A 24-hour clinic serving 20,000 people and was supposed to open in Apil, remains unfinished, allegedly because the Gupta-owned Optimum Coal has failed to pay the building company, reports Groundup.
Kwazamakuhle Clinic in Hendrina was supposed to open in April. This 24-hour facility will improve health-care for approximately 20,000 people living in this Mpumalanga Province township. But three months later it remains unfinished with no indication of when it will be ready. Groundup reports that the clinic is incomplete because Optimum Coal, a company owned by the Gupta family, failed to pay the company responsible for building the facility. The building of the clinic is part of Optimum’s social and labour commitments in terms of the Mining Charter. The report says now court documents obtained show Optimum’s cavalier approach to its contractual obligations. Yet there appears to be not the slightest effort by the Department of Mineral Resources (DMR) to take action against Optimum.
The report says another story of Gupta shenanigans might leave readers jaded, but this story exemplifies how state capture affects poor people. As reported earlier Optimum committed to paying for the new clinic. Three amounts had to be paid to the company building the clinic, Re-Action Consulting: R5.6m on 7 January 2016, another R5.6m on 16 March 2016, and R3.8m in August 2016. The first two tranches were paid while Optimum was owned by Glencore. It was then bought by Gupta-owned Tegeta, which failed to make the August payment as well as additional management fees owed to Re-Action.
Nevertheless, the report says, Re-Action continued to build the clinic using its own funds. However, it has drawn a line in the sand that the finishing touches to the clinic will not be completed nor the facility handed over to the health department until it is paid the money it is owed. Following months of demands for payment, Re-Action initiated litigation against Optimum in the High Court in Johannesburg. It is asking for Optimum to be wound up on the basis that it is unable to pay its debts. The court record shows how Optimum has stalled the payment by insisting on documentation from Re-Action and then, upon receipt of this documentation, requesting additional documentation.
The report says presumably in preparation for the defence of its court case, in March Optimum hired Accura Development Management to assess the “general quality and outstanding work” of the Hendrina clinic. The report confirms Re-Action’s view of things. It found that the clinic was 95% finished and of acceptable quality. The report contains a list of unfinished items, but these appear minor and could certainly not have been expected to have been ready by the time the August 2016 payment was due to Re-Action.
The Accura report further makes it clear that the payment due to Re-Action in August 2016 was not dependent on the clinic being complete. Accura recommends: “Optimum should withhold 5% of the project value as retention which must reduce to 1.25% on practical completion and 0% on final completion.” The 5% retention has already been deducted from the amounts that Re-Action has invoiced Optimum, and for which it is now litigating.
The report says at first Optimum did not make the Accura report available to Re-Action. Optimum quoted from the report in its correspondence with Re-Action in order to justify its non-payment. In the court papers Re-Action describes these quotes as “selective” and “misleading”. To eventually get the Accura report, Re-Action had to make a discovery application under the Uniform Rules of Court.
The report says it is unclear why Optimum has failed to pay Re-Action. Its court papers offer a series of excuses that are “spurious” as described by Craig Assheton-Smith, Re-Action’s attorney. Assheton-Smith says Optimum’s actions are “clearly designed to delay” a payment that is contractually clear. He says there is no “bona fide” dispute, and concludes that Optimum is unable to pay.
In Optimum’s court papers it denies that it is unable to pay its debts and claims to have placed the disputed funds in its attorney’s trust account, but it provides no evidence for this. In fact in a letter dated 19 January 2017, Optimum’s attorney states that there is no obligation to maintain the funds in the trust account.
The report says Optimum was if it was solvent, as well as several other questions, but the company’s attorney merely responded: “The matter is currently the object of litigation. In light thereof we do not intend to respond to your queries.”
A mining expert is quoted in the report as saying that the amount of money at stake here was “small change” in this industry. In an industry where transactions in the millions of rands are common and the completion of a public clinic would be a much-needed PR win for the Gupta family, it is unclear what other explanation there can be for the non-payment other than Optimum having a serious cash-flow problem.
The report says last year President Jacob Zuma threatened to remove Lonmin’s mining rights if it did not hurry up with the implementation of its housing plan. Optimum appears to be under no such pressure. On 7 February representatives of the DMR, Optimum and Re-Action met at Optimum’s offices to try to resolve the impasse. Optimum’s executive, George van der Merwe, once more said that the company required documents from Re-Action before payment could be made, but he was unable to say what documents these were. It was agreed that Optimum would supply these within seven days. It did not, and the DMR took no action. (Later, in March, Optimum sent a request for a list of documents, irrelevant to the payment due, which Re-Action nevertheless for the most part says it provided.)
The report says a short list of questions was emailed to the Ministries of Mineral Resources and Health but despite extensive follow-up efforts, neither had commented by the time of publication, more than 26 hours after initial enquiries. No one answered the switchboard line of the Mpumalanga Department of Health.
The report says Re-Action’s lawyers asked for the case to be heard urgently, but this was denied by the court. It is therefore likely to be years before this matter is concluded, Re-Action is paid, and the clinic is handed over.
In a nutshell, the report says, Optimum, perhaps because it is short of liquid assets, is unable or unwilling to pay for the clinic. It is in effect being protected by the DMR. (It’s a matter for speculation what has happened to Optimum’s money.) This is state capture at work. And, the report says, the people of Hendrina are the victims.
Optimum has, meanwhile, issued a summons for R10m against Re-Action Consulting, alleging they published false and defamatory statements in court papers. Groundup reports that The Daily Maverick, AmaBhungane, News24, TimesLive, and even GroundUp, have between them published numerous widely circulated highly damaging claims about the Gupta family, their companies, agents and representatives, including Optimum. So did the Public Protector in the report State of Capture. Yet, the report says: “as far as we are aware no litigation is active against these institutions for defamation by the Guptas or their companies (we’ve confirmed this with Daily Maverick and AmaBhungane).”
The report says: “Re-Action is litigating to get Optimum wound up for being unable to pay its debts.
“Optimum’s response has been to sue Re-Action for statements in the latter’s founding affidavit that merely repeat allegations that have already appeared in the media and are well-known to the public. Optimum’s summons to Re-Action is dated 11 May, well after these allegations had appeared in the media or Public Protector’s report, and over a month before GroundUp reported that Re-Action is litigating against Optimum. Yet Re-Action’s founding affidavit, albeit a document that is in theory available to members of the public if they go and get it from the High Court in Johannesburg, has almost certainly been read by no more than a handful of people involved in the court case.
“The amount Optimum is demanding is also out of kilter with South African defamation cases: R1m in special and R9m for general damages. An advocate who specialises in defamation explained to GroundUp that to win special damages, the plaintiff must provide proof that the statements caused measurable suffering, such as contracts lost. General damages are subjective and difficult to quantify, such as a loss to reputation or ‘pain and suffering’. Courts are conservative when it comes to awarding general damages. The advocate said that he is unaware of any cases where more than R250,000 has been awarded.”
Optimum did not respond to a request for comment, the report says.
According to the report, defamation cases are extremely hard for the plaintiff to win in South Africa. Since most or all of the claims (see below) are likely true and in the public interest (a standard defence against defamation claims), it is improbable that Optimum will convince a court to find in its favour.
The report says: “The allegedly defamatory statements in Re-Action’s court papers that Optimum is suing for include (quotes lightly edited for length and to correct typos):
The Gupta family has ‘faced much criticism for their involvement in business transactions which are the subject matter of scrutiny and investigation by the press, public and the relevant authorities’ that are ‘to the detriment of the country’.
‘Optimum has been dogged by controversy since being purchased by the Gupta controlled Oakbay Resources and Energy Limited’.
‘As of 5 December 2016, Mr Johan Burger of FirstRand Bank Limited admitted that the accounts had been closed because of FirstRand Bank Limited’s suspicions that Oakbay Resources and Energy Limited have been guilty of money laundering.’
The ‘lack of a bank account will ensure (Optimum or Oakbay) will inevitably and invariably become financially distressed.’
The founding affidavit references the Public Protector’s State of Capture report’s description of how Eskom colluded with the Gupta family to purchase Optimum at a reduced price, and how Tegeta funds are being laundered offshore instead of being paid to Optimum.
Gupta-owned ‘Tegeta Resources & Energy was interposed as an intermediary between Eskom and (Optimum) in order to artificially inflate the price of coal sold to Eskom.’
The founding affidavit refers to allegations of Optimum’s misappropriation of its R1.3bn rehabilitation fund.
‘The media is rife with articles related to the Respondent’s precarious financial position …’.
A liquidator should be placed in control of Optimum to prevent further misappropriation of money.”
[link url="http://www.groundup.org.za/article/gupta-owned-company-blocks-improved-health-care-mpumalanga/"]Groundup report[/link]
[link url="http://www.groundup.org.za/article/gupta-owned-company-demands-r10-million-defamation/"]Groundup report[/link]