Reported by Swazi Media Commentary
Swaziland’s absolute monarch King Mswati III and his personal representative Sihle Dlamini were at the very heart of events that led to the collapse of the mining company SG Iron at the Ngwenya Iron Ore Mine. It had debts of US$4 million when it closed and more than 700 jobs were lost. King Mswati took a US$10 million loan from the company less than six months after it started trading which he refused to pay back when it hit difficulties.
Swaziland’s absolute monarch King Mswati III and his personal representative Sihle Dlamini were at the very heart of events that led to the collapse of the mining company SG Iron at the Ngwenya Iron Ore Mine. It had debts of US$4 million when it closed and more than 700 jobs were lost. King Mswati took a US$10 million loan from the company less than six months after it started trading which he refused to pay back when it hit difficulties.
A compensation
claim for at least US$141 million has been prepared by Southern
Africa Resources Ltd (SARL), against the Kingdom of Swaziland at the
International Centre for Settlement of INVESTMENT Disputes (ICSID).
SARL held a 50
percent stake in SG Iron Ore Mining (PTY) Ltd (SG Iron), which had formerly been
known as Salgaocar Swaziland (PTY) Ltd. The Swaziland Government held 25
percent of the shares and the King personally held 25 percent ‘in trust for the
nation.’
The mine was
forced to cease trading in August 2014 after a series of events orchestrated by
Sihle Dlamini, who is Director Administration at the King’s Office and
Assistant Private Secretary to the King. He was also the King’s personal
representative on the SG Iron board of directors.
Here is a step
by step guide to what happened.
30 September
2010
SG Iron Ore
Mining (PTY) Ltd. (when it was still called Salgaocar Swaziland (PTY) Ltd), was
registered in accordance with the laws of Swaziland on 30 September 2010 under
Certificate of Incorporation No.1196, with its principal business of operations
at the Old Ngwenya Mine, Ngwenya, in the Hhohho district of Swaziland.
SG Iron’s stated
goal was to reprocess iron ore dumps left over by the Anglo American Mining
Company in the late 1970’s, when it ceased mining operations in the area, and
to secure the main mine lease for 30 years once the iron ore dumps had been
cleared.
Due to
advancements in technology, it had become scientifically possible to process
the dumps and upgrade them into sellable grade ore. This project would create
new jobs in Swaziland, while creating a new source of wealth for Swaziland, as
well as clearing Swaziland of the dumps left by the Anglo American Mining
Corporation and restarting mining activities.
30 June 2011
King Mswati, who
as absolute monarch in Swaziland has sole control over mining rights in the
kingdom, granted SG Iron a Mining Lease for seven years. The company agreed to
pay the King ‘in trust for the Swazi Nation’ a royalty of 3 percent. It also
gave the King 25 percent of the total company issued share capital at no cost.
It also gave a further 25 percent of the issued share capital to the Swaziland
Government, again at no cost. The remaining 50 percent of issued share capital
went to SARL.
The King holds
shares ‘in trust for the Swazi Nation’, but it iswidely
reported outside of Swaziland that in fact he has received millions of
dollars from international companies such as phone giant MTN; sugar
conglomerates Illovo and
Remgro; Sun International hotels and beverages firm SAB Millerto, which he
spends on himself and his family.
The King, who
rules over an impoverished kingdom of only 1.4 million people, has 13 palaces,
a fleet of top-of-the range BMS and Mercedes cars and a private jet airplane.
Meanwhile, seven in ten of his subjects exist on incomes of less than US$2 per
day.
As a general
undertaking, the Mining Lease provided that each party should ‘act in such
manner as shall be necessary in order to give effect to [the] Mining lease’.
That mean they should all have worked to make sure the company was a
success.
It was agreed
SARL, being the 50 percent shareholder of SG Iron, had management control of SG
Iron, which was in charge of, and responsible for, day-to-day running of SG
Iron. SARL was to provide all financial support and technical expertise
necessary for SG IRON to succeed.
Article 6.8 of
the Mining Lease provided that the Chairman in addition to having his own vote
on the Board of Directors should have a casting vote. Shanmuga Rethenam was
appointed as the Executive Chairman of the Board of Directors of SG Iron, and
Sivarama Petla was appointed as its Chief Executive Officer. Both Executive
Chairman and CEO were nominee and representatives of SARL.
Mbuso Dlamini
was appointed as the Director for and on behalf of the Swaziland Government and
Sihle Dlamini was appointed as the Director for and on behalf of the King.
SG Iron put up
approximately US$50 million to start the mining operations and added further
capital. The King and the Swaziland Government made no financial contributions.
21 October
2011
The official
inauguration of operations was on 21 October 2011 with the dispatch of ore to
Maputo Port in Mozambique. On 21 December 2011, the first shipment was carried
out from Maputo Port and on 9 March 2012, a rail services from Mpaka to Maputo
Port, Mozambique, started.
16 April 2012
Less than six
months after operations began, King Mswati, through his representative Sihle
Dlamini, asked for and received an advanced payment / loan of US$10 million on
the King’s future dividend. This was at a meeting of the Board of Directors of Salgaocar
Swaziland held in Mbabane, Swaziland, on 16 April 2012. The money was to
be repaid from future dividends payable to the King.
There was no
public announcement made that the King received the money which he held ‘in
trust for the nation’ and it is not known how he spent it. This later fuelled
speculation that he had used the money to fund his own personal lavish
lifestyle.
26 April 2012
Reports began to
appear on the Internet and later in newspapers in Swaziland that King Mswati
had taken
delivery of a privateDouglas DC-9 jet and that it had been given to
him as a gift bySalgaocar.
The company
refused to confirm or deny the gift. The Swazi Government was lukewarm in its
denial. The Times of Swaziland reported, ‘Dismissing the
rumours, government Press Secretary Percy
Simelane said “That is pure speculation. The donor has asked to
remain anonymous and it will be like that.”’
Barnabas
Dlamini, the Swazi Prime
Minister, claimed to the media that the jet had been donated by
‘development partners’ of Swaziland.
21August 2014
Sihle Dlamini,
representing the King at SG Iron wrote to the CEO of SG Iron, Sivarama Petla,
instructing him not to sell any more cargo on 21 August 2014. He did this
without consulting the major shareholder, SARL. Since that day all attempts by
SG Iron to sell cargo were blocked.
Contrary to the
terms of the Mining Lease, the Board of Directors was not consulted about the
decision to stop sales of iron ore. The Chairman, who was to chair all board
meetings under Article 6.7 of the Mining Lease, and who also possessed a right
of veto, was not even informed of the King’s decision.
In October 2014,
in a founding affidavit at the Swaziland High Court to have the company placed
under Judicial Management, Sihle Dlamini would state that a shareholders
dispute at SARL in Singapore had made it impossible for management decisions to
be taken at SG Iron. He also stated that the fall in the world price of iron
ore had made production at the mine uneconomical.
After 21
August 2014
Blocking the
sale of iron ore meant no trade could take place and SG Iron’s operations were
brought to an abrupt standstill. Since no money was coming into the company
from the sale of cargoes there was a cash-flow crisis.
Sales could have
resumed at any time because more than 100,000 tonnes of iron ore remained at
Maputo Port, Mpaka Railway Siding and at the Mine Stockyard. In his High Court
affidavit in October 2014, Sihle Dlamini revealed he had given
instructions for ore to be stockpiled until the price of iron ore recovered.
SARL also
requested that the King repay the full or part of the US$10 million loan /
advance dividend to allow SG Iron to continue operating. The King refused to do
this, instead the King’s representative Sihle Dlamini demanded that SARL inject
more capital into the business, something it would not do while shipment of
cargoes remained blocked.
SARL would say
in January 2015 that it felt it had been held hostage by the King’s
representative’s decision to unilaterally stop all shipments of cargo.
22 September
2014
At a board
meeting of SG Iron held in Mbanane, Sihle Dlamini representing the King and
Mbuso Dlamini, representing the Swazi Government, expressed dissatisfaction at
the status of the company, saying that a shareholder dispute at SARL was
impacting on SG Iron, something which was disputed by SG Iron.
The two men gave
an ultimatum that fresh funds should be injected into the project no later than
26 September 2014. The Chairman of SG Iron, appointed by SARL, was present at
this board meeting, and he requested that management allow the sale of the
cargo, which would release sufficient funds to keep the company operating.
SARL again
requested that the King should, ‘for the good of the company’s workers, its
shareholders and the kingdom of Swaziland’, repay the full or part of the US$10
million loan / advance dividend to allow the continued operation of SG Iron.
Sihle Dlamini, the King’s representative, refused.
Subsequent to
the meeting, Sihle Dlamini, representing the King, asked SARL to wipe out the
US$10 million loan.
29 September
2014
In a letter
dated 29 September 2014, SARL refused to write off the King’s debt. SARL said
in January 2015 that in response to this, Sihle Dlamini took a unilateral
decision to stop operations and place the company into Judicial Management and
then liquidation. This decision was taken without discussions with the major
shareholder or considering the voting rights in place at SG Iron.
3 October
2014
Sihle Dlamini
representing the King and Mbuso Dlamini, representing the Swaziland Government,
called for a meeting of the Board of Directors and despite being told by the
Chairman of the Board Shanmuga Rethenam that he could not attend, they went
ahead with the meeting without him.
This was the
first Board Meeting that had been held without the Chairman’s presence in the
history of SG Iron. Sihle Dlamini, the King’s representative, served as the
Chairman of the meeting, although he represented only 25 percent of the
company’s share capital and SARL, the 50 percent shareholder, was supposed to
have control of the board.
Sihle Dlamini
and Mbuso Dlamani both resolved to place SG Iron under Judicial Management,
without seeking the Chairman’s consent, rather than permitting operations and
cargo sale to continue.
10 October
2014
SG Iron was
placed under provisional Judicial Management by an Order of the High Court of
Swaziland dated 10 October 2014. This order was based on the founding affidavit
of Sihle Dlamini, the King’s representative. The Judicial Manager was able to immediately take control and
assess the affairs, assets and liabilities of SG Iron.
In his
statement, Dlamini said the company, ‘commenced operations on the 21st of
October 2011 and it has been extremely successful to date and has been a major
income earner for the Kingdom of Swaziland.
‘[It] has also
provided a number of investment opportunities to local transport contractors,
construction companies and heavy plant and machinery contractors who carry out
the bulk of its mining operations at Ngwenya.’
He added the
company, ‘is not in an insolvent position in that its assets exceed its
liabilities’. He said, however, the Board of Directors had ‘become hamstrung’
and was unable to take effective decisions on the operations of the company.
He said, ‘During
or about December 2013, a serious shareholder dispute arose between the
shareholders of the investor SARL, which dispute has resulted in arbitration
proceedings being instituted between themselves in Singapore.’
He said he was
not, ‘fully apprised of the nature of the dispute’, but nonetheless believed it
meant that SARL representatives on the Board of SG Iron were unable to take
decisions.
Sihle Dlamini
also said that the falling price of iron ore had impacted the company. He said
the price fell from E1,360 (about US$136) per tonne in January / February 2014
to E550 (US$55) per tonne. This was a new six-year low of the price of iron
ore.
‘It also
effectively meant that the cost of processing the ore now at the present moment
exceeds the price that [SG Iron] is able to obtain for the ore on the
international market. In other words, it has become financially impossible to
continue to mine.’
He stated,
‘Currently, as at 30 September 2014 [SG Iron’s] total indebtedness to its
creditors amounted to approximately E42 million (US$4.2 million). Although that
amount seems large, [SG Iron] would very easily be able to pay these creditors
if it were in a position to sell the product that it currently has and more so
if the price of iron ore recovers.’
However, he did
not report that even at the lowest price of US$55 per tonne, if he himself, as
the King’s representative, were to permit the 100,000 tonnes of ore stockpiled
to be sold it would raise US$5.5 million, more than the US$4.2 million SG Iron
owed its creditors.
In his
statement, Sihle Dlamini made no reference to the US$10 million loan that had
been made to the King that he subsequently refused to pay back.
16 December
2014
On the request
of the Judicial Manager appointed by the Court, the Court ordered the
provisional liquidation, or winding up, of SG Iron by an Order dated 16
December 2014.
22 January
2015
A Notice of
Investment Dispute from SARL prepared for theInternational Centre for
Settlement of Investment Disputes (ICSID) on 22 January 2015 stated the
Judicial Manager, who it said was controlled by the King through Sihle Dlamini
and Mbuso Dlamini, informed all creditors / vendors of SG Iron of its
provisional liquidation, but failed to inform its largest creditor and primary
shareholder, SARL, in writing of the event. He also failed to inform Eltina
Limited, a major creditor of SG Iron, who bought the cargo of SG Iron and had
provided US$10 million as a loan to SG Iron.
SARL reported.
‘The Judicial Manager met with [Sihle Dlamini and Mbuso Dlamini] the Director
representing the King and Government almost every day and took instructions
only from them’, not the SARL directors, or Eltina Limited.
SARL reported,
‘[SARL] should have been given the opportunity to put forward their case before
the Judicial Manager, since there were numerous alternatives to revive the
company, in a violation of their due process rights they have not been allowed
to do so by [the Swaziland directors].’
SARL added the
Judicial Manager, ‘acting solely on the instructions of [the King’s] representatives,
wholly failed his duty’, and when SARL and Rethenam, as Chairman of SG Iron,
asked to sell cargo at a higher price even to its own competitor, the Judicial
Manager ignored this request.
‘The only
possible explanation for his refusal was that [the Swaziland representatives]
knew that, if a cargo was sold, the company would receive cash flow and SG Iron
could not be liquidated.’
The closure of
the mining project cost 700 people their jobs in Swaziland and it was estimated
that several hundred jobs were also lost at the Port of Maputo, Mozambique.
SARL also
reported that it had ‘direct evidence’ that the mine was being guarded by the
Umbutfo Swaziland Defense Force.
‘[King Mswati
III] is the Commander-in-Chief of the Umbutfo Swaziland Defense Force,
providing further evidence of the wholesale expropriation of [SARL’s]
investment by state organs of [Swaziland] including the King’s Office,
[Swaziland’s] judiciary and [Swaziland’s] military,’ it stated.
SARL added that
as a result of SARL’s closure its ‘investment has been expropriated’, and the
King’s US$10 million dividend / loan ‘has been written off by judicial decree’.
SARL added,
‘Having expropriated [SARL’s] investments and avoided the repayment of US$56
million in loans to finance the investment, it is understood that the Judicial
Manager is now attempting to sell SG Iron to third parties for a song.’
The notice
stated it had ‘suffered direct harm in the amount of no less than
US$141,147,440.17, for the direct financial consequences of the behaviour of
the King and his representatives.
In addition it
is claiming US$57,186,022.53 for its advance and loan owed by SG Iron to SARL.
SARL also stated that Eltina Limited was owed US$5,426,954.66.
In its notice of
investment dispute, SARL said the order from Sihle Dlamini issued in August
2014 that no more iron ore should be sold was ‘a deliberate attempt to create
an artificial cash crisis’ at SG Iron in order to gain control of the
company and expropriate the company of its investments.
SARL linked the
move to destroy the company to 6 April 2012 when the request was made by King
Mswati III, for the US$10 million loan.
‘It appears to
be the desire to avoid the repayment of this advance dividend / loan to HMK
[His Majesty the King] that lies at the root of the expropriation of [SARL’s]
investments in Swaziland,’ SARL stated.
1 February
2015
The Observer
on Sunday, a newspaper in Swaziland, in effect owned by King Mswati,
attacked SARL and its Notice of Investment Dispute. It quoted Sihle Dlamini,
who called the notice ‘a smear campaign’. He also likened SARL to ‘terrorist’
organisations.
Following
publication of this article, William Kirtley, attorney to SARL, wrote to
the Observer, to say, ‘The only person who stood to gain
anything from this was HMK [the King], since the joint venture had provided an
advance payment / loan of US$10 million and, indeed, during one of the
final board meetings it was repeatedly requested that this be written off SG
Iron’s books.’
8 February
2015
The Observer
on Sunday, part of the Swazi Observer group of newspapers, in
effect owned by King Mswati and described bythe Media Institute of Southern
Africa in a 2013 report
on press freedom in the kingdom as ‘a
pure propaganda machine for the royal family’, attacked SARL
and said it was, ‘lying by claiming to have filed a notice of arbitration with
the International Centre for Settlement of Investment Disputes (ICSID) against
the Kingdom of Swaziland’. It said it had proof that no such notice had been
lodged.
In fact, SARL
had never claimed to have ‘filed a notice of arbitration.’ In
a media release dated 29 January 2015, it was announced SARL had
submitted ‘a notice of investment dispute’. A notice of investment
dispute is first filed to see if the amicable resolution of a dispute is
possible. Only when it is clear that the amicable resolution of a dispute
is not possible is the ‘Notice for Arbitration’ filed.
ENDS
* Special thanks
to Swazi Media Commentary for this
story
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