Billionaire Patrice Motsepe’s R2.55 billion bet backfires and puts hundreds of jobs on the line

South African billionaire Patrice Motsepe’s nearly decade-long backing for phosphate producer Kropz has backfired.

The company announced the restructuring of its sole operating asset, and one of its contractors warned of hundreds of job losses.

On Monday, London-based Kropz said it will restructure its Elandsfontein mine, about 70 miles northwest of Cape Town, after $160 million (R2.55 billion) of investment.

It halted production of its main product as it struggled to turn a profit, partly due to the impact of the war between the US and Iran on the global fertiliser industry.

Motsepe’s African Rainbow Capital owns about 90% of Kropz.

Trollope Mining Group, which mines on Kropz’s behalf at Elandsfontein, said in a 2 September letter to employees seen by Bloomberg that its “contract will be drastically reduced if not completely terminated at the end of November” and 238 jobs may be cut.

Motsepe first invested in the company in 2018; through his African Rainbow Capital company, he built up almost total control after a series of bailouts of the mine.

Kropz has struggled to meet production targets at Elandsfontein and has courted controversy by attempting to mine in a national park. 

African Rainbow declined to comment beyond Kropz’s statement. Kropz and Trollope didn’t immediately respond to requests for comment.

The company’s share price fell 39% in London after the announcement, reducing its market cap to just $12 million, down from its 2022 peak. 

“There has continued to be significant financial pressure on the operations arising predominantly from the continued Middle East conflict,” Kropz said in the statement.

“The disruption to key fertiliser inputs has adversely affected global fertiliser production and demand for phosphate rock.”

The company will cease phosphate rock production and sell down its stockpiles, it said.

It will focus on the production of so-called nanophos, a soft rock that releases phosphate more gradually.