EXCLUSIVE: Bank advisor warned against Aurora mine deal

By IAfrica
In South Africa
Aug 25th, 2014

JOHANNESBURG – A Standard Bank transaction advisor says her warnings over a 2009 mine deal involving Aurora Empowerment Systems were ignored by the liquidators who approved the deal.

Transaction advisor Sandra du Toit said red flags initially went off when the bank was unable to locate the Malaysian investor who had promised to provide over R600-million in funding the for purchase of two former Pamodzi Gold mines which were in liquidation. 

These revelations are contained in hundreds of pages of transcripts from an insolvency inquiry held by the Master of the High Court between 2011 and 2013.

The testimony has until recently been kept secret, however a court order by Judge Erberhard Bertelsman resulted in all the transcripts being made public.

The inquiry looked into the affairs of the Pamodzi group of companies which led to their liquidation and the subsequent takeover of two of their mines by Aurora.

President Jacob Zuma’s nephew Khulubuse Zuma and former President Nelson Mandela’s grandson Zondwa Mandela are among the company’s directors.

Aurora has been liquidated. 

Warnings ignored

On April 17, 2012 Du Toit told the inquiry, chaired by Advocate Wayne Gibbs, about the year-long period she spent advising the Joint Provisional Liquidators of Pamodzi.

She said the bank had wanted to confirm that the funding promised by Aurora would materialise. Malyasian investor, Dato Zainal Rajah Shah and his company AM Capital, were allegedly going to capitalise the deal.

But when Du Toit asked a representative from Standard Bank Malaysia to find out more about Shah, he was nowhere to be found.

Du Toit told the inquiry that Shah’s office turned out to be “meeting rooms” and not a real office. Nobody in Malaysia seemed to know about Shah.

“If somebody directed an enquiry to me about somebody with a similar profile in the South African market I would be able to ask a couple of my colleagues and they would say, ‘Yes, I know him, I have worked with him, he actually is an important guy, he is a big deal maker’, or not, and when we reached out to our Country Head in Malaysia the feedback came back, ‘We haven’t heard about this guy before’,” she said.

Du Toit added that there were several companies with the name AM Capital in Malaysia, but none of them could be linked to the mysterious Shah.

Proof of Funding

After the initial red flag, the bank demanded proof that the funding was legitimate, Du Toit says.

“We repeatedly advised the liquidators that we required stronger documentation, that we required proof of funding that we can actually verify by phoning a commercial bank confirming that the commercial bank had issued the letter, confirming that the funds were in fact in the bank account…”

“No such letters were forthcoming and what we were offered instead was opportunities to meet with these potential backers and to listen to them convincing us of their financial capability,” du Toit said.

Other bidders

Du Toit said she had suggested that the liquidators find other bidders for the mines, which now lay in ruins after being stripped of their assets.

However, Du Toit said, former liquidator Enver Motala refused outright, instead insisting that the liquidators would “not entertain” any new offers while still dealing with Aurora.

“If you know there is another bidder breathing down your neck you are sufficiently motivated to make sure that you get your ducks in a row. When there is no other bidder on the horizon and no other bidder being entertained by the joint provisional liquidators, what motivation is there to complete this transaction in a speedily and efficient manner?” she said.

Motala has since been removed as a liquidator amid allegations that he had a prior relationship with some of those linked to Aurora.

He had also not disclosed a prior criminal record as required by law. Another liquidator, Gavin Gainsford was also removed.

Du Toit says Motala had taken a “hard line” and consistently rejected her advice.

“We were instructed by Mr Motala that the transaction with Aurora will proceed,” she said.

Fraud allegations

Meanwhile, the North Gauteng High Court will this week hear a case relating to allegations of fraud against the directors of Aurora and two of their business partners, Fazel and Suliman Bhana.

The Pamodzi liquidators are claiming R1,7-billlion in damages from the abortive deal. The liquidators want Mandela, Zuma, Thulani Ngubane and the Bhanas held personally liable for the damage caused to the mines along with funds lost in the deal.

Meanwhile, President Jacob Zuma is yet to sign a proclamation authorising the Special Investigating Unit to probe what went on at the former Pamodzi mines. 

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