The Industrial Development Corporation of South Africa (IDC) has mounted an application for Kalagadi Manganese to be put in business rescue over claims that it was struggling to pay its creditors.
Documents filed in the South Gauteng High Court by the IDC, which owns a 20% stake in the mine and is also a creditor, paints a bleak picture of its inability to meet loan repayments.
It claims that the financial situation of the company established in 2001 by Daphne Mashile-Nkosi has reached a stage where the IDC cannot continue advancing funds or deferring repayments as either lender or shareholder.
“Something has to be done to rescue the business . . . as the largest creditor, it can best be achieved by placing the first respondent’s business in the hands of experienced business rescue practitioners,” read the papers seen by Fin24.
The IDC, a government-backed development finance institution, said its exposure in Kalagadi was R3 billion. Among the claims contained in the court document is that Kalagadi failed to meet repayments for a $12 000 000 loan facility with the African Development Bank (AfDB).
“As the first respondent could not make these payments, the applicant paid the initial debt due on behalf of the company, utilising the approved shareholder loans”.
The next capital repayment was due on 1 September 2016, but again Kalagadi was unable to make a payment to the AfDB and the payment was eventually paid from a working capital facility provided by Absa and guaranteed by the IDC.
The IDC says the assumption that it should not pursue the liquidation route simply because Kalagadi is owned by a black female, is incorrect, arguing that if that were the case, it would mean black ownership would oblige it not to take any legal steps against its black debtors.
A Kalagadi representative confirmed the court challenge, saying “one of its shareholders, the IDC, has approached the court to seek the company’s business rescue”.
Manganese is, among other things, used in steel production and to reduce the octane rating in fuel, and South Africa accounts for nearly 78% of the global reserves, according to the Minerals Council South Africa.
More than 14,9 million tonnes of manganese were mined in 2018, up from 14,3 million tonnes in 2017.
In its response, Kalagadi alleges that the reason for its inability to meet its financial obligations was that it was still in a “development phase” – something the IDC is rejecting, arguing the company had never reached a stage where its operations have become profitable, even after the development phase.
“lt seems to be expecting its creditors to wait for years before they will be able to commence the repayment of its debts, of more than R6 billion at this stage.”
Those close to the matter have lambasted the IDC, whose mandate is to ensure the growth of industrial entities, for working to topple a black-owned company, accusing it of attempting to overturn the company under the guise of rescue.
It is not the first time that a case of business rescue will play before the courts. Earlier this year, SA Express was placed under business rescue after one of its service providers, ZieglerSA, successfully sought the order. The rescue process failed and the airline is under provisional liquidation – a fate that Kalagadi is gearing up to fight head-on.
– Sibongile Khumalo, Fin24
