Billionaire Patrice Motsepe's African Rainbow Capital wins South African ruling in $195 million graphite fight

African Rainbow Capital, the empowerment investment company founded by billionaire Patrice Motsepe, said Wednesday that the Johannesburg High Court has ruled it cannot be held liable for breaching a confidentiality agreement it never signed, a finding it says removes the legal basis for a $195 million (3.2 billion rand) claim pursued against it in Tanzania.

The court granted orders including that Pula Graphite Partners had made out no cause of action for breach of contract against ARC in the Tanzanian proceedings, and that Pula had no claim for contractual damages over a prospecting licence it later surrendered.

The dispute goes back to a confidentiality agreement signed in 2019 between the American-based Pula Group and African Rainbow Minerals, the listed mining company Motsepe chairs. Pula handed over proprietary technical information about its graphite project in southeastern Tanzania while courting an investment that never materialised.

Two years later, ARCH Sustainable Resources Fund, an ARC-linked vehicle managed by the UK investment adviser ARCH Emerging Markets Partners, took a cornerstone stake in the Australian Securities Exchange listing of Evolution Energy Minerals. Evolution, spun out of Marvel Gold, raised 22 million Australian dollars and holds the Chilalo graphite project in the same region of Tanzania. ARCH now owns about 25 percent of the company.

Pula says the purchase of 40 million Evolution shares was the breach. It alleges that its confidential data reached ARC and ARCH, that this allowed ARCH to buy into a direct competitor, and that it was left at a severe disadvantage and deprived of the chance to develop its own deposit.

It sued in the Tanzanian High Court in October 2023, naming African Rainbow Minerals, ARC, Motsepe personally, and ARCH Sustainable Resources GPCo, a Guernsey-registered general partner of the fund. Only African Rainbow Minerals had signed the agreement.

Pula Group is chaired by Charles R. Stith, a former United States ambassador to Tanzania, and led by his daughter, Mary Stith.

Because the confidentiality agreement is governed by South African law, ARC went to the Johannesburg High Court seeking a declaration on how that law applies. Judge Leicester Adams ruled in April that no obligations under the agreement extended to ARC, which was never a party to it, and that if Pula could prove a breach and resulting damages, its contractual remedies lay against African Rainbow Minerals alone.

A second problem emerged with the licence itself. Pula told the Tanzanian court it held the exploration right when it filed in October 2023. It later transpired that the right could not be renewed and had to be surrendered. In August 2023, a newly incorporated company called Pula Carbon was granted a fresh exploration right over the same ground. Pula Carbon is party neither to the confidentiality agreement nor to the litigation.

ARC said that in the run-up to the South African hearing, Pula accepted it was not bound by the agreement, could not have breached it, and had no claim for contractual damages over the surrendered licence. The company said it has been advised the judgment leaves Pula without a legal basis for any of its claims against any of the defendants in Tanzania.

Pula applied for leave to appeal in May, then abandoned it. By declining to prosecute the appeal, ARC said, Pula has accepted that the judgment is final and binding.

Pula has been publicly critical of how the matter has moved through South African courts. It raised concerns in January about Motsepe-linked companies seeking a late ex parte judgment in Johannesburg, and questioned in April the speed with which the ruling was delivered.

The damages claim itself has not gone away. It remains before the Tanzanian High Court, where ARC has argued that the Johannesburg judgment renders the issues res judicata, meaning already decided. That court is expected to hand down judgment at the end of July.

Motsepe, worth $4.3 billion by Forbes' estimate, is South Africa's richest Black businessman. He founded African Rainbow Capital in 2016 as a Black economic empowerment investor, serves as executive chairman of African Rainbow Minerals, chairs Harmony Gold and is deputy chairman of the insurer Sanlam. He is also president of the Confederation of African Football and a vice president of FIFA.

The asset at the centre of the fight has lost some of its shine. Graphite is a critical anode material in lithium-ion batteries, and Chilalo was pitched as a low-cost, development-ready source. Evolution has since cut costs, shut its Perth office, downsized its board and shifted its focus toward gold opportunities in Africa, keeping Chilalo for long-term development. ARCH endorsed the change and placed its own representative as chairman.

For now the ledger reads one way in Johannesburg and another in Dar es Salaam. ARC treats the South African judgment as the end of the matter. Pula's claim survives until a Tanzanian judge says otherwise, and that answer is weeks away.