Publications
Partners
Johannesburg - Ndaba Ntsele, South Africa's entrepreneur of the year in 2008, has called for an investigation into executives at the government-owned Industrial Development Corporation (IDC).
This is after Ntsele broke silence on the closure of Pamodzi Gold, a junior mining firm that he founded and chaired, and which he said the IDC allowed to fold with the loss of 13 000 jobs.
"I'd like to see an investigation into the conduct of the IDC's executives in relation to the loss of so many jobs," Ntsele told Fin24.com in an interview.
In a series of interviews over the last two months, Ntsele accused IDC executives of gross neglect of duty and a "callous attitude" that prevented his company from saving the jobs at Pamodzi Gold.
However, the IDC's Abel Malinga has disputed these allegations.
He claimed that Pamodzi's fund-raising efforts were overtaken by events having met with Pamodzi Gold and its backers before the company went into provisional liquidation.
"We offered them resources like our mining team and explained the whole transaction to them, in order to facilitate a transaction to save the investment," said Malinga.
After the meeting, some of Pamodzi Gold's creditors applied for liquidation, a move the IDC opposed. It applied for judicial management of the company instead. "We wouldn't have opposed it if we weren't interested in saving the company."
Pamodzi's troubled relationship with the IDC started when the gold firm's Orkney-based mines ran into production problems and the company struggled to recapitalise itself.
Pamodzi Gold's funding problems, which involved failed attempts to raise R400m from various banks, came amid the global economic recession. In desperation, it turned to the IDC.
The IDC duly committed R200m under a five-year loan facility on condition Pamodzi raised the R200m balance from capital markets.
Ntsele said Pamodzi then secured a R650m loan with the China Africa Development Fund (CADF) and another R750m loan from Cape Town-based Sekunjalo Investments. A Middle Eastern backer, Endeavour Financial, also lent financial support.
"The only condition to access the money was that the IDC, as the only secured lender to Pamodzi, would issue to CADF a letter of support for the new investment.
"But the IDC refused to issue such letter even though CADF did not need an additional cent from it," said Ntsele. CADF is a subsidiary of the state-owned China Development Bank.
IDC wanted liquidation
Ntsele said that the IDC did everything it could to liquidate his company, even going as far as telling the CADF not to invest in Pamodzi Gold.
Malinga countered, however, that the CADF proposal (before liquidation) was not a firm offer. "CADF still needed to go back to consult in China and get the internal approvals," said Malinga. After the court granted the provisional liquidation, the matter was out of the IDC's hands as the liquidator was now in charge.
"As a creditor, we then needed to act like all other creditors and let the Insolvency Act take over. We couldn't have circumvented the law without being seen to be acting against the interests of the other creditors," said Malinga.
CADF and Pamodzi now needed to present all their plans to the liquidator. The IDC was ready to support any proposal that would save the firm. "It's entirely untrue that we refused to see them."
According to Ntsele, IDC Geoff Qhena recommended the Chinese wait for Pamodzi Gold's liquidation and then buy the assets cheaper.
"In my presence, and that of another Pamodzi Gold representative, he asked two representatives of the CADF in a meeting in March why they would want to buy the company when they can get it a discount after its liquidation," said Ntsele.
The Chinese responded they were not looking for discounts, but to help save the 13 000 jobs and therefore managed to get the IDC's permission to conduct a due diligence study on Pamodzi Gold.
Malinga also disputed this.
"Qhena never said it. What Qhena said was that he'd support anything that takes Pamodzi out of liquidation. It was in our own best interests to do so. We wanted CADF as a partner from the beginning in order to prevent liquidation."
A series of letters then followed, mainly to IDC executives, and when there was no further response, Ntsele asked IDC board chairperson Wendy Luhabe to intervene.
That was in late May, a few days before the return date for the provisional liquidator of Pamodzi's Orkney and Free State mining operations.
"I am writing to you in an urgent attempt to secure a meeting with the executive tem dealing with the Pamodzi Gold matter," said Ntsele in a letter to Luhabe.
He said Pamodzi's foreign funders wanted to meet with the IDC executive team and that Pamodzi itself was desperate for an "urgent meeting with anyone".
Qhena responded on Luhabe's behalf, noting Ntsele's letter and saying the IDC "needed to be seen to be acting within the strictures of the law" on the matter.
Qhena advised Ntsele to "take up whatever proposal" with Pamodzi Gold's liquidators. "Alternatively, you could replace the funds (R200m) withdrawn whereupon we would be in a position to engage further with you."
A series of correspondence between Ntsele and Qhena ensued the following few days, with Ntsele urging the IDC to withdraw its demand for the repayment of the R200m loan and instead issue a letter of support to the CADF.
Ntsele reiterated that the liquidation of his company would cause "very large scale additional social costs" as all its creditors would be forced to wait longer to be paid.
"Again, there would be massive job losses at a scale that has never been seen in recent times in the mining sector," wrote Ntsele.
Zuma approached
In a final throw of the dice, Ntsele approached President Jacob Zuma to request a "timely and decisive intervention" to resolve the problem.
"We believe that the prevailing shenanigans of the IDC are not warranted particularly because no further money is required," wrote Ntsele to Zuma.
He said the IDC's attitude was a setback "which poses a serious threat to the imminent foreign direct investment" from the CADF.
"They must desist from playing silly games with the lives of our indignant and desperate people (the affected mineworkers)," fumed Ntsele before pleading for assistance in securing the letter of support from the IDC.
The letter never came. Instead, a meeting with the IDC was finally set up after the CADF's MD for South Africa, Lilliang Teng, wrote to Qhena on 18 June requesting a meeting.
"We are giving serious consideration in investing in this company, ensuring that the greatest number of jobs are saved in this process," wrote Teng.
From an earlier meeting with the IDC and Pamodzi in March, the CADF had been given permission to conduct a due diligence study. Teng reported the CADF's "opinion that it (Pamodzi Gold) can be successful and expand if funded correctly".
Citing the DME letter, Teng informed Qhena that the CADF's internal processes for the loan were "at an advanced stage", but that CADF would like to obtain the IDC's support in order to invest in Pamodzi Gold.
"The envisaged investment would require no additional funding from the IDC," concluded Teng.
Pamodzi Gold was put under final liquidation in September.
- Fin24.com
