Duduzane Zuma, President Jacob Zuma’s son, is just a step removed from and, although it is denied, may hold a stake in the opaque BEE company that controversially grabbed rights worth billions from under the noses of corporate giants Kumba Iron Ore and ArcelorMittal.
The company, Imperial Crown Trading 289, won prospecting rights to a residual share of the Sishen iron ore mine from the mineral resources department late last year, pipping Kumba, which has rights to the rest of the mine and operates it. ArcelorMittal previously owned the residual share.
The allocation has handed Imperial Crown, a shelf company without a track record, the balance of power in a R5-billion-a-year standoff between Kumba and ArcelorMittal. If it sells to either party, it will reap a vast profit.
Despite a media storm, Imperial Crown has revealed little of itself. The only public information is that it was started 16 months ago with a board of two well-connected directors: Archie Luhlabo of the Mineworkers’ Investment Company and Gugu Mtshali, reportedly Deputy President Kgalema Motlanthe’s long-term romantic partner. It is not known whether Luhlabo and Mtshali represent themselves or others as shareholders.
As the storm was about to burst last month, Imperial Crown handed 50% of itself to a new investor, represented on its board by Jagdish Parekh who claimed on Wednesday that he represented no-one but himself — that he personally held half of Imperial Crown, which was offered to him because of his mining, financial and legal expertise.
But this was contradicted by a source with access to some of the players in the matter. Requesting anonymity, the source said Parekh held the stake on behalf of JIC Mining Services, a mining outsourcing company that Parekh leads as chief executive officer.
Indeed it is unlikely that a company that has landed highly lucrative mineral rights would cede half of itself to an individual, no matter how well qualified.
A key requirement of the Mineral and Petroleum Resources Development Act is that a prospecting rights applicant must have “access to financial resources” and “technical ability”. In the past, start-up BEE companies have entered into an agreement with a “technical partner” which, once the stake is awarded, receives a substantial stake in return for its financing and expertise.
The transfer of 50% is consistent with this pattern, but only if the stake went to JIC rather than Parekh personally.
Either way, Parekh’s entry brings Zuma muscle to Imperial Crown. Duduzane Zuma (27) is a JIC shareholder and serves alongside Parekh on its board.
JIC is controlled by Zuma family benefactors, the Gupta brothers, with Duduzane holding a 26% stake in conjunction with Rajesh Gupta.
The Guptas, immigrants best known for their Sahara Computers business, took Duduzane and his twin sister, Duduzile, under their wing after Zuma’s election as ANC president in December 2007. Duduzile serves on the Sahara board and Duduzane shares multiple directorships with the Guptas.
Interviewed last month, Duduzane said one of the Guptas was his “exclusive partner” who advised him financially and legally.
Parekh is very much part of the Gupta machine: he also runs Oakbay Investments, the Gupta family investment vehicle.
If Parekh holds the Imperial Crown share on JIC’s behalf, Duduzane Zuma, as a JIC director and shareholder, has a stake in Imperial Crown. If Parekh holds the share personally, Zuma muscle is at least tied in via the Gupta network.
The mineral resources department awarded Imperial Crown the Sishen rights in November after ArcelorMittal failed to convert its title to the residual share of the mine to a new-order mining right — apparently because it did not meet BEE requirements.
In what analysts see as more than coincidence, Kumba and Imperial Crown both applied for the rights on May 4 last year, days after ArcelorMittal’s title lapsed. Although Kumba is BEE-compliant, the department chose Imperial Crown on BEE grounds. It is reviewing its decision after Kumba formally complained.
If the review leaves Imperial Crown’s rights intact, it may sell to Kumba or ArcelorMittal, potentially giving one of them the upper hand in their multi-billion-rand dispute.
The dispute arose after Kumba cancelled a historical agreement in February to supply ArcelorMittal with ore at cost-plus-three percent, arguing that ArcelorMittal no longer co-owned the Sishen mine.
The difference between what ArcelorMittal would have paid under the old agreement and will pay at current market rates is about R5-billion a year, enough for either party to make a lucrative offer to Imperial Crown for control of the share.
Industry and consumers are likely to suffer: ArcelorMittal has already announced a R600/ton surcharge on steel because of extra input costs. The trade and industry department has objected, saying it will “hamper our industrialisation efforts”.
Repeated efforts to reach Luhlabo, Mtshali and Duduzane Zuma for comment failed. Parekh denied that Duduzane Zuma had any stake in Imperial Crown.