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Guptas' troubles mount as another JSE sponsor ditches Oakbay

Jun 05 2017 14:28
Matthew le Cordeur

Cape Town – River Group has terminated its role as Oakbay Resources and Energy sponsor on the JSE, the Gupta-owned mining firm announced on Monday.

SPECIAL ISSUE: #GuptaLeaks

The River Group decision was based on its “revised assessment of association risk surrounding the company and its shareholders”, Oakbay said in a statement on Monday.

Oakbay Resources is facing mounting challenges as media houses publish daily exposés from the #GuptaLeaks, a database of between 100 000 and 200 000 emails that reveal behind-the-scenes communications of the Guptas' many enterprises.

The family and their companies are the focus of intense scrutiny after allegations of state capture linking them to President Jacob Zuma, his son Duduzane and his political allies.

On Friday, Oakbay reported an operating loss of R1.279bn for the year to end-February 2017, from a prior loss of R1.5m. The firm’s cash on hand dwindled from R225m in 2016 to R2.7m in 2017.

In addition, the JSE is investigating Oakbay share trades after cancelling suspicious trades in the company's shares on March 31 2017, the morning after Pravin Gordhan was removed as finance minister.

Oakbay Resources CEO Jacques Roux left the company on March 31 after one year on the job, while board member Mark Pamensky will leave this Saturday. George van der Merwe has assumed the role of CEO.

Sponsor headache

River Group’s termination will be a major concern for the Guptas, who battled to convince the sponsor to replace Sasfin, which also terminated its services.

Former Oakbay Investments chief executive Nazeem Howa said the group approached “every single” JSE sponsor to support the Oakbay listing, and the group was rebuffed by “every single one” of them.

"After the second and third round, River Group started coming around,” he said.

Oakbay said last year that it did not anticipate River Group would withdraw sponsorship, as Sasfin Capital did in May.

Sasfin joined auditors KPMG in terminating their services, citing the same reason of “association risk”. South Africa’s top banks also blacklisted all Gupta-owned companies in 2016.

SizweNtsalubaGobodo took on Oakbay as its new auditors, while the Bank of Baroda has managed its banking affairs.

Oakbay said it is in the process of identifying and appointing a new sponsor. “The effective date of River Group's termination shall not be earlier than July 31 2017,” it said.

It will then have 30 days after this date to appoint a new sponsor, or it will be in breach of JSE regulations.

This breach nearly occurred last year, when Oakbay was battling to find a sponsor. City Press reported in 2016 that the JSE confirmed that it was considering suspending Oakbay’s listing.

“The JSE strictly enforces its listings requirements and takes appropriate action where necessary to protect investors where there are breaches,” Andre Visser, general manager of issuer regulation at the JSE, told City Press.

The Gupta family owns 80% of Oakbay Resources & Energy. The company’s major assets are Shiva Uranium in Klerksdorp, and Brakfontein, a coal mine in Delmas that supplies Eskom.

READ: Eskom approached Tegeta before it had a water licence, MPs told

Although Oakbay’s shares are rarely traded, any suspension from the JSE could have an effect on the 3.57% stake held by the Industrial Development Corporation.

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