How to hijack a coal mine, 1, 2, 3
Optimum Force | 1: Drive mine into business rescue 2: Line up Guptas to buy it 3: Give them cosy coal contracts
THULI Madonsela’s state capture report lifts the lid on how Eskom helped the Guptas hijack Optimum Coal Mine from Glencore, fund the deal through suspect payments and sweetheart coal contracts — and then flip its coal terminal for a tidy R2-billion profit.
Tegeta, the company that bought Optimum mine and its holding company on favourable terms, is owned by the Guptas and President Jacob Zuma’s son Duduzane.
The report provides the first detailed account of:
Strong-arm negotiations behind the scenes that Madonsela said forced Glencore to sell Optimum so that the Guptas could benefit;
Eskom CEO Brian Molefe’s close contact with the Guptas and other Tegeta directors at critical stages of the deal;
How the deal was funded, including by an adviser to Mineral Resources Minister Mosebenzi Zwane; and
A secret late-night bail-out from Eskom for R660-million in coal pre-payments to Tegeta, exthe posed by Carte Blanche and City Press in June.
Madonsela dates the root of the rot to an Eskom board meeting held in Cape Town on April 23 2015, when negotiations over a long-standing dispute with Glencore’s Optimum mine were discussed.
The board “consisted predominately of individuals with direct and indirect business and personal relations” with Duduzane, the Gupta family and “their related associates”, including businessman Salim Essa.
Among those who attended the Cape Town meeting were board members Mark Pamensky, Nazia Carrim and Viroshini Naidoo. The report points out that all three have “identified conflicts of interest”.
Pamensky was associated with a company called ORE that is 64% owned by Atul Gupta; Shiva Uranium, in which Tegeta has a 20% stake; and Yellow Star Trading 1099, which Essa is a director of.
Naidoo is married to businessman Kuben Moodley, who was special adviser to Zwane when Optimum deal was being negotiated. Moodley is also the sole director of a company called Albatime — one of the entities the report says funded the deal. Carrim, who has since resigned, is related by marriage to Essa.
At the meeting it was resolved that negotiations with Optimum Coal Mine should be referred to Molefe — who was then acting CEO — before being tabled for board approval, which Madonsela “found peculiar”.
Molefe promptly cancelled a co-operation agreement with Optimum and levied a R2.1-billion fine for contractual nonperformance. This forced the company into business rescue.
“The only party who probably stood to benefit from [Optimum] being financially distressed and in business rescue would be a prospective suitor,” Madonsela said. “In this case the prospective suitor was Tegeta.”
Madonsela found Molefe’s role in these events worrying given evidence of his relationship “with the Gupta family as well as the directors of Tegeta”.
The evidence included records showing dozens of phone calls between Molefe and Ajay Gupta, who described him as a close friend who regularly visited the Gupta family home in Saxonwold, Johannesburg.
Another crucial meeting was held at Eskom’s offices on November 24 2015. Called to discuss selling Optimum to the Guptas, it was attended by business rescue practitioner Piers Marsden and Tegeta director Nazeem Howa.
At this meeting, Eskom made it clear it wouldn’t allow the sale to go ahead if it was only for Optimum Coal Mine rather than Optimum Coal Holdings, which owned two mines and an export terminal in Richards Bay, even though Marsden only wanted to sell Optimum mine.
Once a sale agreement was signed in December, Tegeta managed to secure lucrative coal contracts from Eskom.
Last month Tegeta sold its Richards Bay terminal. Ajay Gupta told Madonsela the company stood to make a profit of R2-billion from the deal.
Madonsela found it puzzling that Eskom allowed Tegeta to sell the terminal when it had insisted Optimum’s entities could not be sold separately.
“It appears the conduct of Eskom was solely for the benefit of Tegeta,” she concluded. This may contravene the Public Finance Management Act.
Another major issue Madonsela had with the deal was how it was funded.
A business account at the Bank of Baroda received 32 deposits for Tegeta totalling R2.5-billion. The depositors include Moodley’s company Albatime.
Moodley told the Sunday Times this week that Albatime had no involvement whatsoever with the transaction “therefore there is no conflict”, despite detailed evidence to the contrary in Madonsela’s report.
Eskom payments also came under scrutiny.
Between January and April, Eskom paid Tegeta R1.1-billion, R900-million of which was used to pay for Optimum. Despite these payments the company found itself R600-million short.
On April 11, two days before payment was due, Eskom held an urgent special board tender committee meeting at 9pm to authorise a R660-million prepayment to Tegeta. Those who authorised the prepayment included Naidoo and Carrim.
On April 16 the Sunday Times called Molefe about the pre-payment. He did not confirm or deny it. Later that day his spokesman denied it in an e-mail.
Madonsela found the Eskom CEO’s role in these events worrying