Kalagadi founder fights for control
Daphne Mashile-Nkosi is fighting once again to retain her position as executive chair for life of Kalagadi Manganese, this time against the biggest shareholder, which has been with her the longest.
Daphne Mashile-Nkosi is fighting once again to retain her position as executive chair for life of Kalagadi Manganese, this time against the biggest shareholder, which has been with her the longest.
The Industrial Development Corporation (IDC) approached the court on an urgent basis last week to put its largest mining investment into business rescue, citing the dire financial circumstances in which the blackwomen-owned miner finds itself with debt of R7.1bn that it is in no position to repay.
Mashile-Nkosi successfully fought off a hijacking of her Kalahari Resources’ board in 2010 when the company’s documents were tampered with at the Companies and Intellectual Property Registration Office, removing her and other directors and replacing them with eight other people, including the politically connected Sandi Majali.
Kalahari Resources owns 35.5% of Kalagadi. Another Mashile-Nkosi company, Kgalagadi Alloys, owns 44.5%.
In 2012, Mashile-Nkosi was in a major legal battle with then 50% shareholder in Kalagadi, ArcelorMittal, over funding and corporate governance in Kalagadi. The steelmaker later sold its stake to Kgalagadi (40%) and the IDC (10%).
On Friday the IDC lost its case for the matter to be heard on an urgent basis — it was instead referred to a commercial court. But the voluminous affidavits and annexures gave an insight into a rapidly deteriorating relationship between the state-owned corporation and Kalagadi, which owes it R3bn and defaulted on payment.
In an interview with Business Day, company founder MashileNkosi picked out a letter the IDC had sent Kalagadi on September 27 2019 demanding that she relinquish her position as executive chair of the company and take up a nonexecutive role within two months.
The condition was set by the IDC, a 20% shareholder in the miner, for extending its guarantee underpinning a R935m loan from banker Absa to Kalagadi.
“The IDC said I can never be chair for life as per the shareholder agreement they signed in 2008. The only way to deal with me is to bring in business rescue, remove the board, remove everybody and change that shareholder agreement,” Mashile-Nkosi said.
“It’s unfortunate because I became chair for life on the advice of the IDC people at the time because we knew we were starting a company that would be a black women-owned company,” she said.
“It makes me angry that my personality is in question. They brought me in because I’m strong. I did it because I had the balls to do it. I’m over 60, for God’s sakes! I cannot go back into my mother’s womb and become something else.”
The IDC “does not have a ‘personal issue’ with Ms Daphne Mashile-Nkosi”, David Jarvis, its divisional executive for corporate affairs, said, adding that the chair issue would be “addressed at an appropriate time”.
Not only does the IDC want Mashile-Nkosi to take a less hands-on role at the company that she founded and nurtured through a very difficult fundraising and construction phase, but in the September letter it added the condition that Kalagadi CEO Thulo Malumise had to either reapply for his job or be replaced within two months.
In the court papers filed last week, the IDC strongly rejects it has any designs on removing the board or taking over the company as Mashile-Nkosi alleges.
It is abundantly clear from the papers that the IDC has grown deeply unhappy with Kalagadi’s management. It has declined to accede to the company’s request that long-standing contractor miner Murray & Roberts Cementation (MRC) be removed and that Kalagadi itself mine its manganese deposit.
There is a common theme running through Kalagadi’s arguments in last week’s court case brought by the IDC, and in its own application lodged in court last Thursday against the IDC, seeking an order to compel the lender to restart talks on debt restructuring and to give reasonable consideration to its plans for the mine.
It lays the blame for its failure to make a R241m payment in March to the IDC and the African Development Bank, which it owes more than $160m (R3bn), squarely on MRC.
“There is no dispute that Kalagadi is experiencing financial challenges. That situation has been caused directly by MRC’s repeated failures to meet its production targets that had been agreed to by MRC as the mining contractor,” Malumise said in Kalagadi’s papers against the IDC.
“The effect of the repeated failures meant that Kalagadi was not able to take forecasted manganese products to the market and thus earn enough revenue to service its debt obligations,” Malumise said.
MRC is having none of it, instead pushing the blame back to Kalagadi, arguing that the mining infrastructure built by another contractor appointed by Kalagadi was “underdesigned and incomplete” when it arrived on site.
“Essentially, Murray & Roberts Cementation has been completing the required infrastructure, while simultaneously trying to ramp up production,” it said on Monday.
“As development progressed, Murray & Roberts Cementation encountered more complex geology than what was contained in the geology model — as provided by Kalagadi — that the contractual planning was based on, which had a further negative impact on the development advance rates,” it said.
MRC notes that it has received payments for the work done to date, but “there are some additional significant outstanding amounts that are now in dispute with Kalagadi”.
This is one of the main areas of concern raised by the IDC, which stands guarantee for any payments to MRC that Kalagadi cannot make. The IDC argues the debt burden on Kalagadi will grow if it has to advance outstanding payments to the contractor when Kalagadi is already unable to service its existing loans.