Next big scandal brewing?

Judged by newspaper reports on the awarding of mining rights at the Sishen iron ore mine, the next scandal about the misuse of political power to enrich the “politically well connected” is unfolding, with one of the few remaining “Mr Clean” high-profile members in the government, deputy president Kgalema Motlanthe, this time in the firing line. One newspaper columnist describes it thus: “This must rank as one of the craziest things to have happened in South African business.”

The story broke at the end of last week when it was reported that an empowerment company, which among its directors count a lady friend of Motlanthe, was awarded the prospecting licences at the Kumba Iron Ore mine. The rights previously belonged to ArcelorMittal, which lost them when failing to convert its rights into new-order mining rights under the Mineral and Petroleum Resources Development Act.

Under the headline “Arcelor, Kumba robbed blind”, the "Sunday Times" reported that the 21.4% share in the mining rights has been awared to the previously unknown Imperial Crown Trading 289 (ICT) by the Department of Mineral Resources.

After telling ArcerolMittal it no longer had the right (for which it previously paid R2.8 billion), Kumba applied for it itself, but the department –apparently without informing Kumba – “quietly, but amazingly quickly, stepped in and gave it to some well-connected people,” the Sunday Times reported, adding that “it smacks of opportunistic greed and abuse of power”.

According to "Die Burger", the “well-connected people” include Gugu Mtshali, who previously worked as a personal assistant in the office of the treasurer-general of the ANC at its Luthuli House headquarters. She allegedly was, until last year, also involved in a long-term romantic relationship with Deputy President Motlanthe. He, however, denied these allegations.

Another director of the company is Archie Luhlabo, a senior official of the Mineworkers’ Investment Company – the investment arm of the National Union of Mineworkers.

The directors, according to MiningMx, also include Monica Ripepi, “who apparently sets up and sells shelf companies".

There are serious questions about how ICT succeeded in gathering the required information necessary for an application for the prospecting licence at an existing mine. Not even Arcerol would have been able to do so without obtaining the information from Kumba, which was making its own application.

According to "Business Report", the spokesperson for the ministry of Mining Resources Jeremy Michaels said last week that since Arcelor did not apply for conversion of its rights to new-order rights under the act, “the rights reverted to the state, which is the custodian of South Africa’s mineral wealth”.

Interestingly, according to one report both Kumba and ICT put in their prospecting applications slightly late on 4 May last year, four days after the deadline at the end of April.

It is unlikely that this matter simply will go away quietly. ArcelorMittal spokesperson Marion Green-Thompson said the matter was now subject to a legal process, and emphasised that the company would pursue every available avenue to get redress. The company was adamant that it has a valid agreement with Kumba, through which it remained entitled to buy ore at cost plus 3%.

According to a report by "Engineering News", both Arcelor and Kumba have indicated that the matter would be resolved through the dispute settlement process outlined in the 2001 Iscor unbundling agreement, which could include arbitration.