Shock and ore: Dirt flies in Sishen battle

The three-year battle between Imperial Crown Trading and Kumba Iron Ore for a multibillion-rand stake in Sishen is getting dirtier and dirtier.

An alleged assassination attempt has driven a witness to go public with allegations of collusion between ICT and the department of mineral resources.

A legal consultant who claims that he survived an assassination attempt on a lonely stretch of the N7 highway between Cape Town and Springbok last month has come to the Mail & Guardian with an incredible story. Gawie Hendriksz says he knows how politically connected mining company Imperial Crown Trading 289 (ICT) acquired a multibillion-rand stake in the Sishen mine in the Northern Cape during the long weekend of May 2009.

ICT provisionally acquired a 21.4% stake in Sishen when it beat Anglo American’s subsidiary Kumba Iron Ore to the rights for what both companies believed was a vacant stake in one of the world’s largest opencast iron ore mines.

ICT and Kumba have spent millions in court sparring over the allocation of the 21.4% stake, and have laid criminal charges against one another. Hendriksz, who since July 2011 has been under contract to a risk consultancy acting for Kumba, makes the following key allegations:

ICT co-founder and chief executive Phemelo Sehunelo paid a bribe of R250 000 to Charles Lerumo, the department of mineral resources’s Northern Cape assistant director of mineral laws to facilitate the acceptance of ICT’s application;

Lerumo kept R150 000 and passed R100 000 on to Thozama Basi, the department’s Northern Cape assistant director of social and labour plans;

Basi, who took possession of Kumba’s application on April 30 2009, made copies of documents such as title deeds from this application during the subsequent long weekend. She then handed these copies to Sehunelo; and

ICT’s application was incomplete and unsigned at the time it was purportedly captured on the department’s computer systems on May 4 2009. Lerumo saw to the capturing of ICT’s application on May 4, even though the ICT application was in fact only signed on May 5 that year. This is significant, as Kumba’s application was also registered on May 4 and legislation promotes a “first past the post” approach to competing applications. Basi chose not to respond to detailed allegations put to her by the M&G. Lerumo would not even entertain the questions.

Responding on behalf of Sehunelo and ICT, attorney Ronnie Mendelow described Hendriksz as “nothing but a scurrilous liar seeking to peddle ‘information’ (in actual fact disinformation) to the highest bidder”. Mendelow said that during a taped interview with ICT’s lawyers on November 2 2010, Hendriksz had offered a different version, in which Kumba had in fact bribed the department of mineral resources officials. Mendelow said: “Suffice it to say that these allegations were all without any foundation whatsoever, and that the allegations regarding paying off of advocate Charlie Lerumo by our client, advocate Sehunelo are completely false and without any foundation whatsoever.”

Mendelow said that on his own version, Hendriksz had attempted to “peddle his information” to Kumba and ArcelorMittal. “Mr Gawie Hendriksz’s alleged desire — to make the facts known before somebody succeeds in killing him, is a conjured up story,” Mendelow said. Arcelor potentially lost the 21.4% stake in Sishen it previously held by failing to convert its rights in terms of new legislation by the end of April 2009.Before the M&G contacted Mendelow, Hendriksz had disclosed his interaction with ICT to the newspaper, claiming that he had “played along” with the latter as part of his own investigation.

Hendriksz had also disclosed his interactions with both Kumba and Arcelor to the M&G. The DMR also dismissed Hendriksz as “an information peddler”, claiming he had previously approached the department to offer his assistance in the matter. The department rejected his approach. While Hendriksz’s allegations have not been tested in court, he has made a detailed affidavit to the Hawks investigator probing ICT’s conduct.

No assessment of his credibility is complete without considering his role in the successful investigation of another case involving the Kimberley department of mineral resources office—the so-called Saltworks case. In this matter, Hendriksz was hired by Jalie du Toit, owner of Saamwerk Soutwerke, which had been on the brink of acquiring a mining right from the department to extract salt from a pan near Upington in 2006 when a rival mining company, Suid-Afrikaanse Soutwerke (SA Soutwerke), produced what it claimed was a valid permit to mine the same saltpan.

Du Toit’s suspicions were raised because two well-connected Northern Cape politicians—ANC regional chairperson John Block and Upington mayor Gift van Staden—had become directors of SA Soutwerke four months earlier. Du Toit hired Hendriksz to investigate. Hendriksz made it his business to find out how mineral rights were awarded, and by whom, in the office of the department of mineral resources in Kimberley. “In the course of my Soutwerke investigation, I was in the department office in Kimberley every second or third day until they got used to me,” he told the M&G. By May 2009, when the 21.4% stake in Sishen became vacant, sparking the scramble between Kumba and ICT, Hendriksz said his investigations into SA Soutwerke’s permit had “intensified”. “I was regularly attending at the Kimberley office of the department and was meeting several officials on a regular basis ... [deputy director] Hennie Jansen van Rensburg and [assistant director of mineral laws] Charles Lerumo in particular. “I sought not only to obtain information from them, but also, unknown to them, to cross-check information provided by one of them with the other. I avoided consulting them jointly,” Hendriksz said. In May 2009, Jansen Van Rensburg was temporarily heading the regional office in Kimberley because his superior, Pieter Swart, had taken leave. On May 18, Hendriksz said Jansen Van Rensburg called him into his office and said: “Here is a file on my table. I’ve got exactly the same case and problem with Kumba and ICT like in your matter with SA Soutwerke. The same what happened on your side. The permit is fraudulent, with high-up cover-up.”

At another meeting a few days later, on May 21, Jansen van Rensburg told Hendriksz what he meant by “high up”. “He said to me: ‘There is also involvement on the political level. There’s someone called Jagdish Parekh who also has a lot of influence [in ICT]. You’ll see, sooner or later—like John Block [with SA Soutwerke]—he’ll be brought in as a partner for ICT.”

ICT lawyer Mendelow, responding on behalf of Parekh, said Parekh “had nothing whatsoever to do with ICT in May 2009 and thereafter when our client’s application for the prospecting right was granted. He first became involved in ICT well after the prospecting right had been granted.”

Hendriksz said that at another meeting on June 10, Jansen Van Rensburg told him that his superior, “Swart, had instructed him, during the course of April 2009, that he [Jansen Van Rensburg] was to take over as acting regional manager of the Northern Cape regional office for the month of May 2009.

“Jansen Van Rensburg was to prepare for the lodging of a prospecting right application by ICT during this period, and was to ensure that this application was accepted, regardless of any irregularities with it,” he added. The instruction had apparently come from one of Swart’s superiors in Pretoria. Swart denied this, saying: “I’ve never given Mr Van Rensburg the instruction as set out in your letter. My holiday arrangements [in which Jansen Van Rensburg would act] were made a considerable time before the end of April 2009 [when the Sishen applications were lodged].” As Jansen van Rensburg has since died, Hendriksz’s recollection of their encounters cannot be confirmed.

In the interim, the salt mine dispute Hendriksz had been investigating reached its conclusion, providing an independent test of the credibility of both Hendriksz and Swart. The case, heard in September 2009 in the Northern Cape High Court, turned on allegations that the mining permit on which SA Soutwerke relied—produced by the ANC’s Block at a meeting with the DMR—was a forgery. Before the hearing department of mineral resources officials—including Swart—gave sworn statements supporting Block’s SA Soutwerke and suggesting the fake permit was legitimate. By the time Hendriksz came to testify, Swart’s statement had been mysteriously withdrawn and Hendriksz’s evidence of manipulation and double-dealing by the department was hardly challenged in cross-examination.

In his ruling Judge Hennie Lacock found that SA Soutwerke’s permit was a fake. The judge made no mention of Hendriksz, but Jasper Tredoux, Saamwerk Soutwerke’s advocate, said: “Gawie was a truthful witness — But his greatest importance was behind the scenes. “He helped unravel everything that happened in the department of minerals, who did what with regard to the mining licence applications.”

His employer in this matter, Du Toit (owner of Saamwerk Soutwerke) said: “In the court case there was a lot of bullshit on the department’s side. I stood alone; nobody in the department would help me understand where the other permit came from. But Gawie helped me. “Without Gawie’s investigation I could not have taken this case to court.”

The relationships Hendriksz built with department of mineral resources officials during the Saltworks case, particularly with Lerumo, were crucial to the alleged disclosures they made to him about ICT. Said Hendriksz: “Lerumo was the department’s legal advocate, so I was working a lot with him [on the Soutwerke matter]. I slowly built up trust with him —”

In mid-2010, the department charged Lerumo with misconduct and regional manager Swart summoned him to a departmental disciplinary inquiry. On June 10, Hendriksz said that Lerumo had approached him for advice. He had suggested to Lerumo that he remind Swart of his own alleged conduct in the ICT matter. According to Hendriksz, the charges were then withdrawn. In February 2011, when the department revived misconduct charges against Lerumo, he and Hendriksz met again—and on this occasion Hendriksz decided to record the conversation. He asked ex-policeman Andreas Steenkamp to sit in a car outside the Protea Hotel in Kimberley, where the two men met, tap their exchange using a remote listening device and transcribe it in a notebook.

The alleged conversation took place on February 21 in the hotel reception area. Steenkamp refused to discuss the encounter with the M&G, but confirmed that he had given a sworn affidavit to the police, the content of which is unknown. The M&G has seen a copy of Steenkamp’s purported shorthand notes from this encounter. At face value, they support Hendriksz’s claim that Lerumo admitted receiving money from ICT’s Sehunelo and that he also implicated department of mineral resources official Basi.

The M&G understands that Swart eventually proceeded with disciplinary action against Lerumo, who was found guilty. The charges included an allegation that Lerumo accepted R5 000 from a mining consultant to speed up the processing of their applications, though it is not know if this particular charge was proved. Lerumo is still employed at the department in Kimberley. Hendriksz said his attempts to persuade Lerumo to approach the police and seek indemnity from prosecution had not borne fruit.

In addition to developing ties with Jansen van Rensburg and Lerumo, the third—and possibly most controversial—aspect of Hendriksz’s investigation was his decision to approach all five parties in the dispute, the police, the department of mineral resources, Kumba, ArcelorMittal and ICT, to offer information. According to Hendriksz, he first approached Colonel Tobias Marais of the South African Police Service, who had investigated SA Soutwerke, to tell the Hawks that if they wanted to know “exactly what happened about ICT” they should get in touch with him. The Hawks did not respond.

Hendriksz then approached Kumba’s attorney, Robert Botha, who told him that “Kumba does not buy information”. Hendriksz said he responded that he did not want to sell anything, but that Kumba could take him on as a consultant. Botha’s reluctance gave Hendriksz “a feeling that they had already burnt their fingers somehow”. Hendriksz said that because “ArcelorMittal and Kumba were the only two companies that had nothing to do with ICT’s fraud and bribery of DMR personnel”, he approached Arcelor next. Hendriksz claims he made contact with a senior Arcelor executive, who told him that they were not worried about ICT. Only later did he learn that Arcelor had been negotiating to buy ICT.

Finally, Hendriksz said he was contacted by Lerumo, who wanted him to meet ICT chief executive Sehunelo. Lerumo set up the appointment, and the two met at ICT’s Kimberley offices on October 25 2010. “During this meeting, Sehunelo said that he understood that I was someone who knew a lot about what had transpired regarding ICT’s application over the 30 April to 4 May 2009 weekend. I replied that I did. “He then said that I could perhaps assist ICT by deposing an affidavit that would support ICT’s case. “Sehunelo explained that I would have to depose an affidavit in which I would falsely state that I was aware of collaboration between Kumba and officials in the department which resulted in department officials tampering with the ICT application by inserting documents from the Kumba application. This was to make it appear that the ICT application had been submitted using copied documents.”

Hendriksz undertook to work with ICT, saying: “I wanted to play along with them, to understand who the key role players are behind the curtains there. I wanted to establish what political roleplayers with influence were ... in ICT.” Saamwerk Soutwerke’s lawyer Tredoux supported his explanation, saying: “Sometimes you have to go under cover and disguise your intentions in order to uncover the truth.”

The following week ICT flew Hendriksz from Cape Town to Johannesburg, where he met ICT attorney Mendelow and advocate Edmund Wessels in the latter’s Sandton chambers. The M&G has seen a record of the 1Time return flight booking made by Sehunelo’s personal assistant Sharifa Ferris. At the Johannesburg meeting Hendriksz said he had “said what Sehunelo asked me to say”. Mendelow confirmed the meeting, and gave the M&G access to a transcript in which Hendriksz indeed repeated the claim that Kumba paid a former official from the department to meddle with ICT’s application. In a transcript of the recording which the M&G has seen, Hendriksz promised ICT further information about who took bribes in the department from Kumba in return for employment as a consultant. He also offered to testify for ICT in court. Wessels expressed interest in Hendriksz’s information, but the interview did not end with a definitive undertaking by either party.

In their response, Mendelow and Hendriksz agreed that both parties had lost interest in each other soon after this meeting. Mendelow said that he believed Hendriksz was an information-peddler, while Hendriksz said: “I would not have consented to being so engaged, given my knowledge of the fraud perpetrated by ICT.” In July 2011, a consultancy called Risk Analysis, retained by Kumba’s legal team to identify evidence or witnesses which could assist the company’s litigation strategy in the ICT matter, made contact with Hendriksz.

Risk Analysis’s Mungo Soggot said: “We approached Mr Hendriksz ... after learning that, on account of his work in the Saamwerk matter, he was uniquely placed to provide an insight into what took place at the DMR Kimberley office in April 2009. “His brief was to help us identify other potential witnesses to the impropriety he described. In particular, his brief was to explore whether Charles Lerumo—with whom he had a close relationship—could become a witness. It was never intended at this stage that he would be a witness himself,” said Soggott, a former M&G journalist who left the newspaper in 2002.

Hendriksz entered into a contract with Risk Analysis. Ultimately, Kumba and its legal advisers introduced him to the Hawks. Hendriksz said his ultimate goal was to stamp out corruption in the department, which is “damaging the mining industry”.


Under 2004 mining legislation, companies were required to convert mining rights under old law by applying for “new order” rights by May 1 2009.

By the deadline, iron-ore miner Kumba, had applied to convert its 78.6% stake in the Sishen iron mine. But steel manufacturer ArcelorMittal, with the remaining 21.4%, had not. Kumba and an obscure shelf company, Imperial Crown Trading 289 (ICT), raced to acquire the rights to ArcelorMittal’s 21.4% stake, estimated to be worth R800-billion over the mine’s remaining life.

But May 1—a Friday—was a public holiday.

On Monday May 4, Kumba and Imperial’s applications for the vacant Sishen stake were recorded on the department’s system in Kimberley. ICT applied for a prospecting right, Kumba for a mining right. Controversy now surrounds both applications.

ICT claims Kumba acted deceitfully by handing in its application early and asking department officials to lodge it on May 4.

Kumba claims that ICT’s application was not ready on May 4, but that officials recorded ICT’s application as lodged on that day—even though ICT’s application trickled in over succeeding days.

Both companies also accuse one another of bribing officials to tamper with their rival’s application.

In November 2009, the department handed ICT a prospecting right on the basis that both applications had arrived on May 4, but that ICT had superior BEE credentials.

One of ICT’s founding directors was Prudence “Gugu” Mtshali, reportedly Deputy President Kgalema Motlanthe’s romantic partner. Motlanthe was South Africa’s caretaker president in May 2009 when ICT applied for the stake.

In March 2010 ICT handed over a 50% stake to JIC Mining, represented on its board by Jagdish Parekh. JIC is controlled by the Gupta brothers, benefactors of the Zuma family.

In August 2010 Arcelor offered to buy out Imperial and incorporate its directors into a new consortium that included President Jacob Zuma’s son Duduzane and Parekh, making them instant billionaires.

But the buy-out was never consummated. Instead, Kumba and Arcelor won a High Court judgment in December 2011 that mineral rights over a single area are indivisible and that Arcelor’s old order 21.4% stake is fully Kumba’s.

ICT are now out in the cold, although it finalised its appeal against Zondo’s ruling last week.

In July 2011, the Hawks raided ICT’s office and the department in Kimberley for evidence of fraud when the applications were made.

ICT has challenged the legality of the raids, and the seized materials are currently out of the Hawks’ reach.

Source: Mail & Guardian

Feeding Frenzy: its a BEE feast for Zuma cronies

The controversies surrounding the Sishen and Lonrho mineral rights have raised old questions about black economic empowerment (BEE), including the undeserved enrichment of elite individuals. But now, under the Jacob Zuma regime, there is growing concern about cronyism, patronage, and the role of government officials.

This time the appearance of patronage can be traced to the top. Some individuals, including the president’s son, Duduzane Zuma, could be greatly enriched by gaining ownership of mineral rights in a questionable process. Unease about the process has become more widespread.

The National Union of Metal Workers (Numsa) has commented scathingly on what it calls “the ArcelorMittal and Imperial Crown Trading looting scheme”. Minerals & resources minister Susan Shabangu’s decision last week to place a moratorium on new awards of mineral rights demonstrates that even government has concerns.

These events raise important questions: how are BEE policies working, what are the achievements and weaknesses — and are the effects in line with government’s intentions?

In more than 16 years, BEE has achieved many successes and some failures. It started in the early 1990s with companies such as Thebe Investments, launched by senior ANC officials, and Nthato Motlana’s Corporate Africa, which gained control of New Africa Investments (Nail). Thebe remains a successful enterprise, and there are other enduring black-controlled businesses. Some have grown through strong share price gains, buoyant markets and productive investment.

Among these are Patrice Motsepe’s African Rainbow Minerals, with a R34bn market cap, and MTN (R225bn market cap) which is run by CE Phuthuma Nhleko. One of the most successful is the unlisted Royal Bafokeng Holdings, a community-based investment company . It started with royalties from Impala platinum mining . Under chairman Kgosi Leruo Molotlegi and CE Niall Carroll, a former investment banker, it has diversified into mining, financial and industrial investments. At its financial year-end last December, it had a R30bn investment portfolio and minimal debt.

Nail started as a 20% shareholder in Sanlam’s Metlife, then attempted to become a conglomerate but collapsed . Mvela Group gathered stakes in companies such as Absa and Life Healthcare, but is now being dismantled . Having made his fortune, founder Tokyo Sexwale has returned to politics as human settlements minister.

Throughout these years, there has been debate about how BEE can best be achieved, and it has worked — but also created risks and unease on many fronts. In an institutional or legal sense, rules of the game were set through the Broad- based Empowerment Act of 2003 and the publication of industry codes and charters over the next few years. These changed the way companies and other stakeholders think about the process.

In the 1990s it was mainly about deals and ownership. The codes and charters have formalised a broader approach. They use a balanced scorecard, giving only a 20% weighting to ownership. Companies also gain credit in other areas including preferential procurement, employment equity, skills development and enterprise development (see table). Management control, where influence over a business is large, gets only 10%.

However, ownership of equity in companies and access to other assets such as mineral rights still play a big role in the process. This is where some old themes and questions are constantly at play. Since the charters and new regulations came into effect , most big companies have done deals over the past few years.

In each case, there are familiar questions: how can the deal be funded when the BEE investors have limited or no capital? Should key individuals benefit from the deal, or should the shareholders be entirely broad-based? If lead individual investors are involved, what value will they add to the business? Will they assist in running the business , adding new perspectives on the board — or provide influence among cronies in high places?

The Sishen/ArcelorMittal case has attracted special attention, partly because valuable mineral rights are involved and there are individuals who have direct links to senior politicians. (See next story). In other large BEE deals announced recently, companies have opted for broad-based empowerment shareholders. That includes the Sasol, SABMiller and MTN deals.

Government and other stakeholders have backed the broad-based empowerment principle, which usually seems intuitively more beneficial. But there is still leeway for companies when designing BEE deals and choosing their partners.

The benefits of broad-based empowerment deals are not always achieved as hoped. Funding arrangements linked to the share price can unravel when product prices or financial markets weaken, as occurred two years ago. Sasol’s R30bn Inzalo deal — which gave 10% of the group’s share capital to the black public, broad-based BEE groups, trade unions, employees and the Sasol Inzalo Foundation — was announced in May 2008, when the share price rose to R490. It’s now R284. Other companies, such as Barloworld, have restructured BEE deals for similar reasons.

Jenny Cargill, founder of BEE consulting company BusinessMap, gives several examples of communities that have been disadvantaged by BEE ventures or decisions made by government officials . The Richtersveld community in the Northern Cape is one. Cargill describes the potentially negative effects on communities as BEE’s “powder keg”.

In planning BEE deals, dilemmas on issues such as funding and the shareholding structure can arise. As the Sishen/ArcelorMittal case has shown, the actual or perceived ability to influence decisions on access to those rights through special relationships can be a valuable card for black investors . For some investors, the special relationships may be their only currency .

When they do play that card, and stand to be greatly enriched , investors and other stakeholders are quick to link the decisions — by government and companies — to a culture of corruption and cronyism, though weak laws, poor transparency and inept officials may be part of the problem. That’s a risk that government cannot afford .

WHAT IT MEANS

The empowerment field is not level

ArcelorMittal deal is just plain rotten

Source: Financial Mail