Pula Steel sale flops as SA buyers exposed as scammers
Mbongeni Mguni | Friday July 17, 2020 11:16
Documents from the process indicate that DH Machine Manufacturing, the SA firm, was discovered to have been linked to Coinit Trading, a suspected pyramid scheme raided by the South African Hawks and financial investigators last year.
“Further investigations revealed that the company, which was funding the deal from the DH group was being investigated by the Hawks in South Africa and that their doors had been closed and banks accounts frozen,” reads a letter from Pula Steel liquidator, John Hinchliffe to creditors.
Coinit is accused of scamming millions of rands in an investment scheme in which clients were promised huge returns.
DH group, meanwhile, had successfully bid P26.1 million for Pula Steel and paid a deposit of P2.1 million. Trouble apparently arose when the liquidator noticed that the deposit was inadvertently below the amount required and asked DH group to top it up with P469,479.
The South African buyer then failed to pay the required top up for the deposit and also missed several deadlines set by Hinchliffe. The liquidator discovered DH’s links to Coinit and advised creditors he had broken off the deal.
“I therefore took steps to terminate the agreement with DH,” Hinchliffe told creditors.
“The deposit payment that has been received from DH shall be forfeited to the estate and shall be used to fund the winding up.”
This week, the liquidator told creditors he had received the High Court’s approval to hold a final auction for Pula Steel. Should the auction fail, the plant assets will be sold individually.
“In the meantime, the plant remains in care and maintenance and is protected by 24-hour security,” Hinchliffe said.
The Verma family, who founded Pula Steel in 2015 and held 22% equity at its liquidation in October 2017, said they were still interested in getting the plant running again.
The family fell out with the liquidator and a section of the creditors over the sale process, at one point suing in the High Court to invalidate the creditors’ meeting where the DH sale was approved. The family lost the case.
“Yes, I have all the passion for this plant and would love to buy it with a new team and my personal wish is if the old team can get together,” Deepak Verma, former Pula Steel director, told BusinessWeek.
“It would be the best because this plant has capacity and a proper strategy can grow this in leaps and bound.
“I feel we should have a dialogue in the presence of the ministry in Gaborone, along with the liquidator and pave way for the sake of jobs and to show the openness to investors.”
Pula Steel, built at a cost of P130 million in 2015, owes creditors about P100 million. Pula Steel was commissioned with much pomp and fanfare as the country’s first steel plant, but operated in fits and starts due to financial and technical challenges, particularly the shortage of its raw material.