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. â€¨â€¨
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.â€¨â€¨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.â€¨â€¨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.”
In June 2019, a case involving the Attorney General was brought before the High Court, in which the applicant Letsweletse Motshidiemang challenged Sections 164 (a) and 167 of the Penal Code. The applicant contended that these sections are unconstitutional because they violate the fundamental rights of liberty and privacy.
The applicant argued that these sections violated his right and freedom to liberty as he was subject to abject ignominy. These laws subjected the LGBTIQ community to brutal and debasing treatment through social control and public morality. On the 1st of November 2017, the Botswana High Court further allowed Lesbians, Gays and Bisexuals of Botswana (LEGABIBO) to join the case as amicus curiae.
However, in July 2019, the respondents, in this case, i.e. the Government, filed an appeal against this iconic High Court ruling seeking re-criminalization of homosexuality. Human Rights Group has criticized this move of the Government all over the world. The appeal was heard before five judges at the Court of Appeal on Tuesday. The State was represented by Advocate Sidney Pilane, while LEGABIBO and Letsweletse Motshidiemang were represented by Tshiamo Rantao and Gosego Rockfall Lekgowe, respectively.
Non-Governmental Organizations advocating for the LGBTIQ+ community joined the two parties at the Court of Appeal during this case. They argue that the minority group should enjoy their rights, especially the right to privacy and health. Botswana Network on Ethics, Law and HIV/AIDS (BONELA) Chief Executive Officer, Cindy Kelemi says the issues being raised by LEGABIBO are that as individuals belonging to the LGBTIQ community, they have and must share equal rights, including the right to privacy, which also speaks to being able to involve in sexual activities, including anal sex.
“Those rights are framed within the constitution, and therefore a violation of any of those rights allow them to approach the courts and seek for redress. We do not need the law to be regulating what we do in the privacy of our homes. The law cannot determine how and when we can have sex and with who, so the law does not have any business in that context. What we are saying is that the law is violating the right to privacy,” she said on the sidelines of the decriminalization case in Gaborone on Tuesday.
The first case involving the homosexual act was the Utjiwa Kanane vs the State in 2003. Contrary to section 164(c) of the Penal Code, Kanane was charged with committing an unnatural offence and engaging in indecent practices between males, contrary to section 167. The conduct at issue involved Graham Norrie, a British tourist, and occurred in December 1994. (Norrie pleaded guilty, paid a fine, and left the country.)
Kanane pleaded not guilty, alleging that sections 164(c) and 167 both violated the constitution. The High Court ruled that these sections of the Penal Code did not violate the constitution. Kanane then appealed to the Court of Appeal. BONELA CEO recalls that in its judgment then, the High Court indicated, Batswana were not ready for homosexual acts. Twenty years later, the same courts are saying that Batswana are ready, she says.
“They gave the explicit example that shows that indeed Batswana are ready. There are policies and documents in place that accommodate people from marginalized communities and minority populations. The question now is that why is it hard now to recognize the full rights of an individual who is of the LGBTI community?” She further says intimacy is only an expression. The law that restricts homosexuality makes it hard for LGBTIQ members to express themselves in a way that affirms who they are.
“We want a situation where the law facilitates for the LGBTIQ community to be free and express themselves. The stigma that they face in communities is way too punitive. They are called names; some have been physically violated and raped at times. It shows that the law doesn’t not only prevent them from expressing themselves, it also exposes them to violence.” The law on its own, Kelemi submits, cannot change the status quo, adding that there is a need for more awareness and education on human rights and what it means for an individual to have rights.
“As it is now, it is very tough for some to do that because of a legal environment that is not enabling. We also want to see a situation where LGBTIQ+ people can access services and be confident that they are provided with non-discriminatory services. It is challenging now because health care providers, social workers and law enforcement officers believe that it is illegal to be homosexual. What we are saying is that if you have an enabling law, then that will facilitate for people to be able to express themselves, including accessing health services,” Kelemi said.
“As we are doing this advocacy work, one of the issues that we picked up is that there is lack of capacity, especially on the part of healthcare workers. We noted that when we provide services or mobilize Men who have sex with other men (MSM) to access health facilities, health care workers are not welcoming, forcing them to hideaway. We must put an end to this to allow these people the freedom that they equally deserve.”
The President, Dr Mokgweetsi Masisi, has declared as an act of corruption the attitude and practice by government officials and contractors to deliver projects outside time and budget, adding that such a practice should end as it eats away from the public coffers.
For a very long time, management problems and vast cost overruns have been the order of the day in Botswana, resulting in public frustrations. Speaking at the commissioning of the Masama/Mmamashia 100 Kilometres project this week, Masisi said: “There is a tendency in government to leave projects to drag outside their allocated completion time and budget. I want to stress that this will not be tolerated. It is an act of corruption, and I will be engaging offices on this issue,” Masisi said.
In an interview with this publication over the issue, the Director-General of the Directorate on Corruption and Economic Crime (DCEC), Tymon Katholo, says, “any project that goes beyond its scope and budget raises red flags.” He continued that: “Corruption on these issues can be administrative and criminal. It may be because government officials have been negligent or been paid to be negligent by ignoring certain obligations or procedures. “This, as you may be aware has serious implications on not only of the economy but even the citizens who use these facilities or projects,” Katlholo said, adding that his agency is equally concerned.
According to the DCEC director, the selection, planning and delivery of infrastructure or projects is critical. In most cases, this is where the corruption would have occurred, leading to a troubled project. A public finance expert at the University of Botswana (UB), Emmanuel Botlhale, attributes poor project implementation to declining public accountability, lack of commitment to reforming the public sector, a decline in the commitment by state authorities and lack of a culture of professional project management.
In his research paper titled, ‘Enhancing public project implementation in Botswana during the NDP 11 period,’ Botlhale stated that successful implementation is critical in development planning. If there is poor project implementation, economic development will be stalled. Corruption is particularly relevant for large and uncommon projects where the public sector acts as a client, and experts say Megaprojects are very likely to be affected by corruption. Corruption worsens both cost and time performance and the benefits expected from such projects.
Speaking during this week’s Masama/Mmamashia pipeline commissioning, Khato Civils chairman said Africans deserve a chance because they are capable, further adding that the Africans do not have to think that only Whites and Chinese people can do mega projects. During his rule, former president Ian Khama went public to attack Chinese contractors for costing the government a move that ended up fuelling tensions between China and Botswana after Khama dispatched the then Minister of Foreign Affairs, Pelonomi Venson Moitoi, to China to register Botswana’s complaints with Chinese government-owned construction companies. Botswana had approached the Chinese government for help in its marathon battle with Chinese companies contracted to build, among others, the failed controversial Morupule B power plant and refurbishment of Sir Seretse Khama International Airport (SSIK).
A legal battle between former Botswana Democratic Party (BDP) legislator Samson Moyo Guma and First National Bank (FNB) over a multimillion oil refinery project intensified this week with Justice Zein Kebonang referring the matter to Court of Appeal for determination. The project belongs to Moyo Guma’s company called United Refineries which he has since placed under judicial management.
The war of words between Moyo Guma and FNB escalated after the company’s property worth millions of Pula were put up for sale in execution by the bank and scheduled to take place on 8th October. It emerges from Court papers that the bank had secured an order from the High Court to place the company’s property under the hammer.
Moyo Guma then also approached the High Court seeking among others that the public auction scheduled for 8th October 2021 be stayed. He contended that the assets that were to be sold belonged in reality to United Refineries and that as the company had been under judicial management at the time of the attachment, the intended sale in execution was unlawful.
He also sought the Court to declare that the writs of execution against the properties of guarantors and sureties of United Refineries Botswana Holdings Propriety Limited (the company) are unlawful. Moyo Guma also sought a stay of the execution against the property known as Plot 43556 in Francistown, that is, the land buildings, plant and machinery which make up the property and any all immovable or movable property belonging to the guarantors and sureties of the company pending finalization of the winding up of United Refineries.
But FNB disputed Moyo Guma’s assertions and submitted that the properties in question belonged to TEC (Pty) Ltd and not United Refiners. TEC Pty Ltd which is one of the shareholders in United Refineries is one of the sureties and co-principal debtors of a debt amounting to P24 million owed by United Refineries to FNB. FNB argued in papers that the properties belonged to TEC because it was TEC which had passed a covering mortgage bond in its favour over the property it now sought to execute.
Moyo Guma submitted that the covering mortgage bond passed in favour of FNB did not tell the full story as the property in question was in truth and fact owned by United Refineries and not TEC Pty Ltd. He maintained that the shares had been had been passed by the company in exchange for the properties in question and that the parties had always been guided by the spirt of the share agreement in dealing with each other despite delays in the change or transfer of ownership of plots 43556 and plot 43557 in Francistown.
Kebonang said it was clear to him that the two plots (43556 and 435570 belonged to United Refineries notwithstanding that TEC (Pty) Ltd had passed a mortgage bond over them in favour of FNB. “For this reason the properties were immune from attachment or sale in execution so long as the judicial management order was in place,” he said.
The background of the case is that Moyo Guma together with five other investors, namely Elffel Flats (Pty) Ltd; Mmoloki Tibe; TEC (Pty) Ltd; Profidensico (Pty) Ltd and Tiedze Bob Chapi, each bound themselves as sureties and co-principal debtors in respect of a debt owed by a company called United Refineries Botswana Holdings (Proprietary) Limited (the Company), to First National Bank Botswana (FNBB) (1st Respondent).
FNB had extended banking facilities to the company in the amount of P24 million which was then secured through the suretyship of Moyo Guma and other shareholders. Court records show that Moyo had on the 11th February obtained a temporary order for the appointment of a provisional judicial manager in respect of United Refineries and it was confirmed by the High Court on 24th September 2019.
In terms of the final court order by the High Court issued by Justice Tshepho Motswagole all judicial proceedings against the company, execution of all writs, summons and process were stayed and could only proceed with leave of Court. Court documents also show that First National Bank had sued the company and the sureties for the recovery of the debt owed to it and through a consent order, the bank withdrew its lawsuit against the company.
But FNB later instituted fresh proceedings against Moyo Guma and did not cite the company in its proceedings. “There is no explanation in the record as to why the Applicant was now reflected as the 1st Defendant and why the company had suddenly been removed as the 1st Defendant. There was no application either for amendment or substitution by the bank,” said Justice Kebonang.
FNB had also argued that it sought to proceed to execute against Moyo Guma and other sureties on the basis of the suretyship they signed and that by signing the suretyship agreement, Moyo and other sureties had renounced all defence available to them and could therefore be sued without first proceedings against the principal debtor (United Refineries). The question, Kebonang said, was that can FNB proceed to execute against Moyo Guma and other sureties on the basis of the suretyship contracts they signed?
“The starting point is that the Applicant (Moyo Guma) and others by binding themselves as sureties became liable for debts of the principal debtor and such liability is joint and several. He said the consequences of placing the company under judicial management means that every benefit extended to it should also extend to sureties.
“If the company is afforded more time to pay or its debt is discharged, reduced or compromised or suspended the obligation of sureties is to be likewise treated. It follows in my view that where judicial proceedings are suspended or stayed against the company, then any recourse against the sureties is similarly stayed or suspended,’ said Kebonang.
He added that “In the circumstances of this case, it seems to me that so long as the company is under judicial management, the moratorium that applies to it must also apply to its sureties/guarantors and no execution of the writs should be permitted against them. Any execution would be invalid.”
“Mindful that there is judicial precedent on this point in Botswana, at least none that I am aware of, and given its significance, I consider it prudent that the Court of Appeal must provide a determinative answer to the question whether a creditor can proceed against sureties where a company is under judicial management,” said Kebonang.
Pending the determination of the Court of Appeal, he issued the following order; the execution of writs issued in favour of FNB against Moyo and other sureties/guarantors of United Refinery are hereby stayed pending the determination of the legal question referred to the Court of Appeal.