How to Steal a Gold Mine: The Aurora Story

By Dianne Hawker

In 2009, Aurora Empowerment Systems a black-owned, politically connected business, made a bid to rescue the liquidated Pamodzi Gold mines.
Khulubuse Zuma, Michael Hulley and Zondwa Mandela, were listed as directors of Aurora. The company looked too good to be true – promising to turn the mines into a new business. Soon after the acquisition, cracks appeared. Many workers and suppliers went unpaid and Aurora-managed mines were stripped of assets, as illicit payments were made. 

• Language: English
• Publisher: Tafelberg
• Release date: Feb 10, 2023
• ISBN: 9780624090571

Dianne Hawker

Dianne Hawker has worked as a legal journalist and editor in many South African news organisations. She helped set up Newzroom Afrika.  She has worked in radio and online news and is currently the Multimedia Editor at Timeslive. She is a seasoned media trainer and coaches through her company, iNtatheli Media. She lives in Johannesburg.

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Tafelberg

I dedicate this book to my grandmother, Ruth Elizabeth Hawker, who taught me to be a difficult woman. Rest in peace Super-Granny. And to my parents who have always supported my wildest dreams. I love you.

INTRODUCTION

Susan Ferreira has a crystal-clear recollection of the day her husband took his own life. It’s ten years later and she’s speaking to me while seated in a small but tidy lounge in a council-owned apartment whose rent she cannot afford to pay. Her hair is well styled and dyed the kind of blond that helps to hide grey hair. Her husband, Marius, was employed at the Grootvlei mine in Springs both during the time it was owned by Pamodzi Gold and subsequently when it came under the management of Aurora Empowerment Systems.

Pamodzi was an early black empowerment company that came to public notice when in 1998 it acquired a majority share in the food manufacturing and distribution company FoodCorp, many of whose brands are household names. Pamodzi seems to have been determined to make a name for itself by becoming one of the first black-owned gold-mining companies. Amid much fanfare, Pamodzi Gold was listed on the Johannesburg Stock Exchange in 2006. Subsequently it acquired several gold mines: Grootvlei Proprietary Mines in Springs (a large mine with four shafts), Nigel Gold Mining Company, and Consolidated Modderfontein Mines (Cons Modder), all on the East Rand, as well as an opencast gold mine at Orkney on the West Rand. All the Pamodzi mines showed promise with their sufficient reserves and were expected to produce profitable yields for years to come.

Yet just more than two years later the wheels came off the business. Quite why this happened is still a matter of debate, but the outcome was that the former Pamodzi mines ended up in the hands (though not in the ownership) of a company called Aurora Empowerment Systems. Under the new regime, the mines’ assets deteriorated extensively, making the resale of the mines near impossible. What remain now are mere carcasses of once profitable mines – and a story that has not been fully examined to this day. Despite having all the hallmarks of fraud, and having been investigated briefly by the Directorate for Priority Crime Investigation (better known as the Hawks), the case never made it to court.¹ Yet the evidence of malfeasance, theft and criminal dealing is overwhelming.

Aurora exploded onto the mining scene in 2009 as the alleged saviours of the group of struggling mines owned by the Pamodzi Group. The leading figures associated with Aurora were immediately intriguing.² President Jacob Zuma’s lawyer Michael Hulley and the president’s nephew Khulubuse Zuma were listed as directors of the fledgling mining company. And there was also Zondwa Mandela, the affable and attractive grandson of the iconic power couple Nelson and Winnie. Zondwa was, above all, the public face and representative of the company, who for instance would appear later before a parliamentary committee to explain his company’s role when questions began to be asked about its conduct and activities.

To grasp the Aurora story, one has to understand first and foremost that this was not a victimless crime. Corruption and fraud cases in South Africa are often given prominence according to the monetary values involved. While the amount stolen in the Aurora case, through illicit gold sales and asset stripping, is said to be in the hundreds of millions of rands, this is by no means the full extent of the tragedy. The mines that Aurora took over were staffed with five thousand workers who depended on their employment to keep themselves and their families alive. These same workers were the first to sound the alarm when Aurora’s promises started to crumble. Salary payments first slowed and then stopped completely while workers watched entire mining shafts being sold off for scrap. Their protests ultimately brought media attention to the matter and later resulted in an inquiry by the Master of the High Court, who was already overseeing the liquidation of the former Pamodzi mines.

The idea that an entire mine could be stolen through an elaborate scheme involving politically connected individuals may have seemed unbelievable to many South Africans when this story began to become public. However, we have now lived through almost a decade of state capture and have learned, especially from the revelations of the Zondo Commission of Inquiry, of the attempts, many of them successful, to steal the whole country. The Aurora mine story offers a glimpse into a little-known but parallel story of the capture of private rather than state-owned entities, and it reveals the same kind of collusion between business people with political connections, government and politicians.

However one sees the Aurora case – as a form of corruption or of capture – the outcome is one of the saddest and most misunderstood stories in South African history. At the centre were people like Susan Ferreira and her husband, Marius, who had no idea of the maelstrom in which they were eventually caught. And they were not alone. Hundreds of Aurora workers, affiliated mostly to the National Union of Mineworkers, Solidarity and UASA, were left without salaries for months on end. Many could not get payments from the Unemployment Insurance Fund (UIF) because they occupied the unusual limbo of no longer having jobs but simultaneously not being officially unemployed. Later, they were also caught between two sets of liquidators: those for Pamodzi and those for Aurora. Despite being preferred creditors, by November 2022 hundreds of former employees had still not been paid what was owed them.

When I asked Susan Ferreira why this was the case, she couldn’t explain it. Another worker whom I asked, Thembelani Terra Dimane, said that the majority of the victims were poor black people and thus not important in the scale of things. It is a sad reality of South Africa where the lives of black workers are often seen as expendable. While waiting for their outstanding salaries and pensions to be paid, many former mineworkers remained in derelict mine hostel buildings with no running water, no electricity and, in some cases, no doors to keep out the cold weather. The miners, who often hailed from Mozambique or Lesotho, said they could not return home empty-handed and instead stayed on in these crumbling hostels year after year in the hope of receiving some answers. Eventually, when the Grootvlei mine was sold, they were forced to move away or return home as paupers.

South Africa is often hailed as a country with one of the best constitutions and legal systems in the world. Yet somehow the Aurora mine takeover took place in a regulated legal environment where there was seemingly little oversight. Not only did the company owners cheat its employees, but those meant to conduct oversight and protect the workers failed them dismally. Once the scheme had been uncovered, those meant to prosecute and seek justice for the crimes committed failed to act, leaving one of the country’s largest frauds to fade from memory as if it had never happened.

In 2008, something went horribly wrong and to this day many who were affected by it can’t quite explain it. Was it a tragedy? Was it a con? Was it a deliberate act of greed that resulted in thousands of lives being changed forever? This book aims to find out and explain what truly happened in the Aurora mine saga and, at the same time, show how easy it can be to steal a gold mine.

1

MINES IN DECLINE

If you look at the Pamodzi portfolio now, it’s hard to understand how the company could have fallen into trouble and lost its gold-mining assets to a relatively unknown company which had been incorporated just a few months previously. Pamodzi Gold was listed on the Johannesburg Stock Exchange in December 2006 in order to become the vehicle used to consolidate the South African junior mining sector. In its 2007 annual report, Pamodzi boasted that it had a realistic strategy in place to become a one million ounce per annum gold producer in the next two years through its acquisition of gold mines on the East and West Rand as well as in the Free State.³ Our aim in 2008 will be to increase shareholder value, manage and control our operation costs, and look at innovative solutions to decrease out our hedge book, Pamodzi chairperson Ndaba Ntsele wrote at the time.

In 2020 I meet Ntsele face to face in the Sandton headquarters of the Pamodzi Group. He’s an elderly man whose stories are filled with anecdotes that tend to take long winding roads. Though he is much older than many of the business magazine covers posted on his boardroom walls, he is energetic and speaks enthusiastically about his latest business deals without giving away too much detail.

In 2007 Pamodzi Gold began growing its gold-mining operations through a series of deals in which it hoped to buy cheap; secure finance; and later grow its mining operations. Harmony Gold, one of the larger, more established players, sold its Orkney mines to the group for R550 million.⁴ The company also purchased three mines on the East Rand area bordering Springs: Grootvlei, Nigel and Cons Modder.

On paper the portfolio looked good, but Ntsele and his team later ran into difficulty. He explains that prior to the global financial crash of 2008, mining seemed a safe bet, particularly to a South African company competing on the global stage. There are a lot of mines that were really expensive to run, because of the overhead [costs]. That’s why as business people, we took advantage of the situation, especially as an African person. Because you will recall that we were prohibited from the mining industry by law during apartheid. So, this was an opportunity for me because I was in business in any case. So I negotiated with Harmony Gold, and also some Canadian gold miners, that they must sell me their mines that they were not mining because of costs.

Ntsele’s plan was to revamp the mines by starting afresh. He intended to renegotiate salary terms and employ new staff on lower salary bands. When people have been in their mine for a long time, maybe their scale is R30 per hour. So a fresh mine is a new business, you can start at the bottom. As a mergers and acquisition expert, Ntsele had set up a team that he hoped would take the company’s relatively small mining business to greater heights. In the larger picture, however, he viewed the Pamodzi Gold operation as a comparatively minor aspect of the company’s overall business, which had interests in numerous sectors including food services, rail, petroleum and transportation.⁵

Ntsele’s business acumen was fostered in Soweto, through housing development. I developed those houses in Soweto, in the East Rand, in Pretoria, Mamelodi Gardens. And I was a property developer of note. In the early 1990s, as the economy opened up to black entrepreneurs, so Ntsele’s business grew. He branched out into importing goods, and became the licensed distributor for Nike in South Africa, before acquiring part-ownership of the private hospital group Auckland Investments and of Wesbank First Auto.⁶ Mergers and acquisitions were the name of the game, and it didn’t require Ntsele to have intimate knowledge of his businesses. Instead, he focused on putting strong managers into place who could run the businesses effectively. It was not something new to me as a mergers and acquisition person. You negotiate to buy a business, you get licences, and then you get management to run the business, and then you guide the management, he said to me.

Ntsele’s plan for the Pamodzi mines would have been a stroke of business genius if everything had fallen into place. But the company faced a wide range of discrete problems. As we have seen, Pamodzi Gold owned several gold mines, each with its own type of challenge and problem. Together they involved a perfect storm of hedge agreements, rising debt and bad business agreements.

Before the East Rand mines were purchased by Pamodzi, they were owned by Petrex, which had entered into a very onerous hedge agreement with Standard Bank in 2003.⁷ By 2009, gold was trading at a price far above that which Petrex had bet on.⁸ This meant that after the acquisition Pamodzi was losing millions in payments related to this deal. In April 2009