New scramble for Africa
At this weekâ€™s Mining Indaba in Cape Town the Democratic Republic of Congo (DRC) was touted as a hot new investment destination. But companies selling the DRCâ€™s rich mineral prospects donâ€™t always tell investors what theyâ€™re getting into, or who theyâ€™re getting in with.
The Mail & Guardian has tracked two cases featuring listed companies hiding involvement of controversial partners—both with South African connections.
Case 1: Billy Rautenbach
Last week the Central African Mining and Exploration Company (Camec) — listed on Londonâ€™s junior exchange and chaired by former England cricketer Phil Edmonds — announced a $80-million deal to buy lucrative DRC mining operations and concessions, rich in copper and cobalt deposits.
What the company did not say was that the man behind its new partnership is Zimbabwean Billy Rautenbach, a fugitive from South African justice.
Nor did it mention that the Rautenbach company that previously controlled the concessions was exiting from a particularly nasty fight with his former partners. The dispute involves allegations against Rautenbach of intimidation, cheating and running the business like his personal piggy bank.
Through his attorney, Rautenbach denied all the allegations and said the matter had been settled “amicably”.
There is an international arrest warrant for Rautenbach, who commutes between Harare and the DRC, on charges relating to his erstwhile management of Hyundai motors in South Africa.
Edmonds, who is at the Mining Indaba, did not respond to a message left with his secretary, but earlier told Britainâ€™s Daily Telegraph: “We didnâ€™t think it was in any way relevant to talk about Mr Rautenbach.”
Rautenbach is now effectively a 20% shareholder in listed Camec via the issue of Camec shares for part of the $80-million.
Edmonds told the British paper: “We believe [the warrant] is a purely political situation. It has not come to court, so we are quite happy with the due diligence we have done.”
Due diligence, however, apparently did not include talking to Rautenbachâ€™s former partner in the DRC venture, James Tidmarsh, Rautenbachâ€™s Geneva-based company lawyer.
Rautenbach was reportedly forced to buy out Tidmarsh and another minority shareholder after Tidmarsh obtained a court order in the British Virgin Islands — where most of Rautenbachâ€™s companies are registered — placing his holding company for the DRC operation in provisional liquidation.
Rautenbach settled “amicably” with his former minority shareholders, lifting the liquidation, but not before Tidmarsh had placed on record a 100-page affidavit setting out allegations against Rautenbach in damning detail.
They included claims that he was cheating his compulsory joint venture partner, the DRC state-owned Gecamines, which holds 20% of Rautenbachâ€™s Boss Mining operation.
In a letter to Gecamines, Tidmarsh alleged Rautenbach was selling them short, paying the joint venture just above cost for the mined ore, which his wholly owned marketing company then sold at a massive profit.
“The purchase of the totality of the production of Boss Mining â€¦ almost at the production cost cannot be justified,” he wrote.
Tidmarsh alleged in his affidavit that this made Rautenbach cross: “He told me the letter had damaged the company and had cost him more than $1-million to ‘sort outâ€™. He told me the way to treat the Congolese was to ‘drip-feedâ€™ them with money.”
Resigning as director of another of Rautenbachâ€™s affiliate companies, Tidmarsh noted in the minutes that Rautenbach was drawing repayment of “loans” extended to the company of $10-million: “Such ‘loansâ€™â€¦ have never been properly formalised or justifiedâ€¦ nevertheless large amounts of money have been taken, either directly by the majority shareholder, or for his personal or familyâ€™s benefit.”
Efforts by the minority shareholders to challenge this “loan”, to demand audited company accounts, and to get a fair share of the $1-million in monthly profits led to a breakdown in relations with Rautenbach.
According to Tidmarsh, Rautenbach opted for a forced buy-out of the minorities and attempted to soften them up with implied threats, for example telling Tidmarsh that he (Rautenbach) could no longer “protect” Tidmarsh if he travelled to the DRC and that he could expect to be arrested on his arrival.
At a tense meeting in Harare, Rautenbach allegedly offered to buy out the 20% minority share for $2-million, paid out over 20 months to make sure the minorities “behaved”.
If they did not accept the offer, Tidmarsh alleged, Rautenbach warned that he would engineer to sell the assets out of the company and make sure the minorities got “nothing”.
Case 2: Nico Shefer
In the other case, court action due to begin on Friday has exposed the role of controversial businessman Nico Shefer in the Congo concessions secured by Metorex, a company listed on the JSE and in London.
In the Pretoria High Court, a company with a multimillion-rand judgement against the DRC government will ask the court to subpoena Shefer, Metorex executives and others involved in the DRC project.
Identiguard International wants the court to probe the relationship between Metorex, Sentinelle Global Investments — a company in which Sheferâ€™s family trust has a share — and the DRC government.
Identiguardâ€™s debt judgement against the DRC apparently flows from an agreement reached with the DRC government in payment for the recovery of ore allegedly smuggled out of the DRC by Rautenbach during his tenure as chief executive of Gecamines.
With the support of his Zimbabwean patrons, notably current Minister of Rural Housing Emmerson Mnangagwa, the late Laurent Kabila appointed Rautenbach to run Gecamines in November 1998. He was removed in March 2000, following allegations that he was skimming the operation for his own benefit.
Identiguard has scratched around for DRC government assets to attach in South Africa and latched on to a Metorex circular which claimed the company had “concluded an agreement” with the DRC government and been “granted a mining licence” to exploit an ore body and stockpile known as Ruashi, together with it minority partner, Sentinelle.
Metorex used this information, in part, to raise millions of rands in a public share offer.
When lawyers for Identiguard went knocking on Metrorexâ€™s door with their claims, the company then replied that they in fact had no agreement with the DRC government, and therefore no liability that could be tapped.
The agreements, they said, were actually between the DRC and Ruashi Mining, a DRC company that could not, therefore, be tapped for the South African claim, despite Metorexâ€™s majority shareholding in it.
In court papers, Metorex executive Charles Needham, strenuously resisted Identiguardâ€™s efforts to bring him to court to give evidence about the matter.
He claimed the compilers of the circular simply “thought it prudent at the time not to refer to the involved and intricate structure of the contracts”.
Needhamâ€™s Achilles heel seems to be the question of Sheferâ€™s involvement.
Shefer may have had a bad press. His lawyers claim the corruption charge against him reported in the M&G last month is dead in the water. And Sheferâ€™s current DRC patron, Diomi Ndongala, had a reputation for trying to clean up the mining sector during his brief tenure as minister of mines in 2003.
But when the M&G asked Needham, he professed not to know about the shareholding in Sentinelle of Shefer and his wifeâ€™s Taniko Family Trust: “Itâ€™s not on the register of shareholders,” he claimed.
Needham took this line, despite referring, in his replying affidavit to Identiguard, to the written evidence of Sentinelleâ€™s accountant, who confirms Taniko as a shareholder.
The JSE has confirmed that a written complaint has been lodged against Metorex relating to the Ruashi project circular, claiming it was misleading.