The perfidious relationship among the sponsors of the now defunct Pula Steel in Selibe Phikwe was for once put on full display by one of the key figures in the choreographed project, Deepak Verma at the Hilton Hotel in Gaborone this week. Willowy in his unpacking of the drama that led to the folding of a promising project, Verma shared how they as promoters bundled and buried Pula Steel to the detriment of Selibe Phikwe and Botswana.

In the process it was over P150 million of tax payers’ money down the drain and what remains is battle of egos – soon to be beamed at the courts. At this point, Pula Steel equipment is up for auction; and the Vermas are planning on launching a spirited court bid to force the liquidator to allow them to buy the white elephant that is supposed to be Pula Steel. Deepak Verma is accusing Nigel Dickson Warren of refusing to accept their offer to buy Pula Steel.  

Emphatic in downplaying his education credentials and fervent in his mocking of CEDA Chief Executive Officer (CEO) Thabo Thamane as a questionable graduate of London School of Economics, Deepak Verma portrays himself as a shrewd businessman who managed to siphon P14 million from a BCL/Pula Steel deal and bought himself profitable apartments in South Africa and a project similar to Pula Steel in Zimbabwe. He says he is making R2.5 million a month on his apartments because everything he touches turns gold.

Pula Steel went into judicial management on Feb 24th 2017, according to Deepak Verma, they made an offer to Nigel Warren Dixon to buy the shares on 23rd June 2017, this offer was revised when Nigel did not accept their initial offer and tried to broker within shareholders by way of advising them that he was waiting for all shareholders value to match the allocated shares. Verma posits that according to their shareholders’ agreement whoever had offered the liquidator the maximum must be offered the project, “but he opted to broker the deal so that every ones value is the same.”

In plain language the Vermas wanted to buy Pula Steel for P361 000. This is a company that was assembled in 2010, 80% owned by the Verma family and 20% belonging to Wealth Creation, an arm owned by the former BEDIA CEO, Brian Mosenene and Mpho Balopi, who was an ordinary citizen by then. Mosenene had known the Vermas by virtue of his BEDIA escapades in India and he introduced them to Mpho Balopi. “Mosenene had told us that he is interested in becoming a businessman and he motivated our interest in partnering with him,” explained Deepak Verma.

Pula Steel was to become an 80 tonne per day capacity plant that consumes 2400 tonnes raw material every month. According to Deepak Verma, at this point things got serious and they had to up the ante hence deciding that they needed P44 million for the project to take off. This is where CEDA, Botswana Development Corporation (BDC), Vermas and Wealth Generation came into one pot for mixing. P13 million was to come from promoters as debt and CEDA was to inject P7 million as equity and have a 35% interest in the business. Lesego Selotate was CEDA’s deputy CEO at the time the deal was being stitched and was the focal person.

Interestingly, BDC was non-committal at the stage and decided to put an executive to do some due diligence and the said executive never filed comments on the project and BDC did not put the P10 million they had pledged. Wealth Generation was expected to pop out P4.5 million into the reconfigured project.

Amid the capital call there was a nagging obstacle, the promters were failing to get land for the project despite the machinery having arrived. Five interlocking plots were identified and they were to be consolidated and allocated to Pula Steel, but in Deepak Verma’s words, “our file got stuck at some office at the Square Mart building and this delayed the project and a lot was changing in the market.”

But after protracted negotiations, Government finally offered Pula Steel land next to the five consolidated plots, “the project had already lost 12 months at this stage”, and “mind you during this period the company had a CEO in Brian Mosenene of Wealth Creation who was already getting a salary; there was also a Florence Mokalake who was working as an HR person and she was being paid but with no production,” said Deepak Verma. At this point CEDA was beginning to take control of things, the Vermas feeling sidelined despite their claimed knowledge of the business and its operations.

Deepak Verma was instructive in pointing out that “any delay in timelines are the first steps to derailment of any promising project.” He claims that the Vermas are the only directors who did not take salaries from Pula Steel for a period of six months. He said he was running a textile business on the side. This was the bleeding period for Pula Steel, money was moving out with nothing coming in.

HOW BCL GOT INVOLVED WITH PULA STEEL

“We reached out to BCL because the induction furnace of Pula Steel needs water for cooling. We wanted the water they were pumping out and throwing into the dam. We only wanted the water and not the steel scrap. It must noted that at the time BCP was prospecting for iron ore in Shoshong, Mahalapye, and Barolong farms.” According to Deepak Verma, after pitching their proposal for water with BCL, the mine’s hierarchy conceived an idea that maybe they should have a stake in Pula Steel to increase the value of their company.

The Vermas who now had a 52% stake in Pula Steel at this point interested CEDA, a 35% shareholding partner, with BCL’s proposal. BCL demanded 55% share in the company of Pula Steel. The mining giant at the time notified the promoters of Pula Steel that it was controlling 6% of GDP in the country hence they are bring influence more so that their executives serve in various boards such those of Botswana Power Corporation (BPC). The partners were to sell some of their shares to bring in BCL and CEDA made it clear that they will not go below 26%.

After negotiations, Mitchin and Kelly helped the partners close the deal with BCL, giving away 50.5% of the company to the mining giant in Selibe Phikwe in 2014. Mitchin and Kelly are still involved in Pula Steel’s liquidation process today. The Verma Family received P14 million from the deal; Wealth Generation got about P3.5 million  and the other P3.5 million was paid to CEDA, “We were told not to talk to the media about the deal,” divulged the irritated Deepak Verma.

After BCL came in, the capacity of the project was increased and there was need to build a power substation of 5.5 MW and the cost of transfer of power to the substation was initially estimated at P5.5 million and the money was to be paid at a rate of P60 000 per month for five years but after some period the deal changed, BPC now demanded P21 million for the substation with an upfront payment.

Deepak Verma said this was another setback for the project, an escalation in costs that was unforeseen. BCL demanded the increase in capacity and they were in control, he said. In 2014 BCL brought in a new CEO for Pula Steel. This was the time when CEDA refused to participate in these decisions hence did not partake in capital call and their share was diluted to 6%.

At this point in the address Deepak Verma took a detour and started lashing at Thabo Thamane, the CEO of CEDA. “CEDA has invested P13 million and is now a creditor, he is at the mercy of the liquidator. He did not mortgage for the loan – he could have mortgaged the property or land. I have decided that I am putting together an induction furnace and this time I am not taking a partner. I am not relocating, I have been here 20 years and I am staying,” he said.

At the time of near collapse of Pula Steel, the Vermas had 26%, Wealth Generation 4%, CEDA 6% and the rest was held by BCL. The company could not control its costs. There were labour disputes, several allegations of racism and unfair treatment of employees among other things. The company was certainly going under. In addition there were poor decisions made on behalf of the company, such as spending more on consultants instead of the company doing the jobs direct. The final nail on the coffin was the collapse of BCL which meant Pula Steel became obvious collateral albeit its own frailties.

POLITICIANS HAD A SAY

All along Selebi Phikwe, Keorapetse had reported Pula Steel to the Directorate of Corruption and Economic Crime (DCEC) with a number of cases to be investigated. The MP has always questioned the wisdom for coming up with Pula Steel when the biggest steel manufacturing companies in the world were crying foul about the market. 



The then assistant Minister of Presidential Affairs and Public Administration, Phillip Dikgang Makgalemele had informed parliament that 18 cases were classified for investigation, nine were closed due to lack of evidence while eight were still under investigation. Details of the said corruption reports were not shared. Pula Steel was borne of a diversification strategy by BCL code named Polaris II which sought to diversify the operations of BCL from just mining and smelting.

Pula Steel which was a subsidiary of BCL Limited which has now been placed under final liquidation following its closure last year October is currently under judicial management.

The steel manufacturing company was placed under judicial management by the High Court to suspend all orders by creditors to attach the company’s property for auction.

At the time Pula Steel’s Judicial Manager, Vijay Kalyanaraman of Grand Thornton who was appointed by the High Court said at that time that Pula Steel is not yet insolvent despite liabilities but it would need cash injection by shareholders for production to continue. The Judicial Manager has applied for Pula Steel to be replaced under liquidation as shareholders have failed to inject the necessary cash to allow for recommencement of production.

Pula Steel was the first integrated steel plant in Botswana using scrap metal to produce steel billets, an intermediary steel product. Built at a cost of P130 million in 2015. The company, majority owned by BCL Mine and with shareholding from CEDA and founders, the Verma family, was placed in liquidation last October, owing creditors an estimated P100 million.

The Vermas are vociferous on their Pula Steel takeover bid. Deepak Verma says he can create 1000 jobs if offered the company. He is of the view that Batswana should desist from always blaming foreign investors when projects do not go according to plan. He says it is very important to critically look at the facts and all parties involved. “Certainly you cannot blame the Vermas for Pula Steel collapse, we know the business but were overshadowed.”