State Capture: R2.1b for Optimum Coal was sourced from criminal funds – Here’s how

Eskom’s acquisition of Optimum Coal Holdings (OCH) by Tegeta Exploration and Resources was one of the major events which triggered the establishment of the Zondo Commission.

It was also a central focus of the Public Protector’s report ‘State of Capture’, released in October 2016.

The Public Protector (PP) found that the acquisition was pursued through unlawful means and funded almost entirely by proceeds of crime.

The commission came to the same finding, as outlined in Part VI Vol III of the Zondo Report (pages 80 to 95).

The ultimate beneficial owners of Tegeta were:

• The Guptas directly or indirectly held 65.13%
• Duduzane Zuma indirectly held 19.49%
• Salim Essa indirectly held 6.73%
• Ronica Ragavan indirectly held 6.49%
• Ashu Chawla and other Gupta employees indirectly held 2.16%.

The criminal project of acquiring OCM

The criminal shenanigans resorted to by puppets of the Guptas have already been described in the Eskom section of the Zondo report.

Very briefly:

Brian Molefe, seconded to Eskom in April 2015, “immediately set about scuppering advanced negotiations between Eskom and Glencore” over a penalty levied by Eskom.

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Molefe and Eskom board chair Dr Ben Ngubane wanted to suspend all mining licences to Eskom.

Then-minister of mineral resources Ngoako Ramatlhodi refused, and in September 2015 former president Jacob Zuma replaced him with Mosebenzi Zwane.

Molefe also scuppered the sale of the Optimum Coal Mine (OCM) to the Phembani Group.

On 22 November 2015, Eskom board member Mark Pamensky oiled the way and advised Atul Gupta that “Oakbay should ensure that a condition precedent for the OCH acquisition sale should be Eskom’s withdrawal of the R2.17 billion penalty claim” and advised Atul on how to get the deal to be accepted by the Eskom board.

When Glencore rejected the R1 billion offer from Oakbay for OCM on 25 November 2016, the Department of Mineral Resources under Zwane issued spurious notices under the Health and Safety Act in an attempt to shut down Glencore mines.

Glencore caved, and then Tegeta had to come up with the cash.

Former Eskom executives Matshela Koko and Anoj Singh “prepared a motivation for Eskom to prepay Tegeta R1.68 million” for a year’s supply of coal, despite the fact that Hendrina appeared to be oversupplied.

The Eskom board unanimously adopted the resolution to pre-pay the coal in December 2015, even though this was clearly in the interests of Tegeta and not Eskom.

By early April 2016, Tegeta was short of R600 million, and Eskom made another prepayment of R659 million.

The board signed off, and the payment was rushed through on 13 April 2016 by Singh and Molefe.

R2.1 billion for Optimum sourced from criminal funds

Tegeta paid the purchase price for Optimum of R2.1 billion on 13 April 2016.

The funds used for the acquisition were for the most part proceeds of crime, detailed below:

Source	Amount
Eskom pre-payment	R660m
Eskom payment to Tegeta	R68m
Oakbay ‘loan’ to Tegeta	R158.5m
Albatime ‘loan’ to Tegeta	R104.5m
Trillian Asset Management ‘loan’ to Tegeta	R152m
Centaur Mining ‘loan’ to Tegeta	R842.2m
Tegeta’s residual funds in Bank of Baroda account	R100.5m
Total	R2 085.7m

• The Albatime loan consisted of the unlawful payment of R42 million from Regiments Capital and R56.2 million stolen from the Transnet Second Defined Benefit Fund (TSDBF).
• The Trillian payment included an amount of R93.4 million that was unlawfully paid by Transnet.
• Albatime transferred R110 million into a fixed deposit account at Bank of Baroda, which the bank used as security to advance a loan of R105.5 million to Tegeta.
• Trillian’s loan of R152 million came from the funds stolen from the TSDBF.
• Funds stolen from the TSDBF amounting to R160.2 million were transferred into a fixed deposit account at Bank of Baroda, which the bank used as security to advance a loan of R104.5 million to Tegeta.
• Centaur Mining obtained the amount of R842.2 million from back-to-back facilities; the source was laundered proceeds of crime.
• Noteworthy, Duduzane Zuma’s beneficial interest of 19.49% equates to a benefit of R342.8 million from criminally sourced funds.

Criminal offence to receive proceeds of crime

The Zondo Commission referred to Section 2 of the Prevention of Organised Crime Act (Poca), which makes it a criminal offence to receive proceeds of crime.

The commission is of the view that there are reasonable grounds to believe that Duduzane Zuma, Salim Essa, Ronica Ragavan, Ashu Chawla and members of the Gupta family may be guilty of contravening Section 2 of Poca.

This article first appeared on Moneyweb and was republished with permission. Read the original article here

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