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The sting in Aurora's broken tail

Jun 28 2015 17:00
Susan Comrie

Johannesburg - When Aurora Empowerment Systems was created in 2009, Khulubuse Zuma predicted that within a few years the company would be worth between $5bn and $10bn. 

But on Thursday, the North Gauteng High Court ruled that Zuma and his co-directors, Zondwa Mandela and Thulani Ngubane, should be held liable for Aurora’s debts, which are estimated at R1.7bn. 

In a damning judgment, Judge Eberhard Bertelsmann criticised the Aurora directors and their financial advisers for their takeover of the Grootvlei and Orkney gold mines – a reckless gamble that cost 5 300 workers their jobs and caused untold environmental and economic destruction.

“The respondents must have known from the first moment that they would wreak havoc in the miners’ lives through their actions, yet they pressed ahead,” Bertelsmann said.

He said the promises Aurora made to the liquidators were “a figment of an overactive imagination”. 

“The entire project was and remained a pipe dream – with disastrous consequences for many individuals,” he said.

Zuma is a nephew of President Jacob Zuma and Mandela is a grandson of former president Nelson Mandela, and Bertelsmann noted that they boasted about their political connections.

The public shaming from Bertelsmann has done nothing to deter the directors. On Friday, Zuma’s spokesperson, Vuyo Mkhize, confirmed that he would appeal the judgment. 

The ruling follows an application by the joint provisional liquidators of Pamodzi in terms of the old and new companies acts, sections that allow directors and controllers to be held personally liable for the debts of a company. 

Mandela, Ngubane and Aurora’s financial advisers, Solly and Fazel Bhana, were found guilty of “wilful deception” and “reckless management of Aurora’s affairs” – and will now be held personally liable for the debts. 

Zuma claimed that he was kept in the dark about problems at the company, saying: “The media told me everything that was going on in my company … I would demand [answers] … and I would be told the stories.”

Despite his claim of ignorance, Bertelsmann still found that Zuma should be held financially liable, saying: “If he really did not know, it is because he deliberately chose not to be informed.”

There was no sign of the directors or the Bhanas in court on Thursday morning, although a handful of the 5 300 mine workers who lost their jobs gathered outside the court.

“We’re very happy for the workers’ sake,” said Gideon du Plessis from trade union Solidarity. “The judgment proved that we were dealing with people with strong political connections and who enjoy political protection, and they’ve finally realised that they are not untouchable.”

On Friday, Zuma confirmed through Mkhize that he had already decided to seek leave to appeal the judgment. 
Zuma’s lawyers intend to challenge the finding that he failed to act, pointing out that he invested R35m of his own money into the mine in an attempt to rescue it. 

Attorney Etienne van der Merwe, who represents Mandela, Ngubane and the Bhanas, said he would be meeting with his clients this week to decide whether they would also appeal.

For workers who are hoping that the judgment will translate into cash in hand, this means further delays.

“Obviously the expectations [of workers] will be very high that there will be revenue coming their way very soon, but that is not the case,” Du Plessis conceded.

“But it is the first victory that we’ve experienced in five years.”

He said most workers were owed between two and nine months’ salary, but the most they would be guaranteed was R28 000.

Although the judgment means that the directors and their advisers will have to pay up, the exact amount they’re liable for still needs to be determined. 

And from there, the hunt for funds can begin, which could include delving into the directors’ and the Bhanas’ bank records, trusts and offshore companies. 

It’s unlikely that this will be an easy process. During the liquidation inquiry, financial adviser Solly Bhana claimed that, despite owning numerous racehorses, he did not have a bank account and received all his payments in cash.

Likewise, his son, Fazel Bhana, who was considered by most people to be the de facto boss of Aurora, told the inquiry that there was no paperwork for loan agreements running into millions of rands. 

“Your father would know from the old school if you give your word, your word was good enough to raise money...” Fazel told the inquiry.

Zuma is an active director of 27 different companies in South Africa, and also holds lucrative stakes in oil concessions in the Democratic Republic of Congo through two offshore companies registered in the British Virgin Islands. Although Zuma has refused to disclose the size of his stake in these concessions, Mkhize confirmed that the total value of the blocks, over their lifetime and if they are developed to production, could be in the region of R100bn.

“Zuma is fully aware of the implications of sequestration: the requirement for him to disclose all of his financial activities for the past and the present; and the reality that his management of his affairs would pass on to a trustee who would dictate everything about his life in the financial sense, from which house he stays in, what car he drives and where he works for whatever reasons,” Mkhize said. 

“He understands, for instance, that if you are sequestrated and you are unemployed, the trustee can elect to direct or to find any employment for him. Because of that … he is prepared to do all in his power to ensure that an outcome, which he believes will be the only outcome which is fair and just, materialises.”

This, Mkhize said, would be for Zuma to be excused from any personal liability for Aurora’s debts. 
Mkhize also revealed that before the judgment was made, he had attempted to negotiate an out-of-court settlement on Zuma’s behalf. 

“If the [directors] get sequestrated and they lose all their earthly possessions, then at least they will know how their 5 300 employees felt when they lost everything under their watch,” Du Plessis said. 

“They were literally going about – all the directors – as if they were untouchable … they were heartless. There was just no conscience from their side, and now, for the first time, they will start to feel the heat and the uncertainty.”

*In our print edition we used a picture of Brigadier Thulani Ngubane instead of his namesake, who is Khulubuse Zuma's business partner. City Press apologises for the mistake and inconvenience caused. 

gideon du plessis  |  khulubuse ­zuma  |  aurora
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