The sale of the country’s pioneering steel plant, Pula Steel, has run into trouble with reports that the winning bidder has missed financial deadlines for the deal, while a former shareholder has upped legal pressure to overturn the process.
Pula Steel was built at a cost of P130 million in 2015 and entered liquidation in October 2017 having operated in fits and starts due to financial and technical challenges, including shortage of its raw materials. Creditors owed about P100 million were left in the lurch following the plant’s closure.
This week, it emerged that after the auction ended on January 31 and a winning bidder identified in March, the process has been bogged down due to funding issues around the winning bidder, who has reportedly missed key deadlines for the finalisation of the deal.
According to the specifications of the auction, the winning bidder was supposed to pay 20% of the winning bid within 30 days of the award.
“There have been some unforeseen delays and I am still waiting for advice from the people who are managing the tender on my behalf,” Pula Steel liquidator, John Hinchliffe told BusinessWeek on Wednesday.
“There’s no clear way forward at the moment, but we have to resolve this in the course of next week and give our creditors an update on what the position is.”
Hinchliffe further explained: “The process should have been finalised by March 29, but we are currently unable to reach a conclusion on the issues and consequently are considering our position on the tender.
“We are finalising a way forward that may or may not include the winning bidder.”
The troubles surrounding the sale have been complicated by legal challenges mounted against the process by the Verma family, who were the founders of Pula Steel and owned 22% at the company’s closure.
The Verma family was amongst unsuccessful bidders for Pula Steel and claim they were not invited to the tender opening, as part of a continuing conspiracy to muscle them out of the steel plant.
The Vermas have publicly accused CEDA, a five percent shareholder and major lender to Pula Steel, of concocting a scheme to collapse the company and re-sell it to a preferred investor.
It is understood the Verma family reported the liquidator to the Master of the High Court and have also mounted a legal challenge stretching back to issues that occasioned Pula Steel’s collapse.
Former Pula Steel director, Deepak Verma told BusinessWeek that the Master of the High Court, after conferring with the liquidator, had said a ‘witness’ was present at the tender bid opening.
“Who is the witness, what are their credentials, their jurisdiction? I have already given this matter to my lawyers and they will render an opinion.
“My lawyers will also look at how we have been maligned in this whole process and accused of mismanaging Pula Steel which has affected our reputation.
“We received a letter saying our bid was unsuccessful with no reasons given, which should not happen.
“We also asked who the successful bidder was and that information has not been given,” Verma said.
The former director said the Verma family had offered to buy and recapitalise Pula Steel a few years ago when it first ran into problems. The steel plant’s major troubles came from lack of supply of its raw material, scrap metal, which usually came from BCL Mine.
“When BCL went into liquidation, we as the shareholders had the first right to buy and we made an offer but we were not sold those shares.
“If we had been given the opportunity, we would have even raised capital outside Botswana and no jobs would have been affected,” Verma said.