17 June 2024 | 09:15 AM

State Capture – The Guptas and the R250 million “kickback laundry”

Key Takeaways

AmaBhungane has seen evidence of a quarter of a billion rands – apparent kickbacks for contracts at state-owned companies – being laundered through a channel that bears multiple fingerprints of the Guptas and their close associate Salim Essa.

The family has often denied taking unfair advantage of its relationship with President Jacob Zuma and other leaders.

When the Guptas’ Oakbay group publicly released details of its financial performance last month, then-CEO Nazeem Howa said it wanted to dispel “especially the myth that we are heavily reliant on government business, when nothing could be further from the truth”.

The evidence revealed today, however, suggests there is substance to the oft-whispered claim that the Guptas leverage their political connectivity to extract kickbacks from others doing business with the state. These “tolls” would allegedly be spirited away outside formal Oakbay structures.

It also gives a first indication of how the Guptas may have accumulated their vast wealth – billions spent on private jets, property here and in Dubai, celebrity weddings here and in Turkey, even a huge temple in India – while Oakbay companies appear not to make profits to match.

Bank records show that over the course of just six months in late 2014 and early 2015, about R190-million washed from Homix (Pty) Ltd, a letterbox company exposed last year in a kickback scandal involving Neotel, to a similarly obscure company.

And information from a separate official report shows that weeks later, Homix dispatched multiple payments totalling another R65-million to Hong Kong. The Reserve Bank became suspicious of money laundering because the payments did not match claimed imports, and froze some of the money.

When Homix was first exposed in the Neotel scandal, there was a single pointer to possible Gupta involvement. A former senior Gupta employee had stepped from the shadows when auditors asked questions, identifying himself as Homix’s CEO.

But a Gupta spokesperson claimed the family had no more ties to the man and that seemed to be the end of the matter.

Now, evidence of Gupta and Essa involvement in the laundry chain is stacking up, starting with the origin of the money and ending in Hong Kong – where Essa happens to share a business address with a company that received some of the proceeds.

But back to the beginning: Allegedly, the font of the family’s power to toll state contracts is the deployment of their people to senior positions such as on the boards of state-owned companies. This is the essence of the “state capture” charges repeatedly made.

On the Transnet board, individuals who have been linked to the Guptas or Essa include chairperson Linda Mabaso, chief financial officer Garry Pita, procurement committee chair Stanley Shane and member Vusi Nkonyane. Iqbal Sharma, a previous procurement committee chair, was also close to Essa.

In some instances these links are circumstantial and there is no suggestion of wrongdoing against any individual. Transnet has repeatedly stated that it has confidence in its procurement processes, which include a “rigorous regime of policies governing conflict of interest”.

But then there is this set of fingerprints: The five identified companies that paid the bulk of the money to Homix during the six months of bank records have two things in common — Transnet money and the name “Gupta” or “Essa” somewhere in their stories. Here they are:

Cutting Edge Commerce – R3.3m total, Oct 2014-Feb 2015
Three months before Cutting Edge started paying Homix, the Guptas’ Sahara Systems became a 51% shareholder, according to Cutting Edge’s share register. Cutting Edge’s website says it provides IT and consulting services and lists public sector clients South African Airways, Airports Company South Africa and Transnet.

Cutting Edge did not answer questions.

Sechaba Computer Services – R1.7m total, Nov 2014-Mar 2015
In November 2014, when Sechaba made its first identified payment to Homix, IT multinational T-Systems appointed Sechaba as its supplier development partner to carry out all “field services” in Gauteng.

T-Systems’ biggest clients were Eskom and Transnet. AmaBhungane has previously reported how, when T-Systems risked losing a major Eskom contract in 2014, Essa allegedly approached T-Systems offering to lobby Eskom for a fee.

Sechaba also registered the website for Essa’s Trillian group, the consulting company that has scored controversial contracts with Transnet.

Sechaba chief executive Krisen Naidoo this week said his company had contracted Homix director Yakub Bhikhu as “external sales services consultant to expand our international sales pipeline”, but that it ended the relationship after seven months when Bhikhu did not deliver.

Naidoo said Sechaba dealt only with Bhikhu and assumed Homix “was simply the company he traded under for billing purposes.”

Sechaba paid Homix a monthly average of R345,000 over five months of identified payments.

Regiments Capital – R84m total, Nov 2014-Mar 2015
By the time Regiments, a financial advisory firm, made its first identified payment of R13,7-million to Homix in November 2014, it was eating firmly from Transnet’s trough. Earlier introduced to the state company as a junior partner to global consulting firm McKinsey, it had elbowed McKinsey aside and won, according to an earlier amaBhungane report, contracts of at least R484-million between 2013 and 2015 without open tenders.

Regiments’s payments totalling a staggering R84,3-million to Homix makes it the largest identifiable contributor.

The overflowing Transnet honeypot – and Regiments’ highly ambitious plans for further public sector work – must have attracted attention because in April 2015, according to court papers filed by Regiments, the Gupta family started to put pressure on it to sell a controlling share, backed by their ally, Regiments director Eric Wood.

The disagreement over this proposal caused a split in the company, according to the court papers, in which Regiments’ remaining directors target Wood.

Wood subsequently left to join Trillian, a rival company majority owned by Essa.

The litigation also exposes the relationship between Wood, Essa and Kuben Moodley, who was advisor to mining minister Mosebenzi Zwane, also a Gupta ally.

Regiments refused to comment this week. Wood said he would soon file in court a response to the matters raised in Regiments’s lawsuit.

Burlington Strategy Advisors – R1.8m, Mar 2015
In March 2015, Burlington – a subsidiary of Regiments Capital — signed a R5-million contract with Liebherr Africa to provide it with market feasibility studies in relation to the supply of cranes to Transnet. Liebherr made a R2-million downpayment to Burlington, which paid exactly 90% straight on to Homix.

When Burlington, out of its depth regarding cranes, failed to provide actual services and Liebherr demanded that the R2-million be repaid, Essa associate Kuben Moodley and seemingly Essa himself intervened to block repayment (see sidebar below: “Liebherr and Homix: The crane cash”).

Neotel – R34.5m Apr 2014, R41m Feb 2015
Last year, Neotel’s auditors queried two suspicious payments the telecoms company had made to Homix for no apparent services rendered: the first after Neotel had won a contract to sell network equipment to Transnet, and the second in February 2015, after it had won a Transnet contract for network services.

The first payment predates the Homix bank records amaBhungane has seen, but, the letterbox company had more than R50-million in the bank at the start of the period in October 2014, suggesting payments already received from Neotel and others.

Neotel’s auditors launched a full-scale investigation requested by its board. In the course of this, Ashok Narayan – the former managing director of the Guptas’ Sahara Systems – presented himself as Homix’s CEO, trying to convince investigators that Homix had provided an actual service by helping Neotel negotiate with Transnet (see sidebar below: “Homix and Bapu: The mysterious blue door”).

Where the money went
Homix had no discernable office infrastructure or staff commensurate with the R166-million it received from these five companies alone. And equally suggestive of it being nothing but a laundry channel for others’ ill-gotten gains was the fact that during the six months of the bank records, all of the money went straight out again, to the equally obscure Bapu Trading (see sidebar below: “How to wash R186m”).

AmaBhungane has been unable to make contact with Homix’s sole director, Yakub Bhikhu, or Bapu’s, Chetan Patel. They were unknown or no longer at addresses given, and the same Pretoria number they had both provided in credit checks is inactive.

At the end of the six months in April last year, Homix’s account had a balance of less than R200,000. But tens of millions more must have flowed in, as the outflows continued apace.

A report on an investigation by an official agency, submitted to former public protector Thuli Madonsela and leaked this week, records that Homix purchased 16 batches totalling over R65-million in foreign currency from Mercantile Bank, to be remitted to Hong Kong as payment for imports.

But Mercantile got suspicious and reported three of the purchases, totalling R14.4-million, to the Reserve Bank’s financial surveillance department, which froze it after inquiries revealed that customs documentation for the supposed matching imports had been falsified.

The report sates: “Homix remitted exorbitant amounts of money offshore illegally.”

The R51-million that got through to Hong Kong, according to the report, went to two companies: YKA International Trading Company and Morningstar International Trade.
AmaBhungane could not trace YKA’s sole director, a Chinese resident.

Morningstar’s registered director and owner is Mahashveran Govender, a South African. But amaBhungane could not trace him either, not least as the residential address he gave Hong Kong’s company registrar is a run-down flat in central Johannesburg, where there was no sign of him.

Morningstar’s Hong Kong registered address, however, gives a possible clue about where the money may have gone. It is a small, 15th floor office in Sheung Wan, the old part of Hong Kong.

The same flat is also the registered address of three Essa companies – Tequesta Group, Regiments Asia and VR Laser Asia.

Essa and Narayan had not responded to detailed questions by the time of going to press.
The Gupta family ignored detailed questions sent by amaBhungane, choosing instead to respond through ANN7, the TV station they part-own.

In a statement read out by a presenter on air, the family called the allegations “historical, flawed inferences” and accused amaBhungane of being an “unofficial judiciary in the court of public opinion”.

A spokesperson for Transnet did not reply to all questions this week but said the contracts awarded to Neotel and Leibherr “followed our stringent governance requirements”.

He said Neotel formally advised Transnet that its investigation “revealed no wrongdoing or corruption by any Transnet executive. There is therefore no basis for suggesting impropriety or breach of our governance procedures by the company or any individual…

“Transnet does not get involved in the activities of its suppliers. Any queries related to third-party engagements by our suppliers should be raised with them.”

How to wash R186m

The Homix bank accounts bear all the hallmarks of being used as a conduit for money laundering.

During the first week of March 2015, for instance, 24 transactions went through Homix’s Standard Bank account: R46.41 million was paid in by amongst others Regiments Capital and Sechaba Computers, and R46.46 million was paid out, with very few exceptions to Bapu Trading.

At the end of these eventful six days Homix had R200,000 in the bank, roughly where it started. This pattern is repeated over and over again.

In most instances, the amounts received by Homix were a little different to the amounts paid out to Bapu. Money was also often transferred to Homix’s call account before being brought back in differing amounts — and transferred to Bapu.

However, there are some instances where Homix’s role as a pure conduit is more obvious. When Homix received the R1.8 million payment from Burlington Strategy Advisors on March 17, Homix immediately passed R1,782,178 on to Bapu – the difference being exactly 1%.

An R819,021 payment from Cutting Edge Commerce, then majority owned by a Gupta company, was also passed on to Bapu a day later, with an exact 1% discount.

And while most companies have to wait 30 days to be paid, Bapu appears to have had far more favourable terms from Homix, receiving up to 11 payments in a single week, and sometimes up to four payments in a single day.

Over the six month period for which amaBhungane saw bank records, Bapu received 71 payments totalling R185,951,847 from Homix. The onward destination from Bapu is not known.

Homix and Bapu: The mysterious blue door

The company through which at least R250-million flowed was a hole in the wall led by a ghost.

With millions in its account, Homix was no more than a room behind a plain blue door abutting a latrine in a run-down office block in Centurion. Neighbours said the door hardly ever opened.

Its sole director, one Yakub Bhikhu, is untraceable and his credit history gives his most recent employtment status – in 2013 – as “unemployed”.

Homix’s bank records show no sign that the company had staff. There were no salary payments, and only four months of payments to Vodacom for what appears to have been a single cellphone bill.

For the rest, the cash just flowed out again, mainly to Bapu Trading – a company even more obscure.

Homix first came to public attention in July 2015, when amaBhungane disclosed how Neotel, the telecommunications giant, had paid it multi-million rand commissions – apparent kickbacks to persons unknown — to secure contracts with Transnet.

The disclosure led to the resignation of Neotel’s chief executive and chief financial officers.

The payments were first flagged by Neotel’s auditors who wrote in a report to the board: “Background checks have failed to assess the credentials of this entity [Homix]. Senior management purport not to know … who this entity is, what skill set and value this entity brings.”

Neotel paid Homix R34.5-million in April 2014 – 10% of the value of a deal in which Neotel sold network equipment to Transnet. It paid Homix another R41-million in February 2015 – 2% of a R1.8-billion deal under which Neotel would provide telecoms services to Transnet.

It is understood that during Neotel’s internal probe, investigators were approached by someone claiming to be “Yakub Bhikhu”, but who the investigators were convinced was not the same person listed as Homix’s director.

The “fake” Bhikhu urged them to obtain explanations for the payments from one Ashok Narayan, who claimed to be Homix’s CEO.

Narayan argued that Homix had provided a real service by helping to negotiate the Transnet contract, but was ill-informed about the contract details and did not know who Homix’s auditors were.

Narayan is the former managing director at the Guptas’ Sahara Systems, but now seemingly based at a Dubai company, The Marketing Quotient.

It is alleged that Gupta associate Salim Essa has an interest in The Marketing Quotient. This could not be verified, but when amaBhungane called the company in Dubai and asked for Essa, they said: “He’s not here. Give me your number, I’ll pass it on.”

If Homix comes across as no more than a letterbox company, there is even less sign that Bapu Trading exists as a thriving business – or at all.

Despite R186 million flowing from Homix to Bapu in six months, there is no sign of Bapu at its registered address, a small shopping centre in the modest, predominantly Indian suburb of Erasmia, east of Pretoria.

The company’s only director is 29-year-old Chetan Patel. Like Bhikhu, he’s left few traces – the only phone number connected to him is an inactive Pretoria landline.

The same landline was also provided by Homix’s Bhikhu in credit inquiries.

Chetan Patel is also listed as a director of two other companies – both registered to a house in Basson Street, Erasmia. The owner of the house said he had never heard of Patel.

Essa and Narayan did not respond to questions.

A Neotel spokesperson said: “The issues raised in this matter have been reported by Neotel to the relevant authorities. Commenting on the content of those reports would be inappropriate.”

Liebherr and Homix: The crane cash

Gupta lieutenant Salim Essa and the Homix laundromat can be seen washing money paid by the German company Liebherr Africa, which was then nurturing its relationship with Transnet.

In early 2015, Liebherr bragged that Transnet was using more than 60 of its cranes to do heavy lifting in South Africa’s ports. While Liebherr had contracted to supply Transnet with more, a competitor was eating into its market share, also competing for and winning crane tenders.

Transnet was meanwhile pressuring suppliers to include local companies in projects. This was government’s “competitive supplier development programme”, a successor to its notorious “industrial offsets” that were allegedly used to squeeze benefit for cronies from South Africa’s arms deal.

Faced with such pressure, Liebherr needed to play its Transnet game on point, and it took a few important steps in March 2015.

It trumpeted the launch of a new sales, service and training hub in Durban, launched “in cooperation with Transnet”, and it publicly affirmed its commitment to “supplier development”.

Quietly, it signed a deal with a firm called Burlington Strategy Advisors. Purportedly, Burlington would study local markets to determine for Liebherr which South Africans could supply it with crane components at “optimal prices”. For this Liebherr would pay Burlington R5-million, including an upfront R2-million.

A few red flags emerge.

The first is that Burlington knew absolutely nothing about cranes, as admitted by its owners in papers filed in the Johannesburg high court this month.

Burlington is a subsidiary of financial advisory firm Regiments Capital. Its executive directors are suing their former business partner Eric Wood. Among their accusations, they say the Liebherr deal was “irregular” because: “Regiments has no expertise in the supply of cranes, which lies outside of its area of business.”

Wood said he could not answer questions for this article as he is preparing his legal response to Regiments’ accusations.

A second flag emerges: Wood’s liaisons with the Guptas and their associates.

One month after signing with Liebherr, Wood tried to sell a majority stake in Regiments to the Gupta family. His partners refused, sparking infighting and ultimately causing Wood to break away — then forming Trillian Capital with the close Gupta business associate Essa.

A third and important flag is that Burlington paid 90% of the Liebherr R2-million downpayment to Homix some two weeks after receiving it, And 99% of that was immediately spirited off to the equally obscure Bapu Trading.

As reported alongisde, Homix and Bapu appear to be involved in a chain of laundered kickbacks linking to the Guptas and Essa.

Liebherr told amaBhungane Homix or Bapu are unknown to it.

A fourth flag is Essa’s apparently clingy interest in the Liebherr R2-million — even though he was a purported outsider to the deal. This is suggested in emails attached to Regiment’s court papers.

For eight months after signing and receiving the downpayment, Burlington provided no service to Liebherr, which was becoming worried. Wood, who had not yet left Regiments, wrote to the Germans in October 2015: “I have liaised with my fellow directors at Regiments, and it is our view that we do not possess the requisite credentials, experience and technical skills to properly fulfil the mandate.”

He promised to “consider” repaying the R2-million.

In the weeks that followed, successive emails from Liebherr demanded repayment. They noted that Burlington’s failure to perform “leaves Liebherr in a difficult position with its commitments with Transnet”.

Then in December 2015, Wood received an instruction from curious quarters. One Kuben Moodley emailed Wood to say: “Sammy says don’t pay,” a common reference to Salim Essa.

Moodley happened to be Mineral Resources Minister Mosebenzi Zwane’s special advisor. Zwane is well known for his engagements with the Guptas. Today Moodley works for Essa’s Trillian alongside Wood.

To this day, Liebherr confirmed, the R2-million has not been repaid.

Moodley said: “I find your version of events so far removed from the commercial reality of the transaction that you are referring to that I am not able to meaningfully comment.”

He said “Homix played nothing more than a business development role, for which it was paid a fee by agreement with Regiments Capital, the owner of Burlington” and his relationship with “anyone outside of a commercial transaction is irrelevant”.

Regiments, on behalf of Burlington, declined to comment.

The amaBhungane Centre for Investigative Journalism produced this story. Like it? Be an amaB supporter and help us do more. Know more? Send us
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Susan Comrie and Ankit Paliwal, Input Editor at IANS in India

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