Seaboard exits Lesotho Flour Mills
End of a controversial era as American company divests
TEBOHO KHATEBE MOLEFI and
MOTSAMAI MOKOTJO
MASERU – Seaboard Overseas Limited, the 51 percent controlling shareholder of the Lesotho Flour Mills (LFM), is finalising an exit strategy from the milling company, Public Eye can reveal. The move by Seaboard to seek an exit strategy – which could reshape the country’s grain industry – comes amid a series of reports that the company has for years failed to pay government dividends, citing unprofitability.
According to reports that have previously been carried by the paper, the milling company has over 20 years of recorded failure to declare government dividends, with management also appearing to be running the company aground.
This is not only the result of boardroom greed but also the LFM directors’ incompetence. The cost of the directors’ failure looks as severe as feared, though contrary to provisions of the Companies Act No 18 of 2011, none of the directors has been held liable.
“The directors, including former directors, shall be severally and individually liable to the company, its shareholders, and any other person for any loss suffered by the company, its shareholders, or any person as a result of the directors’ failure to perform their duties…,” Section 63 (3) of the Companies Act states.
Lengthily investigations by the Public Eye have revealed that the LFM is in a dire financial state, according to sources who spoke to the publication on condition of anonymity. “The company cannot pay dividends due to competition from local competitors; they sell mealie-meal, which is not fortified, at ridiculously low prices,” one source said, while adding “how are we expected to make a profit and subsequently support King Letsie III’s efforts in providing nutritious food?”
“We are at a level at which, after buying produce for three months, we are unable to sell it at a standard price to make profits,” the source revealed.
Another source also highlighted the issue of transfer pricing, which the LFM has been accused of using in a bid to avoid paying dividends.
“Seaboard, or its subsidiaries allow us to pay them after three months, which is not the case with local farmers. We are stuck with loans and wouldn’t be surprised if we get shut down tomorrow,” another source has told the paper, while indicating that they recently retrenched over 20 employees due to the financial strain they are experiencing.
Speaking to Public Eye this week trade minister, Mokhethi Shelile, confirmed that Seaboard was indeed working on an exit strategy.
In a brief interview, Shelile revealed that the government is “not happy with Seaboard since it hasn’t paid dividends for the past 27 years.”
“We held an Annual General Meeting on Friday last week where Seaboard raised the issue that they are working on ways of pulling out,” Shelile said.
He added that “we are going to meet again this month regarding the management contract.”
“Those people’s (Seaboard) performance hasn’t inspired confidence. When I was still an employee at Lesotho National Development Corporation, they were received by me, yet they haven’t given dividends to governments,” he said while further indicating that severing of ties will be “soon.”
Principal Secretary (PS) in the Ministry of Finance, Nthoateng Lebona, revealed to these reporters in a separate interview that a shareholders meeting will take place this month but refused to divulge details, insisting that “you write down your questions and you will get further details from the Public Relations Officer.”
Public Eye established through credible sources that last week ahead of the LFM general meeting Minister of Finance and Development Planning, Dr Retšelisitsoe Matlanyane, called for the postponement of the crucial meeting meant to discuss finances related to the LFM.
“Matlanyane wanted to postpone the meeting because she was out of the country but was told by other shareholders that she needs to appoint a proxy to attend on her behalf,” the source said.
This paper also established at the same time that Matlanyane was in Beijing, China, alongside Ministry of Energy’s PS, Tankiso Phapano, and executives from the Lesotho Electricity Generation Company (LEGCO), for a meeting with China-based Beijing Jingyuntong Technology (BJT) bigwigs.
BJT has landed the contract for construction and operation of Phase II of the Ha Ramarothele Solar Energy Project.
When quizzed about Matlanyane’s trip to Beijing, PS Lebona said information regarding the trip will be availed to this publication “when it’s appropriate.”
Phapano’s phone rang unanswered until going to print.
In an earlier interview, former prime minister, Dr Moeketsi Majoro, told this publication that to the best of his knowledge the USD $300 000 LFM management contract was illegal.
“In my time I had to have a sober approach and a three-pronged approach together with then Minister of Trade, Tefo Mapesela, being fiery and the mild Minister of Agriculture, Mahala Molapo, when tackling this issue,” he indicated.
Adding credence to the story, Majoro’s successor, former Finance Minister, Thabo Sofonea, indicated that plans were already advanced in trying to terminate the management contract with Seaboard.
“I had already instructed our legal team to assess the modalities of terminating that contract. During meetings what we discussed was how to part ways with Seaboard.
I went as far as not approving and signing off on financial books,” a furious Sofonea said of the contract in which the government owns 49 percent, Seaboard 51 percent and Globakery 1 percent.
He further indicated that for the two years he was in that portfolio, he was told the government could not sustain the company thus, huge sums of money were proposed by Seaboard as a settlement.
“There was a Mosotho man (name withheld, but known to this paper) who was hell-bent on protecting the interests of Seaboard. I asked him once ‘Why are you allowing these white men to swindle this country to this extent?’,” Sofonea recalled.
A source inside the company who feared reprisal has labelled the contract as a ‘shithole’ deal in which Seaboard Management Company receives USD $300 000 in management fees from the LFM.
The fee, which came into operation on January 1, 1999, and meant to exist for 10 years, gives Seaboard the $300 000 “adjusted to on each one-year anniversary date of this agreement, based on the aggregate changes in the official United States Consumer Price Index (or comparable inflation index) from January 1.”
The contract, which this publication has seen, continues: “The adjustment for inflation shall be effective on each one-year anniversary date of the commencement date,” while adding, “The management fee shall be made pursuant to 12 equal monthly payments prior to the tenth day of each month for services rendered in the preceding month.”
On behalf of the government, ex-chairperson Dr Mphu Ramatlapeng, Keith Clifford, and Florence Hoohlo signed the contract, while for Seaboard, Ray Penny and Andrew Mills inked the deal.
“The question that should be asked is, ‘Under which terms and conditions were the benefits offered since the common denominator in all these is Seaboard and its subsidiaries?’” one source close to LFM workings asked, further claiming that “the signatories of the management contract (Clifford and Hoohlo) rendered it invalid since the two members were not eligible.”
This publication was informed that Clifford was not a board member at the time but an employee of Seaboard while Hoohlo was the managing director’s secretary.
“Since they signed on behalf of board members who represent government, there should be a power of attorney,” another source noted.
“This contract is such garbage that also contributes to the LFM failing to declare dividends. Seaboard are so brazen that its management is paid a management fee while also earning via local or internal payroll,” the source further revealed.
“Why do Seaboard senior staffers continue to be given the opportunity to manage Lesotho Flour Mills despite their failure to give the government its dues over the past 25 years?” the source asked.
While there has been calls as early as October 2017 to review the Seaboard/LFM management contract either renew the existing agreement when it expired, create a completely new agreement, or to revise the existing agreement all efforts have come to naught.
Dr Ramatlapeng has previously told this publication that the management contract was already signed when presented to them as a board.
“The contract was already a negotiated deal, which we expected to be reviewed by government every year, but that wasn’t the case,” she said, adding that what was saddening was that the shareholders used to show lack of interest in matters surrounding the deal – sending PSs instead of ministers to the AGM.
Incumbent chairperson, Mazvi Maharasoa, previously declined an interview to interrogate the state and future of the LFM, referring this paper to LFM Chief Executive Officer Fourie Du Plessis.
For his part, Du Plessis has on several occasions maintained that he was in no position to answer such questions since the matter is private.
“We will address the situation with the government and other shareholders, not in the media space.”
Sidebar
+pic of the Lesotho Flour Mills structures
Was the $10m LFM sale a steal or missed opportunity?
TEBOHO KHATEBE MOLEFI and
MOTSAMAI MOKOTJO
MASERU – At a valuation of $10 million, the 1998 acquisition of Lesotho Flour Mills by Seaboard Oversea Limited was touted a benchmark for agro-industrial deals in the country – but it has since raised questions about privatisation and foreign investment.
This staggering figure is contained in the Shareholders Agreement between government, Seaboard and Saxonvale Investment Inc, seen by Public Eye.
The agreement which was signed by then Director of Privation Unit, Mothusi Masholugu, for government, Ralph Moss for Seaboard and Seymour Clyde Harley for Saxonvale includes startling revelations considering the amount.
Clause 2.3 reads: “It is agreed that as at the date of signatures of this Agreement, and in terms of the Sale Agreement, the net asset value of the company, upon full performance of all obligations set out in the Sale Agreement by the Government of the Kingdom of Lesotho, is in Maloti equivalent, at the effective date of the Sale Agreement of the sum of US $10 000 000.”
Bizarrely, Section 9.8 of the Shareholders Agreement, gives Seaboard autonomous rights to sell its “entire 50 percent interest or any further percentage interest that it may acquire, to an affiliate company, without being subject to the right to first refusal, and the right of pre-emption.”
As if to add injury to insult Section 9.10 reads: “…Parties to this Agreement may dispose of shares without offering shares to any public stockholders”.
The LFM situation attracts attention following the recent release of the Public Expenditure and Financial Accountability (PEFA) 2024 report which revealed “lack of monitoring of State-Owned Enterprises (SOEs) and Extra-Budgetary Units (EBUs) by Ministry Department Agencies (MDAs), the Ministry of Finance and Development Planning, and the Legislature.”
This in light of a similarly worrying Portfolio Committee on the Economic and Development Cluster report presented to parliament – The Consolidated report on the Annual Budget and Estimates of Revenue and Expenditure for the Financial Year 2025/2026 in which the LFM has been flagged for not declaring dividends.
Yet government indicates that “M 794.4 million will be collected from other sources of revenue (dividends of non-financial public corporations, interests received from financial and public corporations, surface rent, rent monetary compensation, application fees, rent from government property, sales of maps, books and other public, sales of tender, biding and contract documents.”
The milling company’s CEO, Fourie Du Plessis, has refused to discusses issues related to the company’s non-payment of dividends and the existing sales agreement, insisting that “I can’t discuss such matters in the media.”
Minister of Trade, Mokhethi Shelile, has breathed fire in castigating the contract and failure by the LFM to declare dividends.
“I am not happy with the current arrangement…Seaboard went as far as changing procurement by buying from one of their own subsidiaries, which makes produce expensive,” Shelile briefly said.
Shelile was quick to indicate, though, that Minister of Finance, Dr Retšelisitsoe Matlanyane, was better placed to speak about the management contract “but we are yet, as a government, to formulate an opinion.”
