Guptas dig mining power


When does coal become a dirty business?

Much of the mainstream media howled like banshees after news emerged in January that Cosatu and SACP leaders had raised concerns about  “Zupta” during a lekgotla meeting of the ANC executive committee. “Zupta” refers, of course, to links between the Johannesburg-based Gupta families and that of President Jacob Zuma.

The key stimulus – this time – was the sale in December of the Optimum Coal complex in South Africa, by Swiss-based Glencore, to little-known Tegeta Exploration & Resources, an entity owned by the Gupta family. It had emerged that Mineral Resources Minister Mosebenzi Zwane had attended meetings during December with Glencore CEO Ivan Glasenberg.

The minister and various members of the Gupta family also flew to Switzerland for the meetings. The minister’s explanation was that his role was to save jobs. Noseweek (noses183,185 & 191) has examined the issues around Optimum in some detail – not least the position of Deputy President Cyril Ramaphosa as its biggest BEE shareholder – and heavy-duty claims by Eskom of contractual violations by Optimum, which had always vigorously denied the allegations.

An alien, landed on earth and told the Optimum story, would probably swear blind that Eskom had been instructed to invoke obscure contractual issues to force Optimum into bankruptcy. Least strange, perhaps, is that, happily for the Guptas, Tegeta bought Optimum for, essentially, nothing. The sale from Glencore to Tegeta was agreed at US$136m. However, it was made clear that not only would proceeds from the sale “be used to pay Optimum’s R2.55bn (US$160m) debt”, but that Glencore was expected to eliminate the balance of Optimum’s debt.

Glencore bought its controlling stake in Optimum in three main chunks: 31% in 2011 for US$382m, 32% in 2012 for US$401m, and another 5% in subsequent small deals. At the current exchange rate of about R15.50-to-the-dollar, this means that Glencore paid more than R12 billion for its majority stake in Optimum, plus about R3bn to give it away to Tegeta.

The extent of Ramaphosa’s involvement remains as clear as mud, especially considering that his assets were apparently placed in a blind trust when he returned to politics.

A sum of R15bn-or-so may be relatively small beer for a transnational mining and commodity trader such as Glencore, but the message sent to the international investing community is loud and clear. Who believes Eskom’s claim that it will still enforce upon Tegeta the astronomical “penalties” it was demanding from Glencore?

And while the mainstream media went near-insane about the political involvement in Tegeta’s acquisition of Optimum, there is nothing new in the Guptas’ using blatant force in their business dealings. As Indian nationals, it is possible that the Gupta interest in coal was inspired by the omnipresence in Indian life of Coal of India, a giant corporation, the world’s biggest coal miner.

Either way, the Guptas have long relished becoming a force in South African coal. Back in 2010, Vryheid Revival Mines (VRM), a coal group based in KwaZulu-Natal, objected to a potential Gupta takeover on the basis that the Guptas do not qualify for BEE status.

 Duduzane Zuma

During a meeting with VRM in February 2010, the following potential BEE suitors pitched up in Vryheid: Atul and Tony Gupta, Ravindra Nath (finance director of Sahara, a Gupta entity), Duduzane Zuma (President Jacob Zuma’s son), various bodyguards, half a rugby team of police officers, the head of the Vryheid Police Station, and the mining ministry’s regional manager: mineral regulation, for KZN, Nqobile Njoko.

VRM continued to resist the Gupta would-be invasion and also raised alarm bells over large numbers of Indian nationals arriving in Vryheid, an area with high unemployment rates.

In reaction, the ministry suspended VRM’s mining licence, in a move foreshadowing – no matter how vaguely – the kind of treatment that Glencore would be given in respect of Optimum.

Back on 5 May, 2010, VRM met in Durban with mining ministry officials, regarding the suspension of VRM’s mining rights. Rebone Nkambula, acting chief director: mineral regulations, was shipped in from the ministry’s head office in Pretoria. And, of course, Tegeta was invited to the meeting and attended.

Somehow, VRM endured, or the Guptas lost interest, or both. Either way, VRM could have served, in effect, as a dry run for the acquisition of Optimum.

Keywords:
Gupta
Tegeta Exploration & Resources
Vryheid Revival Mines
Vrm
Eskom
Optimum Coal
Duduzane Zuma
Mining Rights
South Africa
Coal Mining
Rebone Nkambula
Glencore
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