United Manganese of Kalahari (UMK), a company owned partly by US-sanctioned Russian mogul Viktor Vekselberg and the ANC’s funding front, Chancellor House, is at loggerheads with the SA Revenue Service (Sars) over a tax bill of more than R350m.
The company paid R30m into the ANC’s coffers in the past two years, including R15m towards its December elective national conference, according to declarations made to the Electoral Commission of SA (IEC) in line with the requirements of the Political Party Funding Act.
The act became law in 2021, forcing parties to disclose all donations received above R100,000, whether in cash, kind or both to the IEC each quarter.
Media reports suggest UMK has been a consistent ANC donor for several years.
Business Day understands that in 2017, Sars alerted UMK that it would conduct a transfer pricing audit in respect of the 2011, 2012 and 2013 income tax years of assessment. The scope of the audit was transactions between it and its “offshore connected parties”.
High court
The taxman, after its probe in 2019, issued a letter of audit findings in April 2019 informing UMK of the outcome of the audit, which determined it owed Sars R350m, excluding interest levied on the dividend tax assessment.
UMK then approached the high court in Pretoria, without first seeking an audience with the tax court, to review and set aside the Sars decision to raise additional income tax and dividends tax assessments.
The high court dismissed its application, saying that the tax court was better suited to adjudicate the dispute.
The mining house then approached the Supreme Court of Appeal (SCA), seeking to set aside the decision of the high court. The matter was heard in February and the judgment was handed down on Friday.
In a unanimous ruling, the SCA dismissed UMK’s appeal with costs.
UMK is the fourth-largest producer of manganese in SA. It owns a mine in the John Taolo Gaetsewe District Municipality in the Northern Cape. There it extracts unrefined manganese, which it crushes and screens before it is stockpiled.
AmaBhungane reported last year that financial records from Cyprus showed that UMK paid out R2.4bn in dividends in 2020, after a year of favourable manganese prices in 2019.
UMK started prospecting for manganese in 2005, after being awarded prospecting rights for 15,200ha within the Kalahari manganese field, and this was followed up with the mining right in 2008.
It was established that Vekselberg’s Renova Manganese Investments owned a 49% stake in the company, while BEE group Majestic Silver Trading holds the remaining shares. Chancellor House has a commanding stake in Majestic.
Legal advice
Chancellor House MD Mogopodi Mokoena is UMK’s board chair. The sole shareholder of Chancellor House is Chancellor House Trust, and the ANC is a beneficiary of this trust.
Mokoena said on Sunday: “We are respectfully not in a position to comment at this stage as the company is waiting for legal advice from senior counsel on the judgment.”
Vekselberg’s shareholding of less than 50% has in a way shielded UMK from also being sanctioned by US authorities as that country’s laws state that a company in which a sanctioned individual owns 50% or more is also liable for sanctions.
Vekselberg, said to be an ally of Russian President Vladimir Putin, is subject to US sanctions against dealing with Russia. He was first sanctioned by the US authorities in 2018 and again in March last year after Russia’s invasion of Ukraine. The 2018 sanctions related to alleged tampering with the 2016 US elections by Russian entities.
The Biden administration has since seized a $90m yacht owned by Ukrainian-born Vekselberg, who is estimated to be worth nearly $7bn by Forbes.
In August, Putin is expected to visit SA for the annual summit of Brics — a group of emerging economies made up of Brazil, Russia, India, China and SA.
Arrest
International relations minister Naledi Pandor last week confirmed that Putin had been invited to attend the 15th Brics summit in SA.
President Cyril Ramaphosa chairs the bloc this year. The visit is set to be particularly controversial after the International Criminal Court this month issued a warrant of arrest for Putin, accusing him of ordering the abduction of children in occupied parts of Ukraine, an act that amounts to a war crime.
The Kremlin has already said any arrest of Putin will be a declaration of war and it will use weapons of war against any nation that dares to arrest him.
In February, SA hosted the Russian and Chinese navies for joint military exercises off its east coast, despite the concerns of the US and EU.
Big SA corporations such as FirstRand and Remgro have already warned that the country’s diplomatic ties with Moscow will hurt trade and export revenue in the long run.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.