amaBhungane & Scorpio #GuptaLeaks: How family hijacked (and then lost) a Lesotho diamond mine
- amaBhunghane, MNNCIJ & Scorpio
- 01 Dec 2017 12:37 (South Africa)
In August 2014 Lesotho Prime Minister Tom Thabane appointed Atul Gupta as an “economic investment envoy”. Thabane said ANC President Jacob Zuma had introduced him to the Gupta family and he had enlisted them “to help scout for investment” for the country. Now new evidence is emerging that the main “investment” the Guptas were touting – apart from in Thabane himself – was their takeover of a Lesotho diamond mine. By AMABHUNGANE, MNN CENTRE FOR INVESTIGATIVE JOURNALISM and SCORPIO.
23 October 2014: The two letters
The two letters that landed on Tlali Khasu’s desk on 23 October 2014 were identical in almost every way.
Both carried the official letterhead of his office – the Lesotho ministry of mining – and both concerned the potentially lucrative but stalled Mothae diamond mine. The official who signed both letters on Khasu’s behalf assured the readers that “I remain, Yours Sincerely, Tlali Khasu, honourable minister – mining”.
The difference was that one brought bad news, the other a lucrative opportunity.
The two letters appear to have been the first step of an audacious plan orchestrated by the Guptas and their business partner Salim Essa to seize the Mothae diamond mine in Lesotho with the help of the country’s political elite.
Khasu’s first letter was addressed to the local subsidiary of Lucara Diamonds, a Canadian mining company that held the licence to mine at Mothae, just 5km away from Lesotho’s famous Letšeng mine.
Exploration had confirmed that the mine was “diamondiferous”, but despite Lucara’s $38-million (R519-million) investment since 2009, the company had failed to develop a viable commercial plan.
“It has come to my attention that the mine stopped operations in 2012,” the minister’s letter stated. “Subject to the provisions of the Mines and Minerals Act ... I intend to cancel the said mineral concession.”
The second letter, entitled “Offer of a mining lease at Mothae Mine in Lesotho”, was directed to a small flat on the 15th floor of Hong Kong’s Hillier Commercial Building, surrounded by nail salons and massage parlours.
“I am pleased to inform you that the Government of Lesotho is in the process of re-acquiring the mining lease of the above-mentioned mine... the mine will be on offer to you as soon as the Government re-acquires it,” it stated.
This second letter was addressed to Tequesta Group, whose humble location hid the company’s powerful backers – records from the Hong Kong business registry show that at the time the sole director was Salim Essa, the charismatic business partner of the Guptas.
“Looking forward to doing business with you,” the minister signed off in an altogether friendlier tone.
At the time, Tequesta was little more than a letterbox company with no presence in Lesotho or track record in mining. The #GuptaLeaks now show that the company’s primary business was acting as a conduit for billions of rand in highly questionable sales commissions which flowed from a Chinese rail company to the Gupta family, Essa and even the family of President Jacob Zuma.
Just two months earlier, in August 2014, Lesotho Prime Minister Tom Thabane had appointed Atul Gupta as a special adviser and had granted him, Essa and a third Gupta associate diplomatic passports.
When confronted, Thabane reportedly told journalists that Zuma had recommended the Guptas.
“These people are good friends of the [African National Congress] and we have good relations with the ANC… I was introduced to them by the ANC president [Zuma] and other ANC officials,” Thabane was quoted as saying. “I appointed them to help scout for investment for my country. They have influence in a number of countries that can help Lesotho.”
The Guptas, he told reporters, were interested in mining and he was “facilitating” this for the family.
Thabane was in a precarious political position. In June 2014, he had suspended parliament in order to prevent a vote of no confidence, and in August had been forced to flee the country to avoid an attempted coup.
But by October 2014, Thabane was back, thanks to the intervention of the South African Development Community led by South Africa’s deputy president Cyril Ramaphosa, but had been forced to call a snap election.
In such a fraught situation, why would Thabane and his mines’ minister – besieged by political rivals – take the risk of offering a lucrative diamond mine to the controversial Guptas?
When Thabane was asked back in August 2014 why he was using his office to benefit the Guptas, he denied he stood to benefit, saying:
“[C]heck with all the banks the world over... I have not received money from them… I am merely using my office to get developments going for my country.”
However, investigations by amaBhungane and MNN now show that Thabane stood to benefit in other ways.
The prime minister’s son, Potlako Thabane, told us this week that Tequesta approached him to be part of a diamond mining project, although he said he could not remember the name of the mine.
“I’m a businessman and a politician as well – people come to me with proposals,” he said. “If memory serves me right they tried to register a local company but that never really took off… I think we wanted to be partners, but it never happened.”
In South Africa, the Guptas have a track record of co-opting the children of influential politicians, including Zuma’s son Duduzane.
Multiple sources, including the younger Thabane, confirmed that the Guptas also offered to provide funding to the embattled prime minister’s re-election campaign.
“We wanted [the Guptas] to, we made arrangements for them to provide funding. But then they suddenly lost interest. They never provided a cent,” Potlako Thabane said.
Two sources told the story slightly differently. One, a well-placed source close to Tom Thabane, said that the Guptas had provided some funding for Thabane’s election, but failed to deliver on the full amount promised. Another, a senior government official, said the Guptas provided as much as M10-million (R10-million) to Thabane’s election campaign.
Questions sent to the prime minister’s office three weeks ago are yet to be answered.
That the Guptas were interested in the outcome of the election is evident from the #GuptaLeaks. A week before Khasu’s letter arrived, younger brother Tony Gupta commissioned a detailed analysis of each political party’s chances in the looming February 2015 election.
The nine-page report, compiled by a business associate of the Guptas, provided a minute breakdown of expected voter turnouts, district-by-district voting patterns, and the probability of Thabane’s All Basotho Convention (ABC) holding on to power.
Thabane could scrape a narrow victory, according to the analysis, but only if ABC teamed up with its estranged coalition partner, the Lesotho Congress for Democracy (LCD) led by deputy prime minister Mothetjoa Metsing. Remember that name.
In December 2014, two months after Khasu’s letter to Lucara, the Canadian miner announced it would voluntarily relinquish its rights to the Mothae diamond mine.
In terms of section 41 of Lesotho’s mining legislation, Lucara would have 12 months to find a buyer for its 70% stake in Mothae. If it failed to find a buyer, the rights would revert to the government.
But with political storm clouds on the horizon it appears the Guptas weren’t willing to wait that long.
29 January 2015: The hijacked mining right
Thursday 29 January was the perfect day for a shotgun wedding.
There were a few clouds in the sky above Maseru and the temperature hovered around 24 degrees as Tequesta and the minister of mines put their signatures to a final shareholders’ agreement.
Tequesta Group Lesotho would be 80% owned by Essa’s letterbox company in Hong Kong, while the remaining 20% would be owned by the government.
The company’s primary activity was listed as “diamond mining”.
In the background the Guptas hovered around, sending instructions about how the Lesotho company should be registered – emails that would later appear in the #GuptaLeaks.
Leaked documents from the ministry of mining indicate that as soon as the shareholder’s agreement was signed, Khasu put his signature on a coveted 10-year mining lease (number 0013/ML/2015), gifting the Mothae diamond mine to Tequesta Group Lesotho. The lease would become effective immediately.
“You are asking me about things that happened when I was a minister long time ago... I can’t remember anything,” Khasu told us recently.
There were three problems with what Khasu had just done:
First, the Mothae mining right unquestionably still belonged to Canada’s Lucara. Although the company had agreed to relinquish its rights in December 2014, the company still had 11 months to find a buyer before the state could assign the licence to someone else.
Second, the job of assessing applications for new mining rights is carried out by Lesotho’s mining board. A June 2016 memo from the mining board to the minister makes it clear it was never consulted.
And third, a draft of the licence found in the #GuptaLeaks suggests that the deal Tequesta offered would have left the country with little more than diamond dust: a sales tax of between four and eight percent and rental of $87,000 per year, only payable once the company showed a profit.
It is not clear whether this offer was improved before the deal was signed – sources have only been able to locate the first page of the lease signed by Khasu. The official documents that normally accompany a mining lease, spelling out the terms of the agreement, have not been found.
When we spoke to Potlako Thabane, we asked him why the Guptas had in his words “suddenly lost interest” in funding the prime minister’s re-election campaign.
His explanation: “They wanted a mine. The mine they were targeting they couldn’t get. I think that’s why. After that all communication stopped.”
But records appear to contradict him. Documents filed with Lesotho’s ministry of trade and industry show that the newly minted Tequesta Group Lesotho was registered to an office linked to Potlako Thabane at the Thetsane Office Park, south of Maseru Mall.
The same records also listed Potlako Thabane’s email address under Tequesta’s contact details. Thabane said this was purely for administrative purposes.
“Normally you would need an address, a local address in Lesotho when you register a company… They asked if they could use it and I said yes.”
Thabane insisted that the deal never materialised and that he had never participated in it. As far as he was aware, Tequesta never received the mining rights.
“They went to register a local company but nothing came out of it. They just talked,” he said.
Yet, whatever the legal status of the mining lease that Khasu inked on 29 January 2015, the Guptas had extracted something of value – which they planned to use.
In the interim…
It is fair to say that 2015 did not go according to plan for either the Guptas or Thabane.
The February 2015 elections were as close as the Sahara analyst predicted it would be, but Mothetjoa Metsing’s Lesotho Congress for Democracy (LCD) broke its alliance with Thabane’s ABC, instead siding with the rival Democratic Congress (DC) led by Pakalitha Mosisili.
Metsing retained his position as deputy prime minister, while Mosisili became Lesotho’s new head of state. Both Thabane and mines minister Khasu were out.
Meanwhile Lucara, unaware that its licence had been gifted to a Gupta-controlled company, continued trying to find a buyer. It announced in May 2015 that it intended selling its stake to London-listed Paragon Diamonds for $8.5-million (R116-million now).
This was not lost on the usurpers. The #GuptaLeaks show Essa emailing Tony Gupta a link to an article announcing the sale.
Essa added no comment, but the circumstances presumably needed little explanation: the hijacked licence was in danger of being clawed back.
And that was not the only bad news. In June the new prime minister, Mosisili, thanked Atul Gupta and Essa for their help, fired them as advisers and revoked their diplomatic passports. It was later reported that despite criticism from a clandestine group calling itself “Friends of the Guptas”, Mosisili remained unmoved.
“The prime minister said he did not need them as advisers. The home affairs minister was left with no option but to tell them their services are no longer needed,” a spokesperson for Mosisili told City Press at the time, adding: “They are a controversial family in your country. The prime minister didn’t want to get involved.”
But as 2015 wore on and Paragon struggled to come up with the $8.5-million price tag, the prospects for the questionable right awarded to Tequesta started to look up.
3 December 2015: The anonymous letter
On 3 December 2015, an unusual instruction arrived in Ashu Chawla’s inbox along with a photograph.
The executive at the Guptas’ Sahara Computers was used to receiving odd instructions – the #GuptaLeaks show that at various times he was instructed to organise weddings, draw up bogus invoices and keep tabs on politicians and business people entering and leaving the country.
The photograph attached to this email was of a draft letter – the email contained instructions that the letter should be retyped, placed on a Tequesta Hong Kong letterhead and sent back to the anonymous sender.
The letter, which would ultimately find its way onto the desk of new mines’ minister Lebohang Thotanyana, was both obsequious and brazen:
“Honourable Minister... Tequesta Mining Company wishes to congratulate you and wish you all the best in your new appointment as the Minister of Mining in the Kingdom of Lesotho.
“We cordially wish to bring to your attention that Tequesta Mining Company was issued a Mining lease/agreement for Mothae... This letter informs you [sic] most revered office that Tequesta Mining Company will begin mining operations in Mothae as per the agreement.”
The letter, signed by Salim Essa, ended with a wish “to humbly request a meeting” with Thotanyana “as soon as possible”.
What is apparent is that Essa and the Guptas were trying to grab back Mothae, using the questionable mining right awarded to them on the eve of the February 2015 elections.
What remains a mystery is the identity of the sender.
“We need confirmation that the Company will start Mining operations immediately so that authorities are not embarrassed,” the anonymous sender instructed Chawla in the body of the email.
Chawla immediately forwarded the letter to Essa with a note: “This is what they are expecting on letterhead.”
From the instructions it appears that “they” were connected to government.
Thotanyana confirmed to MNN that the strange letter made its way onto his desk (and eventually into the files at the ministry of mining).
“I wouldn’t want to comment on all this information. That is to say I am not denying or confirming anything here... But I know about this letter. It was addressed to me as the then-mining minister,” Thotanyana confirmed.
Thotanyana had been party to Lucara’s attempts to sell the Mothae mining right throughout 2015, and thus should have been highly suspicious of Tequesta’s claim that it owned the rights to Mothae and had been quietly sitting on the licence for almost a year.
Instead of demanding explanations or sending Essa packing, Thotanyana agreed to a meeting.
18 January 2016: The R2-million offer
By January 2016, the Guptas were back in business on both sides of the border.
In South Africa, they had wrestled the Optimum coal mines away from Glencore, and in Lesotho they were close to recapturing Mothae diamond mine, provided they could persuade the new mines’ minister to recognise their licence.
“I was invited for several meetings by these people [the Guptas] at their residence in South Africa,” Thotanyana told MNN. “In particular, I remember Salim Essa – he was co-ordinating all this between me and them.”
Thotanyana declined to provide exact dates for the meetings.
From the #GuptaLeaks we know that Tony Gupta attended a meeting on Saturday 15 January 2016 to discuss a mysterious “D Project”. Two days later, he received an excited email from Ravindra Nath, the chief executive of Gupta mining company Tegeta Exploration and Resources.
“[T]his will offer us an opening with the Country and the Govt. This relationship may be exploited for future opportunities not only in mining but in other sectors also,” Nath enthused.
It should be noted upfront that there is nothing in Nath’s email that explicitly identifies “D Project” as the Mothae diamond mine. The email refers to “D” as a commodity they planned to mine as part of a joint venture with a foreign government and sell “raw”. (In theory “D” could be something else, but the context of the email strongly suggests Nath was referring to diamonds.)
In the email, Nath laid out how the Guptas could still further squeeze the unidentified government out of their share of “D” revenue through tax holidays and by using the Guptas’ mining company JIC to perform the contract mining.
“[W]e will be selling it raw. The company which process (sic) it can also share profit with us… We may discuss with the Government for certain tax concession or holiday atleast [sic] till the time break-even is not achieved or capital infused is not recovered [sic].”
He finished off: “I trust that labour laws are no [sic] so bad as in South Africa.”
The #GuptaLeaks offer no further clues as to what happened to the Guptas’ bid to grab Mothae mine.
It is alleged by a well-placed source within the ministry of mines that the Guptas offered Thotanyana R2-million for helping legitimise their claim to the Mothae licence, but he refused.
The former minister declined to comment, saying:
“I wouldn’t want to go deep into my discussions with them.”
He added that he refused to support their claim “because clearly it was issued outside confines of the law”.
In the end…
The following month the Lesotho government invited mining companies to submit expressions of interest for Mothae. A deal was eventually inked with Australian mining company Lucapa for a 70% stake for $9-million (R123-million). Tequesta did not submit a bid.
By mid-2016, Lesotho police had started investigating how Tequesta almost captured the Mothae diamond mine.
A leaked memo from June 2016, written by Makhojane Monyane, the principal secretary in the ministry of mining, indicates that police approached Lesotho’s mining board asking for information about the lease granted to Tequesta.
Monyane told Thotanyana that although she had not seen the lease, she was informed by a staff member who had said that “the lease was issued to work in favour of ABC” – Thabane’s political party.
In June 2017, Thabane was re-elected prime minister. So far there have been no signs of the Guptas making another bid for influence in the mountain kingdom.
In September, a Maseru-based NGO was scheduled to host an event to explore the “deep rooted, overarching existence of White Monopoly Capital (WMC).”
The event, supported by both ANN7 and The New Age, was billed to include Andile Mngxitama from Black First Land First and Phapano Phasha from the Progressive Professionals Forum, but was cancelled at the last minute.
The title of the event?
“Why the Guptas are not guilty.” DM
Photo: President Jacob Zuma of the Republic of South Africa receiving His Excellency Tom Thabane of the Kingdom of Lesotho for the 37th South African Development Community (SADC) Ordinary Summit of Heads of State and Government at the Department of International Relations Cooperation, OR Tambo Building in Pretoria. 19/08/2017 Photo: Kopano Tlape GCIS
The MNN Centre for Investigative Journalism in Lesotho co-produced this story. Its views are its own. See www.lescij.org for its stories, activities and funding sources.
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