In September 2012, then-minister of public enterprises Malusi Gigaba appointed a new Alexkor board, marking the start of a process of what the Zondo commission’s investigative team has called “an orchestrated plan of state capture” at the state-owned mining company.
If the commission’s investigating team is correct, there were two prongs to the Guptas’ efforts to ‘capture’ the company.
One was allegedly via Alexkor’s core diamond business, as part 1 of this series detailed.
The other was allegedly aimed at the company’s plans to pivot to coal mining — a new diversification strategy that coincided with the installation of the new board.
The origins of the coal strategy are unclear, but the ever-enterprising Gupta family appears to have sniffed out opportunity in Alexkor’s proposed new venture.
Over the next few years, spanning two boards and two ministers, Gupta-linked companies allegedly began circling Alexkor’s proposed coal business, which would have made Alexkor a preferred agent for supplying Eskom.
We know from the #GuptaLeaks that as early as 2014 the Guptas approached Eskom about a supply contract from their Brakfontein coal mine — an interest that in 2015 culminated in their takeover of Optimum coal mine in a deal that went to the heart of state capture.
The remnants of the Guptas’ interest in Optimum are now the subject of a titanic court battle between the Investigating Directorate (ID) of the National Prosecuting Authority (NPA), the business rescue practitioners currently in control of Optimum, and Daniel McGowan, the former Gupta associate who is poised to take over the mine.
The case put forward by the ID suggests McGowan was a proxy for the Guptas and a channel for their massive money-laundering operation — though he denies this.
That assertion is important for the Alexkor saga because McGowan was also positioned to be a key player in the coal gambit via his Gupta-funded Centaur group.
The lure of coal
When Gigaba appointed the new Alexkor board in 2012, he made Rafique Bagus the chair.
Bagus wasted no time trying to get Alexkor’s hands dirty with coal.
In the foreword to Alexkor’s 2013 annual report he made a case for the new strategy, pointing to the “critical and significant shortfall in strategic coal supply” facing Eskom.
“We can significantly contribute to the development of new coal supply sources by utilising mining methods, processes, technologies and skills that are well within our current core capability,” Bagus said in the annual report.
Alexkor planned to partner with emerging black-owned mining companies.
The state-owned diamond miner had been in poor financial health for years, and with emerging miners clamouring for access to Eskom coal deals, there was a case to be made for diversifying Alexkor’s business.
Kgathatso Tlhakudi, director-general of the department of public enterprises, told amaBhungane that “at face value it looked like a legitimate strategy to pursue”.
He said that empowerment was a key consideration and that the turn to coal was about how to “create space for a much more organised access to Eskom for emerging miners”.
But more cynical considerations may have been behind the turn to coal.
The commission’s investigators allege Gigaba “was engaged in the restructuring of SOE [state owned entity] boards, which became broadly representative of ‘Gupta-Zuma’ interests”.
Both Gigaba and his successor, Lynne Brown, have denied any such manipulation, but Tlhakudi told amaBhungane that the era of Gupta-linked state capture “was one of the weakest periods for us [as a department]. We had lists that literally would come from only god knows where for the appointment of boards”.
An affidavit submitted to the commission by one of its senior investigators, Peter Bishop, lays out how Alexkor fits his account of the pattern of Gupta-linked state capture: a new minister would replace an SOE’s board with individuals linked to the Guptas or willing to favour them; a major new project would be announced; and tenders would be awarded to politically-connected companies despite clear conflicts of interest.
Bagus, the affidavit suggests, was key to the Guptas’ plans, and was in regular contact with the Gupta brothers and their close associates.
Bishop’s affidavit points to approximately 60 phone calls from 2008 to 2013 between Bagus and former Transnet board member and Gupta business associate Iqbal Sharma.
Bagus allegedly made contact with Gupta agent Ashu Chawla about eight times between 2008 and 2013, with Ajay Gupta 26 times between mid-2015 and early 2016, and with Rajesh Tony Gupta about seven times over a similar period.
Bagus also attended the infamous Gupta wedding at Sun City in 2013, while he was chair of the Alexkor board.
Responding to questions, Bagus said he did not recall Chawla, but admitted his familiarity with the Guptas and Sharma. He said he knew Sharma from their time together at the department of trade and industry, adding “I have had several engagements with him over the years, mostly social”.
“As a former civil servant I am often called for advice. I have not discussed my work at Alexkor with any of these people.”
Gigaba did not respond to detailed questions. He wrote back saying only that “I responded to everything that implicated me at the Commission. I stand by every word I made there. I suggest you get hold of my responses so that I don’t get myself dragged into a second and unofficial commission process”.
At the Commission, Gigaba denied being captured by the Guptas, saying Bagus had been appointed on the basis of “a very good record in the public service”.
After the coal supply strategy was announced, a company called Regiments Capital was quick to make overtures to Alexkor.
We now know that Regiments and the Guptas appear to have hunted as a pack, so the sudden appearance of Regiments adds to suspicions about a Gupta ploy.
On 1 October 2013, the month after the new coal strategy was publicly unveiled, Alexkor’s chief executive, Percy Khoza, received an email from a Regiments employee. Regiments’ executive director and Gupta associate Eric Wood was copied in.
The email related to a draft non-disclosure agreement between Regiments and Alexkor. The Regiments employee ended off saying: “Once finalised, we would be in a position to receive and review the master coal supply agreement.”
Khoza forwarded the email to Zarina Kellerman, Alexkor’s newly-appointed chief legal officer.
Two days later, Kellerman sent an email copying all those in the original email, in which she said she wanted to send through an Eskom master coal supply agreement in advance, “on your word of course that you would keep its contents confidential”.
After sending through the Eskom agreement and receiving a response from Regiments, the non-disclosure agreement concerning “financial advisory and other services to Alexkor by Regiments” was signed by both parties.
Kellerman did not respond to written questions.
Khoza told amaBhungane, “The Guptas never initiated anything on the coal strategy at Alexkor but hijacked what was being driven by the executives and the board.”
Regiments was also in discussion with Alexkor about a request for proposals for the appointment of a panel of financial service providers to Alexkor.
Alexkor sought service providers to, among other things, assist with crafting its new coal strategy, identify acquisition opportunities in line with that strategy, provide transaction advice, risk management, and capital raising.
According to the email correspondence, Regiments had been chosen to prepare the request for proposals.
The following year, on 14 January 2014, Kellerman wrote to Regiments saying: “We will be putting out the tender shortly for financial advisors but for now, I am advised that we require your assistance on something specific.”
That “something specific” was a separate job to provide unspecified due diligence advice and asset and investment valuations. A fee proposal for the new job was the circulated among Regiments staff and forwarded by Wood to Gupta lieutenant Salim Essa.
On 16 January, an edited consulting agreement was sent back to Kellerman.
The affidavit by Bishop, the commission’s investigator, zeroes in on the fee structure that Regiments was proposing, claiming that “the proposal put forward to Alexkor was designed solely to benefit Regiments”.
It is unclear what happened with this arrangement.
However, Alexkor continued to pursue the tender for financial advisors which Regiments had helped to design (recall that Regiments had been tasked with drafting the request for proposals).
In an act that Bishop labels “totally irregular”, Regiments then submitted its own proposal in response to the request it had helped design.
An unsigned letter dated 31 January 2014 and addressed to Kellerman contained the subject line: “Appointment to the financial services panel of Alexkor”. It stated that “Regiments Capital… is pleased to submit the accompanying proposal for the above-mentioned tender.”
A June presentation to Alexkor’s tender committee includes Regiments as one of the bidders, but later that year Regiments’ plans were dealt a blow.
Khoza, the chief executive, asked the board to place a moratorium on the tenders for the legal and financial panel of advisors pending the final approval of the coal strategy.
Regiments’ plans may not have reached fruition, but the Guptas and their associates appear to have been trying other routes to access Alexkor and insert themselves in its coal plans.
Enter Centaur and McGowan
In January 2015, a Bermuda-registered investment company called Centaur Holdings posted a news bulletin on its website.
The company announced that that it had “completed a funding package through a wholly owned subsidiary (the “Company”) for IPC Coal (Pty) Ltd and IPC Mining (Pty) Ltd”.
Centaur, which had previously funded IPC, would now fund an “undisclosed sum” to expand IPC’s mining operations at its Nungu colliery in Mpumalanga. Centaur also had an option to acquire an equity stake in IPC.
Centaur’s bulletin might have gone unnoticed were it not for what it suggests about Gupta interests in IPC — and perhaps Alexkor.
Already in 2014, the Guptas showed an interest in adding the same colliery to their burgeoning business empire.
Included in Bishop’s affidavit is an email from August of that year sent from key Gupta executive Ravindra Nath to Tony Gupta, with the subject “information required”. The email contains a list of information required in connection with the Nungu colliery, including off-take agreements and a coal supply agreement with Eskom, information about mining rights, and “approval of coal wash-plant”.
Was McGowan simply a stalking horse for the Guptas?
Researcher Paul Holden has laid out in forensic detail Centaur group companies’ role at the heart of Gupta offshore financial flows — its name looming large in thousands of pages of annexures detailing Gupta networks which form part of Holden’s submission to the state capture commission.
Holden alleged that Centaur group companies were used to launder some of the Gupta-linked criminal proceeds used to purchase Optimum coal mine.
Holden’s analysis is central to South African civil litigation challenging McGowan’s status as the preferred bidder to take Optimum out of business rescue, claiming his status as the company’s largest single creditor is fatally tainted by dirty Gupta money.
In papers responding to the challenge McGowan rejects these allegations.
He avers, “Holden has ‘followed the money’ from the Guptas backward, and inferred that everyone who engaged with them acted in bad faith and is complicit in money laundering. For my part, and that of the companies in which I have been involved, that assumption is not true.”
McGowan, who is now embroiled in a series of legal battles with alleged Gupta proxies in Bermuda, claims Centaur group companies engaged with companies owned or controlled by the Guptas or their associates “on a good faith, arm’s length commercial basis”.
“The transactions we concluded were real (not simulated) and for value. We conducted proper due diligence and ‘know- your-client’ checks before each transaction was concluded, and had no reason to believe that the monies we were loaned or paid were the proceeds of crime. (Indeed, that is still not clear to date.) We were not party to money laundering, or state capture of any kind. I was unaware of the Gupta’s agenda to capture the State and, as evidenced by the Bermuda litigation, it is plain that I am actively fighting against companies owned or controlled by the Guptas and/or their associates.”
But is all of this true?
McGowan & the Guptas
McGowan’s own reported account on the Arabian Business website in 2016, suggests his early business career was rather patchy — until, that is, he teamed up with the Guptas, their associates and their cash.
McGowan’s court papers set out that during September 2012 he and his erstwhile business partner, Simon Hoyle, formed Centaur Asset Management in Bermuda, with an initial focus on litigation funding.
It was Hoyle (who has since fallen out with McGowan) who knew Gupta lieutenant Salim Essa “through a previous professional relationship”.
Essa introduced Centaur to Rajesh “Tony” Gupta who explained that the Guptas were keen to investigate joint ventures with the Centaur Group.
According to McGowan, in late 2013 the Guptas offered Centaur an opportunity to invest and develop the De Roodepoort mine in Mpumalanga, though the project never took off.
“It was… in relation to this project, that Centaur… became involved with the Guptas and Mr Akash Garg. Akash Garg became a director and 50% shareholder of CVL from 2014 to 13 August 2018.”
CVL refers to Centaur Ventures Limited, a company registered in Bermuda on 18 July 2014.
Garg, of course, is the person who married the Gupta brothers’ niece Vega at the infamous 2013 Sun City wedding.
The shareholding of Centaur Ventures was split 50/50 between Garg and Centaur Holdings.
Centaur Holdings was owned in equal share by McGowan and Hoyle — until 2016 when Hoyle was ejected. Holdings’ assets, including its 50% share in Centaur Ventures, were transferred to another company, Centaur Group Limited, which was under McGowan’s sole control — leading to the fallout with Hoyle.
Centaur Ventures owned 100 percent of a Mauritius-based Centaur Mining, which in turn fully owned a South African company by the same name.
Directors of the South African company included Garg, McGowan and Gupta associate Deepak Raswant. Raswant is described in evidence before the commission as “a frontman for the Gupta Enterprise in India” and has featured in previous amaBhungane reporting.
Raswant later replaced Garg as director of Centaur Ventures.
It was this string of companies, Holden told the Zondo commission, that was used to launder the Guptas’ illicit funds offshore and channel money into South Africa.
Centaur and Optimum
A dubious Centaur “loan” to the Guptas enabled their infamous takeover of the Optimum coal mine — one of their prized South African assets.
Centaur’s role in the Optimum scandal was first detailed in the Public Protector’s State of Capture report. Released in 2016, the report named Centaur as one of the entities that contributed to the purchase price of Optimum.
Holden has shone more light on Centaur’s role. In an affidavit for Zondo, Holden shows that the Centaur loan ultimately derived from $100-million loaned from Gupta company Griffin Line to Centaur Ventures (CVL).
“In June 2016, somewhat after the fact, Centaur Holdings posted a news update on its website. The news update announced that Centaur had secured a ‘$100 million credit deal with UAE-based family office.’”
“It is clear that this referred to the $100m loan granted by Griffin Line to Centaur Ventures”.
In his recent court filings McGowan has tried to suggest this was a bona fide transaction: “CVL entered into a Loan Facility Agreement with Griffin Line General Trading LLC on 15 February 2016… CVL did not attempt to hide this; in fact CVL issued a press release in June 2016 publicly stating that it had signed a USD100m facility.”
Yet the 2016 statement hid the fact that the “family” was the Guptas, who had skipped South Africa for Dubai in April that year.
And McGowan’s claim to be unaware of the Guptas’ state capture agenda stretches credulity.
By then their role as politically exposed persons was already established in SA and even internationally. As early as December 2015, Bloomberg had carried a story quoting analyst Nic Borain saying, “There is a very widespread acceptance and assumption that this goes beyond undue influence. This goes close to capture of political authority by a group of foreign businessmen.”
The further progress of the Gupta $100-million seems to defy innocent explanation.
As set out by Holden, Centaur Ventures would then loan R1.5-billion to Centaur Mining. Of this amount, Centaur Mining drew down R885-million which was placed in a fixed deposit account in April 2016.
That money was used to back a Bank of Baroda loan of a similar amount (R842-million) to Gupta-owned Tegeta to fund the Gupta-owned company’s takeover of Optimum from Glencore.
Both Holden and the NPA allege that the purpose of this back-to-back loan arrangement was to launder illicit money derived from state capture, taking it out of South Africa via the UAE, and recycling it back into the country “to expand [the Guptas’] local empire to take advantage of State Capture”.
In short, money from the Gupta state capture project was laundered through their company, Griffin Line, which provided the source for the Centaur loans that were used to purchase Optimum.
The falling out
Is McGowan a bona fide businessman unluckily caught between the Guptas and the NPA?
Or was he a presentable white male front who helped the Guptas move their ill-gotten gains around the world and then hoist them on the petard of their own laundry vessel when things fell apart?
What is certainly true about McGowan’s account is that he is “actively fighting against companies owned or controlled by the Guptas and/or their associates”.
After the Guptas’ state capture network began unravelling, the family and McGowan had a messy falling out.
Optimum, which was placed in business rescue in 2018 along with several other Gupta-associated companies, is at the heart of an ongoing legal battle in Bermuda between the Guptas and McGowan.
Centaur Ventures’ only significant assets are the monies it is owed by Gupta-linked companies and individuals, the largest being its R1.38-billion claim as a “creditor” of Optimum.
In the Bermuda supreme court, Griffin Line, represented by Ajay Gupta’s son Kamal Singhala, is suing McGowan’s companies for a total of $104,127,604.72 (plus continuing interest).
The Guptas are also seeking to block McGowan gaining control of Optimum following a business rescue plan that would see his R1.38-billion claim converted into equity in a restructured Optimum.
McGowan hopes to take control of Optimum through his company, Templar Capital, which holds the R1.38-billion claim after Centaur Ventures, which he controlled, transferred it to him in mid-2020, just a week before the Bermuda courts issued freezing order against Centaur Ventures in relation to the Optimum claim.
Enter the NPA
But McGowan’s hopes of taking over Optimum may be dashed by the NPA’s Investigating Directorate, which earlier this month launched a High Court application for a preservation order over the mine.
The NPA wants the property preserved pending the outcome of a forfeiture application.
It alleges that the R1.38-billion claim ceded to Templar constitutes “either proceeds of unlawful activities or instrumentalities of the offence of money laundering or both”.
The NPA is of the view that Centaur and McGowan were an important conduit in the Guptas’ money laundering network.
In a detailed financial analysis, the NPA corroborates evidence before the Zondo commission, suggesting that the R1.38-billion is made up of tainted funds from different sources linked to the Gupta state capture network.
Centaur Ventures’ claim (now Templar’s) is based on ostensible coal pre-payment contracts that the NPA suggests were fictitious attempts to “paper” transactions.
The NPA contends that the contracts were not at “arm’s length” and contained “extraordinary anomalies”, suggestive of having been “reverse engineered” to fit payments that had already been made.
Through the pre-payments, says the NPA, laundered money was pumped back into the domestic Gupta enterprise via Optimum “with a view to propping up Gupta family entities within South Africa”.
Repeatedly in two affidavits before the Johannesburg high court, the NPA cites McGowan in an affidavit he himself placed before the Bermudan courts: “it is highly likely that the revenue and profit reflected in Griffin’s audited accounts is money stolen from the South African government and laundered via Mr Singhala on behalf of his father and wider family members”.
The implication is that McGowan admits he benefitted from stolen funds.
McGowan has not yet had an opportunity to respond formally to the NPA application, but he told the Sunday Times last week he denied the NPA’s allegations and was “confident that the NPA will be paying us damages at the end of the day”.
In the separate civil proceedings concerning the Optimum business rescue plan, McGowan disputes that the coal pre-payments were illicit.
He says that the business rescue practitioners initially did not recognise CVL’s claims, but changed their minds after an accounting firm was brought in to independently verify the claims.
McGowan contends that the payments were not fictitious and that some coal that CVL paid for was in fact supplied.
Back to Alexkor
If the NPA is correct, then McGowan and Centaur were an important element of the Guptas’ money laundering network.
Where Alexkor is concerned, the seemingly cosy relationship between Centaur and the Guptas suggests that Centaur’s interest in IPC and the Nungu colliery may have been linked to the Guptas’ wider coal gambit.
Centaur’s business venture with IPC ultimately went under. Paul Erskine, a director of IPC Benefication and IPC Mining, said that Centaur was going to put up R25-million to develop Nungu and ended up contributing around half that amount by the time the project sank.
There is, however, a clue hinting at a Gupta link in litigation that was brought by three of IPC’s creditors, two of which — Centaur Asset Management, founded by McGowan and his former business partner Hoyle, and Nungu Ltd — were related parties.
Nungu Ltd was registered in the British Virgin Islands and was to be a vehicle to fund the IPC venture and receive profits from it.
Nungu Ltd in turn received money from the segregated account of Centaur Group Finance Ltd (CGF) — a Bermuda company in which McGowan and Garg were directors.
According to CGF’s financial statements, on 1 January 2015, the same month Centaur announced the IPC deal, Nungu Ltd entered into a loan facility with the segregated account of CGF.
The statements reflect related party loans to Nungu Ltd and Centaur Ventures Ltd of $2,096,483 and $624,594 respectively, and note that the loan facility to Nungu Ltd was terminated and would be repaid in June 2016.
The Nungu-IPC plan collapsed, but Alexkor itself later began eyeing IPC assets — this time under a new board and a new minister.
Lynne Brown had replaced Gigaba, and in August 2015 appointed a new board under Hantsi Matseke, the Free State Development Corporations (FDC’s) chair and alleged “long-time ally of ANC Secretary-General, Mr Ace Magashule”.
Two years later, in 2017, plans were set in motion to establish Alexkor’s coal arm, Alexcoal.
IPC Benefication, a related company to IPC Coal, signed a non-binding MOU with Alexkor in May, in terms of which a new company would be formed, 55% owned by Alexkor with the remainder owned by IPC.
The new company, Alexcoal, would purchase a coal washing plant on land owned by IPC, with the aim of becoming a coal supplier to Eskom. The coal would be sourced from neighbouring coal mining operations including Nungu.
According to a business case for the new venture, “Alexkor made a decision that it will not be involved in the mining of coal but will work with emerging coal miners to assist them to beneficiate their coal to the required standard.”
It is unclear whether Alexkor’s plans for IPC were tied to either the Guptas or Centaur. After all, there was a significant time gap between Centaur’s 2015 announcement of its IPC funding package and the Alexcoal MOU. And by February 2017, Centaur was a co-applicant for the liquidation of IPC Coal.
The state capture commission’s investigators, however, were confident that the Guptas intended to repurpose Alexkor and turn it into a conduit for their coal interests.
Bishop’s affidavit states: “The Commission’s investigating team have established that the entire coal deal was part of a Gupta linked and associated network of companies, positioning themselves to control Alexkor coal business.”
Centaur, in responding to the allegations in Bishop’s affidavit that suggested a link between their IPC funding plans and Alexkor’s later plans, said that Bishop had drawn “incorrect conclusions” by “utilizing the inclusion of companies with similar names into his report”.
IPC Benefication, said Centaur, was the company that supposedly stood to benefit from Alexkor, and was a different company to the IPC mentioned in the Centaur news bulletin. Centaur accused Bishop of conflating different companies solely because the company names contained the same initials, “IPC”.
Responding to follow-up questions, Centaur told amaBhungane that “Neither Centaur Holdings Ltd (“CH”), nor any of the companies within the Centaur Group of Companies have had any business dealings with IPC Benefication”.
Like Centaur’s plans, Alexkor’s big coal strategy ground to a halt.
The Alexcoal MOU was signed in the same month the Guptaleaks blew the lid off the Guptas’ corrupt business empire. The political tide was shifting greatly, and it appears from correspondence before the commission that the following year the new minister, Pravin Gordhan, blocked Alexkor’s coal plans in line with a moratorium on the acquisition plans of state-owned companies.
For a short time earlier this year, Alexkor was the subject of high-level scrutiny at Zondo. Overwhelmed by the caseload and having run out of time, the commission did not delve deeper into the issue.
The company continues to hobble along after years of mismanagement, alleged state capture, and infighting. In September 2019, it was placed in administration.
The administrator’s report to parliament depicted a company in critical decline.
The biggest victims in all of this, as usual, are ordinary people. For nearly a century the inhabitants of the Richtersveld, where Alexkor has its operations, have had their riches sucked out of the earth beneath their feet with barely anything to show for it.
Things do not look set to change any time soon.