FORMER Deputy Minister Paulus Kapia and three fellow directors of a company in which the Swapo Party Youth League is the majority shareholder are being sued for N$2,6 million by Government.

In an effort to recover public money lost as a result of two loan guarantees given by the Ministry of Finance in 2004, Government now wants to hold Kapia and three co-directors in a company in which the SPYL holds the majority of the shares personally responsible for the repayment of two loans that Bank Windhoek granted to a prospective pharmaceutical company, Sesura Pharma, in 2004.

In a case filed with the High Court earlier this year, Government is accusing Kapia and three other directors of Sesura Pharma - Henok Nantanga, Sarah Damases and Hellena Kapiya - of having carried out the business of Sesura Pharma recklessly or with the intent to defraud Government.

Government is also accusing the four of having failed to exercise proper control over Sesura Pharma's management and financial affairs.

Other accusation levelled against the four are having carried on the company's business when it was unable to pay its creditors, having closed down the company's operations and having incurred debts on the company's behalf when they knew that it would not be able to repay the debts.

They are blamed for allowing the assets, which ought to have been registered in Sesura Pharma's name to be registered in the name of a third party.

Kapia, Nantanga, Damases and Kapiya have all filed notices with the High Court to indicate that they will be defending the claim against them.

Sesura Pharma itself did not give any indication that it would be defending the case. As a result, the Registrar of the High Court granted a default judgement in an amount of N$2,644 million against the company on October 9.

Nantanga, who as a minority shareholder holds 40 per cent of the shares in Sesura Pharma, told The Namibian on Wednesday that the case against him, his now former fellow directors of Sesura Pharma, and the company stems from a plan to set up a pharmaceutical factory at Walvis Bay.

When that plan went awry, Sesura Pharma was stuck with premises at Walvis Bay where its planned factory never became operational and a loan from Bank Windhoek that it could no longer service.

Kapia said yesterday that he had been a director of Sesura Pharma only until March 25 2005, when he resigned. He said he was not involved with the company and did not have knowledge of what happened in the company after that point.

"I'm defending myself. I'm not defending the case," Kapia said, confirming that he is defending government's legal action against him and the other defendants.

Kapia was still the Secretary of the SPYL at the time that he served as a director of Sesura Pharma.

An SPYL company, Juventas Enterprises, holds 60 per cent of the shares in Sesura Pharma.

Nantanga said Sesura Pharma, which was set up with himself and Juventas Enterprises as the shareholders, was created to carry out a plan to set up a factory making herbal products and generic medicines at Walvis Bay. The first product would have been devil's claw, which is currently being exported from Namibia in unprocessed form.

To finance the planned factory, Sesura Pharma first got a loan of N$1,25 million from Bank Windhoek, with this amount later doubled to N$2,5 million.

GOVT GUARANTEE

Government, represented by Finance Minister Saara Kuugongelwa-Amadhila, on March 31 2004 gave a guarantee to Bank Windhoek that it would repay the first loan, in an amount of N$1,25 million, if Sesura Pharma defaulted on the repayment of the debt.

According to documents filed with the High Court, David Nuyoma, the current Chief Executive Officer of the Development Bank of Namibia, was the chairperson of the board of directors of Sesura Pharma at that stage. Nantanga, Kapia, Damases and Kapiya were the other directors.

According to company records of Sesura Pharma, Nuyoma resigned as a director on May 5 2004.

On November 24 2004, the Finance Minister signed a second guarantee to cover Sesura Pharma's loan with Bank Windhoek. That guarantee, which in effect replaced the earlier guarantee, covered a loan up to N$2,5 million.

At the time that guarantee was issued, the directors of Sesura Pharma were Nantanga, Kapia, Damases and Kapiya.

"Those things were done procedurally," Kapia said in connection with the loan guarantees yesterday. He said he did not do any lobbying to have the guarantees approved by Government.

According to Nantanga, the company used N$2 million of the loan to buy and prepare a property at Walvis Bay where the planned factory was going to be set up. The remaining N$500 000 was used to service the loan in the meantime.

A decision to set up a joint venture with German partners however did not turn out as planned.

A joint venture company, Sesura and Dr Homann Pharmaceuticals (Pty) Ltd, was set up and the Walvis Bay property was registered in this company's name, Nantanga said.

'THINGS FALL APART'

He claimed the German partners however failed to get the factory up and running, and this eventually caused a collapse in the relationship between the partners in the joint venture company.

The German partners later launched an application in the High Court to have the joint venture company liquidated, and they finally ended up in control of the property, which has in the meantime also been sold, Nantanga said.

As a result of the loan guarantees and Sesura Pharma's failure to repay the loan, Government paid N$2 644 058,22 to Bank Windhoek on May 10 2006, it is stated in the claim Government has filed with the High Court.

Government is asking the court to declare that the four sued Sesura Pharma directors "have acted recklessly and/or fraudulently" with regard to the debt that Sesura Pharma incurred towards Government. The court is also being asked to declare that Kapia, Nantanga, Damases and Kapiya will be held personally liable towards Government for the payment of the debt.