The Johannesburg High Court has ruled in favour of African Rainbow Capital (ARC), controlled by billionaire Patrice Motsepe, in a dispute with Tanzania’s Pula Group which is claiming $195 million (R3.2 billion) for breach of confidentiality.
The main case is due to be heard in Tanzania in the coming weeks.
Pula says it will appeal the SA court ruling, which it says was brought before the SA court as a tactic to influence the Tanzanian courts.
Tanzanian court bars Motsepe-linked firms
The Dar es Salaam court has already barred Motsepe-associated companies – African Rainbow Minerals (ARM), ARCH Sustainable Resources and Motsepe himself – from re-entering proceedings after initially failing to file pleadings.
This effectively places them in default, says Pula, which has slammed the ruling, saying this casts South African courts in a bad light for attempting to shield a local company from accountability in another country.
The Joburg High Court was approached by ARC on an ex parte basis (where only one side argues) for an order to serve papers by way of edictal citation, where an opponent’s whereabouts are unknown.
Pula has no physical presence in SA but lodged an objection once it became aware of the application, saying it stretches credulity to conduct litigation for years and then claim suddenly that you cannot locate the other party.
ARC applied for a declaratory order that the relief Pula was claiming in Tanzania is fundamentally flawed and based on an incorrect understanding of SA law, which is the law governing the confidentiality agreement.
Court’s view
The Joburg court ruled on Tuesday that the confidentiality agreement was concluded between ARM (not ARC) and Pula Group, and that its subsidiary company Pula Graphite has no contractual rights in terms of this agreement, nor can it suffer damages as a result of the alleged breach.
It further ruled that ARC has no obligations in terms of the agreement and cannot be deemed to be in breach.
If there is a breach of agreement, Pula can only seek damages against ARM. Pula Group does not have a claim for damages for an asset previously owned by Pula Graphite.
Criticism
The ruling was criticised by Charles Stith, chair of Pula Group and former US ambassador to Tanzania.
“I hope for the sake of South Africa that our encounters with these judges were an aberration. If it isn’t, the implications are profound,” he said.
“The signal this sends to the world is that if you do business with a South African firm in a dispute that requires court action, the deck is stacked against you.
“To Africa, it sends a message that South African courts will ‘use their discretion’ to keep their companies from being held accountable for any violations they commit elsewhere on the continent.”
In its court papers, Pula argued that ARC’s approach to the SA courts was disrespectful to the autonomy of the Tanzania High Court.
The alleged breach
The case was brought by Pula in 2023 over an alleged breach of a 2019 non-disclosure agreement (NDA) that gave Motsepe’s companies access to Pula’s confidential information, which was then used to invest in a rival graphite project in the Ruangwa region of Tanzania.
Pula argues that of 52 potential graphite projects around the world, ARC chose to invest in a neighbouring mining project to which it had been granted its confidential data and project plans.
The Tanzanian mining company was shocked to find in October 2022 that ARCH Sustainable Resources, a private equity fund in which Motsepe has a substantial interest, had invested in a neighbouring graphite project owned by Australian exploration company Evolution Energy Minerals.
Graphite activity in Africa
According to Benchmark Mineral Intelligence, Africa currently has seven active flake graphite mines and a pipeline of approximately 12 additional projects expected to come online, implying roughly 15 to 20 advanced or near-production projects across the continent.
In Tanzania, industry data shows that at least six to seven defined graphite projects exist within the country’s graphite belt, including Nachu, Epanko, Chilalo, Bunyu, Lindi Jumbo and Mahenge, with around three projects advancing toward final investment decision or near-production status.
Motsepe has previously denied any recollection of seeing Pula’s confidential information and dismissed its claims as “baseless and nonsensical”.
Asked to comment on the ruling, ARC responded: “We have not received and are not aware of any application for leave to appeal the judgment. They have clearly selected portions of the judgment to suit their narrative which is not appropriate – the judgment has to be read in totality.”
This article was republished from Moneyweb. Read the original here.
