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PAC blasts mining companies over dividends

by Lesotho Times
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Ntsebeng Motsoeli

THE Public Accounts Committee (PAC) chairperson, Selibe Mochoboroane, has accused diamond mining companies of using underhand tactics including falsely claiming they are making losses to avoid paying dividends to the government.

Mr Mochoboroane alleged that the mining companies went to great lengths to avoid paying dividends including transfer pricing where they deliberately borrowed loans from their shareholders which they repaid with exorbitant interest rates.

He made the allegations during the Tuesday PAC session where the Namakwa Diamonds Chief Executive Officer (CEO), Robert Cowley had been summoned to explain why the mining company and its subsidiary, Storm Mountain Diamonds (SMD) have not paid dividends and royalties for the diamond sales to the government since the mine began full-scale operations in 2014.

SMD operates the Kao Mine in Butha-Buthe where it is the major shareholder with 75 percent shareholding. The government owns the remaining 25 percent shares.

Mr Mochoboroane said that SMD had not paid any dividends to the government since 2014.

He said the companies “have played the not-profitable card” to avoid declaring dividends to the government.

“We have discovered that mining companies fund their operations by acquiring loans from their shareholders which they pay back with exorbitant interest rates, making the mines seem unprofitable and unable to pay dividends to the government,” Mr Mochoboroane said.

“This means that the shareholders are borrowing from themselves and are paying back the loans to themselves leaving the government without any dividends.

“Our people are frustrated that their natural resources are taken away and they do not benefit from them,” he said, adding that the company should cease its operations if they were not making any profits as they claimed.

Mr Cowley replied that while the mine was not making significant profits to declare dividends to the government, closing down was not an option.

He said the company was still viable and projections show that more profits would be made during the 20-year life span of the mine and they anticipated they would start paying dividends in the next three years.

“It is my belief that the business has viability and will be sustainable for the next 20 years. We would not have invested in it if it was not viable. This is a mining business where diamond prices go up and down. Sometimes sales are good but sometimes sales are bad but if all goes well, the shareholders will get their dividends. Our projections are that we will be able to do so (pay dividends) in the next three to four years,” Mr Cowley said.

Mechachane legislator, Nyapane Kaya, accused Mr Kerry of giving the PAC a false picture of its financial statements to make it look like they were operating at a loss when in fact they were making profits.

“They are playing around with figures to make it look like they are not making profits. They are lending loans to themselves and paying themselves back and claim that they cannot give government its dividend until they have finished servicing those loans. All the while, the nation is not benefiting anything from the country’s resources,” Mr Kaya charged.

‘Matšepo Ramakoae, the Matsieng legislator said it was not logical that the company were still mining while claim losses.

“If you do not make profits, you should quit. There is no way that you have operated for so long and you have not made any profits,” Ms Ramakoae said.

On her part, the Ministry of Mining’s chief legal officer, Mathealea Lerotholi said the mining companies were allowed to seek loans from their shareholders.

Ms Lerotholi however, said the law stipulates that the loans were to be paid back at prime interest rates.

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