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The politically connected Gupta family once again featured in Parliament today, as the Democratic Alliance urged the Industrial Development Corporation to give the Guptas “a wide berth” and Minister of Mineral Resources Mosebenzi Zwane denied travelling with them to Switzerland to persuade Glencore to sell Optimum coal mine to their companies Oakbay and Tegeta.
In an written reply to Democratic Alliance MP James Lorimer, Zwane said today that the allegation “is not correct”.
“The objective of the only reported official trip, to Switzerland which took place in 2015, was widely reported, and even in Parliament.
“The ministry denies any knowledge of the said trip to Switzerland in January 2016, and is therefore unable to respond further.”
Reports alleged that Zwane had met Glencore chief executive Ivan Glasenberg for talks at the Dolder Grand Hotel in Zurich about the matter.
In February, Fin24 quoted Zwane saying his relationship with the Guptas should not be an issue. “I engage with them on the issues of the country, I engage with them on the issues of asking them to invest more in South Africa,” he said.
“I will continue to deal with a number of chief executives and I will move to other countries to talk to them to attract investment.”
“I will not favour any businessperson – whether the Guptas – unduly so, but I will not hesitate to help in instances, especially like Optimum Coal, where a business was put in business rescue,” he told Bloomberg at the time.
In April, Oakbay Investments announced it had completed its acquisition of Optimum Coal Mine and six other target firms from Glencore for a total consideration of R2.15 billion.
State capture
However, banks have since pulled their support of Oakbay over allegations that the Guptas were involved in state capture. Zwane, who has been accused of being “captured” by the Guptas, was one of the ministers tasked to approach banks to engage with them on the matter.
Cas Coovadia, chief executive of the Banking Association of South Africa, said recently “an array of regulations”, including Fica, compelled financial services institutions to conduct due diligence on clients, “particularly those of a substantive nature and those that are in the public domain”.
Oakbay’s auditor KPMG, the top four banks and Oakbay’s JSE sponsor Sasfin Capital all cut ties with Oakbay Investments in March and chief executive Nazeem Howa has been on a mission to get the banks to rethink their move.
Today the DA urged the Industrial Development Corporation to “follow the lead of the commercial banks and give the president’s pals [the Guptas] a wide berth in future”.
DA MP Michael Cardo was officially responding to Economic Development Minister Ebrahim Patel’s Parliamentary written reply regarding a loan restructure deal with Gupta-owned Oakbay Resources and Energy.
In his reply, Patel forwarded IDC chief executive Geoffrey Qhena’s response, who said “there were no political considerations associated with the restructure [and] the restructuring was done purely on commercial terms.”
Cardo said he took this claim “with a large bucket of salt”.
Qhena said “the interest of R257 million, from April 14 2010 to May 31 2014, was converted into shares when the entity was listed (at a 10% discount to the listing price). The additional interest (after conversion) of prime plus 2% will be repaid as a lump sum on March 31 2018”.
Cardo said he would submit more questions to determine how much the portion of the loan swapped for equity would have been worth today had the IDC held Oakbay to its original terms.
“Political expediency”
“Mr Qhena acknowledged that there was a feverish flurry of meetings between IDC executives and Oakbay Resources and Energy shareholders, including Atul Gupta, in the run-up to both the granting and restructuring of the loan facility.
“It seems the IDC sacrificed commercial considerations on the altar of political expediency when it dished out favours for family and friends of Zuma,” he said.
“The fact that the IDC coughed up R250 million for Oakbay to buy Shiva Uranium in the first place – in April 2010 – smacks of political manoeuvring. The loan accounted for almost the entire R270-million purchase price. And when the uranium mine was parceled out, a company part-owned by Zuma’s son, Duduzane, took 26%, with the Guptas holding the rest.
“By December 2015 Oakbay valued Shiva at R10.7 billion on a net-asset basis. This represented a 40-fold increase in value that put the Guptas and Zuma junior in the pound seats, but oddly had still not translated into repayment to the IDC.
“In fact, although the IDC loan was due to be repaid in full in April 2013 with interest amounting to a total payment worth more than R450 million, Oakbay defaulted.
“Instead of foreclosing, the IDC bent over backwards to renegotiate repayment on terms wholly favourable to the Guptas,” he said. – Fin24
