DAMNING

What the “State Capture” report tells us about Zuma, the Guptas, and corruption in South Africa

Quartz africa
Quartz africa

It’s the report that confirms South Africa’s worst fears about corruption: that the state has been captured. In 355 pages, former public protector Thuli Madonsela and her team of investigators outline in detail just how much control the Gupta family, a wealthy Indian immigrant family, has over South Africa’s resources. The Guptas’ close friend, president Jacob Zuma, as well as two ministers implicated in the report, went to court to stop its release. But it was finally released on Nov. 2, after protests and a court battle.

The report (pdf) is potentially damning for Zuma, offering proof that he sanctioned the use of state companies for personal enrichment. But now the real reckoning begins, as a web of corruption around Zuma, the Guptas, and at least three ministers begins to unravel.

Hiring and firing ministers in the Guptas’ house

The report contains a detailed interview with deputy finance minister Mcebisi Jonas, who alleges that the Guptas offered him the finance minister’s post weeks before Zuma was to shuffle three finance ministers in one week. Jonas was driven to the Guptas’ home by the president’s son Duduzane Zuma, where he was met by Ajay Gupta.

The front page of the State Capture Report
The long-awaited report’s cover. (Public Protector of South Arica)

Ajay Gupta allegedly told Jonas they’d been keeping tabs on him and wanted him to be their man in the treasury. Ajay Gupta revealed that they’d already made 6 billion rand ($443 million) from dealings with the government, and wanted to make at least 2 billion rand more (about $147 million). When Jonas refused, they tried to sweeten the deal with 600 million rand (about $44 million) and an extra 600,000 rand ($44,318) in cash, right there. Jonas declined the money, and months later became the whistle-blower that launched this investigation when he revealed his story in March.

Vytjie Mentor, who came out after Jonas with an account of how the Guptas tried to offer her the job of minister of public enterprises, in charge of state-owned companies, also details her exchange with the family. According to the report (p.89), Mentor was told during a meeting in October last year at the Guptas’ home that she would go from an ordinary parliamentarian to cabinet minister in a week. All she had to do was make sure South African Airways dropped their route between Johannesburg and Mumbai, making way for the Gupta-linked carrier Jet Airways. Mentor declined. She was surprised to see the president himself emerge from an adjacent room, who said “it’s okay girl…take care of yourself,” as he personally escorted her out.

According to the report, the Guptas also have the power to fire ministers seen as stumbling blocks to their plans. Former finance minister Nhlanhla Nene’s insistence on sticking to the rules cost him his job. As did Barbara Hogan, former minister of public enterprises, who refused to allow outside influence in appointments of board members of state-owned South African Airways, Transnet, the national rail, and Eskom, the state power utility (p. 89, 90). On an official visit to India, Hogan said she was shocked to find the Guptas running proceedings. She was relieved of her duties a few months later.

Des van Rooyens phone records show he was at the Guptas home, used as evidence in State Capture Report
Van Rooyen’s phone records show he was at the Guptas’ home. (State Capture Report, p105)

Des van Rooyen, the unknown parliamentarian who became finance minister for a few days after Nene, went to court in a bid to delay the report, fearing it would implicate him. And it has. His phone records show that van Rooyen visited the Guptas’ home seven days in a row before he was appointed as finance minister. He was later moved to a less prominent ministry. Van Rooyen has denied any wrongdoing.

Negotiating on behalf of the Guptas

Mining minister Mosebenzi Zwane also tried to have the report delayed, saying it was hastily prepared and that he had not been given time to respond. According to the report (p. 124, 125), Zwane travelled to Switzerland on behalf of the Guptas to smooth over their acquisition of a troubled coal mine from multinational commodity trader Glencore, helping the Guptas become one of the main coal suppliers for state utility Eskom. Zwane allegedly helped facilitate the deal by accompanying delegates from a Gupta resources company, Tegeta, to Zurich, according to a flight itinerary obtained by the public protector. Zwane could not be interviewed in time for the report, but should be allowed to give his version in subsequent investigations, the report says.

Eskom: Keeping the lights on for the Guptas

Eskom, accused of overly cozy ties with the Guptas featured heavily in the report, with 916 mentions. Lynn Brown, who became the minister in charge of South Africa’s state owned enterprises, is implicated in the report for allowing the appointment of a lame-duck board that turned a blind eye to murky deals made at the energy monopoly.

But it’s Eskom’s chief executive, Brian Molefe, who comes out looking the worst. According to cell phone records, Molefe had 58 phone calls with the eldest of the Gupta brothers, Ajay Gupta, between August 2015 and March 2016, just before the Guptas purchased South Africa’s Optimum coal mine for 2.15 billion rand ($160 million). Eskom, which prepaid the Gupta’s Tegeta Exploration and Resources 600 million rand for coal, had been accused of helping to finance the Guptas’ coal mine deal through preferential treatment.

In this photo taken in September 2010 Atul Gupta is seen outside magistrates courts in Johannesburg. The wealthy Gupta family has been criticized or allegedly improper links to president Jacob Zuma. The Gupta family denies that it is corrupt but does not directly address accusations that it tried to boost business by influencing some of Zuma's choices for Cabinet posts, even allegedly offering the finance minister's job to an official. (AP Photo) SOUTH AFRICA OUT
One of the Gupta brothers, Atul Hupta. (AP Photo)

The report concludes (p, 20), “it appears that the sole purpose of awarding contracts to Tegeta to supply Arnot Power Station, was made solely for the purposes of funding Tegeta and enabling Tegeta to purchase all shares in OCH [Optimum Coal Holdings]. The only entity which appears to have benefited from Eskom’s decisions with regards to [the Optimum coal mine deal] was Tegeta.”

Cellphone records also put Molefe in the Saxonwold area, where the Guptas live, 19 times between August and November 2015 and phone calls between Molefe and Ronica Ragavan, head of the Gupta’s holding company, Oakbay Investments. Justifying these calls and visits, Ajay Gupta told Madonsela in an interview last month that Molefe is his “very good friend” who often visits the Gupta compound.

But Madonsela says these records show “a distinct line of communication between Molefe of Eskom, the Gupta family and directors of their companies… These links cannot be ignored as Mr Molefe did not declare his relationship with the Guptas.” Eskom has refuted any allegations of wrongdoing. “We do believe everything that we’ve done so far was above board,” spokesman for the utility, Khulu Phasiwe, told a local radio station.

Advertising with the Guptas

Themba Maseko, former chief executive of government’s communications agency, in charge of a media buying budget of 600 million rand a year, said he was pressured by the Gupta family to place government ads in their newspaper the New Age. Maseko was also one of the whistleblowers who took his story to the media in March.

In an interview with Madonsela in August, Maseko said he was on his way to a meeting with the Guptas in late 2010 when the president called him on the phone to say, “The Gupta brothers need your help, please help them.” During the meeting with Ajay Gupta, Gupta told Maseko that he wanted government advertising channeled to his new newspaper, the New Age. According to Maseko’s account, the government official told Gupta that he could not decide where government departments advertise. Gupta responded that this was not a problem. He would instruct the departments to advertise in the newspaper

An entrance to the ANN7 Television and The New Age newspaper offices, owned by the Gupta family, is seen in Midrand, Johannesburg, South Africa, April 14, 2016. REUTERS/Siphiwe Sibeko - RTX29ZTW
The Gupta family’s media company. (Reuters/Siphiwe Sibeko)

According to Maseko’s account, Gupta instructed Maseko to tell him “where the funds are and inform the departments to provide the funds to you and if they refuse, we will deal with them. If you have a problem with any department, we will summon ministers here.” Later when Maseko refused to take a meeting with a New Age staff, Gupta told Maseko, “I will talk to your seniors in government and you will be sorted out.” Maseko was fired a few months later.

A bright spot: Integrity in the Treasury

The report shows how the Guptas’ plans were repeatedly thwarted by officials in the treasury (p. 131, 132, and 94). The National Treasury, in charge of approving deals linked to state-owned enterprises, stuck to the rules of procurement and public finance. Treasury officials questioned the Eskom coal deal with Tegeta. Unable to stop the initial deal, they succeeded in blocking an extension of the Tegeta contract. These obstructions appear to have frustrated the Guptas and cost Nene his job. Many speculate that current finance minister Pravin Gordhan’s ongoing legal battles are related to the treasury’s resistance to the Guptas influence.

What next?

Zuma, the ministers, and the Guptas have yet to respond to the damning allegations in the report. Madonsela has since left office, with state capture report serving as her parting shot in a seven-year battle against corruption. Still, she’s left instructions on how to use with her findings. Her successor, who has already started, should bring potentially criminal accusations in the report to the National Prosecuting Authority and the police’s Directorate for Priority Crime Investigation, better known as the Hawks.

Madonsela has also recommended that the report be taken further by a commission of inquiry, headed by a judge appointed by the chief justice of South Africa’s constitutional court, Mogoeng Mogoeng. There are concerns that the prosecuting authority and the Hawks have been compromised. (They have spearheaded the fraud case against finance minister Gordhan.) But the public’s hopes lie in the chief justice, who has spoken out harshly against the abuse of power before.

“Public office bearers ignore their constitutional obligations at their peril. This is so because constitutionalism‚ accountability and the rule of law constitute the sharp and mighty sword that stands ready to chop the ugly head of impunity off its stiffened neck,” Mogeng said in March when he ruled against the president over his use public funds used to renovate his personal compound in Nkandla.

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