Inside the R1.1bn SA Steel Mills deal now under scrutiny

Previously unreported affidavits have raised new questions about due diligence processes and a flawed business case upon which theIndustrial Development Corporation(IDC) relied to provide more than R1.1 billion funding to SA Steel Mills (SASM), a steel manufacturing company based in Meyerton east of Johannesburg. A source with knowledge of the matter told theMail & Guardianthat two suspended IDC employees are facing a disciplinary enquiry for their role in the transaction, while questions remain about accountability for senior officials linked to approvals in the transaction. According to the source, a legal opinion commissioned by the IDC recommended sanctions against a former head of legal and regulatory compliance linked to approval of a Customer Account Management (CAM) Memo that enabled the final tranche of funding to be disbursed to SASM.

Despite the IDC making staggered disbursements to SASM over a seven year period amounting to R1.1 billion, the steel manufacturing company has since been placed in business rescue, resulting in theloss of more than 1 100 jobs. Competing allegations of fraud and embezzlement contained in affidavits deposed by feuding parties have also raised questions about the IDC’s due diligence processes in continuing to fund SASM after the company allegedly stopped servicing its debt as far back as 2020. In his affidavit, Ashish Verma alleges theft of funds and large scale money laundering at SA Steel Mills.

The steel manufacturer faced financial difficulty over the past few years, leading to the sale of Pro Roof Industrial Park, which owns SA Steel Mills and the land on which its steel mill operates. Alfeco, led by Ahuja, acquired the business in April 2024 but subsequently withdrew from the transaction. In a blistering attack on SASM’s previous owners, Verma names former financial director Peyush Bhana as one of the alleged masterminds behind the diversion of millions of rand from the company.

[paywall]

At the centre of the dispute between the new and former owners is a contested R749 million shareholder contribution. According to the affidavits, the amount was presented as shareholder loans introduced into the company and certified by auditors as part of the funding structure relied on by the IDC in approving loan facilities. In response to questions from theMail & Guardian,sent ahead of an extended deadline, the IDC said funding applications are assessed through “a comprehensive due diligence process” that considers “financial, commercial, governance and developmental factors, including sustainability and job creation outcomes”.

The corporation said documentation submitted by applicants, including supporting confirmations, is “evaluated alongside internal and independent analysis and governance processes” and that “funding decisions are not based on any single document in isolation”. However, the IDC did not directly answer whether it relied on the auditor’s certificate confirming the approximately R749 million shareholder contribution. The new owners of the business claim that a review of the company’s financial records conducted after the acquisition could not trace the R749 million which previous owners claimed had been injected into the business as shareholder funding to secure additional IDC facilities.

Before Ahuja and his management team took over, SASM was a family-owned business run by Rafik Mohamed. These affidavits and supporting documents form part of a criminal complaint lodged by Alfeco Holdings with the South African Police Service in 2024, including a supplementary affidavit sworn on 6 December 2024. Together, the documents set out detailed claims about how funding conditions were allegedly met and how funds may have flowed through the transaction.

[/paywall]