in either set of papers, to the fact that Felix and Dumisani Mpafa, who is a director and CEO of BLSA Connect, had entered into a 50/50 partnership agreement (seen by Business Maverick) for the development and management of the online trading platform that forms the core of BLSA Connect.

The idea for the trading platform followed Ramaphosa’s call in 2018 for business and labour to galvanise themselves into stimulating SA’s moribund economy.

Companies including Nedbank, Standard Bank, Telkom, Multichoice, Sasol and Growthpoint responded by backing the formation of an SME Fund which will provide venture funding to small companies, and BLSA Connect, which will provide a marketplace where SMEs and corporate procurers can come together.

“South Africa’s business landscape is characterised by a large number of very small and micro enterprises, a significant proportion of which are informal. Yet, the success rate of small and micro businesses is poor,” Ramaphosa said at the launch of BLSA Connect in March.

“We have signed up as a member [of BLSA Connect] as we are firm believers in the power of SMEs to drive economic growth and are supportive of the logic of connecting excellent SMEs to corporate supply chains,” Discovery CEO Adrian Gore told Business Maverick.

“As an initial first step, we have made a once-off payment of R500,000 for 2019/2020. This will be used to help set up the platform and vet SMEs. The purpose of the subscription is to get access to a database of vetted SMEs, with excellent product and service offerings, and in this way widen our pool of potential suppliers.”

The founding directors of the new company were Busisiwe Mavuso (non-executive chair), Dumisane Mpafa (CEO), Jackie Mathebula from Aurik (executive director) and Pavlo Phitidis, founder of Aurik. This is according to an email, dated 07/12/2018 announcing the registration of the company BLSA Connect (seen by Business Maverick) and addressed to the boards of Aurik, the directors of BLSA, Mpafa, and sent by Mathebula.

Since then Aurik has removed itself from the project. But more on that later.

“These initiatives… present a clear and direct response to the economic challenges our country faces,” Ramaphosa continued at the launch. “Through the BLSA Connect initiative and the SA SME Fund, business is placing the development of small business – and the scaling up of small business into medium and large ventures – at the centre of the country’s economic and social revival.”

Things have since gone awry

In an email dated 28 June 2019 the former CEO of BLSA, Bonang Mohale, said, “All we want is to initially ‘instil the fear of God’ in Neil [Felix] with the hope that he will indeed, ‘stop and desist!’ Failing which, we must proceed to the ‘highest court in the land’, for sure!” The email was addressed to, among others: ENS, Mpafa and Busisiwe Mavuso, current CEO of BLSA.

Strong words and strong action. Particularly from an avowed champion of SMEs.

Felix, who runs a small black-owned firm called Ubuntu Empowerment Services, had provoked the ire of the former CEO by addressing a series of emails to the board of BLSA and its corporate partners including Telkom, Discovery, Hollard, Yellowwoods and Capitec, asking for their help in resolving the dispute, and accusing the BLSA of unethical behaviour

What caused the dispute varies depending on who you talk to. At its heart, it appears to be a contractual dispute over amounts to be paid, and who should ultimately own the intellectual property (the domain names and the trading platform itself).

Felix says there are two matters in dispute. The first is the failure by BLSA to make payment for the development of the online trading platform – despite him submitting invoices and receiving commitments in writing from the CEO of BLSA Connect. The amount to be paid was a development cost of R360,000 with a monthly fee of R117,000 for ongoing development and maintenance.

While Felix has submitted an invoice, which accounts for the loans and progress payments advanced to Ubuntu Empowerment Services, the water is being muddied by the second disagreement.

This concerns ownership of the platform. In January 2019, Felix and Mpafa agreed they would be 50/50 partners in the online trading platform (Business Maverick has seen this agreement), which Mpafa would register. Over time it emerged that Mpafa did not want Felix involved in any way and the goalposts were shifted. Felix was instructed to cede the two domain names and control of the platform before the payment of R305,950 could be made.

This will result in a breach of the 50/50 partnership agreement signed between Felix and Mpafa on 10 January 2019. Felix says he is willing to walk away, “providing our partnership agreement is resolved”. What this means is he wants to be compensated for the loss of future income.

BLSA wants to wash its hands of the matter, arguing that this dispute has nothing to do with it.

“BLSA is an advocacy and lobby group, it is a not-profit. We partnered with Dumisane [Mpafa], through his company Beever,” CEO Mavuso told Business Maverick. “He went out to find the skills. He could have chosen Didata but he chose a black SME that has the expertise. We have nothing to do with Neil as BLSA, the relationship is with Dumisane.”

However, she adds that BLSA was forced to intervene: “We have to protect our reputation; our name is attached to this.”

She says Felix arrived at the launch event in March and “saw all these people and decided that this thing has money. Neil Felix is being opportunistic. He is now demanding more money.”

Papers served on behalf of BLSA Connect argue that the website is not currently active and thus Felix is in breach of contract.

Felix responds that his development partners took the website down in protest at non-payment, which had been promised since March, but brought it back up after it was agreed that payment would be made at the end of April.

“BLSA Connect is now developing another platform without us. They have found another development partner and want to spend more money, while a perfectly good platform has been created.”

Felix’s Ubuntu Empowerment Services is not the only firm to find dealing with BLSA and BLSA Connect tricky. Small business accelerator Aurik Enterprise Development was retained to deliver an integrated solution to BLSA Connect, and Aurik partner Jackie Mathebula was listed as a director of the company along with Mpafa and Mavuso.

However, Mathebula has subsequently resigned.

“We found ourselves unable to establish and conclude a partnership MOU with their [BLSA’s] selected partner,” Aurik director Pavlo Phitidis told Business Maverick.

“Our reluctance to deliver our IP without a contract, in the face of the very tight time-lines set by BLSA, left us in a difficult position as we always require contractual relationships to be finalised prior to the delivery of IP, work and effort. It was these circumstances that precipitated the termination of our relationship.”

While BLSA, BLSA Connect and Ubuntu Empowerment Services appear unable to resolve their differences (meaning a small BEE company simply will not be paid), some 1,215 small companies have registered on the platform in the hope that they can provide a service to some of South Africa’s biggest companies. BM