JOHANNESBURG – State owned Industrial Development Corporation (IDC) says there was no political influence at play when it “loaned” R120m to Alliance Mining Corporation (JSE:ALM), the troubled AltX company.
The R120m was supposed to fund a BEE deal in which ANC Treasurer Mathews Phosa and his very close friend, former SABC executive Matilda Gaboo, were set to become major shareholders in Alliance Mining.
Last week Moneyweb reported that the money had been paid to Alliance Mining before the deal had even gone to shareholder vote. It is alleged that the R120m has been squandered by certain former Alliance Mining executive directors. It’s likely that a sizeable chunk of the loan went towards paying a 40c per share dividend declared in July last year – a dividend the company might otherwise have been unable to afford.
We also questioned what type of due diligence investigation was conducted by the IDC, considering that onetime potential suitor, Delta Mining, had called off a proposed merger with Alliance after a due diligence investigation discovered alleged irregularities.
Steven Firer, an audit professor who was appointed to the Alliance Mining board after the troubles surfaced, told Moneyweb he “cannot believe” that a due diligence investigation would not have uncovered Alliance Mining’s difficulties.
The IDC’s head of mining, Abel Malinga, has responded to Moneyweb’s questions surrounding the deal.
Malinga said that the IDC did conduct a due diligence before paying the R120m. He notes that the “majority of the information flow during the IDC due diligence was via the financial director and company secretary of ALM”.
At the time, the position of financial director and company secretary were held by a single person: Connie van Neiuwkerk.
Notes Malinga: “IDC approval of the transaction was given in March 2009 and during the IDC due diligence reliance was placed on Alliance Mining’s 2008 audited financial statements and management accounts up to November 2008. IDC only became aware of the alleged misstatement of Alliance Mining’s audited financial statements and directors entering into unauthorised CFD contracts which resulted in severe losses, via the press many months after the flow of the IDC funds.”
Why did the IDC pay the money to Alliance before shareholders had even approved the BEE deal? Malinga responds: “The IDC received a correspondence from the company’s secretary (ALM) confirming that the shareholders have already given authority to the board to issue a certain number of shares at certain prices and therefore there was no need for shareholder approval.”
The IDC says an internal investigation of the transaction is ongoing.
Malinga says there was no individual person responsible at the IDC for authorising the payment. Thus, it’s uncertain whose head will roll, if at all, should the investigation uncover any irregularities.
Malinga denies that the IDC is looking at a bailout for Alliance Mining.
Why was the money paid to Alliance Mining and not Dartingo, Phosa’s BEE vehicle? Answers Malinga: “The IDC received instruction from Dartingo to pay, on its behalf, for the shares they were buying from Alliance. The IDC always pays the seller directly in order to ensure that the funds are applied for the intended purpose.”
Malinga says the IDC is still investigating whether the funds are recoverable, and whether it will pursue the BEE investors, including Phosa, for repayment.
Meanwhile, Phosa, who is chairman of Alliance Mining, and one of its three remaining directors, is determined to get to the bottom of the alleged fraud at the company. His lawyer Barry Faber told Fin24: “Mathews did not want to abandon ship – he is determined to see this through to the bitter end.”
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