2.11.2016

'State of Capture' report: Zuma central to Gupta patronage

President Jacob Zuma has been instructed to appoint a commission of inquiry into allegations of state capture but has to leave the selection process to Chief Justice Mogoeng Mogoeng. The commission of inquiry is part of the order by former public protector Thuli Madonsela in her on 2 November released final report titled State of Capture which focuses on the Gupta family’s degree of influence on the highest office and other state-owned entities. Those implicated in the report include Zuma, Eskom board chairperson Brian Molefe, Duduzile Zuma, Ajay Gupta, the Gupta-controlled Tegeta company, Minister of Public Enterprises Lynne Brown, former minister of finance Des van Rooyen and Minister of Minerals and Resources Mosebenzi Zwane.
And in a neat pivot, sidestepping Zuma to ensure the commission is unfettered, Madonsela quotes the president from a previous case involving the Economic Freedom Fighters. “I could not have carried the evaluation myself, lest I be accused of being judge and jury in my own case,” Madonsela quotes Zuma.
In her report, Madonsela gives Zuma 30 days to appoint the commission of inquiry, with Mogoeng required to offer a single name to head this body to the president. The commission, to be financed by treasury, will have the same powers as that of the public protector. The commission will have 180 days to complete its investigation and present a report with findings and recommendations to the president. Zuma will then have 14 days in which to report to Parliament on how he intends to proceed.
Parliament has also been given 180 days to review the Executive Members’ Ethics Act to tighten loopholes for potential conflicts of interest and also to address how whistleblowers should be dealt with. The presidency will also have to update the Executive Ethics Code, in line with Parliament’s review.
In cases “where it appears crimes have been committed”, the national prosecuting authority and the Hawks will be notified by the public protector.
The State of Capture report, finally released by the office of the public protector late on 2 November, tells an astonishing story of how the Gupta-controlled Tegeta got into the coal business when it bought major Eskom supplier Optimum out of business rescue. The report, which has been at the centre of a Pretoria high court battle, details numerous dubious situations where Zuma and members of his executive acted in a questionable manner, often seemingly to the advantage of the Gupta family.
Some of what the report reveals was suspected but unproven, such as that Eskom intentionally put Optimum out of business to make it available for the Gupta family to purchase – and then bent over backwards at every opportunity to see that deal succeed.
Some of what the report reveals is new and damaging at an individual level such as the direct links former public protector Thuli Madonsela draws between that killing-off of Optimum and Eskom chief executive Brian Molefe – who turns out to have a close personal relationship with the Gupta family.
In April, Tegeta paid R2.15-billion in cash for Optimum. The origins of that money was the source of fierce speculation but little solid information. By issuing subpoenas to banks, airlines, and individuals, and minutely analysing money flows, Madonsela found the answer: ultimately, South Africa paid.
Over the course of four months, Madonsela found, Eskom paid Tegeta a total of R1.2-billion for coal, some of it yet to be mined. Of this, at least R910-million “was diverted by Tegeta to fund 42% of the purchase price” to acquire Optimum. Eskom scrupulously paid the money well in advance of the deadline for Tegeta to pay for Optimum, even though doing so made little commercial sense.
Some of the 58% of the Optimum purchase not paid for by South Africans through Eskom may have come from South Africans by way of a rehabilitation trust. Mines are required by strictly-administered law to hold in trust sufficient money to restore the environments they mine before they shut up shop. The Gupta family fiercely denied that it had misappropriated that money – but Madonsela is not so sure.
The way in which the Eskom board dealt with parts of the Tegeta transaction “may constitute a violation” of the Public Finance Management Act, Madonsela found. Under that law each board member could be individually liable to five years in jail, if their failure is found to be wilful or grossly negligent. Tegeta insisting in public that it had not received a prepayment from Eskom that was used to buy Optimum “could amount to fraud”, Madonsela found, and that includes shareholders who knew the truth, such as Duduzane Zuma. Judges are advised to impose sentences of at least 15 years for fraud in amounts over R500 000. Messing with rehabilitation funds, Madonsela said, on top of a potential tax penalty running to more than R1-billion, can also see a jail term of up to 10 years. (Mail & Guardian, Johannesburg; edited by SADOCC)

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