Hello? Your Business Is Closing

Published 11 years ago
Hello?  Your Business  Is Closing

It was a phone call in the fast lane. The call on the highway told Ndaba Ntsele, co-founder of Pamodzi Investment Holdings and chairman of Rand Uranium and Foodcorp, that his company was soon to be no more. It ushered in his worst day and was the start of a long, tiring battle to save Pamodzi Gold Limited (PG). The call was from a journalist asking how he felt about his company being liquidated. A shock, especially when creditors had assured that liquidation was not on the cards.

With members of his management team calling to confirm the news, Ntsele knew he had his work cut out for him—you could call it his worst year.

At stake was a black-owned and controlled gold exploration and mining company, formed in 2004, and listed on the Johannesburg Stock Exchange (JSE) in 2006. With a market capitalization of more than R700 million ($112.5 million), PG was all set to be a success. The company acquired mines in the Free State and Gauteng that were no longer viable for the big mining companies. As not all the mines were bought with cash, share options upon listing were offered as compensation. The biggest shareholder was Harmony Gold.


“The mines were in a terrible state at first. We knew we’d have to raise cash to rehabilitate them. Thirty million rand ($3.9 million) would just about do it. You can’t play the game if you don’t have any marbles,” he says.

Ntsele is a self-made entrepreneur who started out selling apples for his aunt to earn money for the movies. He graduated to running busy street corners and hiring vendors to man them. Then he made it in property during the apartheid era and rose to be the CEO of Pamodzi Investment Holdings.

Following the mine deal, the company needed money. The R200 million ($24.5 million) secured from the Industrial Development Corporation (IDC) —a national development finance institution—with security of R800 million ($98 million) was not going to be enough and another R200 million was needed.

By 2009, the company had its Free State assets—a mining complex and plant, along with Orkney mines and East Rand assets, running well. Then the black cloud of liquidation descended, a mere four months after signing the five-year loan with the IDC. Five thousand three hundred jobs were on the line.


“People were gunning to liquidate us,” says Ntsele. He wanted more time. The Free State assets and Orkney mines were, on his account, valued at a joint R1.4 billion ($146.5 million). Nevertheless, the IDC applied for PG to be liquidated, to the surprise of Ntsele.

“We went to them, we asked them if they would do this and they said no,” says Ntsele.

Things were set in motion; the provisional liquidation of the mining company’s assets began and its shares were suspended from trading. The vultures were circling.

Harmony Gold became the front-runner for the Free Sate assets. The company and its assets, now under the authority of the provisional liquidators—headed by Enver Motala—steadily deteriorated and soaked up more and more money.


Everyone went to their corner and prepared for a fight. Ntsele went all over the world to secure funding, from North America to the Arab states, but the global meltdown proved a formidable opponent. Investors and countries were closing shop.

The company had a lot of support from its employees, one of whom introduced a company called Best Rock Investments to Ntsele during one of his mine visits. At first sight everything looked great.

“These were Americans. Americans are smart, they were speaking of places I knew, had fancy degrees on their walls, the funding was approved and all that was left was to wait for authorization codes.”

The deal came to nothing and it was back to the drawing board for PG’s management team. Time was against him.


The Chinese were not fazed by the meltdown, they had money to burn. Ntsele came out to say he had secured R626 million ($65.5 million) from the China Africa Development Fund. Nonetheless, skepticism was rife.

Ntsele still cannot understand why it was so hard to believe they were capable of this; they had managed to raise R1.3 billion ($140 million) for Rand Uranium, an independent resource company, before.

“I have the letter from the Chinese in my office. They had a balance sheet,” says Ntsele.

According to him, a meeting was set up at the PG offices in Melrose, a Johannesburg northern suburb, by the Chinese to negotiate a compromise with Motala. The Chinese were willing to cough up some interim cash.


While the Chinese and PG’s management waited in the boardroom, Motala was 10 minutes away at the CNBC Africa studios to announce that PG was to be liquidated in its entirety and Aurora Empowerment Systems’ interest in PG’s assests.

It was again an annoying telephone call that informed Ntsele of the company’s fate.

“They [CNBC Africa] gave me a chance to get there and be part of the show. I’ve known this boy [Zondwa Mandela, managing director of Aurora] his whole life. I told them that I don’t think that he has the money or experience to buy,” a trace of betrayal showing on his face.

Ntsele says he managed to have a private chat with Motala, who told him (Ntsele) his own brothers had told him to do it.


“These things happen. That’s the nature of this biz called business,” Ntsele says in all his philosophical glory.

As the whole saga played out, Ntsele went from saying: “We will try to retrieve everything. It will be a battle. It won’t be easy, but we will try to save jobs and everything,” to a final: “I’ve thrown in the towel.”

Why the drastic change of heart? you might ask. It’s simple: “It was difficult to fight all these people; the cost to the company would be too much. I asked myself: ‘Should I keep on fighting?’”

Ntsele’s biggest qualm is that people were blind to the fact that PG accounted for only 3% of the whole Pamodzi portfolio and chose to see it as one company.

A last word from the businessman, who sold apples for his aunt, is that this [PG] was not the only bad apple. It just happened to be the only publicly listed one.

What did he learn?

“Protect yourself, even if you think you know all the players very well. As an entrepreneur, the first job is to trust your gut. It’s got you this far, but always have something to back it up. Lastly, this is a money game, but most importantly, it’s an assets game. You need to have more marbles [money] than you need.

“Property taught me to always have a war chest, but we forgot that. There was no need to give the IDC R800 million ($98 million) as security; half of that would have been enough and we could have had some security of our own.

“You learn as you go. You need to see failures as good lessons and you don’t get that from business schools.”