22 June 2017

South Africa: JSE Warns That Gupta-Owned Firm Risks Suspension

Photo: The Presidency
President Jacob Zuma and Atul Gupta (file photo).

The JSE is considering suspending Gupta-owned Oakbay Energy and Resources because it no longer has an audit committee chairperson, sponsor or transfer secretary, which the stock exchange requires for a company to trade.

This was revealed by Oakbay on Thursday in a statement to shareholders, in which it said it "is considering various alternatives available to it".

River Group terminated its role as sponsor on June 5 because of its "revised assessment of association risk surrounding the company and its shareholders", Oakbay said previously.

Oakbay Resources is facing mounting challenges as media houses publish daily exposés from the #GuptaLeaks, a database of between 100 000 and 200 000 emails that reveal behind-the-scenes communications of the Guptas' many enterprises.

The family and their companies are the focus of intense scrutiny after allegations of state capture linking them to President Jacob Zuma, his son Duduzane and his political allies.

This year Oakbay reported an operating loss of R1.279bn for the year to end-February 2017, from a prior loss of R1.5m. The firm's cash on hand dwindled from R225m in 2016 to R2.7m in 2017.

The JSE is investigating Oakbay share trades after cancelling suspicious trades in the company's shares on March 31 2017, the morning after Pravin Gordhan was removed as finance minister.

Resignations cause new issues

Oakbay Resources CEO Jacques Roux left the company on March 31 after one year on the job, while board member Mark Pamensky also left this month. George van der Merwe has assumed the role of CEO.

The sponsor and the transfer secretary are mandatory appointments and play an integral part in the JSE's regulatory and supervisory structure, Oakbay explained.

It appears Pamensky's resignation caused further issues for Oakbay. "The resignation of the independent non-executive director may have compromised the composition of various board committees, being the audit and risk committees, the social, ethics and remuneration committee and the nomination committee pursuant to the provisions of the Companies Act No 71 of 2008 and the Listings Requirements," it said on Thursday.

"It may further lead to the company not having a functioning audit committee in future if a replacement is not appointed in due course.

"As a result of the above, the company has also received notice that the JSE is considering suspending the trading in the Company's shares pursuant to the Listings Requirements and the Financial Markets Act."

Battle to stay on JSE

The Guptas previously battled to convince a sponsor to replace Sasfin, which terminated its services in 2016.

Former Oakbay Investments chief executive Nazeem Howa said the group approached "every single" JSE sponsor to support the Oakbay listing, and the group was rebuffed by "every single one" of them.

"After the second and third round, River Group started coming around," he said in 2016.

Oakbay said last year that it did not anticipate River Group would withdraw sponsorship, as Sasfin Capital did in May.

Sasfin joined auditors KPMG in terminating its services, citing the same reason of "association risk". South Africa's top banks also blacklisted all Gupta-owned companies in 2016.

SizweNtsalubaGobodo took on Oakbay as its new auditors, while the Bank of Baroda has managed its banking affairs.

Oakbay said it is in the process of identifying and appointing a new sponsor. "The effective date of River Group's termination shall not be earlier than July 31 2017," it said.

It will then have 30 days after this date to appoint a new sponsor, or it will be in breach of JSE regulations.

This breach nearly occurred last year, when Oakbay was battling to find a sponsor. City Press reported in 2016 that the JSE confirmed that it was considering suspending Oakbay's listing.

"The JSE strictly enforces its listings requirements and takes appropriate action where necessary to protect investors where there are breaches," Andre Visser, general manager of issuer regulation at the JSE, told City Press.

The Gupta family owns 80% of Oakbay Resources & Energy. The company's major assets are Shiva Uranium in Klerksdorp and Brakfontein, a coal mine in Delmas that supplies Eskom.

Although Oakbay's shares are rarely traded, any suspension from the JSE could have an effect on the 3.57% stake held by the Industrial Development Corporation.

Source: Fin24

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