DPP, DCEC go after ex-BCL bosses
Onalenna Kelebeile | Friday October 20, 2017 14:59
The efforts have been given a boost by a damning report that emerged yesterday from the group’s provisional liquidator.
BCL Group, which includes BCL Mine, Tati Nickel and a portfolio of multi-million Pula projects under BCL Investments, was placed under provisional liquidation last year with billions of pula in liabilities and due debts, zero operating capital and mammoth contractual commitments.
The seven-person Board in place at the time and the executive management team – now seen as part of a top heavy structure in the mine by the liquidator – blamed a collapse in copper prices and high operating costs for the group’s troubles.
However, the provisional liquidator, Nigel Dixon-Warren, in a scathing and revealing 147-page report to creditors leaked this week, said the Board had poor governance over strategic direction and executive management, while the management was “weak, incompetent, inexperienced and unable to adapt”.
The DCEC and DPP are reportedly studying Board members and management who were there at the time of the liquidation, as well as their predecessors, for answers to matters such as:
l The death of 14 employees between 2014 and October 2016, where preliminary findings point to inadequate maintenance and failure to comply with legal requirements,
l Approval of the multi-million pula Polaris II diversification strategy, the investment decisions and the appointment of corporate advisers,
l The decision to enter a $271 million deal to purchase a 50% stake in Nkomati Nickel from Norilsk Nickel in October 2014,
l The decision to divert a P1 billion rehabilitation fund towards operating expenses differences of millions of pula in accounts presented by management and funds actually on the books due to overstating revenues, understating losses,
l Numerous self-harming contracts, violations of tax law and non-compliance including apparent repeated breaking of the Companies Act, and
l Flouting of procurement and tender processes, as well as extravagant spending and wastage.
Former general manager, Dan Mahupela has tough questions to answer about his role in the mine’s collapse, which occurred five years after he took over the helm.
Investigators will specifically want Mahupela to explain why he apparently by-passed his board and engaged corporate advisors to steer the Polaris II, the strategy that many agree sank the BCL Group as investments in various projects continued to be made even as operating capital for the mines dried up. Polaris II is the strategy under which BCL Mine committed itself to a $271 million equity deal with Norilsk Nickel that is presently the subject of no less than four lawsuits by the Russian firm in South Africa, England and Botswana courts.
Mahupela will also need to answer why he was at one point the sole shareholder of Vedaz Proprietary Limited, one of the joint venture companies BCL invested in under Polaris II. His former company secretary could be asked why he excluded Vedaz from an organogramme provided in handover notes on the BCL group’s structure to the provisional liquidator.
The former GM could also be in hot soup for his role in doggedly pursuing Polaris, despite falling operating capital at the mines, investing P179 million by March 2016 in the strategy, while also failing to curtail group-wide misgovernance and incompetence.
Mahupela was clear about Polaris being his legacy project, telling journalists in April last year, six months before BCL closed, that he would be happy to shut the mine in favour of Polaris.
“People say Polaris was a waste of money and we have thrown cash away. That could not be further from the truth.
“If you look at what we have spent on Polaris and the value we are getting today, it’s a ‘laugh’ in the park. The value we see today is about 10% to 15% of the real value. The real value is sitting under the water; we cannot see it with the naked eye.
“If I had a choice today, I would go into Polaris and ditch BCL. BCL should transform itself through Polaris.”
But in his damning report, provisional liquidator, Nigel Dixon-Warren says he has made information available to the DPP and is aware of an ongoing DCEC investigation into the events leading to BCL Mine’s collapse and the role of management and the board.
Yesterday, Mahupela told Mmegi that he could not comment on the provisional liquidator’s report.
“I cannot make any statement at this moment because I have not seen the report,” he said.
Dixon-Warren, who arrived at BCL last October having been appointed by the High Court, has been wading through a sea of accounting, system and process failures, largely without the aid of a paper trail and reliable documentation, which was apparently commonplace in the group. In one instant, BCL was fined R530 million by the South Africa Revenue Service for basic tax non-compliance. The group negotiated this down to R30 million, then repeated the non-compliance and was fined again.
“Based on the preliminary investigations to date the recommendation is that further investigations be undertaken with respect to directors, management and third parties’ conduct including the acceptance and implementation of the Polaris II strategy,” Dixon-Warren says in his report to creditors.
The provisional liquidator notes the directors and management could also be liable for their conduct under the Companies Act if found guilty of wilful or unreasonable negligence or breach of duty.
“In terms of the Companies Act, directors of companies may be held personally liable for the debts of a company where it appears that any business of the company was carried on recklessly or with the intent to defraud creditors.
“Directors may also be guilty of a statutory offence for failing to keep proper books and records,” he writes.
Examples of major investigative points uncovered in Dixon-Warren in his assessments since October 2016 include:
l A P45 million loan to Pula Steel, as part of an overall P106.7 million investment into the company. No security was sought for the loan and after Pula Steel failed to service it, BCL was forced to pay First National Bank Botswana P50.5 million (interest included) in June 2016, just four months before liquidation. Pula Steel is now in liquidation and the amounts are considered irrecoverable
l After the liquidation, management advised that the smelter, BCL’s most valuable asset, be kept at a ‘holding temperature’ costing P15 million per month. External smelter specialists later said there was no such thing as ‘holding temperature’, that such a move would have bled money and that management’s advice was wrong
l Norilsk Nickel, formerly a shareholder of BCL Mine, had four directors on the BCL board who resigned effective May 30, 2014. On May 24, 2014, BCL submitted a binding offer for the Nkomati equity stake. Unsigned minutes of a May 23, 2014 board meeting say the four Russians were not in attendance.
l Four directors, including Mahupela, submitted incorrect statement of assets and liabilities after the liquidation, which include some amounts invested in Polaris joint ventures that were listed as part of BCL’s property, plant and equipment.
Dixon-Warren’s reports contains numerous other red flags in the management at BCL Mine, including the fact that two schools rented out 15 houses from the Mine under agreements that expired in 2003. The three-bedroomed houses were being rented out by the mine to the schools for amounts ranging from P93 to P450 a month.
Meanwhile, at BCL’s 1,600 houses for employees, Dixon-Warren found the workers were given a monthly allowance of between 120,000 to 400,000 litres of water per household and near-limitless electricity usage. The Mine was paying more than P35 million in electricity for its operations and employee houses every month, and in excess of P3 million for water.
“There was very little regard for the cost of water and electrical usage on the site either for operations or domestically,” the liquidator’s report notes.
“Both domestic and operational usage for both water and electricity were poorly measured and hence poorly managed. Wastage and inefficiency were rife.
“Most houses did not have a separate water meter so usage was not monitored or managed. While no direct evidence has been found, it is believed employees abused the allowance with water being stolen and taken to cattle posts and farm. “Similarly, the electrical allowances were excessive and ranged from 400kWh to 1000kWh per household. “Balances for electricity units were also not monitored leading to some houses having in excess of two times the allowance per the policy. Units were even being purchased for vacant houses on monthly basis without any regard for actual usage.”
Creditors meet in Gaborone on November 6 where the report will officially be tabled, as well as any offers that have been made thus far.