Alarms should have sounded when the Guptas approached the Industrial Development Corporation (IDC) for a R250-million loan to buy their nonprofitable Shiva Uranium mine, experts say.
The IDC should have asked even more questions when, after giving notice in 2013 for the loan to be repaid, the Guptas, through their Oakbay Resources and Energy (ORE) company, which bought the mine, asked to renegotiate the loan, which ballooned to R452-million.
The renegotiations saw the finance institution grant ORE a quasi-equity loan, for which they received 3.56% shares in the company.
Now, with the Guptas disposing of their assets, questions are being asked about whether they will be able to make the final repayment of R37.5-million by March.
In June, ORE announced that the company's cash supply had dwindled from R225-million to R2.7-million.
ORE and Shiva failed to respond to questions.
In 2016, the IDC lost R90-million when ORE de-listed from the JSE, and was left with shares it could not sell. Financial analysts believe hard questions should have been asked long before the IDC granted the loan, especially around assurances on repayments.
Professor Kalu Ojah, Wits Business School deputy director, said such loans were not often granted, especially as such requests were signs that the businesses were in financial trouble.
"The risks around these loans, especially for the lenders in terms of nonrepayments, are huge."
He said what was strange about the IDC loan was that it was for such a large amount of money.
"The motive for such a loan needs to be questioned. The IDC, whose work is around development, has very strict governance rules around the issuing of loans. Questions must be asked about what 'development' ORE was involved in to obtain the loan."
He said the delisting left the IDC with problems.
"The IDC has no way of knowing what its shares are really worth. They have to pray that they actually have any value."
IDC spokesman Mandla Mpangase said they had engaged ORE about the loan's repayment. He said there was nothing suspicious about the loan's restructuring and that ORE had honoured the loan's terms and had not defaulted.
