Glencore chief executive rejects Molefe’s alternative state capture narrative
Former Glencore chief executive Clinton Ephron on Thursday conceded that the company took a risk by buying Optimum without conducting full due diligence, but rejected former Eskom chief executive Brian Molefe’s claim that it tried to hold the power utility to ransom for coal price increases in a prime example of state capture.
He said Glencore may have been the author of its own
misfortune in taking over a company locked into a contract with escalation
clauses determined in 1993, but that invoking the hardship clause in it when
operations were running at a monthly loss of R100-million was standard business
practice.
“If that is state capture, then I certainly don’t understand
state capture. Because in my mind, who are we capturing in this instance in
terms of asking for a price increase?”
It was his second appearance at the Zondo commission, and
was designed to deal with Molefe’s claims that the global commodities trader
blithely entered into the deal because its real risk calculation was the
political influence of former business partner and future president Cyril
Ramaphosa.
Molefe, who stands accused of enabling Tegeta’s takeover of
Optimum Coal Holdings (OCH) and the Optimum Coal Mine and thereby the
corruption of the parastatal by the Gupta family, sought to implicate Ramaphosa
in state capture when he appeared before the commission in January.
He accused Glencore of trying to extort R8-billion from
Eskom through exorbitant price hikes, and cast himself as the man who thwarted
this while Ramaphosa tried to assist his former business partners at the
commodity giant.
“Instead of conducting due diligence and understanding how
the coal-supply agreement worked, they did something extraordinary. They sold
9.46% of the shares in the newly acquired company to Mr Cyril Ramaphosa, a
political heavyweight and made him chairman of the newly acquired company,”
Molefe had said.
“That was a strategic decision to use the former secretary
general of the African National Congress and former secretary general of the
National Union of Mineworkers, a member of the national executive committee of
the ANC at the time.”
His testimony led to a charge of fraud and theft being
brought against Ramaphosa, and these president’s political foes have
predictably sought to leverage this in the tug of war within the ANC over the
suspension of officials accused of corruption.
Ephron was grilled by evidence leader Pule Seleka, firstly
about the failure to perform comprehensive due diligence. and secondly the
decision to place the Optimum Coal Mine into business rescue as negotiations
with Eskom hit a dead end.
In reply, he insisted that Glencore’s acquisition of Optimum
in 2014 was “a transaction, not a very good one, but it was a transaction in
the ordinary course of business”.
He said OCH had listed on the JSE a year earlier, and to do
so had to submit independent assessments that ran to 300 pages. Glencore chose
to rely on these and its own knowledge of the industry to perform a value
assessment, because instead of approaching the company directly, which would
have created a competitive situation, it chose to make offers to shareholders
individually.
“We knew there was a risk in not doing a full due diligence
… That was one of the things we had to accept,” he said.
He rejected Molefe’s claim that it did not probe deeper
because it planned to lean on Ramaphosa’s influence to strong-arm Eskom into a
price revision.
“That allegation is preposterous and I can’t understand how
and why someone would think such a thing.”
Ephron said Optimum was put into business rescue as a last
resort when losses were compounded by the fact that Eskom, with Molefe at the
helm, was not only refusing its demand for a price increase, but refusing to
pay at all.
The relationship with Eskom was so dire that it was not
possible to secure an appointment with officials, never mind a proper meeting
to trash out an understanding.
To his mind, it would have been a win-win scenario for both
sides if the contract had been amended to include an additional 30 tonnes of
coal for the remaining lifespan of the Hendrina power station, but Eskom was
not prepared to entertain the proposal.
“These kinds of discussions are happening every day between
Eskom and other industry players as we speak: Why is it okay today and wasn’t
okay in 2015? Was it state capture in 2015 and not today? So I don’t understand
the allegation and I strongly deny it.”
Asked by Deputy Chief Justice Raymond Zondo whether he was
accusing Eskom of bad faith, Ephron said he would allow the commission to reach
its own conclusion.
But he added: “You need to look at the sequence of events
post business rescue and you need to look at the full picture to make a
conclusion. This is chapter one; there is a continuation of the story.”
Tegeta bought Optimum in 2016, in part thanks to an advance
payment of R659-million approved by then Eskom chief financial officer Anoj
Singh, without which the company would not have been able to put up the asking
price of R2.7-billion.
The mine is no longer operational.
It went back into business rescue in February 2018 when the
banking facilities of the Gupta family and affiliated businesses were withdrawn
by the banks, forcing Eskom to source coal for Hendrina elsewhere.
Ramaphosa is scheduled to resume his testimony before the
commission later this month.
Comments
Post a Comment