Not quite as good as gold

In this edited extract from Brett Kebble: The Inside Story, Barry Sergeant takes a look at the slain businessman’s shady empire.

For all his apparent loyalty to gold, Brett Kebble was a man of paper, a man dragged by his paper creations into a vortex of debt. How differently things might have turned out had he stuck to gold, a quiet life in the suburbs and a modicum of recognition.

The creation of Kebble’s huge and fragile pits of vapour started as early as 30 June 1997, when a JSE-listed entity, New Kleinfontein Properties (NK Props), issued 244-million shares to Consolidated Mining Corporation (CMC). This transaction, with its dramatic provenance, was the toxic fountainhead that would taint every moment of Kebble’s business career.

The shares were issued at 600 cents each, computing to a value of R1,5-billion. For one brief shining moment, due to a single transaction that rates as the biggest South African confidence trick of the 20th century, Brett Kebble was a paper billionaire.

This was a defining deal for Kebble for other reasons as well. NK Props would soon change its name to Consolidated African Mines (CAM) and later morph into JCI Ltd. The 1997 transaction not only allowed Kebble to hijack the original JCI, but also marked the start of his full-time and flagrant abuse of investor cash through slush funds. There was already huge mischief behind the 1997 transaction.

During 1996, Kebble had added many millions of rands to his personal wealth as a member of the cabal of directors at Randgold & Exploration who had talked up the company’s stock price. This phenomenon, in turn, surfed on the bubbles whipped up around Randgold & Exploration subsidiary Randgold Resources, which for its part had surged on the rising tide of the Bre-X apocalypse.

In March 1997, global markets had the first hint of what would eventually crystallise into the incontrovertible truth that Bre-X’s Busang deposit in Indonesia was an utter fraud. Gold stocks, and especially so-called juniors and exploration stocks, tanked. Randgold Resources was battered after its listing in London, dragging Randgold & Exploration’s stock price down by around 90% from its 1997 high. By this time, of course, Kebble had taken his money and run.

Riding solo and in total control so as to avoid sharing his ill-gotten gains with anyone, he was conducting the series of transactions that allowed him to hijack JCI. Kebble had sold his Randgold & Exploration shares to CMC, a company also listed on the JSE and one that he already secretly controlled. In this manner, Kebble listed his own little fortune, which he had made within months. The technique, known as a reverse listing, is hardly rare and is referred to by some investors as the materialisation of an asset.

These early career moves graphically illustrate Kebble’s obsession with control. He didn’t control Randgold & Exploration, but he secretly controlled CMC and NK Props. When NK Props issued shares to CMC, Kebble was simply issuing shares to himself. Showing utter contempt for rules of corporate governance, and even greater disdain for the fiduciary duty of directors, with flagrant disregard for conflict of interest, NK Props bought CMC from Kebble for R1,5-billion. It was a paper transaction from start to finish.

Kebble’s strategy was premised on the simple sales pitch of rescuing the original backers of the sale by Anglo American and De Beers of a controlling stake in the old JCI to the African Mining Group (AMG). It had been marketed as one of the biggest BEE deals during a period when chaos allowed Kebble to deploy his talents as a scam artist to a degree that he would never exceed or even equal.

Ownership of 244-million shares in the new JCI gave Kebble close to 50% control. Furthermore, in the space of about 12 months, Kebble’s apparent value had grown from little more than zero to R1,5-billion, at least on paper.

Apart from the early use of slush funds, the June 1997 deal was classic Kebble in that it involved the vending of totally overvalued shares—in this case in NK Props—with Kebble as the beneficiary. The deal was rare to the extent that buyers of the overvalued shares would normally have been found among the broad investment fraternity, as was the case when Randgold Resources listed in London around the same time. In the NK Props deal, however, Kebble was on both sides and no cash changed hands. In other deals involving outside parties, Kebble would look to mop up cash, not paper. In his truly amazing Walter Mitty world, Kebble owed nobody, and the rest of the world owed him cash.

The general financial climate at the time unquestionably contributed to Kebble being able to successfully stage such a monumental con. Apart from exploiting the market chaos as the gold price tanked, Kebble leveraged every possible detail to his advantage. He networked to maximum effect. He fronted the suspect transaction by enticing a number of important names to the board of what would become the new JCI. The chairman was no less than Mzi Khumalo, head of AMG and boss of the newly acquired old JCI, the very entity that Kebble was hijacking. As long as he was not caught out, Kebble could run the new JCI as if it were his personal salon privé.

A major consequence of Kebble issuing JCI shares worth R1,5-billion to himself was that the new JCI acquired CMC, which would be used as one of his prime slush funds. CMC was delisted shortly after acquisition, and its accounts effectively disappeared from the public domain. They could be accessed only after considerable effort by the relevant authorities in Pretoria. As the meagre cash flows available to Kebble deteriorated, he increasingly expanded his slush fund franchise. During 1999, he acquired Consolidated Mining Management Services (CMMS), the second big slush fund under the JCI umbrella.

The third one was acquired early in 2002, when Kebble used JCI to buy out the minorities in JCI Gold.The company’s rate of debt growth had been completely unsustainable, and by assuming control Kebble could again effectively conceal the accounts from public scrutiny. JCI Gold was the remaining relic from the disembowelled old JCI and, like CMC, was delisted from the JSE. CMMS, a 98% JCI subsidiary, was never listed and would become the single most important Kebble slush fund, but both CMC and JCI Gold played useful roles in concealing what was really going on.

Kebble used CMMS, in particular, to buy properties, mostly ultra-luxurious, including what appears to be an orchid farm. However, CMMS was also the vehicle for a number of other activities that had little, if anything, to do with mining, such as share trading.

The 2003 accounts reflect a profit of R14-million for “jobbing”, an activity synonymous with chancing, risking, hazarding, adventuring and gambling. As part of jobbing the stock market, Kebble indulged in one of his favourite bad habits, scrip borrowing, a tactic specifically designed to confuse friend and foe alike. The CMMS accounts show that the entity borrowed Western Areas shares worth R115-million under the heading “contingent liabilities”.

Kebble also borrowed stock in JCI, JCI Gold, Randgold & Exploration and CMC. By the end of 2004, CMMS controlled 85 companies with widely differing interests, ranging from diamond concessions in Angola to luxury properties in Cape Town’s Clifton, and from trading and investment entities (such as Quick Leap Investments 137) to numerous BEE vehicles, including JSE-listed Matodzi.

Brett Kebble: The Inside Story is published by Struik



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