Wool Industry; Is it a case of State Capture or National Policy?

Part 1: Thaba Bosiu Wool Centre

Writes Tjonane Matla

 

A Silicon Valley guru; graduate of the University of Zambia and Santa Clara University, who possesses a Bachelor of Agricultural Sciences and Agribusiness Management under his belt, a retired civil servant whose last station in the civil service was Ministry of Home Affairs and Public Safety after serving for 25 years in the Ministry of Agriculture Co-operatives and Marketing, a strategist, manifesto and policy craft technocrat who contributed to the Basutoland Congress Party 1992 Elections Manifesto (March 1993 elections – a manifesto that its agricultural parts were never implemented to date) and currently the Manager of the Lesotho National Wool and Mohair Growers Association (LNWMGA), for almost ten years, that is Mr Lefu Lehloba.

thaba

 

Lefu Lehloba has displayed his Silicon Valley brains by conceptualizing, crafting, motivating, soliciting funding for and implementing two major multi-million leap-frog projects almost at the end of his career; Wool and Mohair Promotion Project (WAMPP approved by IFAD Board in September 2014) and Wool Centre.

lehl

In early 2013, an official of IFAD landed in Lehloba’s office on a quest to understand why Lesotho National Wool and Mohair Growers Association (LNWMGA) outshines other associations in the professional running of the organisation at grassroots level where other forms of societies in Lesotho struggle and fail. Lehloba responded to the lady IFAD boss, but concluded with a shot straight across-the-bow question that gulvenised the lady on the right spot, as within two weeks she sent a mission to Lesotho to interview Lehloba. The question was, “Why does IFAD impose projects designed for other environments in Lesotho, instead of tailor-making a project for Lesotho, and in particular a project that can address the challenges of the wool and mohair industry in Lesotho?

To cut the long story short, that boss lady meeting and Lehloba’s question, led to what is currently known as Wool and Mohair Promotion Project (WAMPP), approved by the IFAD Board in 2014, signed by Government of Lesotho in June 2015 and launched in June 2016.

 

Wool Centre Concept  

It was while in China during the International Wool and Textile Organisation (IWTO) in May 2015 that the LNWMGA Chairman, Mokoenehi Thinyane and Manager, Lefu Lehloba requested Ambassador Lebohang Ntšinyi – then Lesotho Ambassador to China – to help LNWMGA to solicit funds as they would like to erect a Wool Centre in Lesotho. According to Thinyane, this was done in the presence of a Chinese Businessman Shi Guohui commonly known as ‘Stone’. The import of which will become apparent.

Thinyane and Lehloba express that the wool centre deal was envisaged as a property development initiative to enable future wool processing, where it was believed that the said Chinese Businessman could attract capital from the People Republic of China for a shareholding, and LNWMGA would bring farmers wool. Both Shi Guohui and LNWMGA should form a joint venture to achieve that vision. In terms of the processing of the wool Shi Guohui, upon completion of construction of the wool centre, would have the first right to supply LNWMGA with a proposal to manage the processing of wool for consideration.

At the August 2017 LNWMGA Annual General Meeting held in Butha-Buthe, during the wool centre progress report, presented by Guohui Shi of Maseru Dawning (Pty) Ltd,  Mokhotlong Wool and Mohair Growers delegates specifically asked if LNWMGA has an agreement with Guohui Shi regarding the construction of the wool centre and the response by the Chairman in the conference was that there was no agreement. The conference accordingly resolved that LNWMGA should enter into a clear legal agreement to avoid conflicts and misunderstandings in future.

It appears that since the May 2015 meeting in China with Ambassador Ntšinyi a lot happened behind the scenes.

Agreement of Joint Venture

Files submitted by Advocate Tumisang Mosotho in the High Court of Lesotho (Commercial Division) in the matter of MASERU DAWNING TRADING (PTY) LTD and LESOTHO NATIONAL WOOL AND MOHAIR GROWERS ASSOCIATION CCA/0105/2017, made public on the 14th of November 2017 the JV agreement that was sought at the August 2017 LNWMGA AGM. It appears the delegates were not aware of the fact that signatures of LNWMGA and Maseru Dawning (Pty) Ltd were put on paper on the 31st of March 2016 to form the Lesotho Wool Centre Joint Venture and amended on the 30th of June 2017! LNWMGA was to be the majority shareholder at 75%, with Maseru Dawning (Pty) Ltd to be a minority shareholder at 25%.

Maseru -Dawning CEO

Maseru -Dawning CEO

Section 1.3 of the JV agreement contains an important component of the relationship at its foundation:

 

“The object clause”

1.3 (a) to promote and realize the development of wool and mohair business in Lesotho, including building the Lesotho Wool Centre which include the greasy wool store, wool-bailing factory, pre-sale sample store, testing lab, wool classing factory, wool transportation centre, office building etc.

1.3 (b) Maseru Dawning Trading (Pty) Ltd agrees to compile the Business Plan and the design of the Lesotho Wool Centre Scheme, Operating Scheme, Financing and Repayment Scheme and Training Scheme.

1.3 (c) Parties agree to set up a Joint Venture company (hereinafter referred to as the Company), where

(i) The proportion of the shareholding will be: Lesotho Wool and Mohair Association shall hold 75%, and Maseru   Dawning Trading (Pty) Ltd holds 25%;

(ii)  The form of investment will be: Lesotho Wool and Mohair Association and Maseru Dawning Trading (Pty) Ltd shall be contributed in cash;

(iii) The scope of the company will be: to build and operate the Lesotho Wool Centre which includes many functions range from wool classing, wool baling, transportation, finance, etc. All these things are agreed by both parties and will be detailed in the cooperation agreement.

(c) Lesotho Wool and Mohair Association agrees to use its resources to help the company legitimately build the Wool Centre, including but not limited to the infrastructure, land, road, electricity, frequencies, etc;

(e) Once the project of Wool Centre is finished, Maseru Dawning Trading (Pty) Ltd (MDT) will take the responsibility to operate the Wool Centre and pay annually to the Joint venture. The details shall be agreed by both parties and will be recorded in the cooperation agreement.”

A review of Clauses 1.3(c)(i) and (ii) which specifies that the shareholding shall be split 75/25 in favour of LNWMGA and that the investments shall be made in cash in such said proportion appear to both contradict the capital raising agenda of seeking an investor as expressed in China 2015?

A review of Clause 1.3(c)(iii) which specifies that the company (the JV) shall “build and operate the Lesotho Wool Centre which includes many functions range from wool classing, wool baling, transportation, finance, etc. All these things are agreed by both parties and will be detailed in the cooperation agreement.” and clause 1.3(e) which provides that Maseru Dawning Trading (Pty) Ltd “will take responsibility to operate the Wool Centre………….and will be recorded in the cooperation agreement” appear to both contradict the vision as expressed in China 2015?

 

 

Funds Contributed into the project

As per Joint Venture Agreement section 2.1.9, the Joint Venture Account was to be opened at a local bank, and according to the LNWMGA National Treasurer Teboho Leleka LNWMGA contributed M 4 million (59.7%) while MDT contributed M 2.7 million (40.3%), bringing the total deposit in the JV account’s history to be only M 6.7 million (100%).

Since the cash contributions currently do not match the said shareholding, the question is where they made in terms of clause 1.3(c)(ii)?

 

Additional Clause – Extracts

On the 30th of June 2017 the National Treasurer Teboho Leleka and National Secretary Tšehla Jaase signed, on behalf of LNWMGA, what appears to be an addendum to the Joint Venture Agreement that facilitated Maseru Dawning (Pty) Ltd lending LNWMGA M 1,453,252.50. The Agreement reads as follows: “The parties hereby agrees as follows: That MDT pays into the LNWMGA’s account an amount of M1,453,252.50 to enable LNWMGA to purchase the proposed land at Thaba-Bosiu. (The money includes the part which MDT should contribute with its ratio and the part MDT advanced to LNWMGA with its ratio.) The transfer of the said land at Thaba-Bosiu into LNWMGA’s name shall follow and each party is bound to assist wherever required to enable the transfer to take place.

Is it then the case that MDT has contributed a total of M 4.1 million (50.6% – when rounded off), that is the sum of M 2.7 and M 1.4 million that was meant for payment of the site?

 

Part 2: Thaba Bosiu Wool Centre in High Court

Why stolen idea & State Capture?

“It was while attending the International Wool and Textile Organisation, conference in May 2015 in China while we requested Ambassador Lebohang Ntšinyi to assist us in raising funding or find a property developer that could help us erect a wool centre is Lesotho. In that meeting there was myself, LNWMGA – Managing Director Lefu Lehloba and Shi Guohui.” Says Mokoenehi Thinyane.

ntsinyi

Although much credit has been given to Lehloba in this article, we must state clearly, that is how we view Lehloba and our analysis is based on the past 8 years of close watch. However Lehloba is faced with two big challenges of bottlenecks caused by Civil Servants who somehow have voiced out that he has changed the norm, as he excludes civil servants in some of the critical decisions of the association. This was voiced out by some Veterinary Doctors at the LNWMGA AGM that was held at Qacha’s Nek and recently by Director of Marketing in Butha-Buthe AGM in August 2017. The significance of this complaint of civil servants not perceiving Lehloba the way we classify him shall be of significant importance in the articles that follow where we analyses the ongoing case of Maseru Dawning Trading.

When LNWMGA was found, the then Chairman was more of an intelligentsia of those days who had been a civil servant and left for greener pastures in the private sector. The late Mojalefa Lephole had very close relationship with the late Dr. Rakoro Phororo who actually pioneered the LNWMGA and utilized available government resources to support the association. This means that for the later years the association had no office nor staff but had to depend on civil servants for expertise and that is not the case now as the association has grown to be the largest and richest commodity association in Lesotho with fully flesh staff some of whom are receiving continuous training.

Lastly and very unfortunate Lehloba is serving an organisation of people with natural intelligence and less educational background and exposure to conduct business. The association is now very wealthy with over M 35 million asset base and almost 40,000 members. This has attracted many wool buyers and brokers from South Africa, China and United Kingdom etc. In most recorded cases members of the LNWMGA National Executives has been wooed to do business with some of the willing buyers and brokers and in most cases these members were entertained, and most probably after several wine glasses and in turn made impossible promises that motivated people like Shi Guohui.

In conclusion some of the confusion currently prevailing in the association is simply caused by members who were entertained couple of times by the brokers proposing to do business with LNWMGA and in this very last confusion some cabinet members are alleged to have taken a role in a form of a type of systemic political corruption in which private interests significantly influence a state’s decision-making processes to their own advantage, hence we strongly feel that the whole Wool Centre saga, has symptoms of state capture.

Founding Chairman ofLNWMGA Mojalefa Lephole

Founding Chairman ofLNWMGA Mojalefa Lephole

Chairman Mokoenehi Thinyane

Chairman Mokoenehi Thinyane

 

 

Wool Centre in the high court of Lesotho

 

It is highly recommended that, to comprehend this case, one might need to firstly read the story titled Wool Centre; Is it a case of State Capture or National Policy on page

On the 15th of November 2017 we went to Thaba – Bosiu to interview Maseru Dawning Trading (Pty) Ltd Managing Director Guohui Shi as we had learned that he had received a couple of wool bales from some of the Wool Sheds in Lesotho. Little did we know that Shi commonly known as ‘Stone’, had that very day filed a case against the Lesotho National Wool and Mohair Growers Association concerning the Wool Centre.

We must disclose that Stone refused an interview as he claimed that he is cooking something which was not yet ready for media consumption, but he promised that the next day, we were going to hear something very big. Our question was then how are we going to get information on that big issue, and his response was that it is going to be so big that we are surely going to feel the impact.

The very next day, The Minister of Small Business, in Parliament Session tables a Ban to export all wool. This was indeed ‘something very big’, however the question was how, if at all, did it relate to Thaba Bosiu Wool Centre and ‘Stone’?

In the high court of Lesotho

Advocate Tumisang Mosotho filed on the 14th of November 2017 as follows:

“I am an attorney of this Honourable Court duly admitted and practicing as such. I have considered this matter and bona fide believe it to be a matter for urgent relief for the following reasons:

  • The Applicant has injected capital in excess of M 33,000,000.00 into a project in terms of which the Applicant (Maseru Dawning Trading (Pty) Ltd) and the 1st Respondent have established and registered a joint venture under the name Lesotho Wool Centre Joint Venture.
  • In terms of the joint venture agreement the 1st Respondent is obliged to supply Lesotho Wool Centre with wool and mohair. However, to date and without proper justification the 1st Respondent fails to perform its obligations in this regard.
  • The 1st Respondent refusal in this regard is having a negative impact on the operations of the Lesotho Wool Centre. As such both the Centre and the Applicant are losing millions of Maloti in revenues.

The case although was filed as an urgent application, it was postponed from the 10th to the 17th of January 2018 for the reasons that the Applicant’s Attorney was not ready, where after it proceeded.

Lefu Lehloba commented in one of the many interviews we had with him about the Wool Centre. “Thaba – Bosiu Wool Centre was my brain child, I made it as it was my responsibility and duty to conceptualize, craft and implement it. The development is currently one warehouse, 2 more warehouses and the office are not done, and therefore the facility is not functional or anywhere close to what I crafted and what we agreed upon, but you see people who have no idea of what we wanted taking over and making it their own”.

It was not surprising as there afterwards when the Government Organs furnished with one side of the Balance Sheet rushed to block BKB clearing bank account at the Standard Lesotho Bank, so as to frustrate the bank from paying the Wool Growers, so that they discredit BKB and see Maseru Dawning Trading as an angel while the 99 years BKB that has traded with Basotho for 44 years as the devil.

M 33,000,000.00 injected into the project

“It came as a shock while one evening I am listening to one of the local radio stations, and hear the Applicant’s Attorney calling in, and claiming that his client has spent M 33 million into the project. I was really shocked, as I believe there was a court case in commercial judiciary, but here is an attorney who is discussing the facts on radio and stating the figure that was strange to me, I know how much had been deposited in the account and it is nowhere near M 33 million.” Manager Lesotho National Wool and Mohair Growers Association – Lefu Lehloba during the interview.

“The figure is very strange, we have contributed M 4 million in the Joint Venture Account while Maseru Dawning had contributed M 2.7 million. This means that total deposit into the Joint Venture Account must be M 6.7 million. However it might be of significant importance to disclose that Maseru Dawning did loan LNWMGA about M 1,4 million to purchase the site at Thaba-Bosiu where the Wool Centre is located. This in simple arithmetic means that the figure that we know Maseru Dawning has contributed is M 2.7 plus M 1,4 million only, not the M 33 or M 30 million as per Advocate Mosotho’s papers”. Wool and Mohair National Treasurer Teboho Leleka.

No agreement to trade wool with the Chinese at this stage

Tšehla Jaase, an Expelled Executive Member and Former National Secretary of the Lesotho National Wool and Mohair Growers Association (LNWMGA) said; “No agreement to send wool to Thaba-Bosiu had been signed by either party, nor did the current contract contain any clause to send wool to the wool centre at this stage. The contract is purely based on property development, but Maseru Dawning (Pty) Ltd upon completion of the entire project has first right or priority to run the wool centre upon presentation of a viable and convincing business plan to LNWMGA. Jaase supported his point by clause 1.3 (a), (b) (c) (iii) and (e) of the Joint Venture Agreement.” Refer to Wool Centre, the state captured and stolen idea on page X of this issue.

Jaase reported to the Silo that he is currently expelled by the National Committee due to allegations that he took bribe from Stone and influence Duma Wool Shed wool to be sold to Maseru Dawning.

Jaase further pointed out that despite this written agreement, a number of their members had been secretly meeting with Maseru Dawning Trading Managing Director Guohui Shi and the suspicion is that they might have made such agreements unofficial behind closed bars. He however was very explicit that during the 2016 AGM held at Semonkong, Shi was promised that, the congress shall make a decision to grant him to be a broker of wool, and that was even before completion of the first store. When that did not materialize, Shi was again given an opportunity to present at Butha-Buthe 2017, AGM where he appealed that he is almost done with the first store and accordingly should start receiving wool. According to Jaase, there was never a slot for Shi to present in the AGM Agenda, but they were surprised when he presented.

In our interview with LNWMGA Manager – Lefu Lehloba, the manager reminded us that after a suggestion that was made by one of the delegates in the conference following that presentation, to send wool to Thaba-Bosiu, some members went directly to Thaba-Bosiu and started communicating with ‘Stone’, a situation that lead to such sending wool to Thaba-Bosiu without authorization of the executive committee as per the association’s constitution.

According to the LNWMGA Chairman Mokoenehi Thinyane, the claims submitted by the Applicant’s Attorney stating the intention of establishing the Lesotho Wool Centre as to supply wool and mohair to Shi is false. He further argued that such an agreement was to be done once all sections or components are completed and such a decision was to be based on a business plan that was to be submitted to LNWMGA. Thinyane as well supported his arguments by saying that their intention was purely property development of which switching their wool and mohair selling channels needed a more convincing plan first and they were at this stage not close to such.

‘Stone’ when contacted telephonically (on the 25th of January 2018), states emphatically that he has expended now over M 37 million on the Thaba Bosiu Wool Centre. This included the construction of the road, stores, fencing and entrance. He further stated that the contractor costs and monthly billing were in fact signed off by a subcommittee of LNWMGA and not himself. The contractors contract for the entire envisaged facility is to the tune of M 55 million, a figure unknown to the leadership of the LNWMGA.

The fact that there is ongoing litigation on this matter, that fact that this is a key and if not the most strategic contribution to the National GDP from and agricultural perspective, the fact that this association is the oldest in Lesotho, the fact that this Nations NSDP is based on this sectors growth and beneficiation means that this discord has potentially catastrophic national implications.

The Government stand on the Case

According to the LNWMGA Manager Lefu Lehloba, a Cabinet subcommittee made out of six members namely Ministers Economic Planning Peter Aumane, Agriculture and Food Security Mahala Molapo, Trade – Tefo Mapesela, Small Business – Phori and Deputies from Agriculture and Food Security – Dr. Nthabiseng Makoae and Deputy Home Affairs – Machesetsa Mofambere summoned the National Executive of LNWMGA in late November 2017 and Lehloba became part of the delegation that met this committee. The first point in of the discussions referred to the Joint Venture Agreement, and in that meeting after members of the Cabinet committee read the agreement they resolved to go back to full Cabinet to brief them on the agreement, and further advised that they would talk to ‘Stone’, to withdraw the case, a step that was to lead to discussions out of court.

Lehloba was surprised when the case was not withdrawn, and the basic agreements that were paving for negitiations, of which they are part of the Joint Venture Agreement, were not done as well, making it difficult for the association to now have talks with Maseru Dawning. What further surprised the association was Small Enterprise Minister’s comments in the media about the case in court in favour of the Applicant. This Minister, who is the 3rd Respondent in this case, appeared at the High Court arm-in-arm with the Applicant ‘Stone’.

In our conversation with Minister Aumane of Economic Planning, the honourable minister claimed to have made it possible for both parties to talk, but the Growers seem not to be cooperating with ‘Stone’. Minister Aumane referred the Joint Venture Agreement as a technical document that does not help the situation, as the way he views the whole saga, is for the Growers who are in partnership with ‘Stone’, to sell their wool and mohair through Maseru Dawning not BKB which is “violating a lot of laws and not paying taxes”.

The reader is encouraged to recall that the question in the series of these articles, “Wool Industry; Is it a case of State Capture or National Policy?”

The definition of State Capture is understood by this publication to define scenarios of political corruption in that the personal interests and gains of individuals are furthered through the abuse of power by public political figures through senior personnel of state entities to ensure and facilitate such personal gains.

So in the scenario currently faced by the LNWMGA what will our public political figures do?

Part 3: BKB are they financing terrorism and money laundering tax evaders?

Next Issue

 

 

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