The Guptas’ mining ambitions were not limited to iron. In December 2008, they had begun negotiations to get their hands on one of South Africa’s largest uranium deposits.
The Dominion uranium mine, located outside Klerksdorp in the North West province, was owned by Canadian mining company Uranium One when the family began to show interest in buying it.
At the time, the mine’s operations were on hold after Uranium One had placed Dominion “on care and maintenance” in October 2008 due to a “significant deterioration in the project’s economics’ associated with a worldwide decline in uranium prices”.
Nevertheless, the Guptas were keen to take ownership of the asset. The family’s Oakbay Resources & Energy concluded a sale agreement with Uranium One in May 2009, and on 14 April 2010 Oakbay obtained a 74% interest in Uranium One Africa, a subsidiary of Uranium One whose main asset was the Dominion mine, and renamed it Shiva Uranium.
At the beginning of May 2010, Uranium One announced that it had sold Dominion for $37.3-million (about R270-million at the time) in cash.
It was apparent from the outset that President Zuma’s son Duduzane was involved. Just four days after Uranium One’s announcement, investigative journalists from amaBhungane reported that “company registration documents show that Atul Gupta and Duduzane Zuma took over as directors of the Dominion holding company on April 14, the day the sale was finalised”.
On the same day, Mining Weekly reported that “Duduzane Zuma would be on the Shiva board, which will be chaired by Atul Gupta”. Incidentally, Jagdish Parekh, he of the Sishen saga, who had been made CEO of Shiva Uranium, said in a statement that a consortium of black investors had acquired 26% of Shiva from Oakbay “through a vendor-funded transaction”.
At the time it was reported that the consortium included Islandsite Investments 255, the MK Military Veterans Association and its women’s group, a local community trust and an employee trust. It did not take long for amaBhungane to uncover that Islandsite’s majority shareholder was Mabengela Investments, of which Duduzane Zuma and Rajesh Gupta were both directors. Islandsite was essentially “controlled by Duduzane Zuma and Rajesh, the youngest of three Gupta brothers”.
But Duduzane’s involvement apparently did not end there. In the same Mail & Guardian article, amaBhungane revealed that the Guptas were seeking state-sector investment in the mine, specifically from the Public Investment Corporation (PIC), a government-owned investment entity that manages government investments worth more than R1.8-trillion.
When the sale was announced, Oakbay Resources & Energy said it had secured part of the funding for the Dominion transaction from the stateowned Industrial Development Corporation (IDC). But now there was talk of the PIC investing too. It appeared as if the transaction would be made possible thanks to a fair amount of dubious-looking manoeuvring behind the scenes by Duduzane’s father and president of the republic, Jacob Zuma, and the PIC’s then CEO Brian Molefe.
Molefe’s tenure as PIC boss had been due to come to an end on 12 April 2010, two days before the Dominion mine deal was finalised, when his contract was suddenly and inexplicably extended for three months. According to a Sunday Times report at the time, “following intense lobbying by Molefe’s supporters and well-known businessmen”, President Zuma had “personally intervened” to ensure that Molefe was retained.
“Zuma is understood to have phoned a senior official in the finance ministry to ask that Molefe remain in the job,” the newspaper alleged. A source quoted in the amaBhungane report said that Zuma had in fact called then deputy minister of finance Nhlanhla Nene, who was also PIC chairperson at the time, a week before Molefe’s contract was due to expire to request that he be kept on. The source added that it was the Guptas who had lobbied Zuma to ensure Molefe stayed on, as they were expecting the latter to green-light PIC funding for the purchase of Dominion.
Molefe would later be excoriated in the public protector’s 2016 State of Capture report for his close relationship with the Guptas during his tenure as CEO of Eskom. Many commentators have traced his capture by the infamous family to his time at the PIC. An Mbekite despised by the Zuma coterie, Molefe found himself out of favour, vulnerable and alone after Polokwane. It was in his hour of need, or so people surmise, that the Guptas approached him, ensnared him and “facilitated a rapprochement” with Zuma. By the time Molefe moved on to his next position, as CEO of Transnet in 2011, “there were murmurs in ANC and government circles that this was a Gupta appointment”.
In the end, the PIC investment did not materialise. Perhaps Zuma, Molefe and the Guptas were a little rattled by the media attention that the would-be loan had attracted. AmaBhungane had summed it up well: “Duduzane’s participation leaves the president exposed to the accusation that his reported intervention last month to extend the tenure of controversial Public Investment Corporation (PIC) boss Brian Molefe was designed to smooth negotiations towards a large PIC investment in the project.” Perhaps the whole affair had just become too compromising for the president.
When Oakbay Resources & Energy listed on the JSE at the end of 2014, the public saw for the first time just how much money the IDC had poured into the Shiva transaction. According to the company’s mandatory prelisting statement, the state-owned investment entity had loaned Oakbay R250-million of the R270-million it needed to buy Dominion.
But that was not the most controversial aspect of the revelation. After carefully analysing Oakbay’s financials, amaBhungane reported that the company was supposed to have repaid its IDC loan by April 2013, but it had been unable to do so because it had not generated enough profit from Shiva Uranium. By February 2014, Oakbay had only managed to repay R20-million.
By then, the company’s obligation to the IDC, which included interest on the original loan, had swelled to R399-million.
It seemed the Guptas were in trouble, until once again a government entity proved more than willing to help them out. According to Oakbay’s pre-listing statement, the IDC had agreed to restructure the loan agreement in June 2014. “In terms of the IDC Loan Restructuring Agreement, the outstanding interest portion of the IDC loan as at 31 May 2014 will be converted into equity in Oakbay,” read the statement. “The total outstanding balance of the IDC loan, being capital and interest as at 28 February 2014 was R398909000. Of this amount, R256757826, being outstanding interest, will be converted into equity on the listing date.”
In lieu of repaying the almost R257-million worth of accrued interest, representing almost 65% of the total debt, the IDC had agreed to take a measly roughly 3.6% stake in Oakbay. Furthermore, the interest rate on the loan had been altered in favour of Oakbay; instead of having to pay the Johannesburg Interbank Agreed Rate plus 8% per annum, as dictated by the original loan agreement, Oakbay now only had to pay interest at prime plus 2%. On top of that, the repayment date for the remainder of the loan had been extended to 31 October 2018.
The important question was whether the 28.5 million of Oakbay’s 800 million issued shares which it gave to the IDC in lieu of the interest on the loan were really worth R257-million. Had the Guptas short-changed the IDC?
There were strong indications that the shares were indeed worth much less. When Oakbay listed on the JSE in December 2014, its 800 million issued shares – at R10 a share – gave the company a value of R8-billion.
In accordance with the restructured loan agreement, the IDC was given a 10% discount and therefore “paid” R9 per share. But even this discounted price, according to amaBhungane, appeared overinflated. Oakbay’s own interim financial results released at the end of August 2014 gave the company a net asset value of R4.6-billion, which translated into about R5.74 a share. Even worse, the valuer appointed as part of the JSE listing process valued the shares at just R4.84 each. Compare this to the R10 share price that Oakbay had listed when the IDC got its stake in the company, and the Guptas apparently received a discount of between R93-million and R119-million on the interest they owed.
An interesting aspect of the Guptas’ acquisition of the Dominion uranium mine is the tangential involvement of Russian state-owned nuclear energy corporation Rosatom in Uranium One. Rosatom has become inextricably linked to fears that South Africa’s pending nuclear power plant expansion programme is drenched in large-scale corruption.
In June 2009, as the Guptas’ Oakbay Resources & Energy was wrapping up its purchase agreement with Uranium One to buy the Dominion mine, Rosatom mining subsidiary AtomRedMetZoloto (ARMZ Uranium Holding Co.) obtained 16.6% of Uranium One. The transaction would be the start of ARMZ’s wholesale takeover of the company. In 2010, ARMZ became the majority shareholder in Uranium One, before buying all of the Canadian company’s remaining shares in 2013.
In other words, the Guptas’ purchase of the Dominion mine from Uranium One coincided with Rosatom’s drive to become the sole shareholder of Uranium One.
What this means is that Rosatom and the Guptas, in all likelihood, became acquainted with one another sometime during 2009, which happened to be President Jacob Zuma’s first year in office.
And as we all know, under Zuma’s rule the South African government reignited its plans for investing in new nuclear power plants.
His ambitions were confirmed in 2011 when then energy minister Dipuo Peters announced that government planned to issue a tender for the construction of six new nuclear power plants. It was subsequently widely reported that the programme could cost the country as much as R1-trillion, leading critics to ask how South Africa would afford it.
Zuma’s government did not seem to share concerns over the affordability of the new nuclear power plants. In September 2014, Rosatom announced that it had signed a “strategic partnership” agreement with the South African government that ensured the country would use Russian reactors in the upcoming build programme.
Seeing as government had been nowhere near to starting a competitive bid process for the nuclear contract, as is required by the South African constitution, Rosatom’s announcement shocked and angered the nation. The outrage was so immense that both Rosatom and the South African government later backtracked on the announcement, claiming that government would sign similar agreements with other potential bidders.
But the damage had been done. Today, many South Africans remain highly suspicious of government’s plans to build the nuclear plants, especially when it comes to Rosatom’s possible participation in the programme.
However, if the deal does finally go ahead, the demand for uranium in South Africa will certainly climb to unprecedented heights. The Guptas’ Shiva Uranium – in which Duduzane Zuma has a sizeable stake – will be perfectly positioned to supply government with uranium for the new power plants.
Critics of the nuclear power programme have openly asked whether the Zuma administration’s enthusiasm for nuclear power is not perhaps rooted in the fact that the president’s son and the Guptas stand to benefit from it.
As long as the Gupta–Zuma network remains intact, the potential disaster of a financially crippling nuclear deal remains on the horizon.
- Pieter-Louis Myburgh is an award-winning investigative journalist. The Republic of Gupta: A Story of State Capture (Penguin) retails at R260
WARNING, WARNING NUCLEAR ATTACK!
The Dominion uranium mine, located outside Klerksdorp in the North West province, was owned by Canadian mining company Uranium One when the family began to show interest in buying it.
At the time, the mine’s operations were on hold after Uranium One had placed Dominion “on care and maintenance” in October 2008 due to a “significant deterioration in the project’s economics’ associated with a worldwide decline in uranium prices”.
Nevertheless, the Guptas were keen to take ownership of the asset. The family’s Oakbay Resources & Energy concluded a sale agreement with Uranium One in May 2009, and on 14 April 2010 Oakbay obtained a 74% interest in Uranium One Africa, a subsidiary of Uranium One whose main asset was the Dominion mine, and renamed it Shiva Uranium.
At the beginning of May 2010, Uranium One announced that it had sold Dominion for $37.3-million (about R270-million at the time) in cash.
It was apparent from the outset that President Zuma’s son Duduzane was involved. Just four days after Uranium One’s announcement, investigative journalists from amaBhungane reported that “company registration documents show that Atul Gupta and Duduzane Zuma took over as directors of the Dominion holding company on April 14, the day the sale was finalised”.
On the same day, Mining Weekly reported that “Duduzane Zuma would be on the Shiva board, which will be chaired by Atul Gupta”. Incidentally, Jagdish Parekh, he of the Sishen saga, who had been made CEO of Shiva Uranium, said in a statement that a consortium of black investors had acquired 26% of Shiva from Oakbay “through a vendor-funded transaction”.
At the time it was reported that the consortium included Islandsite Investments 255, the MK Military Veterans Association and its women’s group, a local community trust and an employee trust. It did not take long for amaBhungane to uncover that Islandsite’s majority shareholder was Mabengela Investments, of which Duduzane Zuma and Rajesh Gupta were both directors. Islandsite was essentially “controlled by Duduzane Zuma and Rajesh, the youngest of three Gupta brothers”.
But Duduzane’s involvement apparently did not end there. In the same Mail & Guardian article, amaBhungane revealed that the Guptas were seeking state-sector investment in the mine, specifically from the Public Investment Corporation (PIC), a government-owned investment entity that manages government investments worth more than R1.8-trillion.
When the sale was announced, Oakbay Resources & Energy said it had secured part of the funding for the Dominion transaction from the stateowned Industrial Development Corporation (IDC). But now there was talk of the PIC investing too. It appeared as if the transaction would be made possible thanks to a fair amount of dubious-looking manoeuvring behind the scenes by Duduzane’s father and president of the republic, Jacob Zuma, and the PIC’s then CEO Brian Molefe.
Molefe’s tenure as PIC boss had been due to come to an end on 12 April 2010, two days before the Dominion mine deal was finalised, when his contract was suddenly and inexplicably extended for three months. According to a Sunday Times report at the time, “following intense lobbying by Molefe’s supporters and well-known businessmen”, President Zuma had “personally intervened” to ensure that Molefe was retained.
“Zuma is understood to have phoned a senior official in the finance ministry to ask that Molefe remain in the job,” the newspaper alleged. A source quoted in the amaBhungane report said that Zuma had in fact called then deputy minister of finance Nhlanhla Nene, who was also PIC chairperson at the time, a week before Molefe’s contract was due to expire to request that he be kept on. The source added that it was the Guptas who had lobbied Zuma to ensure Molefe stayed on, as they were expecting the latter to green-light PIC funding for the purchase of Dominion.
Molefe would later be excoriated in the public protector’s 2016 State of Capture report for his close relationship with the Guptas during his tenure as CEO of Eskom. Many commentators have traced his capture by the infamous family to his time at the PIC. An Mbekite despised by the Zuma coterie, Molefe found himself out of favour, vulnerable and alone after Polokwane. It was in his hour of need, or so people surmise, that the Guptas approached him, ensnared him and “facilitated a rapprochement” with Zuma. By the time Molefe moved on to his next position, as CEO of Transnet in 2011, “there were murmurs in ANC and government circles that this was a Gupta appointment”.
In the end, the PIC investment did not materialise. Perhaps Zuma, Molefe and the Guptas were a little rattled by the media attention that the would-be loan had attracted. AmaBhungane had summed it up well: “Duduzane’s participation leaves the president exposed to the accusation that his reported intervention last month to extend the tenure of controversial Public Investment Corporation (PIC) boss Brian Molefe was designed to smooth negotiations towards a large PIC investment in the project.” Perhaps the whole affair had just become too compromising for the president.
When Oakbay Resources & Energy listed on the JSE at the end of 2014, the public saw for the first time just how much money the IDC had poured into the Shiva transaction. According to the company’s mandatory prelisting statement, the state-owned investment entity had loaned Oakbay R250-million of the R270-million it needed to buy Dominion.
But that was not the most controversial aspect of the revelation. After carefully analysing Oakbay’s financials, amaBhungane reported that the company was supposed to have repaid its IDC loan by April 2013, but it had been unable to do so because it had not generated enough profit from Shiva Uranium. By February 2014, Oakbay had only managed to repay R20-million.
By then, the company’s obligation to the IDC, which included interest on the original loan, had swelled to R399-million.
It seemed the Guptas were in trouble, until once again a government entity proved more than willing to help them out. According to Oakbay’s pre-listing statement, the IDC had agreed to restructure the loan agreement in June 2014. “In terms of the IDC Loan Restructuring Agreement, the outstanding interest portion of the IDC loan as at 31 May 2014 will be converted into equity in Oakbay,” read the statement. “The total outstanding balance of the IDC loan, being capital and interest as at 28 February 2014 was R398909000. Of this amount, R256757826, being outstanding interest, will be converted into equity on the listing date.”
In lieu of repaying the almost R257-million worth of accrued interest, representing almost 65% of the total debt, the IDC had agreed to take a measly roughly 3.6% stake in Oakbay. Furthermore, the interest rate on the loan had been altered in favour of Oakbay; instead of having to pay the Johannesburg Interbank Agreed Rate plus 8% per annum, as dictated by the original loan agreement, Oakbay now only had to pay interest at prime plus 2%. On top of that, the repayment date for the remainder of the loan had been extended to 31 October 2018.
The important question was whether the 28.5 million of Oakbay’s 800 million issued shares which it gave to the IDC in lieu of the interest on the loan were really worth R257-million. Had the Guptas short-changed the IDC?
There were strong indications that the shares were indeed worth much less. When Oakbay listed on the JSE in December 2014, its 800 million issued shares – at R10 a share – gave the company a value of R8-billion.
In accordance with the restructured loan agreement, the IDC was given a 10% discount and therefore “paid” R9 per share. But even this discounted price, according to amaBhungane, appeared overinflated. Oakbay’s own interim financial results released at the end of August 2014 gave the company a net asset value of R4.6-billion, which translated into about R5.74 a share. Even worse, the valuer appointed as part of the JSE listing process valued the shares at just R4.84 each. Compare this to the R10 share price that Oakbay had listed when the IDC got its stake in the company, and the Guptas apparently received a discount of between R93-million and R119-million on the interest they owed.
An interesting aspect of the Guptas’ acquisition of the Dominion uranium mine is the tangential involvement of Russian state-owned nuclear energy corporation Rosatom in Uranium One. Rosatom has become inextricably linked to fears that South Africa’s pending nuclear power plant expansion programme is drenched in large-scale corruption.
In June 2009, as the Guptas’ Oakbay Resources & Energy was wrapping up its purchase agreement with Uranium One to buy the Dominion mine, Rosatom mining subsidiary AtomRedMetZoloto (ARMZ Uranium Holding Co.) obtained 16.6% of Uranium One. The transaction would be the start of ARMZ’s wholesale takeover of the company. In 2010, ARMZ became the majority shareholder in Uranium One, before buying all of the Canadian company’s remaining shares in 2013.
In other words, the Guptas’ purchase of the Dominion mine from Uranium One coincided with Rosatom’s drive to become the sole shareholder of Uranium One.
What this means is that Rosatom and the Guptas, in all likelihood, became acquainted with one another sometime during 2009, which happened to be President Jacob Zuma’s first year in office.
And as we all know, under Zuma’s rule the South African government reignited its plans for investing in new nuclear power plants.
His ambitions were confirmed in 2011 when then energy minister Dipuo Peters announced that government planned to issue a tender for the construction of six new nuclear power plants. It was subsequently widely reported that the programme could cost the country as much as R1-trillion, leading critics to ask how South Africa would afford it.
Zuma’s government did not seem to share concerns over the affordability of the new nuclear power plants. In September 2014, Rosatom announced that it had signed a “strategic partnership” agreement with the South African government that ensured the country would use Russian reactors in the upcoming build programme.
Seeing as government had been nowhere near to starting a competitive bid process for the nuclear contract, as is required by the South African constitution, Rosatom’s announcement shocked and angered the nation. The outrage was so immense that both Rosatom and the South African government later backtracked on the announcement, claiming that government would sign similar agreements with other potential bidders.
But the damage had been done. Today, many South Africans remain highly suspicious of government’s plans to build the nuclear plants, especially when it comes to Rosatom’s possible participation in the programme.
However, if the deal does finally go ahead, the demand for uranium in South Africa will certainly climb to unprecedented heights. The Guptas’ Shiva Uranium – in which Duduzane Zuma has a sizeable stake – will be perfectly positioned to supply government with uranium for the new power plants.
Critics of the nuclear power programme have openly asked whether the Zuma administration’s enthusiasm for nuclear power is not perhaps rooted in the fact that the president’s son and the Guptas stand to benefit from it.
As long as the Gupta–Zuma network remains intact, the potential disaster of a financially crippling nuclear deal remains on the horizon.
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