Government is again set to lose another multi- million project which has failed to bear the desired results of helping to diversify the economy of Selibe-Phikwe. Pula Steel and Casting Manufacturing which has been put under judicial management by its majority shareholder Citizen Entrepreneurship Development Agency (CEDA) is said to be up for sale. Information gathered by this publication has shown that CEDA management has recommended to the Board to liquidate the plant as it cannot sustain itself. Sources at CEDA have revealed they are compelled to sell the plant as it is not their mandate to run enterprises but rather to facilitate them.
Early this year Pula steel was placed under judicial management by the High Court and Vijay Kalyanaraman was appointed judicial manager. Kalyanaraman is expected to send report to High Court in August this year to show the exact status of the plant, showing its assets and liabilities and its debt obligations. The company is said to be heavily indebted and all its shareholders except CEDA are broke with BCL under provisional liquidation, thus compounding its financial situation. BCL which has been the major shareholder with 65% shares, lost its stake after it was diluted by its partner in the subsidiary CEDA. This is after a resolution was passed for a capital call of P29m due to Pula Steel from the shareholders. BCL, which was under provisional liquidation, failed to inject its part of the required cash injection. CEDA injected P22 million into the plant in the process becoming the largest shareholder with 49% with other two shareholders the Verma family injecting P7 million and their shares shooting to 22.3% while BCL shares shrank to 22.7% and Wealth Generation remained at 5%.
Troubles at Pula Steel
Since its inception Pula Steel, which was part of BCL ambitious strategy of Polaris II, has been surrounded by controversy with some in management at the mine questioning the viability of the project and the experience and expertise of the Vermas. In 2011 BCL bought 50.5% of Pula Steel at P20 million without any plant and initially used P89 million for the construction of the plant and later forked out P45 million and P2.5 million. CEDA came on board after they bought equity shares of 35% at a value of P20 million from Pula Steel in 2011 and it was divided into two facilities. Of the amount P7 million was for the purchase of shares and P13 million was debentures which is a type of debt instrument that is not secured by physical assets or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Debentures have no collateral as such Bond buyers in this case CEDA bought debentures from Pula Steel based on the belief that the bond issuer is unlikely to default on the repayment. CEDA then sold BCL mine 9% of their shares at a value of P3.6 million and to remain with 26% equity shares. Other shareholders whose monetary contributions were never mentioned were The Verma Family and Wealth Generations Holdings (PTY) LTD, a company owned by former BEDIA Chief Executive Officer Brian Mosenene and former Botswana Democratic Party (BDP) Secretary General Mpho Balopi. Defending the involvement of the Vermas, the then BCL Divisional Manager Corporate Strategy, Mack Williams reasoned that Pula Steel has the experience and expertise and market experience to execute the project. Investigations by this publication showed that the Vermas belong to the Verma Group of Industries based in India and specialising in VERMA GASES (INDIA) PVT. LTD Manufacturers of Anhydrous Ammonia and Liquor Ammonia, with plant at Panoli Ankleshwar, Gujarat India. Others are Om Sai Enterprises which is a manufacturing plant, Uma Transport and Om Sai Transport all based in India. One of the directors of Pula Steel Diveepakah Verma said that they came to Botswana in 2000 and set up a textile plant in Phikwe dealing with non-woven textile.
The fall of company
Six months after take-off, the project was already facing serious financial problems and some were wondering if it will be completed in the second quarter of 2015 as was scheduled. Within a month of its construction the company gobbled P38 million. BCL pumped additional P53 million into the project without increasing their stake in the company. The additional funding shot the amount BCL invested into the company to P162 million. In 2015 Selibe Phikwe Town Council’s Buildings Department and Department of Waste Management and Pollution Control instructed that the plant be closed as it didn’t comply with the Department of Waste Management and Pollution Control provisions. The company is currently under investigations from Directorate of Corruption and Economic Crime (DCEC) which started when BCL was still the major shareholder. Last year other shareholders were shocked when the then CEO, Ranvir Kumar Virma was held hostage by employees demanding their salaries despite other stakeholders knowing that the plant was closed. Verma had told the employees that they were expecting some funds from CEDA. CEDA CEO Thabo Thamane and his deputy Andrew Madeswi were forced to rush to Phikwe to intervene and dismissed the statement by the then CEO that CEDA was to avail extra financial resources, confirming that all shareholders had paid their dues. Answering a question in Parliament on Wednesday regarding CEDA investment into the plant, the Minister of Investment, Trade and Industry Vincent Seretse said CEDA has received P3.6 million as proceeds of the shares BCL acquired from them.