Treasury in dark over mine deal
Scramble to save former Gupta firm as rescue process faces court battle
The state-owned enterprise (SOE) that won the option in February to acquire Optimum mine, formerly owned by the Gupta family, entered into the transaction without the knowledge of the Treasury or permission from the energy minister.
Optimum, formerly owned by the Guptas’ mining company Tegeta, has been in business rescue for more than a year without any resolution, which has put the mine and employees who have not been paid since October 2018 at risk.
The participation of SOEs in ambitious, rogue schemes that were not approved by the Treasury was one of the hallmarks of the state-capture project, and is partly responsible for leaving these entities in financial trouble.
In February, the African Exploration Mining Finance Corporation (AEMFC), which is a subsidiary of the Central Energy Fund (CEF), announced it had been awarded a two-year mining contract under the supervision of the business rescue practitioners for which it would provide R1bn in post-commencement funding.
The AEMFC-led consortium includes empowerment group Lurco, which has partnerships with several companies in mining and related operations.
According to Lurco, the companies will each provide 50% of the funding. Lurco is to secure its part of the funding from UKbased financier Sycamore Capital. The funding will be used to finance the business rescue process and restart operations at Optimum.
As the mine cannot be sold because of a court challenge preventing a sale, the contract gives AEMFC and Lurco the right of first refusal when the assets come up for sale. The CEF also said it had pledged R1bn to support the investment.
But under the Public Finance Management Act, an SOE must inform the Treasury in writing and obtain the permission of its executive authority prior to entering into any partnership or joint venture.
Treasury spokesperson Jabulani Sikhakhane said on Monday finance minister Tito Mboweni was not aware of the transaction. Mmabatho Ramompi, a spokesperson for energy minister Jeff Radebe, said the minister was aware of the transaction, but that he had not yet given his approval.
“We confirm that AE is part of the consortium that was approved by business rescue practitioners to put up post-commencement financing with an option to acquire the asset. It is envisaged that CEF will finally get the ministerial and Treasury approvals on behalf of AE to enable the funding of the project,” she said.
Clouding matters further is the contention by several people with knowledge of the events that the CEF, which announced it would put up the R1bn, did so without the approval of its own board or that of Radebe.
The CEF did not reply to questions sent to it.
The omissions could jeopardise the business rescue process, which has already been delayed by dozens of legal challenges. In the latest, Oakbay Investments, a Gupta-owned company, has applied to the high court in Pretoria to remove the rescue practitioners.
Optimum business rescue practitioner Louis Klopper said he had been told all regulatory approvals were in place. With the agreement signed, he expected the first tranche of funding to flow soon.
A Lurco spokesperson said it had “entered this consortium with the knowledge that the AEMFC has obtained the requisite internal and departmental approvals”.
Omissions could jeopardise the already delayed business rescue process