Investigations reveal that when Daniel Mahupela was appointed Managing Director in 2011, he took over a profitable copper mining giant. In fact his appointment was interesting, according to information sought by The Business Weekly& Review. He took over from his predecessor, Montwedi Mphathi, who was the first ever Motswana to be appointed General Manager at BCL in February 2003. When Montwedi Mphathi took over the leadership of the mine, BCL was not a profitable concern, but under his leadership the mine soon turned around, so much that it even managed to pay off a P400 million emergency fund borrowed from government in 2000/2001.
However, Mphathi while effective, had differences with some of the board leadership who did not approve of his leadership style. It turns out that there was friction with Mphathi trying to run BCL the way he understood to be best, while some of the members of the Dr Tombale-led board preferred his own divergent views of a different direction. The differences in leadership style and business direction ultimately led to Mphathi resigninig in 2010, after he felt that he could no longer continue to work with Dr Tombale and his board. He had an Assistant General Manager then, but the board appointed Mahupela, who at the time was Divisional Manager of Resource Planning a position he had held since his employment in 2008.
Mahupela came with a high pedigree ofmining experience and qualifications, holding a BSc in Mining Engineering from Queens University at Kingston Ontario, Canada and prior positions as Acting General Manager at Jwaneng mine from 2004 to 2006 and Orapa/Letlhakane mines from 2006 to 2008 respectively. He also worked for Morupule Colliery (Botswana), Impala Platinum Mines, Rustenburg Platinum Mines and Palaborwa Mining Company (RTZ) in the Republic of South Africa. Mahupela’s experience and expertise is however derived from open pit mining according to findings, illustrating a lack of experience on the operational requirements to run an underground (closed pit) mine, unlike Mphathi who had that experience. BCL was a whole new environment for him.
Nonetheless, as Dr Tombale and the board’s preferred designate for General Manager of BCL he was ultimately appointed three years after joining the under-ground mining establishment. When Mahupela took over BCL, the company had cash reserves amounting to P3.5 billion made under the leadership of Mphathi who had grown a Rehabilitation account to a sizeable pool of money, not to mention a healthy current account. However, the P3.5 billion was dissipated under Mahupela, the watchful eye of board chairman Dr.Tombale and the then Minister of Minerals Energy and Water Resources (MMEWR), Kitso Mokaila. Day by day, these whopping cash reserves were depleted. The mine became less profitable while operating expenses were on the rise. The past five years were disastrous as the mine was facing financial challenges that required a government bailout.
The BCL board publically, led by DrTombale did not raise concern. Mokaila, as Minister with power over the board as well as Mahupela also did not take any action to curb the excesses and shortfalls in revenue. Mahupela and his board decried the crumbling international copper prices, which they emphasized as a contributing factor for the BCL losses. Mahupela and Dr Tombale were quoted several times saying that the decline in copper/nickel prices came down from a ten year average 9.2USD/lb to 4.0USD/lb in April 2016. Copper/Nickel prices were actually on their highest ever, in 2011, at a time when Mahupela was just appointed to the BCL top seat. During this time, BCL had reserves left by Mphathi. It makes sense for one to think that with prices being at their record high, BCL profits would escalate and that cash reserves would consequently be increased to new highs. In contrast to 2003, when Mphathi took over, prices were under the current lows, at 1.5 USD/lb, when BCL was making a loss.
Inspite of the then low prices he managed to steer the BCL ship then through the world prices glut, and subsequent fluctuations until the price recovery of 2010 when they reached their highest price of 9.1 USD/lb in December of that year. Mahupela came in when prices were at 9.8 USD/lb in 2011. Throughout the period during which Mahupela remained at the helm of BCL, prices were generally higher than Mphathi’s time dropping to 4 USD/lb in 2015. In contrast to the Mphathi era when the lowest prices were 1.5 USD/lb. Overall Mahupela enjoyed higher prices in the commodities than Mphathi, yet BCL became less and less profitable under Mahupela whose time had more favorable copper/nickel prices for profit making.
Speaking during wage negotiations in 2014 Mahupela advised the Botswana Mine Workers Union that the wage increases demanded could not be met due to the difficult background of combined factors notably low metal prices, revenue loss for the 2013 and projected loss for 2014 financial years, reduction in production due to diminishing cut-and-fill ore from Phikwe Central mine, which declined from 80 percent to 30 percent in overall production leading to“(We have delivered) below budget ore tons to the concentrator, impacting negatively on metal produced at the smelter and revenue,”adding that “Ore from the cut-and-fill stopes will no longer be available from 2014 as they have been depleted.”
The need for experience in underground mining becoming an essential for the continued development, optimization and the survival of BCL. Mahupela’s operating expenses continued to skyrocket so much that his cost of mining and running the business amounted to P2.5 billion last year while proceeds from copper and nickel sales only brought in revenues of P1.3 billion leaving a shortfall of P1.2 billion.
No one between Mahupela (MD), Dr Tombale (board chair) and Mokaila (Minister) devised a publicly known successful method to cut costs or a method for more effective extraction of ore at BCL so as to efficiently operate it at a lower costs and increase production. Publically, the key stakeholders were ambivalent with Mahupela’s expenditure, yet it was apparent that the mine was failing. The solution, which has cumulatively led to the current crises was put into effect. Mahupela and the board came up with a strategy, which the public was informed was designed to turn around BCL and make it a diversified enterprise that will quadruple BCL’s fortunes. The Polaris II. An ambitious strategy, which needed a disproportionately high level of funding from a company already unable to generate its own profit. In 2014, when the strategy was launched, the then proud Dr Tombale told the media that the strategy will focus at sustaining nickel/copper, developing iron, chemical by-products, coal beneficiation, and precious metals and other minerals.
Despite being motivated by a good concept, that is the drive to diversify revenue stream from mining but towards maximizing the smelter and other mining operations outside of the Phikwe area , Polaris II was badly implemented with overspending all over. It was too general in scope to have enough effectiveness. Critics of the implementation of the strategy say it was more of a money making exercise in of itself rather than the projects envisioned within it. Through the mineral explorations alone, which have brought no results BCL spent an approximate P301 004 788 (over P300 million) collectively in 2013, 2014 and 2015. The money was spent on Precious Stones exploration, Moeng Manganesse, Iron Ore Projects, Dikoloti Project, Ghantsi BCL, Ghantsi (CU-Ag), Mokojwe (Cu-Ni), Mphoeng (Cu-Ni-PGM), Kasempa Zambia and Trip Trop.
The bulk of these projects were under the ambitious Polaris II, a strategy spearheaded by Dr Tombale and Mahupela, ultimately answerable to then Minister Mokaila.
As part of the strategy, BCL invested into establishing a steel manufacturing plant, Pula Steel. Initially, Pula Steel was a consortium of three companies; BCL with 51 percent shareholding, the Citizen Entrepreneurship Development Agency (CEDA) with 26 percent of the shares andWealth Generation Holdings (Pty) Ltd, a company owned by RanvirkumarVerma and son Deepak Verma, owning the remaining 13 percent equity.
An initial P89 million was budgeted for the construction of the plant, which BCL funded. Due to cost overruns the steel manufacturing company requested an additional P53 million which BCL once again invested, bringing BCL’s investment contribution to P138 million. At the time Mahupela indicated that the additional P53 million was injected in the company because the scope of designs had been expanded from the initial scope of designs.
Under the same Polaris II Strategy, BCL also acquired Tati Nickel Mine, which was supposed to be paid for as a collective with Nkomati Mine in South Africa for P3.1 billion. While Tati Nickel has been paid for, BCL failed to raise money to pay for Nkomati.
Dr.Tombale said in pursuit of the Polaris strategy, the company had undertaken a number of initiatives gearing towards the cleaning of a balance sheet and makes it debt free.
This would involve the restructuring of the company ownership and debts settlement and so far BCL has settled P3.3 billion to make good indebtedness to government through a combination of P1 billion in cash and P2.3 billion balance as a way of issuance of shares, he explained.
Further, he stated thatit was agreed to reduce the tax burden from its 40 per cent to the industry norm of 22 per cent with the royalty also reduced to 3.41 per cent on gross income of 3 per cent. By cleaning the balance sheet of its past debt, BCL would then be well positioned to approach capital markets for funding productive assets, he indicated.
By 2014 the company was debt free, and it soughtto approach capital markets to fund its strategies.
A year down the line, BCL could no longer pay its salaries. While its revenue was at P1.3 billion, expenses had reached P2.5 billion and it began seeking funding from government to enable it to implementits ambitious plans as well as operations.
Chairperson of the Parliamentary Committee on Statutory Bodies Samson Moyo Guma, has reportedthat government had already funded BCL with P7 billion, to date, while a P1 billion loan with Barclays bank Botswana was guaranteed.
At the same time, the company has failed to pay contractors and suppliers a collective P6 billion. Early 2016, when the BCL was now effectively insolvent, Dr. Tombale resigned as board chairman earlier this year. In a statement, he said he resigned a proud man. Some wouldargue that he was running away from the BCL troubles, but he denied that saying it was time for him to resign.
After his resignation, the BCL General ManagerMahupela, announced a vigorous cost cutting measure, which he assured the public he was confident that it would revive BCL, but it was too late. Government had already pumped in more than P7 billion, and the mine was totally bankrupt. It had to be shut down.
The Characters
Mokaila
He was the Minister responsible for government mines at the time Mahupela and Tombale were appointed MD and board chair respectively. Mokaila as the Minister, represented government. He is the one who was tasked with appointing a competitive and skillful board of directors which would see to the success of BCL. Mokaila on behalf of the shareholder, was supposed to scrutinize BCL operations now and then and ensure that the companies brought in value for the shareholder. The BCL strategy was approved by him as representative of the shareholder. He would have called on the many experts in his ministry to scrutinize any plan brought forward by the board. When BCL’s losses mountedafter the departure of Mphathi, he was duty bound tohave asked questions, sat down with the board and MD as early as possible to cut costs and come up with alternative solutionsto make sure BCL stays afloat. He did not, despite countless letters written to him by the workers, as well as petitions by the unions which told him that Mahupela and Dr Tombale were running the mine to the ground. He is actually the key enabler, who adhered toMahupela’s requestsevery timeBCLwanted grants from government. The P7 billion that kept being pumped into BCL was actually approved through Mokaila, he ought to be held to account.
DR TOMBALE
When BCL fell into financial delinquency, DrTombaleresigned from the board. As Chairman of the board, he had differences with the then profit making,Mphathi that led to the latter’s resignation. He appointed his preferred choice, Mahupela. Together they became synonymous with Polaris II strategy, a strategy that subsumedhundreds of millions of Pula, which will now be for the Liquidator to account for.
As a board chair, Dr Tombale and his board was tasked with giving direction to the BCL. The strategic direction that culminated inBCL’s current demise was promulgated under the direction of the company driven by DrTombale, and Mahupela. Dr Tombale gladly called press conferences to announce the strategy. He had no problem and always stood by Mahupela when the very employees of BCL wanted Mahupela out because he was failing. When the reality of BCL’s bankruptcy struck, he parted ways with the company absolving himself of the need to deal with the final death rattle of the company.Fortunate!
MAHUPELA
As a mining expert he should have been able to foresee the future of the mine. He worked under Mphathi, when BCL was profitable. He should have takenover where Mphathi left. Increased profit. Increased cash-reserves for future use, rather he squandered the money made by another man’s effort, only to blame his failures on copper prices. Research shows that copper/nickel prices were at their lowest during Mphathi’s reign at 1.5 USD/lb, while during Mahupela the lowest prices, which were recorded in 2015 were 4 USD/lb, which are over 70 percent higher than Mphathi’s lowest. How then does he blame copper/nickel prices, and the whole nation including Vice President Masisi believe him?