Patrice Motsepe in court for R3.4 billion lawsuit

South African businessman Patrice Motsepe will on Monday, 4 November appear before the Commercial Division of the Tanzanian High Court in Dar Es Salaam.  

Motsepe and his associate companies are being sued by Tanzanian mining firm Pula Group for R3.4 billion.

Surrounding the lawsuit are allegations that Motsepe’s associate companies breached a non-compete contract when it invested in Australia’s Evolution Energy Minerals, located next to Pula’s graphite project.

Motsepe takes legal steps

The associate companies being sued include African Rainbow Minerals (Arm), African Rainbow Capital and ARCH Emerging Markets.

In Arm’s 2024 annual financial statement, the company told shareholders that Pula Group is claiming damages to the amount of $195 million linked to an alleged breach of a confidentiality agreement.

This happens to be Pula Group’s second attempt to get into Arm’s purse, as the financial statement reveals the court dismissed the [Pula] Group’s action on 9 May 2023.

“The claim was delivered to ARM on 4 December 2023. ARM has taken the necessary legal steps to protect its rights.”

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Motsepe’s breach

The Citizen Tanzania reported the case dates back to 28 October 2022, but it was dropped in 2023 due to technical errors.

Pula President Dr Mary Stith, in March, said they are confident with their decision to withdraw then refile the suit, as advised by their lawyers.

When asked how they arrived at the amount they are asking from Arm, Pula’s Chairman, Charles Stitch said: “The amount was based on a third-party valuation of what Pula stands to lose as a result of the competitive disadvantage resulting from Motsepe-associated companies’ violation of confidentiality and non-compete agreement.”

Deny, deny, deny

Moneyweb reported that Motsepe and the associated companies have denied the breach, and added there is no merit to Pula’s allegations.

“Arm was considering investing in minerals that it had not mined in the past when the Pula graphite project was presented to it for its consideration. Arm concluded a confidentiality agreement with Pula and subsequently decided not to invest in the project, and communicated the decision to Pula,” Arm’s spokesperson said.

Arm declined to comment further with the matter now before the court.

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Agreement between the two

On Monday, the court will decide if it is necessary to continue with the main suit as there were also some pending applications from the first and second respondents who seek litigation to have a revision of the main suit.

“Pula said a two-year non-compete contract had been in place, and that Motsepe companies talked to and did the deal with the Australian company within that period.”

Mr Stith, a former US ambassador to Tanzania, said the majority of explorations in Tanzania are conducted by Australian and Canadian companies, and that unfair and predatory practices of companies like Arm perpetuate the disparity in the mining sector, to the detriment of Tanzanians.

2019 agreement

Arm and Pula entered into a two-year agreement in 2019. The agreement compelled them to share confidential information that would put either company at a competitive disadvantage should either company share that information or use it to enter into an agreement with a potential competitor.

The Citizen Tanzania further reported Pula shared confidential information with Arm concerning the mining business and investment in mining activities.

“The information included details about the nature of its graphite mining exploration activities in Ruangwa, Tanzania, and technical know-how on Tanzania’s graphite reserves in the region.”

“A key aspect of the contract was a commitment not to compete while it was valid.

“The initial contract between the plaintiffs and ARM was for two years, but Pula alleges that ARM violated the non-compete clause by delaying implementation and deciding to cooperate with a competitor, Evolution, in Ruangwa,” the publication reported.

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