IDC sweats R250m Gupta loan

Alarms should have sounded when the Guptas asked the Industrial Development Corporation for a R250-million loan to buy the non-profitable Shiva uranium mine.

The IDC should have asked more questions when, after giving notice in 2013 for the loan to be repaid, the Guptas, through their Oakbay Resources and Energy, which bought the mine, asked to renegotiate the loan, which ballooned to R452-million because of interest.

The renegotiations ended with the IDC giving Oakbay a quasi-equity loan, for which the corporation got a 3.56% shareholding in the company.

With the Guptas disposing of their assets, questions are being asked about whether they will be able to make the final repayment of R37.5-million by March - especially with the closing of their bank accounts and with only R2.7-million available to them in cash.

Oakbay and Shiva failed to respond to questions.

The IDC lost R90-million last year when Oakbay Resources and Energy delisted and was left with shares it could not sell.

Financial analysts believe hard questions should have been asked before the IDC granted the loan, especially with regard to repayments.

Kalu Ojah, deputy director of Wits Business School, said such loans were not often granted, especially as such requests were usually a sign that a businesses was in financial trouble.

"The risks of these loans in terms of non-repayment are huge."

He said it was strange that the IDC loan to Oakbay was such a large amount.

"The motive for such a loan needs to be questioned. The IDC, whose work is around development, has very strict governance rules around the issuing of loans. Questions must be asked about what 'development' Oakbay was involved in to [merit] the loan."

Ojah said the JSE delisting left the IDC "with problems".

"The IDC has no way of knowing what its shares are really worth. They have to pray that they actually have some value."

IDC spokesman Mandla Mpangase said: "Obviously it [the delisting] is a problem for us. We would have loved to make a return on the shares and we would have loved to have the certainty that these guys' bank accounts are open . and they are able to pay us."

He said the IDC had talked to Oakbay about the loan's repayment.

Mpangase said there was nothing suspicious about the loan's restructuring, and that Oakbay had not defaulted.

He said the company was not required to make monthly payments. The loan was structured to allow it to make lump repayments at stipulated periods.

Mpangase said that if the Guptas could not repay the loan because their bank accounts were closed the IDC had "a remedy".