King Mswati III is encouraging Indian
investors to reopen the Ngwenya
iron ore mine in Swaziland that was forced to
close in 2014 after he looted US$10 million from it.
The King stands to take 25 percent of
the shares in any company that takes up his offer.
The King, who rules Swaziland as
sub-Saharan Africa’s last absolute monarch, made
his offer during a trip to India earlier in March
2017.
The King and his personal
representative Sihle
Dlamini were at the very heart of events that led to the collapse
of the mining company SG Iron at the Ngwenya Iron Ore Mine in 2014.
It had debts of US$4 million when it closed and more than 700 jobs were lost.
King Mswati took a US$10 million loan from the company less than six months
after it started trading which he refused to pay back when it hit difficulties.
A compensation
claim for at least US$141 million was later
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 about 1.3 million people, has 13
palaces, a fleet of top-of-the range BMS and Mercedes cars and a private jet
airplane. He is soon to take delivery of a second private jet. 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
Reports began to appear on the Internet
and later in newspapers in Swaziland that King Mswati had taken
delivery of a private Douglas DC-9 jet and that it had been given to him as a gift by Salgaocar. The company has
denied it gave the jet to the King, but 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 at the then exchange rate). 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 Defence
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.
·
This
is a revised version of an article first published on the Swazi Media Commentary website on 9 February
2015.
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
