A compensation
claim for at least US$141 million has been prepared by Southern Africa Resources Ltd (SARL), against
the Kingdom of Swaziland at the
International Centre for Settlement of Investment Disputes (ICSID).
SARL held a 50 percent
stake in SG Iron Ore Mining (PTY) Ltd (SG Iron), which had formerly been known
as Salgaocar Swaziland (PTY) Ltd. The Swaziland Government held 25 percent of
the shares and the King personally held 25 percent ‘in trust for the nation.’
The mine was forced to
cease trading in August 2014 after a series of events orchestrated by Sihle
Dlamini, who is Director Administration at the King’s Office and Assistant
Private Secretary to the King. He was also the King’s personal representative
on the SG Iron board of directors.
Here is a step by step
guide to what happened.
30
September 2010
SG Iron Ore Mining (PTY) Ltd. (when it was still
called Salgaocar Swaziland (PTY) Ltd), was registered in accordance with the
laws of Swaziland on 30 September 2010 under Certificate of Incorporation No.1196,
with its principal business of operations at the Old Ngwenya Mine, Ngwenya, in
the Hhohho district of Swaziland.
SG Iron’s stated goal was to reprocess iron ore
dumps left over by the Anglo American Mining Company in the late 1970’s, when
it ceased mining operations in the area, and to secure the main mine lease for
30 years once the iron ore dumps had been cleared.
Due to advancements in technology, it had become
scientifically possible to process the dumps and upgrade them into sellable
grade ore. This project would create new jobs in Swaziland, while creating a
new source of wealth for Swaziland, as well as clearing Swaziland of the dumps
left by the Anglo American Mining Corporation and restarting mining activities.
30
June 2011
King Mswati, who as absolute monarch in Swaziland has
sole control over mining rights in the kingdom, granted SG Iron a Mining Lease
for seven years. The company agreed to pay the King ‘in trust for the Swazi
Nation’ a royalty of 3 percent. It also gave the King 25 percent of the total
company issued share capital at no cost. It also gave a further 25 percent of
the issued share capital to the Swaziland Government, again at no cost. The
remaining 50 percent of issued share capital went to SARL.
The King holds shares ‘in trust for the Swazi
Nation’, but it is widely
reported outside of Swaziland that in fact he has
received millions of dollars from international companies such as phone giant
MTN; sugar conglomerates Illovo
and Remgro; Sun International hotels and beverages firm SAB Millerto, which he
spends on himself and his family.
The King, who rules over
an impoverished kingdom of only 1.4 million people, has 13 palaces, a fleet of
top-of-the range BMS and Mercedes cars and a private jet airplane. Meanwhile,
seven in ten of his subjects exist on incomes of less than US$2 per day.
As a general undertaking, the Mining Lease provided
that each party should ‘act in such manner as shall be necessary in order to
give effect to [the] Mining lease’. That mean they should all have worked to
make sure the company was a success.
It was agreed SARL, being the 50 percent shareholder
of SG Iron, had management control of SG Iron, which was in charge of, and
responsible for, day-to-day running of SG Iron. SARL was to provide all
financial support and technical expertise necessary for SG IRON to succeed.
Article 6.8 of the Mining Lease provided that the
Chairman in addition to having his own vote on the Board of Directors should have
a casting vote. Shanmuga Rethenam was appointed as the Executive Chairman of
the Board of Directors of SG Iron, and Sivarama Petla was appointed as its
Chief Executive Officer. Both Executive Chairman and CEO were nominee and
representatives of SARL.
Mbuso Dlamini was appointed as the Director for and
on behalf of the Swaziland Government and Sihle Dlamini was appointed as the Director
for and on behalf of the King.
SG Iron put up approximately US$50 million to start
the mining operations and added further capital. The King and the Swaziland
Government made no financial contributions.
21
October 2011
The official inauguration of operations was on 21 October
2011 with the dispatch of ore to Maputo Port in Mozambique. On 21 December
2011, the first shipment was carried out from Maputo Port and on 9 March 2012,
a rail services from Mpaka to Maputo Port, Mozambique, started.
16
April 2012
Less than six months after operations began, King
Mswati, through his representative Sihle Dlamini, asked for and received an
advanced payment / loan of US$10 million on the King’s future dividend. This
was at a meeting of the Board of Directors of Salgaocar Swaziland held in Mbabane, Swaziland, on 16 April 2012.
The money was to be repaid from future dividends
payable to the King.
There was no public
announcement made that the King received the money which he held ‘in trust for
the nation’ and it is not known how he spent it. This later fuelled speculation
that he had used the money to fund his own personal lavish lifestyle.
26
April 2012
The company refused to
confirm or deny the gift. The Swazi Government was lukewarm in its denial. The Times of Swaziland reported, ‘Dismissing
the rumours, government Press Secretary Percy Simelane said “That is pure speculation. The donor has asked to remain anonymous and
it will be like that.”’
21August
2014
Sihle Dlamini, representing the King at SG Iron wrote
to the CEO of SG Iron, Sivarama Petla, instructing him not to sell any more
cargo on 21 August 2014. He did this without consulting the major shareholder,
SARL. Since that day all attempts by SG Iron to sell cargo were blocked.
Contrary to the terms of the Mining Lease, the Board
of Directors was not consulted about the decision to stop sales of iron ore.
The Chairman, who was to chair all board meetings under Article 6.7 of the
Mining Lease, and who also possessed a right of veto, was not even informed of
the King’s decision.
In October 2014, in a founding affidavit at the
Swaziland High Court to have the company placed under Judicial Management,
Sihle Dlamini would state that a shareholders dispute at SARL in Singapore had
made it impossible for management decisions to be taken at SG Iron. He also
stated that the fall in the world price of iron ore had made production at the
mine uneconomical.
After
21 August 2014
Blocking the sale of iron ore meant no trade could
take place and SG Iron’s operations were brought to an abrupt standstill. Since
no money was coming into the company from the sale of cargoes there was a
cash-flow crisis.
Sales could have resumed at any time because more
than 100,000 tonnes of iron ore remained at Maputo Port, Mpaka Railway Siding
and at the Mine Stockyard. In his High Court affidavit in October 2014, Sihle Dlamini revealed he had given
instructions for ore to be stockpiled until the price of iron ore recovered.
SARL also requested that the King repay the full or
part of the US$10 million loan / advance dividend to allow SG Iron to continue
operating. The King refused to do this, instead the King’s representative Sihle
Dlamini demanded that SARL inject more capital into the business, something it
would not do while shipment of cargoes remained blocked.
SARL would say in January 2015 that it felt it had
been held hostage by the King’s representative’s decision to unilaterally stop
all shipments of cargo.
22
September 2014
At a board meeting of SG Iron held in Mbanane, Sihle
Dlamini representing the King and Mbuso Dlamini, representing the Swazi
Government, expressed dissatisfaction at the status of the company, saying that
a shareholder dispute at SARL was impacting on SG Iron, something which was disputed
by SG Iron.
The two men gave an ultimatum that fresh funds
should be injected into the project no later than 26 September 2014. The
Chairman of SG Iron, appointed by SARL, was present at this board meeting, and
he requested that management allow the sale of the cargo, which would release
sufficient funds to keep the company operating.
SARL again requested that the King should, ‘for the
good of the company’s workers, its shareholders and the kingdom of Swaziland’,
repay the full or part of the US$10 million loan / advance dividend to allow
the continued operation of SG Iron. Sihle Dlamini, the King’s representative,
refused.
Subsequent to the meeting, Sihle Dlamini, representing
the King, asked SARL to wipe out the US$10 million loan.
29
September 2014
In a letter dated 29 September 2014, SARL refused to
write off the King’s debt. SARL said in January 2015 that in response to this, Sihle
Dlamini took a unilateral decision to stop operations and place the company
into Judicial Management and then liquidation. This decision was taken without
discussions with the major shareholder or considering the voting rights in
place at SG Iron.
3
October 2014
Sihle Dlamini representing the King and Mbuso Dlamini,
representing the Swaziland Government, called for a meeting of the Board of
Directors and despite being told by the Chairman of the Board Shanmuga Rethenam
that he could not attend, they went ahead with the meeting without him.
This was the first Board Meeting that had been held without
the Chairman’s presence in the history of SG Iron. Sihle Dlamini, the King’s
representative, served as the Chairman of the meeting, although he represented
only 25 percent of the company’s share capital and SARL, the 50 percent
shareholder, was supposed to have control of the board.
Sihle Dlamini and Mbuso Dlamani both resolved to
place SG Iron under Judicial Management, without seeking the Chairman’s consent,
rather than permitting operations and cargo sale to continue.
10
October 2014
SG Iron was
placed under provisional Judicial Management by an Order of the High Court of
Swaziland dated 10 October 2014. This order was based on the founding affidavit
of Sihle Dlamini, the King’s representative. The Judicial Manager was able to immediately
take control
and assess the affairs, assets and liabilities of SG Iron.
In his statement, Dlamini said the company,
‘commenced operations on the 21st of October 2011 and it has been extremely
successful to date and has been a major income earner for the Kingdom of
Swaziland.
‘[It] has also provided a number of investment
opportunities to local transport contractors, construction companies and heavy
plant and machinery contractors who carry out the bulk of its mining operations
at Ngwenya.’
He added the company, ‘is not in an insolvent position
in that its assets exceed its liabilities’. He said, however, the Board of Directors
had ‘become hamstrung’ and was unable to take effective decisions on the
operations of the company.
He said, ‘During or about December 2013, a serious
shareholder dispute arose between the shareholders of the investor SARL, which
dispute has resulted in arbitration proceedings being instituted between
themselves in Singapore.’
He said he was not, ‘fully apprised of the nature of
the dispute’, but nonetheless believed it meant that SARL representatives on
the Board of SG Iron were unable to take decisions.
Sihle Dlamini also said that the falling price of
iron ore had impacted the company. He said the price fell from E1,360 (about
US$136) per tonne in January / February 2014 to E550 (US$55) per tonne. This
was a new six-year low of the price of iron ore.
‘It also effectively meant that the cost of
processing the ore now at the present moment exceeds the price that [SG Iron] is
able to obtain for the ore on the international market. In other words, it has become
financially impossible to continue to mine.’
He stated, ‘Currently, as at 30 September 2014 [SG
Iron’s] total indebtedness to its creditors amounted to approximately E42
million (US$4.2 million). Although that amount seems large, [SG Iron] would
very easily be able to pay these creditors if it were in a position to sell the
product that it currently has and more so if the price of iron ore recovers.’
However, he did not report that even at the lowest
price of US$55 per tonne, if he himself, as the King’s representative, were to
permit the 100,000 tonnes of ore stockpiled to be sold it would raise US$5.5
million, more than the US$4.2 million SG Iron owed its creditors.
In his statement, Sihle Dlamini made no reference to
the US$10 million loan that had been made to the King that he subsequently
refused to pay back.
16
December 2014
On the request of the Judicial Manager appointed by
the Court, the Court ordered the provisional liquidation, or winding up, of SG
Iron by an Order dated 16 December 2014.
22 January
2015
A Notice of Investment Dispute from SARL prepared
for the International Centre for Settlement of Investment
Disputes (ICSID) on 22 January 2015 stated the Judicial
Manager, who it said was controlled by the King through Sihle Dlamini and Mbuso
Dlamini, informed all creditors / vendors of SG Iron of its provisional
liquidation, but failed to inform its largest creditor and primary shareholder,
SARL, in writing of the event. He also failed to inform Eltina Limited, a major
creditor of SG Iron, who bought the cargo of SG Iron and had provided US$10
million as a loan to SG Iron.
SARL reported. ‘The Judicial Manager met with [Sihle
Dlamini and Mbuso Dlamini] the Director representing the King and Government
almost every day and took instructions only from them’, not the SARL directors,
or Eltina Limited.
SARL reported, ‘[SARL] should have been given the
opportunity to put forward their case before the Judicial Manager, since there
were numerous alternatives to revive the company, in a violation of their due
process rights they have not been allowed to do so by [the Swaziland
directors].’
SARL added the Judicial Manager, ‘acting solely on
the instructions of [the King’s] representatives, wholly failed his duty’, and
when SARL and Rethenam, as Chairman of SG Iron, asked to sell cargo at a higher
price even to its own competitor, the Judicial Manager ignored this request.
‘The only possible explanation for his refusal was
that [the Swaziland representatives] knew that, if a cargo was sold, the company
would receive cash flow and SG Iron could not be liquidated.’
The closure of the mining project cost 700 people their
jobs in Swaziland and it was estimated that several hundred jobs were also lost
at the Port of Maputo, Mozambique.
SARL also reported that it had ‘direct evidence’
that the mine was being guarded by the Umbutfo Swaziland Defense Force.
‘[King Mswati III] is the Commander-in-Chief of the
Umbutfo Swaziland Defense Force, providing further evidence of the wholesale
expropriation of [SARL’s] investment by state organs of [Swaziland] including
the King’s Office, [Swaziland’s] judiciary and [Swaziland’s] military,’ it
stated.
SARL added that as a result of SARL’s closure its ‘investment
has been expropriated’, and the King’s US$10 million dividend / loan ‘has been
written off by judicial decree’.
SARL added, ‘Having expropriated [SARL’s]
investments and avoided the repayment of US$56 million in loans to finance the
investment, it is understood that the Judicial Manager is now attempting to
sell SG Iron to third parties for a song.’
The notice stated it had ‘suffered direct harm in
the amount of no less than US$141,147,440.17, for the direct financial
consequences of the behaviour of the King and his representatives.
In addition it is claiming US$57,186,022.53 for its
advance and loan owed by SG Iron to SARL. SARL also stated that Eltina Limited was
owed US$5,426,954.66.
In its notice of investment dispute, SARL said the
order from Sihle Dlamini issued in August 2014 that no more iron ore should be
sold was ‘a deliberate attempt to create an artificial cash crisis’ at SG Iron in order to gain
control of the company and expropriate the company of its investments.
SARL linked the move to destroy the company to 6
April 2012 when the request was made by King Mswati III, for the US$10 million
loan.
‘It appears to be the desire to avoid the repayment
of this advance dividend / loan to HMK [His Majesty the King] that lies at the
root of the expropriation of [SARL’s] investments in Swaziland,’ SARL stated.
1
February 2015
The Observer
on Sunday, a newspaper in Swaziland, in effect owned by King Mswati,
attacked SARL and its Notice of Investment Dispute. It quoted Sihle Dlamini,
who called the notice ‘a smear campaign’. He also likened SARL to ‘terrorist’
organisations.
Following publication of this article, William Kirtley, attorney to SARL, wrote to the Observer, to say, ‘The only person who stood to gain anything from
this was HMK [the King], since the joint venture had provided an advance
payment / loan of US$10 million and,
indeed, during one of the final board meetings it was repeatedly requested that
this be written off SG Iron’s books.’
8
February 2015
The Observer on Sunday,
part of the Swazi Observer group of newspapers, in effect owned by King Mswati
and described by the Media
Institute of Southern Africa in a 2013 report on press freedom in the kingdom as ‘a
pure propaganda machine for the royal family’, attacked
SARL and said it was, ‘lying by claiming to have filed a notice of
arbitration with the International Centre for Settlement of Investment Disputes
(ICSID) against the Kingdom of Swaziland’. It said it had proof that no such
notice had been lodged.
In fact, SARL had never claimed to have ‘filed a notice of arbitration.’
In a
media release dated 29 January 2015, it was announced SARL had
submitted ‘a notice of investment dispute’.
A notice of investment
dispute is first filed to see if the amicable resolution of a dispute is
possible. Only when it is clear that the
amicable resolution of a dispute is not possible is the ‘Notice for Arbitration’
filed.
See also
MYSTERY
OF SWAZI KING’S 10m LOAN
KING
AT CENTRE OF IRON MINE FAILURE
ONLY
KING GAINS FROM MINE FAILURE
http://swazimedia.blogspot.com/2015/02/only-king-gains-from-mine-failure.html