‘Reckless’: details of Khulubuse Zuma’s provisional kidnapping

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Last week, the Durban High Court placed the estate of businessman Khulubuse Zuma under interim sequestration following a request by the liquidators of the Pamodzi (Pamodzi) group of companies. Pamodzi consisted of six mining companies, all in liquidation.

Zuma has until March 4 to show why the interim order should not be made final.

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The case arose in 2009 when Zuma and Zondwa Mandela, via Aurora Empowerment Systems (Aurora), took control of mines on the outskirts of Johannesburg that were owned by Pamodzi Gold.

Zuma is the nephew of former President Jacob Zuma and Mandela the grandson of late President Nelson Mandela.

Aurora had five directors: Zuma, Mandela, Thulani Ngubane and the father-son team Sulliman and Fazel Bhana.

Read: Aurora bosses disappear with workers’ wages

Reckless directors

In 2012, the liquidators asked the High Court of Pretoria to have the directors of Aurora declared reckless. If the request were granted, then Aurora’s administrators would be personally liable to Pamodzi for all monies owed to him by Aurora.

The case was brought before Judge Eberhard Bertelsmann, who in June 2015 delivered his judgement, in which he held all directors accountable to Pamodzi.

Regarding Zuma, the judge noted:

  • ‘Zuma is in a slightly different position from the other respondents. It is a common cause that he was not involved in the day-to-day running of Aurora’s affairs. He was not directly involved in the negotiations with the liquidators and has been briefed from time to time by the other respondents or by lawyer Michael Hulley of the situation. His position must therefore be judged in light of his personal circumstances and his knowledge of Aurora affairs.
  • “Zuma was clearly one of two directors who could bring political connectivity to the table and therefore had to be aware of the crisis facing the proposed transaction. In addition, he was convinced to make R35 million of his own funds available to deal with the ailing company. At least part of these funds were used to pay for security services. So he knew the mining assets were in danger. It was therefore no later than November 2009 that he learned of serious disturbances in the affairs of Aurora.
  • ‘Zuma was investigated by the end of 2009 at the latest and cannot be heard to protest his ignorance of the real situation after that date. His inability to act once he learned of the dire situation is clearly an irresponsible disregard for his duties as a director. If he really didn’t know, it was because he deliberately chose not to be informed. Such an approach constitutes recklessness and Zuma should therefore be held liable for all losses incurred on or after December 1, 2009. ‘

Over 5,000 miners have lost their jobs because of these reckless managers.

Read: Khulubuse Zuma “did not know that Aurora’s representations were false”

Proof of claim

The liquidators proved two claims against Zuma: R122 million and R1.4 billion. Judge Bertelsmann denied Zuma leave to appeal his judgment, and the Supreme Court of Appeal also shut the door on him.

Read: Aurora: Zuma’s request rejected

Settlement negotiations

Zuma and the liquidators have entered into settlement negotiations.

Zuma offered two payment plans:

  • Rand 23 million: Rand 5 million was to be prepaid and Rand 16 million in 32 consecutive monthly payments of Rand 500,000.
  • R 2 million: in 20 consecutive monthly payments of R 10,000.

There were two important provisions in the R23 million settlement agreement. First, Zuma would buy into it. Second, if Zuma had not been forthright in disclosing the true extent of its assets, the deal would be broken and the Bertelsmann ruling would be in full force.

Zuma’s strengths

Zuma filed an affidavit which he gave to the liquidators detailing what was supposed to be a detailed disclosure of his assets and their value.

Here are some of the assets mentioned in the papers of the Court of Provisional Receiver:

  • A residential property in Umhlanga, KwaZulu-Natal (The value of the property was not disclosed; as of May 2016, R 1.5 million was owed to the First National Bank)
  • A 2010 Range Rover HSE autobiography worth 200,000 rand
  • A debt to Protea Coin Group in the amount of R 9,912,356
  • A debt to Kapital Minez Consultancy in the amount of 1,600,000 rand; and
  • A debt to the Strauss Daly law firm in the amount of R 2,500,000.

Zuma was fingered in the so called Panama Papers. He stated that he had no interest, either directly or indirectly (personally or through an agent) in any corporation, trust, corporation and / or other legal entity, in Except for an entity he named ‘Impinda Transport’, a business he declared was of no value. He also stated that he was not a creditor of any party.

Default of payment

Zuma maintained his payments to the liquidators until June 2017 and two months later he paid 200,000 rand. This meant that the settlement agreement had become void and that Zuma was now bound by the Bertelsmann judgment: 122 million rand and 1.4 million rand – less payments already received.

When the R200 is simply not enough

The Insolvency Act contains a provision that you can go into receivership if your debts exceed your assets by R200. The affidavit of liquidator Johan Engelbrecht respectfully states the statutory allegation: “It follows that the liquidators have a claim against [Zuma] in an amount greater than R200.

Deed of insolvency and benefit to creditors

The liquidators told the court that Zuma’s R23 million compromise was made with one of his creditors to the exclusion of the others and that it amounted to an act of insolvency. They allege that if a final order is granted on March 4, the appointed liquidator will be able to fully investigate Zuma’s financial affairs, including his 34 director positions.

Presented by Moneyweb

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