Australian group Macquarie Metals comes to rescue of Vantage Goldfields

Written by Ciaran Ryan. Posted in Journalism

An amended business rescue plan will see all creditors paid within three months. But a court action by a competing bidder may derail the best laid plans. From Moneyweb.

Image: Supplied

Five years after the collapse of a support pillar that took the lives of three workers at Vantage Goldfields’ Lily mine in Mpumalanga, there’s light at the end of the tunnel for the company. The 2016 tragedy brought an end to mining operations at Lily and its sister mine, Barbrook, which were then placed in business rescue.

The bodies of Solomon Nyirenda, Yvonne Mnisi and Pretty Nkambule remain buried a Lily mine, and the only way to recover them is to sink a new decline shaft 50 metres below the surface to recover the container in which they were working at the time of the collapse.

The recovery of the bodies has been a critical part of the business rescue plan for the mines. Attempts to revive the mines have been going on for the better part of five years, but have been thwarted by competing offers that have ended up in court.

This week, Vantage Goldfields’ business rescue practitioners (BRPs) accepted an offer to relaunch the shuttered Barbrook and Lily mines by Australian group Macquarie Metals, which last year acquired 98% of Vantage’s parent company, Vantage Goldfields Limited.

Vantage CEO Mike McChesney says the Australian parent will settle creditors, who are owed R212 million, and start with the sinking of a new decline shaft at Lily mine to retrieve the bodies of the deceased workers and revive underground operations at the mine.

“We expect creditors to be paid within the next 60 days and we are already in the process of gathering bank account information of employees who are ready and eager to restart work,” says McChesney.

“By July this year we will recommence operations at Lily and 12 months after that we expect to be recovering gold at Lily Mine. A decision will be taken to recommence operations at Barbrook Mine in short order. Initially we will re-employ roughly 400 to 500 workers, though we expect that to ramp up to 700 and possibly 1 000 over time.”

McChesney says the reboot of the mine has the full support of government, the community and the nearby towns of Louws Creek and Louisville, which were heavily dependent on income from the mines. Due to the shallow mining depths, Lily is a relatively low-cost mine with an average head grade of 2.5 grams per ton (g/t) while Barbrook’s grades vary between 3.5g/t and 4g/t.

The BRPs have amended the Vantage Goldfields business rescue plan to allow for the payment of 100% of the claims of secured, preferred and concurrent creditors, with 65% of their claims due in 15 days and the balance within 60 days.  Concurrent creditors in Makonjwaan Imperial Mining Company (which owns Lily) will receive 30c in the rand paid in two phases over the next 60 days.

Business rescue practitioner Rob Devereux of Qey-West Finance says the Macquarie Metals offer was one of two on the table, and far superior in terms of the benefits to creditors. “Macquarie Metals has the funds available, creditors are going to start getting paid in the next two weeks, and it is eager to start mining. This is a great success story, given the difficulties that Vantage Mining has experienced in the last five years.”

Bump in the road

One potential speed bump on the road is an “extremely urgent” application for an interdict to stop the BRPs proceeding with the business rescue plan, on the grounds that it was unilaterally and unlawfully amended – which is denied by the BRPs.

The application is being brought by competing bidder, Arqomanzi.

Says Devereux: “Arqomanzi wants to stop us paying the 800-plus staff who have been without pay for five years, and their offer was rejected because it proposes paying 60c in the rand to staff, while the Macquarie Metals offer will pay them 100c in the rand within the next 60 days.

“The courts must now decide the way forward. Our responsibility is to the company, and we believe we’ve acted in the best interests of all concerned.”

Bitcoin crashes through R700,000 – cheap at the price?

Written by Ciaran Ryan. Posted in Journalism

Does this mean the ship has sailed? Definitely not, according to this sample of experts. From Moneyweb.

Many are suggesting it won’t be long before bitcoin eclipses Apple as the world’s biggest company by market cap. Image: Shutterstock
Many are suggesting it won’t be long before bitcoin eclipses Apple as the world’s biggest company by market cap. Image: Shutterstock

Elon Musk’s announcement this week that Tesla had made a $1.5 billion (R22 billion) investment in bitcoin pushed the price to a new all-time high of $48 000 (R740 000).

The company also plans to start accepting payment in bitcoin for its cars.

Read:Bitcoin tops $48 000 for the first time after Tesla’s purchase

A brief history of Elon Musk’s devotion to the crypto cause

Bitcoin eased back to R680 000 after crashing through the R700 000 mark, a 36% jump in price in a little over two weeks.

Whether we are in bubble territory or not is a question that has been pushed to the side, as bitcoin’s price heads into unchartered territory.

It’s worth pointing out where bitcoin stands in the rankings of the world’s largest assets. This week it sailed past Tesla, Facebook and Alibaba in terms of market cap, and many are suggesting it won’t be long before it knocks Apple, the world’s biggest company by market cap, off its perch.

Source: Assetdash.com

A question readers are asking is whether it is too late to board this train, so it’s a question we put to crypto experts:

At R700 000, is bitcoin still a buy?

All respondents point out that none of their opinions constitute financial advice, and that cryptos are volatile investments that can expose you to risk.

Farzam Ehsani, CEO of crypto exchange VALR

Unlike equities or other asset classes where traditional valuation approaches – such as discounted cash flows, multiples or comparables – can be used, bitcoin and crypto are so new and different that traditional methods of valuation simply don’t apply. Bitcoin has no cash flows to discount, no revenue or profit to multiply and nothing else obvious to compare it to.

The closest asset class we can compare it to is gold, which is valued at $10 trillion to $12 trillion and many in the crypto space proclaim bitcoin to be ‘digital gold’. As such, if bitcoin hit parity with gold in terms of market cap, we’d be looking at a price per bitcoin of over $500 000 (more than R7 million).

The thing is that whenever something digital has replaced its analogue version, the digital version has always been much larger.

So is bitcoin cheap? In the long run I think it’s still incredibly cheap. But will there be a lot of volatility and can the price go down from here? Absolutely.

My personal price prediction [for bitcoin] is $500 000 [R7.3 million] by 2030, if not earlier.

Jason Carpenter, chief investment officer at crypto invest company Etherbridge

Bitcoin is still cheap at $45 000 (R680 000). Its total addressable market is north of $150 trillion. Its immediate addressable market is $11 trillion, [which is the] current size of the gold market. This potentially puts bitcoin at $350 000 (R5.2 million).

Our fundamental market cycle model which encompasses six different ‘on-chain’ indicators [using data from the Bitcoin blockchain] is at levels last seen in April 2017. From a fundamental perspective, all stakeholders are still far from being overheated.

The wave of sophisticated capital entering the space also serves as tailwinds for this cycle.

Josh Miltz, co-founder of crypto investment company BitFund

Of the 21 million bitcoin that will ever exist, 88.69% are in circulation. There are approximately 900 bitcoin per day that continue to enter the circulating supply through the mining reward, which means that (bitcoin) miners are receiving around $41.5 million (R614 million) a day in revenue.

There are consistently more than one million active bitcoin wallet addresses each day and the network saw more than $17 billion (R251 billion) in on-chain transaction volumes in the last 24 hours. That is an annualised transaction volume of over $6 trillion (R89 trillion), which is about half of Visa’s annual payment volume.

Some 60% of all wallets have not moved their bitcoin over the last 12 months. This includes hundreds of percent in appreciation and even one day where the bitcoin price dropped 50% in US dollar terms.

Simply put, bitcoiners are not selling their bitcoin.

Thus, it is arguable that if you are buying crypto and bitcoin for the long term, HODL (hold on for dear life). Then it is always a good time to consider buying bitcoin. However, if you’re simply trying to make some money, the high volatility may be risky.

Richard de Sousa, founder and CEO of crypto exchange AltCoinTrader

Bitcoin is certainly still cheap at the price. It’s heading towards R1 million and is on the verge of going parabolic. Cryptocurrencies are here to stay, and it’s gone mainstream. If you’re in the camp that thinks bitcoin is a scam or is not real, you are saying that your knowledge is better than the richest man in the world, and the top 500 businesses in the world. Elon Musk, arguably the richest man in the world, has just announced that Tesla has put $1.5 billion or 15% of the company’s cash reserves into bitcoin in the last few days.

Ethereum at about R27 000 is about to overtake gold, currently trading at R28 200 an ounce. Ethereum has problems: it’s too slow and doesn’t scale, and while this is true, it continues to hit all-time highs. I see Ethereum at R50 000 by the end of this year, which is double where it is now, though many people believe it will go much higher than this.

Michael Saylor of MicroStrategy [which has acquired more than 70 000 bitcoin using internal treasury funds] invited the top companies in the world to explain how to convert fiat money into cryptos. Bitcoin has been giving us returns of over 200% a year since inception, and in my opinion is the best investment ever. I agree with Saylor that the only time to sell bitcoin is when something better comes along, and I don’t see anything better on the horizon.

Jon Ovadia, founder and CEO of Ovex

Bitcoin is a difficult asset to value, however I do have strong conviction that the price now is significantly lower than it will be in five years’ time. Timing the market is very difficult and playing the long game is easy in my opinion.

In short, I think if you are buying on a five-year time frame, bitcoin is very cheap.

Whether it goes down from here is hard to say, but very possibly.

Of course there are those like ‘Dr Doom’ Nouriel Roubini who say bitcoin’s fundamental value is zero “and would be negative if a proper carbon tax was applied to its massive polluting energy-hogging production, I predict that the current bubble will eventually end in another bust”.

Roubini is professor of economics at the Stern School of Business at New York University, and has long been a critic of crypto currencies.

Why smaller cryptos are crushing bitcoin

Written by Ciaran Ryan. Posted in Uncategorized

A battle for the future of the world’s financial system is raging – and Ethereum, Cardano and Polkadot are in the ring. From Moneyweb.

The jury is still out, but Cardano could dislodge Ethereum as the platform of the new global financial system. Image: Akos Stiller, Bloomberg
The jury is still out, but Cardano could dislodge Ethereum as the platform of the new global financial system. Image: Akos Stiller, Bloomberg

Bitcoin hogged the headlines in the last week with its sprint past R700 000 on news that electric car company Tesla had invested $1.5 billion in the crypto, but a potentially more interesting story is playing out among three of the smaller cryptocurrencies – Ethereum, Cardano and Polkadot.

There is a battle playing out among the three over who gets to control what many perceive as the future global financial system – something known as ‘decentralised finance’ or DeFi.

Types of financial systems

A brief explainer here: the existing financial system is built around centralised control, such as banks, stock exchanges and insurers. These require intermediaries and brokers who add friction and costs to the system. These intermediaries squat in the middle of transactions for which they siphon off fees. And they’re often not quite as independent as they claim, so they end up selling you something you may not really need or want.

There are crypto exchanges where you can purchase cryptocurrencies (as well as digital silver, digital gold, stablecoins backed 1:1 with the rand, the US dollar and other currencies). These also have owners, and therefore fall under the heading of ‘centralised finance’.

Then there are the decentralised finance (DeFi) exchanges that have popped up in the last few years. They allow you to buy and sell cryptos without an intermediary, and often at better prices than on centralised exchanges.

You can also borrow, lend and earn interest – all without a go-between. Sending and receiving funds through DeFi is generally faster than in the traditional world of finance, and a loan can be taken out in minutes with no paperwork whatsoever.

With DeFi, the lender doesn’t even know your name.

To borrow on one of these exchanges, all you have to do is provide collateral in some recognisable form, such as bitcoin. Pretty soon, you’ll be able to ‘tokenise’ or convert highly illiquid assets such as property into digital assets and use that as collateral. And you’ll be able to own a fractional share of a highly desirable property, or a tiny piece of Apple equity. These are called ‘tokens’ rather than shares, and you will be able to buy and sell them on these DeFi platforms.

An option for the poor

The poor will also have easy access to this financial system.

Traditional financial providers and governments have promised to extend financial services to the poor, but the results are so far have been underwhelming. DeFi should be able to do that with greater efficiency and much lower costs.

For example, it has been estimated that the fees for cross-border remittances cost developing countries about 5% of GDP.

Crypto-based providers like Paxful have been able to slash those fees to 1% and less.

A new financial architecture

Competing to own this new DeFi space are software projects like Ethereum, Cardano and Polkadot. These are not ‘stores of value’ like bitcoin, but are platforms offering a new way of transacting without intermediaries. Each of these has its own cryptocurrency, so you can invest in them.

They are open-sourced projects, meaning any developer has access to the code, and they will eventually be interoperable with other financial ‘rails’ such as Visa and Mastercard.

Vitalik Buterin is the founder of Ethereum, and he set out to build a system that would allow transactions to take place between people anywhere in the world, with no need for trust or due diligence, and to settle those transactions instantly without need for an intermediary.

The idea of the ‘smart contract’ was born, where transactions are recorded on a giant decentralised ledger reposited (stored) on thousands of computers around the world rather than on a single centralised server, as with a bank.

This ledger is known as the Ethereum blockchain (the Ethereum cryptocurrency is called ether, or ETH).

Ethereum is a brilliant concept but suffers from bottlenecks and inefficiencies. The fees for using the system rise and fall depending on congestion on the network. The scalability of Ethereum has been a problem for some time, and developers hope the recent adoption of the Ethereum 2.0 upgrade will solve that.

Ethereum’s constraints have created opportunity

Those problems with Ethereum have opened up opportunities for Cardano and Polkadot, which do not suffer the same scalability issues.

Charles Hoskinson worked with Ethereum but left in 2014 and founded Cardano in 2015. He set out to build a system that improved on issues of speed and scalability faced by other cryptocurrencies.

In December last year a new phase of the project was launched allowing for the integration of smart contracts, with the addition of a multi-currency ledger being added to the blockchain.

This is of particular interest to corporations operating around the world.

Cardano (which goes by the code ADA) has been called the ‘Ethereum killer’ because of its ability to solve common business problems and scale without the kind of congestion problems facing Ethereum.

The jury is still out as to whether Cardano will dislodge Ethereum as the platform of the new global financial system.

Cardano in rands

Source: TradingView

Cardano has run from R2 to R13 in the last two months. You can earn interest of about 5% a year on your Cardano by ‘staking’ it (staking means putting your crypto to work in the blockchain and getting rewarded for it).

Ethereum in rands

Source: TradingView

Polkadot (DOT) was founded by Gavin Wood, who previously worked as a research scientist at Microsoft and co-founded Ethereum with Vitalik Buterin with the aim to make “one computer for the entire planet”.

Polkadot’s big advance over other blockchains, which operate in silos, was to create an internet of interoperable blockchains for a decentralised web. It aims to allow all blockchains to link and work together and offer smart contract functionality.

This is a huge benefit for developers as it allows them to develop apps that will work on all blockchains, not just one.

As Decrypt points out, the two issues blockchain-based systems most need to solve are scalability – the number of transactions per second the network can handle – and governance: how the community manages protocol upgrades and changes. Polkadot aims to solve both of these problems.

It was launched in May 2020, but has already risen to become the sixth largest cryptocurrency with a market cap of $26 billion – an extraordinary feat in a matter of just months.

Polkadot in USD

Source: CoinGecko

What the experts say

Richard da Sousa of AltCoinTrader says coins to watch in 2021 are ether, Cardano and Polkadot, for the reasons already given. “While bitcoin and Ethereum are breaking all-time highs in recent weeks, smaller coins such as Cardano have yet to do that.”

Jon Ovadia, CEO of crypto company Ovex, says two coins to look out for are FTT and SRM.

“Full disclosure: these are coins backed by one of our investors, FTX. Both of these coins are what are known as exchange coins and essentially give the holder rights to cashflows of the exchanges.

“The way this works is the exchange uses a portion of the fee income to buy back tokens from the open market on a regular basis. The most recent FTT burn was over $3 million. So I’d watch those coins very closely.”

Jason Carpenter of Etherbridge says Ethereum is definitely one to watch.

“Additionally investors could look at buying some of the blue chip DeFi infrastructure. Uniswap, Compound, Aave, Synthetix, Maker, Balancer. These networks are becoming core infrastructure of the Ethereum financial system.

“As these investments are incredibly volatile and in their infancy, caution must be paid to risks,” says Carpenter.

You can buy these on most decentralised exchanges, including Binance. Perhaps the best one-stop shop as a decentralised exchange is Uniswap, while Binance (which is a centralised exchange) offers access to most of these tokens.

“Investing in bitcoin, Ethereum and DeFi should be done so with small allocations and with a long term time horizon.”

Josh Miltz, co-founder of crypto company BitFund, says two coins on his radar are Polkadot and Filecoin.

“Polkadot is considered one of the most pioneering projects based on a multi-chain framework that can be a competitor. It aims at providing the most advanced peer-to-peer network for numerous blockchains. Over the past three months, Polkadot has gone from $3.70 a coin to $22.80 a coin, with a market capitalisation of over $20 billion.

“Filecoin is an open-source public cryptocurrency and digital payment system, is intended to be a blockchain-based cooperative digital storage and data retrieval method, and is another exciting cryptocurrency to look out for. The project was launched in August 2017 and raised over $200 million within 30 minutes.

“Filecoin aims to store data in a decentralised manner. Unlike cloud storage companies like Amazon Web Services or Cloudflare, which are prone to the problems of centralisation, Filecoin leverages its decentralised nature to protect the integrity of a data’s location, making it easily retrievable and hard to censor.”

MTI was by far 2020’s biggest investment scam – Chainalysis

Written by Ciaran Ryan. Posted in Journalism

Helped itself to R8.6bn worth of bitcoin belonging to its ‘investors’. From Moneyweb.

Chainalysis was able to analyse MTI’s cryptocurrency transaction history to learn more about the scam. Image: Dado Ruvic, Reuters
Chainalysis was able to analyse MTI’s cryptocurrency transaction history to learn more about the scam. Image: Dado Ruvic, Reuters

It’s official: Mirror Trading International (MTI) was the world’s biggest crypto scam of 2020, having roped in $588 million (R8.6 billion) worth of bitcoin across 470 000 transactions, according to the recently released 2021 Crypto Crime Report by Chainalysis.

The number of victims likely runs into hundreds of thousands, says the blockchain analysis company.

However, 2020 wasn’t quite as bad as 2019 for crypto scams: in 2019, Ponzi schemes took in nearly $7 billion worth of cryptocurrency, against just under $2.7 billion in 2020.

The biggest scam of 2019 was PlusToken, which sucked up $3 billion worth of cryptocurrency from millions of victims – most of them in Asia. Chinese authorities have since arrested 109 individuals associated with the scam and prosecuted six of the most prominent.

Badge of infamy

The dubious distinction for 2020 goes to MTI, SA’s own home-bred crypto scam which was “by far” the biggest in the world in 2020, says the report.

“The fact that the value of loss from crypto Ponzi schemes declined in 2020 suggests that “cryptocurrency users and the general public have grown more suspicious of such scams, or that potential Ponzi scheme operators have been scared off by the punishments doled out to the PlusToken operators,” says the report.

Most scams in 2020 were smaller in scale, and tended not to follow the typical Ponzi route of paying out fake proceeds to early investors.

Source: Chainalysis 2021 Crypto Crime Report

MTI, which was placed in provisional liquidation late last year, attracted tens of thousands of investors from around the world by offering returns of up to 10% a month.

Read:
FSCA investigating Mirror Trading International (Aug 2020)
Get-rich-quick scheme pulls a crowd, despite regulators calling time-out (Aug 2020)

“MTI presents itself as a passive income source. According to its website, users simply deposit a minimum of $100 worth of bitcoin, and MTI promises to grow it using an [artificial intelligence] AI-powered foreign exchange trading software,” says the report, which analyses web traffic to the company’s web site as well as transactions flows.

“The site indicates that customers can achieve consistent daily returns of 0.5%, which would translate to yearly gains of 500%,” it adds.

“Algorithmic trading is a common premise for many cryptocurrency investment scams.”

MTI had offices in Stellenbosch and Johannesburg. More than half its web traffic comes from South Africa, with a substantial portion of the balance coming from the US, UK, Canada and Mexico.

“We assume from this that most MTI victims hail from these countries in similar proportions as well. MTI has been actively receiving bitcoin from ‘customers’ since June 2018 and even has 150 employees listed on its LinkedIn company page.”

Warnings

However, despite these airs of legitimacy, Google searches reveal that people have been rightly speculating that the company is a scam for most of its existence. In August 2020, the Financial Sector Conduct Authority (FSCA) issued a warning about MTI and urged investors to ask for their money back. There were almost multiple warnings about the scam in the press.

In December last year the FSCA filed charges against MTI after its investigation found that the company falsified trade statements, didn’t declare losses and committed other acts of fraud to deceive the market, says Chainalysis.

“The investigation also found that MTI had over 16 000 Bitcoin of claimed customer investment funds unaccounted for. MTI claimed to have transferred those funds to a new FX trading platform after its old platform banned MTI due to its scamming reputation, but the new platform says these funds were never deposited.

“Since those charges were filed, MTI customers have complained that they can no longer access or withdraw funds they’ve deposited to the platform, and MTI CEO Johann Steynberg has fled SA.”

Investigation

Chainalysis was able to analyse MTI’s cryptocurrency transaction history to learn more about the scam.

“MTI Club has received $589 million worth of bitcoin across more than 470 000 transactions, primarily from exchanges, but also from self-hosted wallets. MTI has also sent and received significant funds to and from a popular, Bitcoin-friendly FX trading platform, as we show in the Reactor graph above,” according to the report.

“Perhaps most interesting is MTI Club’s apparent usage of a popular cryptocurrency gambling service as a money laundering and cash-out mechanism,” it says.

“The platform is the biggest risky destination of MTI funds by volume, having received $39 million worth of cryptocurrency from the scam in 2020.

“Cryptocurrency observer and venture capitalist Dovey Wan remarked that this is becoming a common money laundering technique for many cybercriminals who use cryptocurrency, as gambling platforms can be used similarly to mixers to obscure the origins and flows of illicitly-obtained funds.”

Source: Chainalysis 2021 Crypto Crime Report

The report shows scammers are disproportionately likely to send funds to gambling platforms rather than other services frequently used for money laundering.

Source: Chainalysis 2021 Crypto Crime Report

“Mirror Trading International is another example of why the industry must spread the word that algorithmic trading platforms promising unrealistically high returns are nearly always scams,” states the report.

“When cryptocurrency exchanges and other services learn of these scams and receive their cryptocurrency addresses, they should discourage users from sending funds to those addresses or at least warn them that financial losses are highly likely. In addition, exchanges, gambling platforms, and other services that these scams use to launder funds should consider blocking incoming transactions from businesses that relevant government bodies label as scams or potential scams, as removing the ability to convert funds to cash makes it more difficult for scams to operate.”

The Chainalysis report also warns of increasing scams involving decentralised finance (DeFi) platforms.

Source: Chainalysis 2021 Crypto Crime Report Tweet

Court ruling says mining group MRC is abusing court process

Written by Ciaran Ryan. Posted in Journalism

Australian mining group MRC and its CEO’s attempt to bring defamation suits against South Africans questioning its environmental and corporate practices, defeated. From Moneyweb.

Image: Shutterstock

In a ground-breaking ruling, Deputy Judge President Patricia Goliath has set a high bar for anyone contemplating bringing a Slapp suit as a way of silencing criticism of corporate behaviour.

The ruling says corporations should not be allowed to weaponise our legal system against ordinary citizens and activists to intimidate and silence them.

Strategic Litigation Against Public Participation (Slapp) suits are outlawed in many parts of the world on the grounds that they are intended to censor, intimidate, and silence critics, by burdening them with the cost of a legal defence until they abandon their criticism or opposition.

In 2016, Australian mining group Mineral Commodities (MRC) and its CEO Mark Caruso started filing defamation suits against six South African lawyers and environmental activists over comments they made criticising the company’s environmental and corporate practices.

The judge agreed with the activists that MRC and Caruso were engaged in a Slapp suit and ruled they were abusing the court process in doing so.

“The right to freedom of expression, robust public debate and the ability to participate in public debates without fear is essential in any democratic society. I am accordingly satisfied that this action matches the DNA of a Slapp suit,” reads the judgment.

“Litigation that is not aimed at vindicating legitimate rights, but is part of a broad and purposeful strategy to intimidate, distract and silence public criticism, constitutes an improper use of the judicial process and is vexatious. The improper use and abuse of the judicial process interferes with due administration of justice and undermines fundamental notions of justice and the integrity of our judicial process. Slapp suits constitute an abuse of process, and is inconsistent with our constitutional values and scheme.”

SA’s lack of anti-Slapp legislation such as exists in other countries “renders civil society vulnerable when they embark on pursuing legal challenges and raising legal defences.”

Two attorneys at the Centre for Environmental Rights (CER), Tracey Davies and Christine Reddell, and activist Davine Cloete, were accused of making defamatory statements about MRC’s subsidiary company Mineral Sands Resources (MSR) and its director Zamile Qunya during presentations at the University of Cape Town in 2017.

Prominent environmental lawyer Cormac Cullinan was sued over comments he made in a Cape Talk radio show suggesting the company had bought off traditional leaders as a way of pushing through the Xolobeni mineral sands project on the Wild Coast, against the wishes of most community members.

Social worker and journalist John GI Clarke had most to lose, with a defamation claim of R10 million, over an article in which he says he was misquoted as suggesting the company had been involved in the 2016 murder of Pondoland community activist Sikhosiphi “Bazooka” Rhadebe.

The arguments

In their defence, the defendants filed two special pleas: the first claimed that the case brought by Caruso and MRC was a Slapp suit and therefore an abuse of the court process; and the second claimed the company should have to demonstrate financial harm for its case to succeed.

MRC and Caruso filed exceptions (objections) to these pleas.

The court dismissed the first set of exceptions, effectively agreeing with the activists that the defamation cases are an abuse of the court process.

The second set of exceptions were upheld, meaning the court did not agree with the activists that the company must show financial harm for its defamation claim to succeed.

Cullinan says this part of the ruling was expected, because the High Court had to follow a binding Supreme Court of Appeal (SCA) judgment. This ruling in the Cape High Court can now be appealed to the SCA.

“We want to appeal that part of the judgment that went against us so that it can be decided by the SCA and if the SCA agrees with Goliath J our legal system will have a framework for dealing with Slapp suits in the future. Once MRC and Caruso picked this fight, our primary objective was to ensure that they became an example that would discourage others from using Slapp suits. The spotlight will now be on them to show why the defamations cases they launched are not Slapp suits,” he says.

Says Clarke in response to the ruling: “It’s a huge relief. This judgment is akin to the release of a hostage. It’s said in warfare truth becomes the first casualty. In lawfare, truth becomes the prized hostage where the more powerful party uses legal procedure and arcane legal procedure to harm the truth.

“Going forward, so much more truth will be able to be shared and told, not just on the Xolobeni mining saga, but in other areas where powerful mining companies have tried to constrain the truth.”

Last year Australian press reported that Caruso is facing criminal charges of assault and aggravated home burglary. MRC issued a statement in October last year that Caruso had stepped down as chairman of the MRC board but would continue as CEO after “an alleged incident which occurred whilst Mr Caruso was assisting a friend in enforcing an abandonment order and a subsequent property seizure and delivery order at that friend’s premises.”

An abandonment order is when a tenant leaves a property before the end of the tenancy agreement without notifying the landlord or letting agent.

Quotes from the judgment:

Individuals or NGOs must have the freedom to respond to issues affecting society, such as those related to the environment and sustainable development.

The present matter arises in the context of debates about whether the mining companies have complied with their legal obligations and whether they have caused environmental damage. Matters such as this, self-evidently require public engagement and public debate.

The social and economic power of large trading corporations renders it critically important that they be open to public scrutiny without the inhibiting risk of crippling liability for defamation.

The mining companies are claiming inexplicably exorbitant amounts for damages, which the defendants can ill-afford. They instituted these proceedings fully aware of the fact that there is no realistic prospect of recovering the damages they seek.

However, it appears that the action is not aimed at obtaining monetary, or financial damages, but rather vindicating a right, or for some other purpose. The plaintiffs have indicated that in the alternative, they would be satisfied to dispose of the matter on the basis of a public apology. This is a signature mark of many Slapp suits.

The revolt of the ratepayers

Written by Ciaran Ryan. Posted in Journalism

The revolution is happening at local level, and it’s only just getting started. From Moneyweb.

Potholes in Maritzburg have reportedly gone unrepaired for years, and companies willing to do their own repairs are prevented by law from doing so. Image: Shutterstock

Potholes in Maritzburg have reportedly gone unrepaired for years, and companies willing to do their own repairs are prevented by law from doing so. Image: Shutterstock

Rates and tax revolts are either underway or being contemplated by ratepayer associations fed up at being forced to pay rates and taxes to dysfunctional municipalities.

They are called ‘tax diversions’ rather than revolts, and they’re of questionable legality, but several ratepayer associations are willing to test the law. Others are planning court actions to allow residents to take over the delivery of municipal services, as recently happened in Kgetlengrivier in North West Province.

The UAG or Umdoni Action Group (based in Scottburgh, KwaZulu-Natal) was established in 2015 to protect the interests of ratepayers, tenants and residents of the area, and has opted for ‘tax diversion’ to hold the local municipality accountable. The ratepayers’ complaints are familiar ones: “Broken roads and stormwater systems, crumbling basic infrastructure, decrepit CBD, very few working street lights, overgrown verges and parks. The list is almost endless,” states the group’s website.

The UAG launched a rates diversion policy in May 2020 after years of attempting to engage with the local municipality to resolve their complaints without success. To get involved, ratepayers have to fill in a ‘Declaration of Dispute’ form which the UAG emails monthly on behalf of all participants to the municipal manager. The rates and taxes that would normally be paid to the municipality are retained in ratepayers’ own accounts.

Ultimatum

“Should our complaints not be resolved within a reasonable period, we will impose on Umdoni Municipality an ultimatum, in which we will reserve the right to effect repairs using the diverted funds and our own labour, contractors and material,” says the group’s call to action.

UAG’s initiative appears to have borne some fruit. During a recent Zoom meeting, the newly-appointed CFO at the municipality undertook to “craft a plan” to resolve the rates diversion impasse.

However, UAG remains resolute that no retained rates will be released until repairs actually take place and services resume.

Geoff Smailes, a founding member of UAG, says several hundred residents have signed up for the tax diversion campaign so far, but to have any real clout, it needs all residents on board.

It’s a small beginning, but campaigns like this are being contemplated across the country.

Withholding taxes

This is not the first time ratepayers have voted by withholding payment to dysfunctional municipalities. In 2009, 30 ratepayer associations withheld rates and taxes and many more declared disputes with their municipalities for non-delivery of services and other issues.

“On the face of it, withholding rates and taxes is unlawful, and declaring a dispute doesn’t legitimise withholding taxes, but it does defer it, as it effectively puts the disputed amount on hold until the matter is resolved,” says Tim Tyrell, project manager at Organisation Undoing Tax Abuse (Outa). “It is also unlawful for local governments to charge taxes and fail to deliver services for which they are charging.”

A dispute is only legitimate if the person declaring the dispute is a legal persona, such as the ratepayer.

“This is why it’s very important to properly constitute and register any community organisation, especially one that seeks to go the rates/taxes diversion route,” adds Tyrell.

Moneyweb this week reported on the court-ordered takeover by residents of water and sewage services in Kgetleng in North West province, after the municipality was found to have breached its constitutional obligation to provide these basic services. Local residents got together and raised money and expertise to get the sewage and water plants – which had been abandoned by municipal workers – up and running in about a week.

Dissolution of municipality

In January 2020, history was made when the Makhanda High Court in Grahamstown ordered the dissolution of the Makana Local Municipality and an administrator be appointed to run its affairs.

The court action was brought by the Unemployed People’s Movement as frustration grew over the municipality’s failure to provide basic services, such as garbage collection and clean water.

The decision was appealed by the Eastern Cape government and the Makana Municipality, but the appeal was rejected by the court.

Another area where a tax diversion campaign is being considered is Pietermaritzburg, falling under the Msunduzi Municipality. Ratings Afrika’s Municipal Financial Sustainability Index (MFSI) survey ranks municipalities on six measures of financial sustainability: operating performance, liquidity management, debt governance, budget practices, affordability and infrastructure development. Municipalities are then given a score out of 100. As shown in the table below, Msunduzi scores a miserable 31. Umdoni is somewhat better at 51.

Source: Ratings Afrika

Melanie Veness of the Pietermaritzburg Chamber of Business says businesses are fleeing the area because of inconsistent electricity supply, potholed roads and a near total breakdown of basic service delivery. “This is the second time in 10 years the Msunduzi Municipality has been under administration, and not a single portfolio within the municipality is well run.”

Factional rivalry

Complicating matters in the local government are factional rivalries in the ruling ANC. Ratepayers are expected to pay for services while a huge percentage of the prepaid meters in the area are illegally bypassed.

Veness says there are roughly 40 000 electricity meters in the area, but only 11 000 are being billed.

Criminal “entrepreneurs” have been able to run electricity cables to poorer arrears and charge R150 a month for connections. None of this goes to the municipality. Potholes have gone unrepaired for years, and companies willing to do their own repairs are prevented by law from doing so. Unless something drastic is done, more companies will leave the area, adds Veness.

Anthony Waldhausen, chair of ratepayers umbrella body Msunduzi Association of Residents, Ratepayers and Civics (Marrc), says the group is consulting with lawyers over an appropriate course of action to ensure ratepayers are given the services they are paying for. Marrc has been emboldened by the recent victory of ratepayers in Kgetlengrivier in North West province, who were allowed by the court to take over the provision of services.

“A lot of residents in this area are talking of a rates and taxes boycott, but we are discouraging that as we are looking for more effective ways of getting the basic services we are paying for. One possibility we are looking at is to ask the court to follow the Kgetlengrivier court case in North West and allow us to take over service delivery in this area.

“We’ve made numerous attempts to resolve our concerns by meeting with the mayor and municipal manager, but these have not borne fruit.

“We now have to look at more urgent ways of solving the problems we face.”

Politically connected but unqualified

Like many other municipalities around the country, Msunduzi is rife with cadre deployments. Unqualified people with the right political connections are being appointed to senior positions.

“There are many good and competent people in the municipality, but their hands are tied. Their budgets are redirected elsewhere by their seniors and there is little they can do.”

Ratepayers across the country are fed up with being told to suck it up while local municipalities are being run into the ground by comrades with neither the expertise nor the willingness to do their jobs.

The issue of rates and taxes boycotts will not go away.

“We don’t encourage boycotts but we do endorse the various types of civic indignation we are now seeing. If enough people break the law, the law becomes moot,” says Tyrrell.

“What are local governments going to do? In many cases, there has already been a collapse of services.”

Outa says it is rolling out a number of campaigns to improve communication between residents and local government, including a mobile-based app to report faults and potholes to the right people in municipalities, and then track the progress in addressing these issues.

Another Outa campaign plans to focus on building capacity at local level to form ratepayer associations and become effective in holding municipalities to account.

North West residents take matters into their own hands, and get court’s blessing

Written by Ciaran Ryan. Posted in Journalism

When local government broke down, the people of Kgetlengrivier rolled up their sleeves and did the work themselves. From Moneyweb.

The area has clear drinking water even though its municipality ‘fails to supply potable water’. Image: Shutterstock
The area has clear drinking water even though its municipality ‘fails to supply potable water’. Image: Shutterstock

In an astonishing judgment in the North West High Court in December last year, the judge ordered the imprisonment of the municipal manager of Kgetlengrivier in North West province for 90 days, suspended on condition that raw sewage spilling into the Elands and Koster rivers be cleared up within 10 days.The Kgetlengrivier Local Municipality falls within the Bojanala Platinum District Municipality (the seat of Bojanala Platinum is Rustenburg).

Justice Gura also ordered that residents association Kgetlengrivier Concerned Citizens be allowed to take control of the area’s sewage works, to be paid for by the local and provincial governments.

The municipal manager was further sentenced to imprisonment for 90 days, suspended on condition that he provides clear, potable water to the residents of Koster and Swartruggens in North West within 10 weeks of the ruling.

This is a judgment that should have officials in dysfunctional municipalities across the country quaking in their boots.

It means potential jail time for the worst offenders, and opens the door for citizens to take control of essential services in their areas.

Read:Municipalities just don’t listen – Auditor-General (2018)

AG: How to improve the state of our municipalities (2020)

Residents given control

Justice Gura also ordered that residents in Kgetlengrivier be given control of the area’s water works so they could appoint qualified people to run it. All this must be paid by the local and provincial government.

The result?

“Now we’ve got beautiful, clear, drinking water, and we’ve got more than we know what to do with,” says Carel van Heerden, the head of Kgetlengrivier Concerned Citizens.

“Local residents paid R7.5 million out of their own pockets, but we got the pumps repaired or replaced, we rented generators to make sure the water could continue pumping in the event of power outages, and we got the water system back in full operation in a matter of weeks.”

The local government will have to pay the residents back their R7.5 million – plus their court costs.

Read: Confirmation that municipalities are a huge burden on taxpayers

“This is unprecedented in South Africa,” adds van Heerden. “The judge in this case was incredibly brave, and we believe established a precedent for other ratepayers’ associations around the country dealing with corrupt or failing municipal leaders.”

Ministers’ reaction a sign of things to come?

In the Kgetlengrivier case, the national ministers of Environmental Affairs, and Human Settlements, Water and Sanitation were cited as respondents, but agreed to abide by the court‘s decision – perhaps signalling national government is no longer willing to back comrades found to have mismanaged at local government level.

On January 8, the municipal manager, RJ Mogale – facing jail time unless the conditions of the court order were met (and they were, but not by him) – issued a public notice claiming van Heerden “and a handful of white males” had illegally taken over the water and sanitation plants and “had disrupted the provision of water fundamentally violating the rights of residents to Kgetleng”.

Mogale goes on to advise residents that the municipality had made an application in the North West High Court to reassume control of the water and sanitation plants. That application was dismissed by the court.

‘Illegal takeover’ claim ‘despicable’

Van Heerden says Mogale’s attempt to frame what happened at Kgetleng as an illegal takeover by a “handful of white males” is racist and despicable, and a legal suit is being planned against him in the coming weeks for his incautious remarks.

The court order makes it clear that the municipality has been bypassed and rendered irrelevant, other than to pay the costs of providing water and sanitation services provided by the residents.

“We have the support of the community, regardless of race,” says Van Heerden.

“We’ve provided jobs to the local community that were not there before. And we got the job done in weeks that the municipality couldn’t get done in years.

“It took us about a week to get the sewage plant running again. People from every part of this community [were] involved in this salvage operation, and everyone is fed up with the non-delivery by the municipality.

“Many of the more affluent people in the community have joined this fight, even though they don’t rely on municipal services. They have solar panels and boreholes because they can afford them. They got involved in the fight because they wanted to ensure poorer members of the community who desperately need these services were able to survive.”

How it came to this

There is a long and storied history behind this court judgment.

In 2018, workers at the newly constructed R144 million sewage plant downed tools over a pay dispute, leaving the community without water for several days. Van Heerden says vandalism and theft of equipment was rampant, and those running the site were incompetent. Workers abandoned the site one by one until there was no one left to work it at all. The town’s taps ran dry.

Residents obtained an urgent court order to restart the plant and supply water to the community. They ran the plant for a few weeks until the municipality resumed control.

In February 2020, workers again went on strike for backpay and again abandoned the site, says van Heerden. “We again got a court order to restart the plant and we ran it for four or five weeks before handing it back to the municipality.”

Residents previously won another case against the municipality, which they claimed was unlawfully setting rates and taxes.

Yet another case interdicted Eskom from cutting electricity to the municipality, which was more than R200 million in arrears.

Read: Municipalities owe Eskom R31.5bn

Municipality must show that it’s up to the task

This time, however, the court may not be so lenient with the municipalities’ attempts to reclaim control over the water and sewage systems.

The December 2020 court order reads: “It is declared that the KLM [Kgetlengrivier Local Municipality] fails to supply potable water to the residents of Koster and Swartruggens.

“It is declared that the water purifying works at Koster and Swartruggens are in states of disrepair and are mismanaged.

“It is accordingly declared that Bojanala [Platinum District Municipality, also a respondent in the case] and the KLM are in breach of their constitutional obligations for providing potable water sustainably.”

Though an interim order, the municipalities must show by March 1 this year why this order should not be made final – meaning they will have to put a powerful case to the court that they have managed to get their act together and can do a better job than the residents.

Growing trend

“Civic indignation is a growing trend across the country, as shown by this event in Kgetleng,” says Tim Tyrrell, project manager at the Organisation Undoing Tax Abuse (Outa).

“In this case, residents approached the court because they were being forced to pay for services that were not being delivered. They decided to ask the court for permission to take over those services, and the court agreed.

“This is an encouraging sign that courts are alert to the problems facing communities and are trying to come up with solutions that ensure services continue uninterrupted – as required by the Constitution.”

In other parts of the country, tax revolts in dysfunctional municipalities are either underway or being contemplated. That’s the subject of the next instalment.

Trade unions attach municipality assets over outstanding pay and benefits

Written by Ciaran Ryan. Posted in Journalism

Nelson Mandela Bay Municipality says it wants its trucks back and will settle the bill, while government steps in to save Kopanong’s assets being auctioned by municipal workers union. From Moneyweb.

Port Elizabeth. Image: Shutterstock
Port Elizabeth. Image: Shutterstock

The Democratic Municipal and Allied Workers Union of South Africa (Demawusa) last week attached assets belonging to the Nelson Mandela Bay municipality over an outstanding R8.8 million in pay owed to 36 workers.

The outstanding payment dates back to 2015 for the workers who were insourced immediately after the Labour Relations Act amendments, which require temporary workers to be permanently placed after three months.

The assets attached include a fleet of trucks as well as other vehicles. The loss of these vehicles would be devastating for the Nelson Mandela Bay municipality and its already crippled service delivery.

The 36 workers were employed in a call centre operated by the municipality, but had been short-paid since 2015, according to Demawusa coordinator, Siphiwo Ndunyana. “Most of these workers started as early as 2009 but were deemed to be permanently employed from 2015,” he said.

A dispute was declared in 2019 and was referred to arbitration, resulting in the workers being granted backpay of R8.8 million which had to be paid by December 15, 2020.

“The municipality ignored this legally binding award and did not pay the workers. As a fighting union, we are taking this to its logical conclusion. We do not want municipalities to smile at the expense of workers,” says Ndunyana.

The union called a halt to the auction as it says the municipality had agreed to settle the outstanding payments within a few days.

Nelson Mandela Bay municipality is in a stand-off with National Treasury, which has withheld R1.6 billion in conditional grant funding from the city, because of its failure to elect a mayor and a properly qualified municipal manager. Last week Eastern Cape DA leader Nqaba Bhanga was elected mayor, after two years in ANC hands. The city burned through 10 municipal managers in those two years. Bhanga blamed the ANC for breakdown in service delivery and promised to return order and good governance to the city.

A similar dispute to that in Nelson Mandela Bay was playing out in the Free State this week, when South African Municipal Workers’ Union (Samwu) was ordered to halt the auction of assets belonging to the Kopanong municipality. In 2017, the union secured a high court to attach the municipality’s assets to recover more than R58 million in unpaid pension fund contributions. SABC reports that the auctioning of the assets was halted after government obtained a stay of execution, arguing that the planned auction did not follow proper procedures. Kopanong has been mired in controversy for years for failing to pay its bills, prompting the DA to call for the dissolution of the municipality.

This is not the first time a municipality’s assets have been attached as a way of collecting outstanding debts.

Last year Eskom attached 139 farms worth R2.5 billion from Matjhabeng municipality in the Free State for unpaid electricity bills, and also went after furniture, cars and other equipment in settlement of a R2.3 billion arrears bill owed by Emfuleni municipality, south of Johannesburg. The utility also went after the bank accounts of Maluti-a-Phofung municipality in the Free State in pursuit of an outstanding bill of R5.3 billion, but later agreed to release some funds to allow it to pay salaries and other costs.

Dysfunctional municipalities that have been run into the ground are facing revolt across the country. In the next instalment we’ll look at some parts of the country where residents have had enough and are taking matters into their own hands.

Is bitcoin headed for a GameStop-type short squeeze?

Written by Ciaran Ryan. Posted in Journalism

Demand from retail and institutional investors has created a supply shortage, which could mean trouble for those shorting bitcoin. From Moneyweb.

The Reddit traders saw their GameStop victory as a blow against the evil Wall Street empire, but bitcoin is already seen as a cradle of rebellion. Image: Bloomberg
The Reddit traders saw their GameStop victory as a blow against the evil Wall Street empire, but bitcoin is already seen as a cradle of rebellion. Image: Bloomberg

The war between Wall Street and retail investors may have started with GameStop, but it won’t end there. The field of battle has moved on to silver and, perhaps, bitcoin.

Hedge funds shorting GameStop – effectively betting the share price would drop as this dinosaur gaming business slowly shut its doors – got beaten to a pulp when day traders on a Reddit forum coordinated buying to drive the price up from around $17 to $347 before it dropped again to around $90. The Reddit crowd did it for fun and for profit.

Read:‘Game over’ for hedge fund

Based on the commentary around this, most people enjoyed seeing short sellers get the eyeballs squeezed out of their skulls. This may not be a passing fad. The Reddit crowd has gained millions of enthusiastic followers, and is now on the hunt for other hedge funds to beat up. Their attention moved to silver, which rallied 13% to over $30/oz earlier this week before running out of steam as the #silversqueeze hashtag trended on Twitter.

And then there’s bitcoin. Take a look at the following graph showing the number of open short positions by hedge funds on bitcoin from the Chicago Mercantile Exchange (CME). Funds have increased their short positions to about $1.4 billion just as the bitcoin went on its parabolic run above $40 000 earlier this year.

Source: Chicago Mercantile Exchange

What’s clear from the above chart is that hedge funds are on their own on this shorting expedition. Asset managers and other investors have not significantly increased their short positions, possibly because some heavyweight institutions like MicroStrategy and Square have boarded the bitcoin train, while reputable banks like JP Morgan think it could ride as high as $146 000 in the long term. The global head of CitiFXTechnicals says a move to $318 000 by December 2021 is possible based on a study of the charts.

Betting against that kind of institutional heft could land you in trouble.

The following chart shows the volume of CME futures long bitcoin (in other words, expecting a price rise). Hedge funds are again the biggest players, but only to the tune of about $600 million, versus the $1.4 billion betting on a drop in price. But what’s more interesting about the chart below are the number of asset managers and other investors going long bitcoin. In this case, the hedge funds are not drastically out of line with sentiment among other groups of investors.

Source: Chicago Mercantile Exchange

While the Reddit traders taking hedge funds to the shredder over GameStop saw this as a blow against the evil Wall Street empire, bitcoin is already seen as a cradle of rebellion.

The early adopters backed bitcoin because they saw that governments and their boomer parents had trashed the financial system and bitcoin was a way of fixing the problem. There will only ever be 21 million bitcoin issued, unlike fiat currencies such as the US dollar which are being fire-hosed into circulation – apparently without limit.

Read:Is bitcoin the new gold?Goldman Sachs’s Rahmani strikes warning over bitcoin value

Technically, bitcoin is at a crossroads and needs to break above $38 000 to continue its bullish trend, according to this analysis. A failure to maintain price levels above $34 000 could push it into a bear trend, with support at $19 000. Over the medium and longer term, however, the outlook for bitcoin remains positive, so betting on a long and sustained drop in price could be disastrous.

And, as the GameStop saga has demonstrated, there is a motivated army of amateur investors willing to take on hedge funds and beat them at their own game.