This article is the second in the series dedicated to the company Kraoma S.A.
By Tahiry Rabenasolo
Forgotten by the media
On 8th August 2018, the Malagasy State corporation Kraomita Malagasy S.A., or KRAOMA S.A., signed a strategic partnership with the Russian company Ferrum Mining LLC establishing a joint-venture, KRAOMA MINING S.A. The first article of this series discussed the conditions of the strategic partnership, the farm-out agreement signed on 12 September 2018 between KRAOMA S.A and KRAOMA MINING S.A, and the reactions of the stakeholders to this Malagasy-Russian partnership, particularly those of KRAOMA S.A.’s employees who last week ended a strike that had begun at the end of November 2018. Links between this partnership and suspicions of Russian support for the re-election campaign of former President Hery Rajaonarimampianina were also mentioned in the national press in March 2018.
However, Ferrum Mining itself has received little attention in the media. Nevertheless, there are many questions concerning this company that must be answered to objectively assess whether the partnership with Ferrum Mining represents an opportunity or a threat to KRAOMA S.A. and the Malagasy State. Who runs this Russian company? Who owns it? Why was it chosen as a partner by KRAOMA S.A. without a call for tenders? Is this choice due to Ferrum Mining's notoriety and past achievements? Or is it more a matter of good political connections, or even corruption? Is Ferrum Mining affiliated with Stork International Gmbh, formerly KRAOMA’s main customer to which it is now heavily indebted?
Ferrum Mining’s website reports on its cutting-edge expertise in the mining industry on the African continent. It mentions that Ferrum Mining has “has all the necessary licenses and is working in the fields in the Republic of Madagascar” in addition to being in the geological exploration phase within the framework of “promising projects in the Republic of the Sudan, the Republic of Zimbabwe and some other countries”.
The information made available to the public by the Federal Tax Services of the Russian Federation tells a different story. Ferrum Mining was only registered in November 2017, initially under the name Petroneft. It was founded by Alena Vladimirovna Zhezherova (ЖЕЖЕРОВА АЛЕНА ВЛАДИМИРОВНА in the Cyrillic alphabet) with a registered capital of 10,000 roubles (about 520,000 ariary). According to this register, Mrs. Zhezherova owns 100% of the shares of Ferrum Mining and is also its only employee. Nevertheless, the company today would employ at least nine Russian nationals, deployed in Madagascar in September 2018. Also, the building where the headquarters of the company is situated, located in Saint Petersburg, Blagodatnaya st. 63, bld. 1A, office 23, is shared with 17 other companies. A small company with big ambitions or a big company trying to avoid unwanted attention? In any case, we might ask ourselves how Ferrum Mining was able to acquire the reputation and sufficient expertise in just nine months to convince the leaders of KRAOMA SA to enter into a partnership of this importance without a tender process.
The Ferrum Mining headquarters in St. Petersburg (Google map)
Some other incongruities
The success of Ferrum Mining in the realisation of other large-scale projects in the field of chromium or other mineral extraction, in Madagascar or in other countries, could justify the eagerness with which this partnership was concluded. However, it has been impossible for us to identify any prior activity by Ferrum Mining and there is no indication that it is actually involved in projects in Sudan or Zimbabwe. Interestingly, activities related the mining industry only rank 17th among those reported by Ferrum Mining in the business register, right after hunting and trapping wild animals.
Contrary to what Ferrum Mining's website says, it appears that it does not have any license for mining in Madagascar. The register available on the website of the Office of the Mining Cadastre of Madagascar (BCMM) does not mention that such licenses were attributed to the company. According to Simon Seva Mboiny, the Managing Director of KRAOMA MINING S.A., who was interviewed for the first article of this series dedicated to KRAOMA S.A., Ferrum Mining only provides financial support to KRAOMA S.A. through their joint venture KRAOMA MINING S.A. and therefore does not have, or need, a license.
Ms Zhezherova: a figurehead?
Some details cast doubt on the real functions of the Managing Director and sole proprietor of Ferrum Mining. According to a partner organisation of the MALINA network specialized in investigative journalism and expert of the Russian context, there is no trace of Mrs. Zhezherova in the relevant databases or on social networks.
Another surprising fact is that Mrs. Zhezherova is not mentioned in any of the partnership documents we were able to obtain. A certain Evgeny Osipov signed the contract establishing the partnership between Ferrum Mining and KRAOMA S.A on behalf of the former. We note that Mr Osipov is also the Chairman of the Board of Directors of the joint venture KRAOMA MINING S.A. and has signed the farm-out agreement between it and KRAOMA S.A. Although it is common to see important tasks delegated within a large company involved in multiple projects, it is strange for the first large-scale project carried out by Ferrum Mining in Madagascar to not have the name of its Executive Director and Founder appear anywhere.
It is therefore legitimate to suspect that Ms Zhezherova is in fact a figurehead for Ferrum Mining, and not its true founder.
Other companies with a similar profile
This conclusion is supported by the existence of two other companies, Pion LLC and Transcom LLC, which would also have been founded and directed by Ms Zhezherova. These two companies have a very similar profile to that of Ferrum Mining according to official records. Founded in St. Petersburg with a share capital of 10,000 roubles each, Ms Zhezherova would be their only shareholder and employee.
The profile of their headquarters are surprisingly similar to Ferrum Mining's head office. Particularly that of Transcom LLC, which shares its address with seven other companies, on the site of a dilapidated housing unit.
Pion LLC is now dissolved, but Transcom LLC is still active in the timber and building materials business. The latter would benefit from annual revenues of up to US $ 1 million but remains very discreet. No Internet presence for this company was found during our investigation.
A suspicious lack of bids
A bidding process would have provided answers to the questions surrounding Ferrum Mining. Indeed, Decree No. 2006-346 requires that any respondent to a call for tenders provide the information necessary to identify it along with a description of its professional, technical and financial capabilities.
Why, therefore, has no call for tenders been initiated? We recall that, according to the Managing Director of KRAOMA MINING S.A., this situation could be explained by the fact that Ferrum Mining is only providing funds through its joint venture with KRAOMA S.A. Has he forgotten the three operating licenses which transferred from KRAOMA S.A. to KRAOMA MINING and the nine employees deployed in Madagascar by Ferrum Mining to provide technical support to KRAOMA S.A.’s staff? And even if Ferrum Mining was simply an investor, an independent evaluation of KRAOMA S.A.'s assets transferred to the joint venture should have been undertaken. This is essentially what the Ministry of Finance and Budget stressed in a letter dated 23 October 2018 addressed to the management of KRAOMA S.A. Such an evaluation is mandatory before any handover or transfer of assets according to article 423 of the Law No. 2003-036 on commercial companies. It should be noted here that the Ministry of Finance and Budget is legally responsible for the management of state-owned shares in commercial companies (97.17% in the case of KRAOMA S.A.).
We might therefore wonder: why this lack of transparency? Have the Russians benefitted from preferential treatments by the HVM regime? Is there corruption favouring the former president and KRAOMA S.A.’s leaders? And what about Ferrum Mining's relationship with Stork?
It is well known that former President Rajaonarimampianina established close ties with the Russian Federation during the last year of his presidency. He visited Moscow in March 2018 accompanied by Benjamin Ramarcel Ramanantsoa, who would later become Chairman of the Board of Directors of KRAOMA S.A, and Ying Vah Zafilahy, then Minister of Mines and Petroleum Industries and now Ambassador of Madagascar in Russia as of September 2018. On the occasion of his visit, Hery Rajaonarimampianina was awarded an honorary doctorate from the Peoples' Friendship University based in Moscow, the establishment from which Mr. Mboiny, also founder of the Association of Malagasy Alumni of the USSR and Russia, graduated. Two months later, in May 2018, a memorandum of understanding was signed between the said Minister of Mines and Petroleum Industries and the Director General of Zarubezhgeologiya JSC, a company owned by JSC ROSGEO, a state-owned investment company of the Russian Federation. The protocol foresees “a long-term cooperation of the parties in the field of geological surveys, the evaluation of mineral resources, and the prospecting and exploration of mineral deposits on the territory of the Republic of Madagascar". Finally, under Rajaonarimampianina’s presidency, Madagascar signed a memorandum of understanding on military cooperation with the Russian Federation and a project of cooperation between the two countries for the renovation of the port of Toamasina was discussed.
It should also be noted that the last two chairmen of KRAOMA S.A.'s Board of Directors, namely Eric Jean Noël Randrasana and Benjamin Ramarcel Ramanantsoa, both combined this position with that of the President's civil cabinet director.
As for Stork, considering the imposing debt owed to them by KRAOMA S.A., there are plenty of motives for encouraging this partnership or even the pure and simple sale of the Malagasy state company to a Russian entity. According to the Managing Director of KRAOMA MINING S.A. and former Stork representative in Madagascar, Simon Seva Mboiny, Stork had purchased in advance more than US $ 6 million of ore from KRAOMA S.A., a contract which would not have been respected by KRAOMA S.A.
Is there a formal link between Stork and Ferrum Mining? Mr. Mboiny replied that he does not know, but mentioned that Stork had offices in Moscow. A company based in the Sverdlovsk region in Russia is also part of the Stork Group. In addition, according to the New York Times, Jugendra Singh Raghav, the Managing Director of the Stork Group, allegedly is a former KGB agent who studied in Russia. According to an article by Africa Intelligence, it is in the framework of these studies that he would have rubbed shoulders with Mr. Mboiny and Mr. Zafilahy, former Minister of Mines and Petroleum Industries and Ambassador of Madagascar in Russia during the Rajaonarimampianina Presidency.
Although it is not currently possible to confirm whether any or all of these assumptions are true, it is likely that the truth about the conditions that led to this opaque partnership between KRAOMA S.A. and Ferrum Mining will soon be known to all. The new Minister of Mines and Strategic Resources of the Rajoelina regime, Mr. Fidiniavo Ravokatra, and the newly appointed Managing Director of KRAOMA S.A., Mr. Nirina Rakotomanantsoa, have announced an audit of KRAOMA S.A. and an independent evaluation of the assets of the State-Owned corporation several times in recent weeks.
Let us hope that the necessary steps will be taken to restore KRAOMA S.A.’s status as flagship of the Malagasy mining industry and ensure that those responsible for its ruin are brought before the competent authorities.
This English translation has been possible thanks to the PerMondo project: Free translation of website and documents for non-profit organisations. A project managed by Mondo Agit. Translators: Nicole Crosbourne and Sarah Hill.