Wednesday, September 23, 2020

Will Pula Steel shareholders develop balls of steel?

It has been a tough three and half years for the Verma family particularly the only son of the family – Deepak Verma. The family is part of the initial shareholders of Pula Steel ÔÇô a company that the Botswana government through the then BCL Limited and the Citizen Entrepreneurial Development Agency (CEDA) invested millions of Pulas in its bid to diversify the economy of the now ghostly town of Selebi Phikwe.   

The young Verma (Deepak) arrived in the country from his family’s native country – India just two or so years after his 20th birthday on the invitation of the then Botswana Exports Development and Investment Authority (BEDIA). At the time, the young Verma and his family were into textile business in Selebi Phikwe which they later closed down to concentrate on Pula Steel project just over five years ago. Pula Steel was envisaged as the messiah to the economy of the town of Selebi Phikwe and surrounding villages given what was seen as an imminent closure of the copper nickel mine.

“I was invited to come set up a manufacturing company in Botswana by BEDIA in the year 2000”, Deepak Verma, who is now just over 40 years old and was the Pula Steel Marketing Director at the time of its liquidation told Sunday Standard with a worried face in the capital Gaborone this week.

But what causes worries to Deepak and his family? The answer lies within the still-born dealings and misleading deals that happened both in public and behind closed doors.

From 2012 when the Pula Steel plant was set up until around 2014 when a new board of directors for the company was constituted all seemed like a bed of roses, things however reportedly turned ugly in October 2016 when – BCL Limited was placed under provisional liquidation. Before liquidation, BCL Limited had a majority stake of

50.5 percent while another state owned entity CEDA held 26 percent followed by the Verma family with 17 percent.

Fast forward to October 2017, Pula Steel itself was placed under provisional liquidation following the internal bickering at the board caused mainly by the fight for the BCL Limited stake. Before the provisional liquidation, CEDA, which at the time was now majority shareholder moved to place Pula Steel under judiciary management. While not confirmed, reports indicated that the local unit of the Accounting and Auditing firm – Grant Thornton was subsequently assigned to look at the financial books of the company. The unconfirmed reports were this week cemented by the young Verma who also confirmed that Grant Thornton was independently appointed by CEDA as financial management company but later converted and confirmed to a Judiciary Management company within a span of 20 days and paid P1.2 million for the latter appointment which was allegedly made up of only three sites visits to the Pula Steel plant.

The young Verma, who is son of Pula Steel’s founding Chief Executive Ranvir Verma was for the first time able to shed light on the behind the scenes transactions that could linked directly to the closure of what was to be Selibe Phikwe’s alternative ÔÇô economically.

While he could not be drawn into ‘name-shaming’, the young Verma singled out the Gaborone Central Business District (CBD) based agency – CEDA as the main culprit when it comes to the fall of Pula Steel.

He confirmed that at the time BCL Limited was under provisional liquidation, there was a discussion at the board level relating to the value of the BCL stake within Pula Steel. The initial agreement ÔÇô which could have seen The Vermas increasing their Steel-stake up to 70 percent, hit a snag after a disagreement between the now top two shareholders ÔÇô The Vermas and CEDA. The failure, the young Verma links it first to the delay tactics by the provisional liquidator of Pula Steel who reportedly took up to four months to give the Verma family a response with regards to their expression of interest to buy the BCL Limited stake.

“The company wouldn’t have gone into liquidation had the provisional liquidator accepted our offer to buy. We could have gone to third a third party and raised money to inject into the business…but he did not allow me to raise that money. Why did he delay? What was his underlying agenda there?”, rhetorically asked the young Verma.

While the Sunday Standard is yet to establish from CEDA, its reasons for shunning The Verma family’s offer , it has been emerged that the family had based its expression of interest to get more stake on the shareholders agreement – a guiding document which dictated terms and conditions of the disposal of shares. Amongst other things, the Pula Steel shareholders agreement is said to have made a provision for the sale of shares on a pro-rata basis.

“I asked for more equity based on the shareholders agreement because it guided the principle that it would be sold on pro-rata ratio and we were the second highest shareholders of Pula Steel at that time which allowed us to go up to 70 percent…which CEDA never wanted”, the y8oung Verma continued sharing his frustration.

The young Verma also said that after realising that his family was ready to increase its stake to 70 percent, CEDA then made a u-turn on injecting more money resulting in the collapse of Pula Steel. At the time of its closure and subsequent liquidation the company employed atleast 100 workers.

“Any project can only run, key things: Finance, market, resource, skill, all is there but people will who are handling due to other agendas have messed the vision, it was the perfect vision of the team to create jobs in Phikwe, but we failed  because hurdles were planted”, said the young Verma in a tweet.

The young Verma also accuses the CEDA Chief Executive Thabo Thamane of leaving no stone un-turned in his attempt to tarnish his family name.

“They had access to higher offices ÔÇô which unfortunately believed their side of the story”, Verma said without further elaborating on the “their stories” part. He however made it very clear that non-commercial decisions were made by the board ÔÇô made up of up to eight members.

Ever since the closure and subsequent liquidation of the company, the young Verma says his family made several attempts to “make up and kiss” with the other shareholders ÔÇô an attempt that has since proved futile.

Whilst he admits that his family has a personal economic gain from the re-opening of the plant, it is hundreds of former employees of Pula Steel that he is said that he is also concerned about.

“Remember Pula Steel can start even today, I have all the resource but the people in between are not allowing me why I don’t know? I can assure to create more than 5000 jobs in Phikwe in next 4 years but I don’t need leg pulling, I need resource, I need skill, and Phikwe will be a city”, reads part of a thread of tweets made by Verma in response to this reporter.

While Sunday Standard prepares to independently verify The Verma’s side of story and hear out CEDA’s, the young Verma has made just one request to other shareholders – “We need to meet and talk about the future of Pula Steel”.

At the meeting, the Young Verma says a collective decision to re-open the steel plant could then be made. This, he said, could be done by developing balls of steel and writing to the High Court indicating the intention to withdraw the liquidation. The question that remains to be answered is then whether other shareholders, precisely CEDA is willing to sit on the same table with The Vermas.

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The Telegraph September 23

Digital edition of The Telegraph, September 23, 2020.