Case against South African billionaire Motsepe starts today in Dar

Dar es Salaam. A case involving South African billionaire Patrice Motsepe and his associate companies is set for hearing at the Commercial Division of the Tanzania High Court in Dar es Salaam today.

Tanzania’s Pula Group is suing Motsepe and his associate companies — including African Rainbow Minerals, African Rainbow Capital and ARCH Emerging Markets — for allegedly breaching a non-compete contract when it invested in Australia’s Evolution Energy Minerals, located next to Pula’s graphite project.

The case dates back to October 28, 2022, when Pula filed an application in a lawsuit claiming a breach of a non-disclosure and non-compete agreement at the Commercial Division of the High Court of Tanzania.

However, the $195 million lawsuit was abruptly dropped in May 2023 due to technical reasons.

But, the Pula President, Dr Mary Stith, said in March this year (2024) that the case was refiled in November 2023 and was still progressing.

“Withdrawing and refiling the suit was based on a technicality. We are comfortable with the course of action recommended by our lawyers…,” Dr Stith said in a statement in March.

The company’s chairman, Mr Charles Stith, is quoted by Bloomberg as saying: “The amount was based on a third-party valuation of what Pula stands to lose as a result of the competitive disadvantage resulting from the Motsepe associated companies’ violation of a confidentiality and non-compete agreement,” Mr Stith said in an interview.

Motsepe and associated companies have denied any breach and said there’s no merit to Pula’s allegations and claims.

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“ARM was considering investing in minerals that it had not mined in the past when the Pula graphite project was presented to it for its consideration” an ARM spokesperson is quoted as saying. “ARM concluded a confidentiality agreement with Pula and subsequently decided not to invest in the project, and communicated the decision to Pula.”

The matter is under Judge Abdallah Gonzi who is expected to give order on the whether to continue with the main suit while there were also some pending applications from the first and second respondent who seek litigation to have a revision of the main suit. Pula said a two-year non-compete contract had been in place, and that Motsepe companies talked to and did the deal with the Australian company within that period.

Mr Stith, a former US ambassador to Tanzania, said the majority of exploration in Tanzania is done by Australian and Canadian companies, and that unfair and predatory practices of companies like ARM perpetuate the disparity in the mining sector, to the detriment of Tanzanians.

“A similar dynamic existed across the continent of Africa, and the case is expected to set a legal precedent in protecting the rights of local mining and exploration companies competing against international counterparts in Tanzania,” he said.

The case is based on a July 2019 agreement between the firms.

In the agreement, the two parties are said to have signed a two-year agreement that compelled them to share confidential information that would put either company at a competitive disadvantage should either company share that information or use it to enter into an agreement with a potential competitor.

As a result of signing the contract, Pula shared confidential information with ARM’s senior executives concerning the mining business and investment in mining activities.

The information included details about the nature of its graphite mining exploration activities in Ruangwa, Tanzania, and technical know-how on Tanzania’s graphite reserves in the region.

A key aspect of the contract was a commitment not to compete while it was valid.

The initial contract between the plaintiffs and ARM was for two years, but Pula alleges that ARM violated the non-compete clause by delaying implementation and deciding to cooperate with a competitor, Evolution, in Ruangwa.