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Oakbay loses R6bn in value

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 Atul Gupta
Atul Gupta

The Guptas’ Oakbay Resources & Energy has lost as much as R6.6 billion since the day before the company announced that its former family representatives had resigned amid a mass exodus by local financial institutions.

Since last Thursday, Oakbay’s JSE share price has fallen by 31%. It was trading at R18.50 on Friday, which valued the company at R14.8 billion.

This decline comes amid a crisis at the company following the loss of its auditor KMPG, bankers Absa and FNB, sponsor Sasfin and the resignation of Oakbay’s CEO and chairperson.

The move by the Guptas to relinquish control of Oakbay Resources was aimed at improving the standing of the Gupta business, but investors are not impressed.

In a note posted on its website this week, Bidvest Bank said: “It was hoped the decision by the Guptas to step down as directors, as well as leave the country, would ease the pressure on the company.

However, for many people, that falls short of what was ultimately required to placate concerns about state capture, which would have been for them to sell their shareholding.

“As long as they remain shareholders, very little changes in the sense that if Oakbay is benefiting from state-related or parastatal contracts, they will continue to be the main beneficiaries.”

Oakbay Investments CEO Nazeem Howa told Bloomberg TV this week that Nedbank and Standard Bank had also black-listed the company. Oakbay Investments has an 80% stake in Oakbay Resources & Energy.

However, Nedbank and Standard Bank both declined to comment about whether they even had a relationship with Oakbay.

Earlier this month, Oakbay Resources said a major Asian bank was continuing to provide services to the company. Shaikh Rauf, a Bank of Baroda senior credit manager based in Johannesburg, confirmed this week that Oakbay Resources & Energy had been a longtime client of the bank.

Howa told Bloomberg TV that Oakbay needed to restore its banking relationships as soon as possible. On Friday, Howa again highlighted that its 7 500 employees remained at risk if Oakbay was unsuccessful in ­
re-establishing banking relationships with Absa, Standard Bank, FNB and Nedbank.

Howa said he hoped to secure appointments with the major local banks and convince them to restore relations.

“We are going to talk to all four banks this week and assure them about the governance being in place,” he explained.

However, by the end of the week, all four major banks wouldn’t say if they had met with representatives of the Gupta family businesses.

Nainesh Desai, head of risk at FNB, said that due to customer confidentiality rules, FNB did not discuss any of its clients’ business matters in the public domain.

An Absa spokesperson took a similar line.

Howa said he had contacted government regarding the jobs at risk at the company.

“The minister of finance is politically responsible for the banks and it is unprecedented for the major banking institutions to all walk away from a business – it has never happened in this country,” Howa told Bloomberg TV.

The remaining banks, Howa said without being specific who they were, that still did business with Oakbay Investments had given notice that they would sever their ties with the company by the end of next month.

“One of the group’s businesses might need to take drastic steps as the business works with all four major banks,” Howa said, without saying which business it was.

Howa questioned how “very strong action” could be taken without a charge being laid or without the company being found guilty of anything.

The departure of the Guptas from the country is causing concern for employees at companies owned by Oakbay Resources.

Oakbay Resources has a 60% stake in Shiva Uranium, which owns the Shiva gold and uranium mine near Klerksdorp.

Maja Mphahlele, National Union of Mineworkers organiser at the Shiva mine, said: “We had a meeting with the company [Shiva Uranium] on Thursday and they told us that it [the banking issues] won’t affect the members in terms of getting their salaries and that jobs are stable. They will continue paying the workers.

“Cosatu at a national level is intervening to speak to those banks to make sure that they can revert their decision. They are certain that the intervention will yield a good result,” he added.

“Shiva did not say how they are going to continue paying, just that they will be paying the workers.

“At the meeting, we spoke to the HR manager for Shiva Uranium in the Klerksdorp area, Joseph Mtshali. He assured us all will be well.

“The mine workers generally are very worried about their future because if the company makes an alternative arrangement, we are not sure if it will be an everlasting solution,” Mphahlele said.

In another development, amid a political backlash and a banking crisis, a key Gupta family business this week put together the billions needed to acquire a major coal mining company.

But where the R2.15 billion plus interest comes from, and how Tegeta plans to turn around a mine losing on average R108 million a month, remains unclear.

Even the business-rescue practitioners appear unconvinced – although Optimum Coal Holdings will be taken out of business rescue, Tegeta appears to have failed to provide a convincing turnaround strategy for Optimum Coal Mine, which will remain under the stewardship of the business-rescue practitioners for the foreseeable future.

“Optimum Coal Mine will operate as a going concern under the operational control of the business-rescue practitioners until the practitioners are satisfied Optimum Coal Mine is no longer financially distressed,” the rescue practitioners said on Thursday.

City Press understands that no deadline has been set for coming up with a viable plan for the mine.

Howa said: “Tegeta’s immediate priority for Optimum is to increase production levels at the mine ... A core element of Oakbay’s business philosophy is to elicit more efficient levels of performance via its proven turnaround skills, which will immediately be put to work at Optimum.”

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