Gupta firms sail close to the wind

Auditors SizweNtsalubaGobodo (SNG) this week abandoned companies controlled by the Gupta family and their associates, citing a board decision after “a thorough assessment of its relationship”.

Nonetheless, several companies in the Oakbay Group this week paid salaries on time, and corporate and court records suggests they are putting in place structures that will allow them to stay in business even as their last bank in South Africa jumps ship.

Gupta family spokespeople were not available and the top managers of various companies refused to answer calls. But employees at various operations on Wednesday confirmed they had been paid their September salaries, and one company in the Gupta network was proud to say as much officially. “Let me be short and clear about this: I paid my salaries, I have weekly wages that need to be paid, and everything was paid,” said Pieter van der Merwe, the chief executive of VR Laser. “It was business as usual for me.”

VR Laser was central to a controversial, and subsequently cancelled, deal between Gupta associates and the state-owned arms company, Denel. This month, VR Laser was applicant number four in a court case in which Gupta companies tried to force the state-owned Indian Bank of Baroda to keep their bank accounts open.

Baroda planned to close their accounts on September 30.

VR Laser had used a combination of Baroda and “pay agents” to pay salaries, Van der Merwe said.

But documents produced in the bid to keep the Baroda accounts open showed that the group of companies’ main pay agent, Terbium Financial Services, was due to end its relationship with those companies at the end of August. In July, the then still JSE-listed Oakbay Resources announced that Terbium had resigned as its bourse-required transfer secretary, shortly after its JSE sponsor, River Group, had also quit.

“Terbium’s termination shall not be earlier than 31 July 2017,” Oakbay said at the time, in the only formal communication about the move. It only emerged in September that Terbium had stayed on as the Gupta group pay agent, receiving large payments from companies in the group and distributing the money to employees using its own banking facilities.

Terbium changed its name from Trifecta Capital earlier this year, just months after the high court set aside a contract between Lekgotla Trifecta Collections, a consortium Trifecta anchored, and the South African Revenue Service (Sars). Sars had requested that move after the amaBhungane Centre for Investigative Journalism reported that Sars commissioner Tom Moyane’s nephew was involved in the consortium and its potentially lucrative contract with Sars.

Terbium chief executive Andre van der Zee was involved in the creation of 4 Africa Exchange, or 4AX, a new bourse in competition with the JSE, which expects to post its first listing this week. Van der Zee could not be reached for comment, and Van der Merwe would not disclose which pay agent his company had used to distribute the September salaries.

Companies such as VR Laser could use several ways to get money to pay agents for distribution, high court Judge Hans Fabricius said last week, in ruling against the Gupta companies in their case against Baroda. They could use a foreign bank account or instruct their own debtors to pay the pay agents.

It had also been alleged that six Gupta companies had already “concluded new pay-agent agreements” before the end of July, Fabricius said in his written judgment, suggesting that there were local companies that did not fear the possible “association” and reputational damage that has seen a long line of professional services companies quit. These companies could be said to have a great deal of courage, though prior Gupta links may also play a role.

One company that could step into the breach on salary payments is The White Lion, documents filed with the high court shows. That company was registered in 2015, although it has made no discernible mark on South Africa as yet. Likewise, its sole director, Martiza Fruin, has left few footprints in official records — and no sign of having the capability to set up a payment network to transfer millions of rands to thousands of people.

But, also in 2015, Fruin was key to the registration of the curiously named Meridiam Mining South Africa. A director of it is Daniel James McGowan, a resident of the United Arab Emirates (UAE), who featured in former public protector’s Thuli Madonsela’s State of Capture report.

McGowan was a director of Centaur Mining when it transferred R885.3-million to the Gupta-controlled company Tegeta, Madonsela reported last year — money that was used in the controversial acquisition of Optimum Coal.

Optimum subsequently featured in allegations of looting at Eskom, which it supplied with coal.

Just where that money came from has long been a source of speculation, especially after revelations in leaked emails that Gupta family operations moved large amounts of money into and out of the UAE.

In June 2016, a company in the Centaur stable announced it had signed a “$100-million credit deal with [a] UAE-based family office”, which would be invested in mining projects “predominantly in South Africa”.

It did not name the family or provide other details.

Centaur is headquartered in Bermuda, with significant operations in the UAE. Neither it nor McGowan could be reached for comment.

Fruin did not respond to attempts to reach her.

There is little evidence of a direct relationship between Fruin and McGowan or between The White Lion and Centaur. But there are strong indications of a close relationship between McGowan and the Gupta family, and evidence that Centaur has ambitions in financial services.

Beyond funding the Optimum acquisition, Centaur also joined the Gupta family in the mining venture Centaur De Roodepoort, as previously reported by the Mail & Guardian. That deal saw the Gupta family turn a R3-million investment into R900-million on paper.

In April 2016, in a flurry of public relations activity, Centaur said its expansion plans revolved around acquiring wealth-management companies in the UAE, South Africa and the United Kingdom. It had financial services licence applications pending in South Africa, it said.

“It’s very political out there,” McGowan said of South Africa in one published interview, “and it’s about getting coal to the right places, and into the power stations.”

On Wednesday, Van der Merwe would not say what his company would do about making October salary payments if its Baroda bank account is closed as scheduled.

“Phone me then,” he said.

This article, published in the Mail & Guardian on September 29 2017, originally referred to Terbium chief executive Andre van der Zee as the driving force behind 4 Africa Exchange. It has been replaced with “was involved in the creation of”. See the full explanation here.

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