Two company directors and three companies linked to the Gupta-era acquisition of the Optimum and Koornfontein coal mines have been convicted of fraud and money laundering involving R107.5 million taken from trusts intended to rehabilitate the mines, raising questions about whether communities will be left to bear the cost of environmental damage.
On Friday, the Gauteng high court convicted Ronica Ragavan, Pushpaveni Ugeshni Govender, Optimum Coal Mine, Koornfontein Mines and Tegeta Exploration and Resources on four counts relating to the unlawful use of the funds.
The money was meant to fund the rehabilitation of the mined land but was used for other purposes, including payments to mining contractors and the provision of security for a loan.
The convictions highlight wider concerns about mine rehabilitation in South Africa, where inadequate financial provision risks leaving the state and communities to pay for environmental degradation.
A recent report, No More Ghost Towns, released in May by the Centre for Environmental Rights estimates that South Africa has about 6 100 abandoned and derelict mines. In Mpumalanga, fewer than six mine closure certificates were issued between 2011 and 2016, none for coal.
The research identifies persistent failures in mine rehabilitation, including reliance on bank and insurance guarantees rather than ring-fenced cash or trust funds, gaps in regulation and a lack of transparency around rehabilitation funding.
Dimakatso Sefatsa, an attorney in the CER’s mining programme, said setting money aside for rehabilitation did not, on its own, ensure that it would remain protected and available for its intended purpose.
“Funds can be diverted through unauthorised payments or placed at risk by being pledged as security for loans,” she said.
“The Optimum and Koornfontein case therefore raises serious concerns about who controls rehabilitation funds, how transactions are authorised and whether regulators and financial institutions adequately verify the purpose and legality of those transactions.”
The CER has advocated for a shift away from reliance on guarantees towards ring-fenced rehabilitation trust funds or direct deposits to reduce the risk of public liability when guarantors fail.
“However, this case shows that changing the financial mechanism is not enough,” Sefatsa said. “Trust funds and direct deposits must themselves be protected by effective controls, independent oversight and transparent reporting.”
Sefatsa said safeguards included reviews of financial provision, trustees’ duties and regulatory intervention. The model trust deed also prohibited encumbering trust assets without the minister’s prior written approval.
But she cautioned that these safeguards were inadequate in practice without consistent monitoring and enforcement. Prosecution after funds had been misused could not replace measures to prevent their diversion.
Communities should have access to trust balances, withdrawals, rehabilitation expenditure and independent verification of completed work, Sefatsa said.
How the funds were used
On Friday, Judge Mudunwazi Makamu convicted Ragavan, Govender, Optimum Coal Mine and Tegeta Exploration and Resources of fraud and money laundering involving R7.5 million from the Optimum Mine Rehabilitation Trust, according to Henry Mamothame, spokesperson for the Investigating Directorate Against Corruption (Idac).
Ragavan, Govender, Koornfontein Mines and Tegeta were convicted of the same offences involving R100 million from the Koornfontein Rehabilitation Trust.
Ragavan was a director of Koornfontein Mines and Tegeta at the time of the offences, while Govender was a director of Optimum Coal Mine and became a trustee of both rehabilitation trusts on 26 April 2016.
The former deputy director-general of the then-department of mineral resources, Maleatlana Joel Raphela, was found not guilty on all counts against him.
The offences contravened regulations under the National Environmental Management Act requiring mining-right holders to set aside funds for rehabilitation and ensure the money remains available for that purpose.
During the trial, the state outlined how Tegeta acquired Optimum Coal Mine and Koornfontein Mines from Glencore in a sale implemented on 8 April 2016. Control of the two rehabilitation trusts passed with the mines.
On 1 February 2016, the Optimum trust held about R1.44 billion and the Koornfontein trust R278.5 million.
In the Optimum case, R7.5 million was transferred from the trust’s Standard Bank account to an Optimum Coal Mine account on 23 May 2016. Ragavan and Govender signed the transfer request.
The state argued that the bank had been falsely informed that the transfer was authorised and that the money would fund rehabilitation.
The R7.5 million was combined with R9.5 million from Tegeta and ultimately formed part of a R26.4 million payment to mining contractor Klipbank Mining for underground mining carried out in April 2016. Rehabilitation work was done using the funds, but the money was never repaid to the trust.
Many mines and commercial clients are already invested in wheeling because it’s ‘cost imperative’. Photo: Seriti Resources
In the Koornfontein case, about R280-million held by the rehabilitation trust was moved from First National Bank to the Bank of Baroda in May 2016.
The department of mineral resources had granted Tegeta approval in principle to use the trust funds for concurrent rehabilitation, subject to three conditions. The version of the letter provided to the bank did not contain those conditions.
On 6 June 2016, R170 million from the trust was placed in a fixed deposit and pledged as security for a R150 million loan facility to Koornfontein Mines. The bank received written undertakings that the loan would be used only for rehabilitation.
The bank paid out R100 million on 13 June. Within two days, the money had moved through Koornfontein Mines and Tegeta accounts to a Tegeta account at the State Bank of India.
Of this, R67.8 million was paid to mining contractors Klipbank Mining and Coalcor Mining, while a further R30 million was returned to the Bank of Baroda and paid to other companies, including Koornfontein Mines and Optimum Coal Mine.
The state established that none of the R100 million was used for rehabilitation and that no rehabilitation work was carried out at Koornfontein. The R170 million remained pledged to the bank and at risk for a year.
Lasting consequences
The CER’s Sefatsa warned that if the diverted funds were not restored and rehabilitation obligations remained unmet, communities could face lasting environmental, health, safety and socio-economic consequences.
These include contaminated water, degraded land, pollution-related health risks, injuries or deaths from unsecured pits and unstable ground and damage to farming and other livelihoods.
She said the abandoned Imbabala coal mine in Wesselton, Ermelo, illustrated the consequences of rehabilitation failure. Mining ceased in 2011 after the company was ordered to stop operating without a valid water-use licence. The mine was abandoned without rehabilitation, and the company was deregistered in 2018.
Unfenced pits have led to children drowning and residents suffering serious injuries, while testing has confirmed contamination of nearby water sources used for crops and livestock.
The department held only R600 000 in financial provision, compared with an estimated rehabilitation cost of at least R450 million.
Calls for stronger oversight
Mariette Liefferink, chief executive of the Federation for a Sustainable Environment (FSE), welcomed the convictions but said criminal accountability must be accompanied by the recovery and protection of rehabilitation funds and progress in addressing the mines’ environmental liabilities.
“South Africa has a legal framework requiring financial provision for mine rehabilitation and closure. However, the existence of legal requirements is not sufficient evidence that funds are secure, adequate or accessible when rehabilitation becomes necessary.”
The safeguards, Liefferink said, cannot be regarded as adequate in practice unless they are supported by effective oversight, independent verification and prompt enforcement.
The full cost of environmental liabilities, available funds and controls over access needed verification. An accounting provision was not necessarily secured funding. “They should never become a source of working capital for a mining business,” she said of rehabilitation funds.
Inadequate funding can leave acid mine drainage, polluted water, erosion and unstable ground unaddressed at coal mines.
The CER’s No More Ghost Towns report proposed an independent body to scrutinise rehabilitation funding, verify balances and transactions, identify conflicts of interest and publish its findings.
Liefferink noted that proper rehabilitation could support local jobs, restore productive land and protect water resources. “The polluter-pays principle must be realised in practice.”
The matter was postponed to 1 December for sentencing proceedings. The court extended bail for Ragavan and Govender until the matter is finalised.