Twelve days in December – part 1

Twelve days in December is Moneyweb’s attempt at putting together a coherent description of events – the so-called connecting of the dots – of what led to one of the most turbulent political and economic periods in the country’s history since the advent of democracy. 

Between December 3 2015, when one of the world’s richest men was coerced into selling Optimum Coal Holdings at the Dolder Grand Hotel in Zürich, to December 15, when government secretly agreed to sell the country’s entire strategic fuel reserve, the nation experienced a spectacular decline in wealth.

It was also the unmasking of President Jacob Zuma who, in playing his hand with the firing of Nhlanhla Nene and the appointment of Des van Rooyen as finance minister, clearly and unambiguously revealed that his loyalty to his friends, the Guptas, trumped everything else, including his constitutional duty to the country. 

But in hindsight, it appears to have been a strategic misstep, one that detonated a nuclear bomb in financial markets and drew condemnation from all quarters, which ultimately led to Pravin Gordhan being reappointed as finance minister. We think the period can be characterised as a coming together of a whole range of apparently disparate events in a highly suspicious orgy of greed. 

Timeline

25 March 2015: Eskom’s executive procurement committee approves a revised contract for Optimum Mine to supply Hendrina power station following months of negotiation.

17 April 2015: Brian Molefe is appointed acting CEO of Eskom.

23 April 2015: The Eskom board meets to approve a new Optimum contract, but decides against doing so.

18 May 2015: Molefe advises Optimum’s CEO in a meeting that they will not agree to a new contract.

10 June 2015: Molefe advises Optimum in a letter that Eskom’s dire financial condition prevents them from signing a new contract.

1 July 2015: Gupta auditor and adviser KPMG sends a letter to Glencore expressing interest on behalf of “a client” in purchasing Optimum Coal Holdings (“OCH” – comprising Optimum coal mine and Koornfontein coal mine).

31 July 2015: Glencore puts Optimum into business rescue.

2 August 2015 – 22 March 2016 Molefe and Ajay Gupta call each other 58 times, according to the State of Capture report.

26 October 2015: Eric Wood becomes aware that Nene is going to be fired.

The start of Twelve Days

3 December 2015: Zwane and the Guptas meet with Glencore boss Ivan Glasenberg at the Dolder Grand Hotel in Zürich, Switzerland. The parties agree to the terms of the transaction. This sees the sale of OCH to Tegeta for R2.55 billion, with Glencore contributing R400 million in cash, making the effective purchase price for Tegeta R2.15 billion.

9 December 2015: Zuma fires Nene and appoints Van Rooyen as the new finance minister.

10 December 2015: (1) Van Rooyen arrives for his first day on the job with two advisers: Ian Whitley and Mohamad Bobot, and a few hours into his appointment Whitley sends an e-mail to close Gupta associates with strategic treasury documents.

(2) A purchase agreement for the sale of all shares in OCH is signed between the business rescue practitioners and Tegeta. The transaction needs to be approved by all parties by March 31, 2016.

11 December 2015: Absa issues a performance guarantee on behalf of Eskom for R1.68 billion.

13 December 2015: Gordhan replaces Van Rooyen as finance minister.

15 December 2015: A closed tender process (by invitation only) sees Glencore participating as one of three parties in the acquisition of 10 million barrels of oil from the country’s strategic fuel reserve. The oil was sold at a discount of at least $10 a barrel to the prevailing price. Assuming a one-third participation, Glencore could have made a profit of R500 million.

Twelve Days ends

18 December 2015: Bank of Baroda issues a “letter of comfort” to the business rescue practitioners of OCH, promising to effect payment of R2.15 billion to the lenders of Optimum.

23 December 2015: The rehabilitation trust funds of Optimum and Koornfontein begin liquidating their investments. This requires the express consent of the trustees of each fund, and is highly unconventional given that Tegeta did not yet own the mines.

1 January 2016: Tegeta takes over “financial control” of Optimum, which requires financing of millions of rands a month given that Optimum was contracted to deliver coal to Eskom at a roughly R300-per-ton loss. This was part of the reason it was placed into business rescue by Glencore.

31 January 2016: Total amounts available in the Optimum and Koornfontein Rehab Trust funds now sitting in cash amount to R1.75 billion.

3 March – 14 April 2016: Tegeta, via a number of payments, transfers R1.133 billion into its account at the Bank of Baroda.

4 March 2016: Bank of Baroda issues a “letter of comfort” to FirstRand to effect payment of R2.15 billion to lenders of OCH.

9 March – 14 April 2016: In what appears to be a scramble as the deadline came and went, Centaur, Trillian Capital, Trillian Advisory and Albatime transfer more than R1 billion to the Bank of Baroda to be used as collateral for loans to pay the balance of the purchase price. Effectively, this money was put into fixed deposits against which the bank lent Tegeta the balance of the money it needed to raise to pay for the acquisition.

31 March 2016: The Absa guarantee and Bank of Baroda letters of comfort expire.

11 April 2016: Eskom’s Matshela Koko signs a letter on behalf of Eskom agreeing to “prefund” Tegeta’s coal sales to the utility to the tune of R586.7 million following a board meeting at 9pm.

12 April 2016: Bank of Baroda receives a letter of fixed deposit collateral undertaking from Centaur. This allows Baroda to extend loans amounting to R885.3 million (the amount Centaur had deposited with them) to Tegeta, using the fixed deposits of Centaur as collateral.   

14 April 2016: Bank of Baroda receives letters of fixed deposit collateral undertaking from Albatime (R10 million) and Trillian Capital and Trillian Advisory (together amounting to R112.2 million). As with Centaur, the letters allowed Baroda to use the deposits as collateral to loan Tegeta money.

In total, Baroda transfers R2.084 billion to a Werksmans account to effect payment for OCH.

Ownership of OCH changes hands to Tegeta.

15 April: OCH discharged from business rescue.

23 June:  Trustees of Optimum and Koornfontein Rehab Fund instruct Standard Bank to pay the funds across to Bank of Baroda.

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