Botswana, the diamonds-rich Southern African country, risks reputational damage as an investment destination following the bungled liquidation of BCL Mine and the trail of disputes in the transaction's wake.
The protracted battle has left the future of at least 5 000 mineworkers and their families contemplating their future as well as business in the eastern Selebi Phikwe in jeopardy.
Most importantly, it has severely damaged Botswana’s reputation as one of the most investment-friendly countries on the African continent.
Such a disorder has been brewing for a long time and with no end in sight, things have taken a new twist with the Save Botswana initiating an online petition to force the government and all officials involved in the crisis to rethink the situation and save thousands of jobs. The battle emanates from Russian firm, Norilsk Nickel, committing to exiting from its African assets, Tati nickel mine in Botswana and Nkomati nickel mine in South Africa - since October 2013. Some four years later Norilsk, had yet to reach fruition on this strategy after the Botswana government’s wholly owned subsidiary, BCL, which firmly committed to acquiring the assets in 2014, was placed into provisional liquidation in 2016.
Two years earlier, in 2014, Norilsk and BCL entities signed the Nkomati share purchase agreement (the SPA). Completion of the sale was subject to fulfilment of certain conditions by the longstop date. In 2016, it was confirmed that the last condition had been satisfied before the longstop date and Norilsk gave notice to BCL confirming that the SPA became unconditional and the completion should occur that year in September. BCL failed to perform its completion obligations resulting in Norilsk serving a material breach notice on BCL and demanding payment of the c.$270 million purchase price under the SPA.
Michael Marriott, CEO of Nornickel Africa, said the deal appeared to be proceeding according to plan until the second half of 2016. “Prior to its being put into liquidation in October 2016, BCL had already taken occupation of the Tati Nickel mine and, at least for a period, continued mining and processing operations as normal. In August 2016, the final approvals necessary for the agreement to become unconditional were received from the Department of Mineral Resources (DMR) in South Africa and we were confident that the sale process had effectively been concluded.”
The government of Botswana later applied to the High Court hence BCL entities were put into provisional liquidation. Since BCL's liquidator had refused to confirm that he accepted Norilsk's right to be paid, Norilsk in November 2016 submitted a Request for Arbitration to the London Court of International Arbitration (LCIA) to determine its claims under the SPA. Towards the end of the year, Norilsk also filed application with Botswana courts seeking permission to commence and prosecute arbitration in the LCIA in respect of its claim.
Last October, Norilsk filed a reckless trading claim against, inter-alia, the government, seeking to declare government responsible for the liabilities of BCL entities to Norilsk.
BCL had entered final liquidation in June. The courts heard the permission application in April this year and handed judgment last month.
Although the LCIA was the contractually agreed forum for resolving disputes under the SPA, this was necessary because both Botswana and UK laws prevent further steps being taken against a company in liquidation without such permission from the court. Having made the Permission Application in December 2016, it then took a lengthy time before the courts set the hearing date.
High Court Judge Singh Walia, who was in charge of Norilsk’s Permission Application, was not willing to set a date for the hearing since he was at that time due to retire. The case had to be allocated to a different judge, Godfrey Radijeng, who scheduled the hearing for April this year, 16 months after the Permission Application was filed.
In its decision, the judge rejected Norilsk's application for permission either to continue the existing LCIA arbitration, or to commence a new arbitration. However, Norilsk has been treated unfairly and contrary to established legal principles. Norilsk has been denied the ability to get on and resolve the dispute through impartial, international arbitration, despite its right to do so under the contract with BCL.
Marriott believes Nornickel’s application should have been straightforward and uncontroversial. “It is our view that Nornickel has been treated unfairly and contrary to established legal principles. We will therefore not abandon our legal action against the Botswana Government and will use every avenue available to recover the debt.”
Former Minister of Mineral Resources, Green Technology and Energy Security of Botswana, Sadique Kebonang, in March 2018 claimed that “Botswana had paid $45-million to Norilsk Nickel” for the settlement of dispute regarding the cancellation of the sale of the Nkomati mine that belongs to Botswana state company BCL. However, despite the official declaration, no payments of the Botswana government have yet been received by “Norilsk Nickel”.
Marriott says the entire saga has been extremely distasteful for Norilsk, which invested in Botswana because it regarded the country as a sound mining jurisdiction. “Botswana has long been regarded as one of Africa’s most desirable mining destination. “I fear, however, that this reputation, based on Nornickel’s experience over the past few years, is very much at risk. The Botswana government’s actions are bad for the economy, bad for investment and bad for the people of the country.”