25 April 2024 | 03:16 AM

Zuma’s nephew and the mine meltdown

Key Takeaways

The apparent financial meltdown of a mine purchased out of liquidation by a company chaired by President Jacob Zuma’s nephew and advised by his lawyer has raised a host of questions about the deal.

A Mail & Guardian investigation has revealed that the Grootvlei mine on the East Rand, part of the liquidated Pamodzi Gold group bought by Aurora Empowerment Systems, is running on empty.

Aurora was initially seen as the saviour of the Pamodzi mines, but its promises have turned to dust in eight months.

This week the Grootvlei mine shut down after Eskom cut off its power because of unpaid bills. Its security company, Protea, has not been paid for months, while the mine’s assurer, Rand Mutual, is also demanding ­payment.

Aurora announced this week that it would be implementing a large-scale rationalisation plan to save the mine, including the “laying off” of 60% of the workforce — 1 441 workers. This has angered unions and prompted strikes by workers, who say they have not been paid for months.

In addition, the Mineworkers’ Pension Fund has reported Aurora to the Financial Services Board and the National Prosecuting Authority, because thousands of workers’ pension contributions have been deducted from wages but not paid over for the past five months.

Suppliers are reluctant to issue equipment and supplies to the mine, complaining that they are not being paid. As a result, critical supplies are running low.

Emergency meetings were held this week to secure other “secret” investors from Britain and the United States to save Aurora’s Pamodzi deal.

This was after Aurora’s Malaysian investor, AM Capital, allegedly refused to contribute further funds until the mines are transferred into Aurora’s name.

Aurora currently operates a management contract pending finalisation of the liquidation process.

Zuma’s nephew, Khulubuse Zuma, and his lawyer, Michael Hulley, with Nelson Mandela’s grandson, Zondwa Mandela, feature on the Aurora board, giving the company heavy political clout and black economic credentials.

Hulley, a non-executive director, was described this week by a senior Aurora executive as a “shadow guarding over Aurora”.

The Mail & Guardian understands that the brains behind Aurora are the Bhana family, which has a chequered financial past.

Fazel Bhana, who describes himself as a management consultant to Aurora, confirmed this week that the Bhana family had a long association with Khulubuse Zuma.

He said Khulubuse approached Fazel and his father, Solly Bhana, to help on the Aurora mine deal. Another Bhana associate, Bashir Moosa, was enlisted as financial manager.

The M&G established this week that R81-million worth of gold has been mined at Grootvlei mine since the empowerment company took over, but workers are concerned that the money is not being ploughed back into the mine or their salaries.

Sources with access to management accounts say they are concerned that money is flowing directly out of the mine into an unknown bank account.

‘Mystery’ trucks

Aurora’s management denies that money is being moved out of the mine for non-mining purposes and says the mine is not making a profit at this stage.

Sources at Aurora’s other Pamodzi acquisition, in Orkney, are also concerned about “mystery” trucks removing equipment from shafts. Aurora denies asset-stripping.

This week Aurora director Thulani Ngubane admitted that the company had “not done their homework” on the due diligence. “We did it,” he said, “but not properly.”

Aurora has blamed its cash-flow problems on investment snags and underestimating the capital injection the mine needs to become profitable again.

Fazel Bhana said directors and management were “burning their own money” to keep the mine afloat.

He estimated that the monthly cost of the mine amounted to R30-million, but insisted that only February salaries were unpaid.

Bhana said the job cuts at the mine were temporary lay-offs. He said he had promised to rehire all the staff after three to five months, once Aurora’s problems were solved.

He said the mine’s railway lines were rusted, while the pumping and cleaning of acid water cost at least R5-million a month.

Aurora was appointed the preferred bidder by Pamodzi’s liquidators for the two mines in October, after Pamodzi went into liquidation in mid-2009.

Impressive credentials

According to a source close to the deal, the empowerment group presented a “beautiful” bid to the liquidators involving the purchase of Pamodzi’s gold assets for R390-milllion, providing that the liquidators were happy with the company’s management of the mines.

Joint liquidator Enver Motala told the M&G: “Aurora’s BEE credentials were impressive indeed — the directors included Nelson Mandela’s grandson … and President Zuma’s nephew.”

In its bid Aurora pledged not to retrench permanent employees and to rehire laid-off workers on new packages. A share-incentive scheme would be created, as they “believe in empowerment in the true sense of the word”.

It also planned to create the Aurora Gold East Rand Community Trust “with the sole purpose of uplifting the community”, which would fund “housing development and bursaries for dependants of staff members.”

Under investigation

It would also implement a strict environmental protection plan.

However, earlier this month Beeld reported that Aurora was pumping untreated acid water into the Blesbok­spruit. The water affairs department’s Linda Page confirmed that management of the mine was being investigated by the Blue Scorpions, and might face prosecution.

Bhana told the M&G that the R30-million used for mining operations was being used to pay Eskom, salaries and insurance. But the mine has not renewed its Alexander Forbes insurance, despite being ordered to do so by the liquidators.

The role of Motala, one of six Pamodzi liquidators, in “pushing” Aurora’s continued management of the mine has also raised questions.

In a confidential email seen by the M&G he expressed outrage that transaction adviser Standard Bank had proposed that another bidder be considered, given Aurora’s problems.

Motala, who is also politically connected, was arrested for fraud and corruption in 2004 in his work as a liquidator, although the charges were later dropped.

Responding through the liquidators’ lawyer, Motala said that Aurora had promised the liquidators financial information and detailed reports, which had not been delivered.

In terms of the agreement Aurora is obliged to deliver detailed reports to the liquidators about all expenses incurred and revenues received in respect of the mining operations. It is understood that the liquidators have sent Aurora two lawyers’ letters this year demanding reports.

Despite its cash-flow crisis Aurora is understood to be bidding for a controlling stake in another listed empowerment company, Labat, for R4.5-million in order to list its mining assets.

Hulley told the M&G: “Aurora is a private company, operating in challenging economic circumstances. It is mindful of its corporate and social responsibilities, to which it remains committed. We fail to see the relevance of your questions, which relate, in the main, to trading and operational matters.”


Who are the Bhanas

The advisers brought in to assist Aurora, father and son team Suliman “Solly” and Fazel Bhana, have a chequered past.

In 2002 their paint-distribution cum oil-importing company, Amlac, was fined R12-million for insider trading after their share price skyrocketed from 4c to R5,28 in three months in 2000.

The company was delisted and liquidated in 2003.

The Bhanas admitted guilt but no criminal wrongdoing. The company’s directors included Solly, Fazel, Solly’s brother Mohammed Saeed and Feroze Essay.

The Bhanas are now management consultants for Aurora, while Essay is a buyer for the mine.

Another business partner of the Bhanas, Bashir Moosa, is Aurora’s financial manager.

Also in 2002 Fazel and Solly were arrested on charges relating to a R19-million VAT fraud.

According to reports, the court ordered the family to pay R5-million before bail of R100 000 was granted. The Mail & Guardian understands the Bhanas paid about R30-million to the South African Revenue Service, although Fazel says the matter was settled and no fine was paid.

Fazel (37) told the M&G that he and his father were “not on Aurora’s payroll” but contracted to the company as consultants. He was the chief strategist on mergers and acquisitions, while his father advised the company on its “funding structure”.

“Our job is to strategise,” he said.

Fazel described President Jacob Zuma’s nephew, Khulubuse Zuma, as a long-standing family friend. “We’ve known Khula for a long time. We didn’t bring them on, they brought us on. He said let’s do this together.”

Workers at Aurora’s East Rand mine said they believed that the Bhanas “call the shots” because of their almost daily presence at the mine.

“I go to the mine once or twice a week,” Fazel said.

“There are so many problems, we go to fix them.” — Ilham Rawoot, Yolandi Groenewald and Sam Sole

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amaBhungane

Before joining the amaBhungane team in 2017, Micah was the national coordinator for media freedom and diversity at the Right2Know Campaign. He holds a Masters in African Studies from Oxford University and a BA Honours in History from Wits University.

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