In a 10 December statement the Special Investigating Unit announced an investigation into allegations of maladministration in the affairs of state-owned diamond miner Alexkor. 

President Ramaphosa signed the proclamation authorising the investigation, which “will focus on maladministration in respect of marketing, valuation, sale and beneficiation of diamonds, pursuant to agreements concluded between Alexkor and service providers.”

“The proclamations authorise the SIU to use all its legislative powers to subpoena bank statements and cellphone records, search and seize evidence, and interrogate witnesses under oath in an effort to hold those responsible to account for their actions.”

“Classic state capture,” is how Gavin Craythorne described events at diamond miner Alexkor — events that made the state-owned company the subject of scrutiny at the state capture commission in January this year.

Craythorne is a marine diamond miner — one of many who operate as small-scale contractors for Alexkor. He has been a thorn in the side of Alexkor executives for years now, describing himself as a whistle-blower calling attention to the rot and capture of the state diamond miner.

Appearing before the commission, Craythorne detailed allegations of how Alexkor’s plans to expand into coal mining were part of a ploy by the Gupta family to benefit their companies.

He also elaborated on longstanding allegations that the Guptas attempted to capture the Alexkor diamond marketing chain through a company called Scarlet Sky Investments (SSI).

But over time he paid a heavy price: shut out of mining concessions, slapped with a defamation suit by SSI and finally forced to sell his ocean diamond mining vessel.

To his detractors, he is driven by ulterior motives.

When it comes to Craythorne, SSI’s director Daniel Nathan doesn’t mince his words, claiming Craythorne “is motivated only by his desire to profit from the marine mining activities in Alexander Bay and his desire to somehow acquire the marine mining rights or the proceeds thereof for himself”.

[sidebarContentSingleImage target=modal url=https://amabhungane.org/wp-content/uploads/2021/12/2.png]A diamond boat floats in the Port Nolloth harbour, 03 September 2021, (Photo: Barry Christianson).[/sidebarContentSingleImage]

Nathan, through his lawyers, told amaBhungane that allegations that SSI was involved in state capture are “untrue” and “defamatory”.

Yet some parts of Nathan’s own account of what happened appear questionable, as we shall see.

The Alexkor matter appears to have fallen by the wayside at the commission, which has had to deal with evidence related to a dizzying range of state-capture cases and was beset by delays.

This has left questions about SSI’s appointment and its links to Gupta associates hanging over the company and Alexkor.

So too are there unanswered questions around the coal strategy (unrelated to SSI), and what appears to have been, in that case, an audacious plan to expand the Gupta state capture machine.

There is an important tale in all of this not only about the machinations of high-level state capture, but in what it means for ordinary people in an impoverished corner of the country, the remote, barren Richtersveld.

Though the coal plans were ultimately thwarted, the infighting and Machiavellian politics of the state capture years left Alexkor and its joint venture with the local Richtersveld community in disarray.

The Pooling and Sharing Joint Venture (PSJV), owned 51% by Alexkor and 49% by the community, is the effective custodian of the mineral wealth that belongs to the community and should have been its crown jewel, but ordinary people have seen little in the way of diamond wealth trickle down to them.

Craythorne is by no means the only victim in a saga that has left a community divided and a company in disarray.

Diamonds in the rough

The Northern Cape diamond mining coast has the feel of a rough and tough frontier — arid and dusty, and dotted with small decrepit towns endlessly battered by the Atlantic winds.

For nearly 100 years the state has been mining diamonds on this corner of the country. Though South Africa is no longer the leading global producer of diamonds that it once was, the industry remains important, especially for local employment.

In the late 1990s the community lodged a claim to the narrow strip of land along the West Coast known as the Richtersveld, which had been expropriated by the colonial state after the discovery of diamonds there in the 1920s. It was on this land that Alexkor had its mining operations.

Only in 2003, after a protracted legal battle against the state and Alexkor, did the Richtersveld community win its land back — and the mining rights that went along with it were later ceded to them. Alexkor was left with its marine mining rights.

In 2011, the PSJV was set up as a joint venture between Alexkor and the Richtersveld Mining Company, the community’s mining vehicle. It combined the community’s land rights and Alexkor’s marine rights, and became the vehicle through which the diamonds were sold.

Alexkor and the PSJV do no actual mining. Instead, it is outsourced to private contractors, mostly to small boat-based marine divers who dredge the seabed using hand-operated suction devices. The contractors deliver diamond-bearing gravel to processing plants and the diamonds are then sold by the PSJV with the help of a diamond marketer.

In November 2014, Scarlet Sky Investments submitted a tender to the PSJV to be the sole agent to market and sell its diamonds.

In 2018 AmaBhungane wrote about SSI in the wake of the #GuptaLeaks, detailing circumstantial evidence that it could have been a vehicle for the Guptas’ planned capture of Alexkor. There were vehement denials of any link to state capture.

Since then, however, Craythorne’s testimony at the Zondo commission, further information uncovered by Zondo investigators and amaBhungane’s own efforts have raised further questions about the Guptas’ designs on Alexkor and SSI’s role.

Back when it applied for the tender, SSI did not have a significant trading history — it was a shelf company bought for the purposes of the tender.

Online company records show that effective December 2014, Nathan was registered as a director alongside Kuben Moodley, with Moodley owning a 60% stake through his company Kimomode. The other 40% was owned by Nathan’s company, Daniel Nathan Trading.

Moodley is widely known as a Gupta associate whose company, Albatime, has featured prominently in media reports about Gupta-linked state capture. He has been accused of being a “fixer” for the family and was arrested in connection with alleged money laundering in September this year on his way to Dubai.

The alleged money laundering relates to the proceeds from contracts that were improperly awarded by state-owned Transnet to Gupta-linked consulting companies Regiments and Trillian.

On affidavit Nathan told the commission, “I have no relationship with Mr Moodley other than our previous association in SSI which ended in and during August of 2015. I have known Mr Moodley since approximately 2001 when we played golf together.”

He said that when he became aware of the Alexkor tender he contacted Moodley to come in as his BEE partner: ”I knew that he had the financial standing, business experience and acumen that would contribute to the business if the tender was successful.”

Two months after Moodley and Nathan were registered as directors, SSI had the tender in the bag when the PSJV board signed off on it, completing a questionable bid adjudication process, as amaBhungane has previously reported.

That marked the start of a bitter dispute over the SSI contract, with Alexkor’s partners in the PSJV and contractors like Craythorne crying foul.

Part of the problem lay in the unusual way in which the PSJV was set up, with the non-executive chairperson of Alexkor occupying the same position in the joint venture, whereas no executive from Alexkor sat on the PSJV’s board.

Percy Khoza, Alexkor’s chief executive at the time, said that he arrived at Alexkor to find that that the company’s memorandum of incorporation barred its executives from having direct oversight of the PSJV.

He said that the board’s chair, Rafique Bagus, allowed him to sit on the PSJV board as an observer, but Khoza had no vote and no ultimate control over what was essentially his main operating company.

Team Gupta on speed-dial?   

The Bagus board had been appointed in 2012 by Gupta-linked Minister of Public Enterprises, Malusi Gigaba, though Gigaba has denied being captured by the Guptas and told the Zondo commission Bagus had been appointed on the basis of “a very good record in the public service”.

But Bagus was well known to the Guptas and was among a long list of politicians and public officials who made pilgrimage to the Guptas infamous Sun City wedding.

Before, during, and after his time at Alexkor, which he left in 2015, Bagus had many phone conversations with the Guptas and their associates, according to an affidavit by an investigator for the state capture commission, Peter Bishop.

Bishop alleges that there were about 26 calls between Bagus and Ajay Gupta between July 2015 and March 2016, and about seven between him and Rajesh Gupta between May 2015 and March 2016.

There were approximately 60 calls between Bagus and Gupta associate Iqbal Sharma, currently facing charges of fraud and money laundering related to the failed Estina dairy scheme — one of the Guptas’ most notorious state capture projects.

The affidavit also mentions approximately eight calls between Bagus and another key Gupta associate — Ashu Chawla.

[sidebarContentSingleImage target=modal url=https://amabhungane.org/wp-content/uploads/2021/11/AmaB-Alexkor-Graphic-2.jpeg][/sidebarContentSingleImage]

Bagus, in response to questions, said he did not recall Chawla, but admitted his familiarity with the Guptas and Sharma. He said he knew Sharma from their time together at the department of trade and industry, adding, “I have had several engagements with him over the years, mostly social.”

“As a former civil-servant I am often called for advice. I have not discussed my work at Alexkor with any of these people.”

Bishop’s affidavit also alleges regular calls between Moodley and the chief executive of the PSJV, Mervyn Carstens.

Between September 2015 and May 2017 Carstens was allegedly in contact with Moodley 97 times.

For most of this period Moodley was not a director of SSI. He resigned in November 2015, but retained his shareholding through Kimomode until April 2017.

After resigning from SSI, Moodley went to work as an advisor for then minister of mineral resources, Mosebenzi Zwane, who has been implicated in the Guptas’ state capture project and was the Free State MEC of Agriculture at the time of the Estina scandal. As MEC, Zwane’s department had oversight of the project.

Alexkor’s chief legal officer, Zarina Kellerman, later joined Moodley as an advisor to Zwane.

Bishop’s affidavit also claims that Carstens was in phone contact with Gupta associate Stanley Shane about 10 times between February and July 2016.

Responding to questions about the calls, Carstens said:

“As for me calling Mr Moodley about 97 times, first and foremost I did not call him 97 times. He called me. If I missed his call, I called him back. I have no recollection of what was discussed on any of the calls with Mr Moodley… I had no reason to need to speak to him.”

“At one stage Mr Moodley was interested in becoming an actual mid-water mining contractor or purchasing an outfit and called me to enquire as to some of the background. I recall there were several conversations about this however eventually he did not put in any proposal and certainly made no purchases in this regard. It appeared to me that he had lost interest.”

Carstens said he did recall speaking with Moodley about golf, and that after the #GuptaLeaks and Moodley’s connection to the Guptas became “evident”, “I blocked his number and did not take his call or reply to any of his efforts to reach me”.

“Calling Mr Stanley Shane is also one of those things which I simply have no recollection of, however any conversations with him would have been around mining. As the CEO of the PSJV I got a lot of these calls on a daily basis.”

Shane was a director, together with Mark Chipkin and Mark Angel (who resigned in 2019), of a company that has been linked to state capture — Integrated Capital Management (ICM).

This company, Bishop’s affidavit reads, was “intimately involved with [Gupta associate Salim] Essa and the establishment of the Trillian Group of Companies, which was used to capture consulting work from Transnet and Eskom from the end of 2015”.

Innocent — or integrated?

Alongside Chipkin, Angel and Shane at ICM was Selwyn Nathan — Daniel Nathan’s father — whose role in the company is more obscure.

Daniel says in his own affidavit, “My father was the honorary chairman of ICM… [he] resigned from that position on 2 November 2015.”

However, a share register and declaration for December 2017 showed that a company of which Nathan senior was the beneficial owner still held a 21.97% share in ICM at that time.

It was Selwyn Nathan who arranged for a R50-million letter of comfort that Scarlet Sky relied on for its bid.

When ICM’s role in supporting Trillian was first exposed by former Trillian Management Consulting chief executive Bianca Goodson, the then attorney for the ICM grouping, Billy Gundelfinger, objected strongly.

In a 2017 complaint to the Press Ombud he said ICM was merely an “arms-length service provider” and emphatically denied that the company took part in any state capture actions.

Since then the linkages between people associated with the Guptas and people associated with ICM have become slightly clearer.

As early as July 2018 amaBhungane revealed ICM’s role in helping a shelf company linked to Essa extract R647-million from Transnet for changing the venue for local locomotive manufacture from Pretoria to Durban.

Goodson has also since given damning and seemingly unchallenged testimony at the Zondo commission in relation to ICM, alleging that Angel, in particular, was aware of the way in which Essa’s extraordinarily ambitious business model was based on exerting influence over decision makers.

This included Angel’s knowledge of a November 2015 email which set out Trillian’s plan to capture R10-billion in consulting income from Eskom over just three years.

Shane did not respond to calls and WhatsApp messages. Gundelfinger, on behalf of Angel and Chipkin, told us his clients had instructed him that they did not wish to engage with us.

Daniel Nathan, in his own affidavit to the state capture commission, has attempted to put distance between SSI and ICM.

According Nathan, ICM was brought in by SSI to “assist it in preparing and submitting its tender submission document to the PSJV”.

Nathan insisted, “SSl’s engagement of ICM was on an entirely arms-length and professional basis for the purposes as aforesaid.”

But was that true?

As we’ll see, Nathan’s attempt to rubbish Bishop’s state capture commission affidavit led him to proffer a bank document that he must have known contained misleading information.

That, unfortunately, may cast some doubt on his other assurances.

Selwyn Nathan, ICM, Investec and SSI  

The process by which SSI was selected as preferred bidder was problematic, an issue to which we’ll return, but it was approved subject to a due diligence check.

A due diligence and verification report on SSI’s and its bid was conducted by the CEO, Carstens, and Zarina Kellerman, the chief legal officer of the PSJV, and submitted to the board in late January.

But the due diligence exercise does not appear to have scrutinised the R50-million issue noting only that “Scarlet Sky has a bank guarantee of R50 million with Investec”

Had it done so, it might have picked up some anomalies.

Bishop’s affidavit notes that “the Commission has subsequently established that lnvestec has no record of any guarantee that was applied for and provided”.

Daniel Nathan hit back at Bishop’s claim in his own affidavit.

According to him, “my father advised [Bishop] that Investec Bank had provided a letter confirming that SSI was an Investec Bank client and that SSI had funds available to it of R50 million (fifty million Rand)”.

As proof of this, Nathan attached a January 2015 letter from Investec stating that it “confirms that Scarlet Sky Investments… is a client of Investec and holds various Investec accounts in their name”.

“We further confirm that as at the date of this letter, Scarlet Sky has an amount of R50,000,000.00 available in their accounts, for use at their own discretion.”

The problem for Nathan, however, is that the information appears to be false. SSI was not a client of Investec and held no accounts with the bank — something he must have known.

Investec told us, “Investec categorically denies any association with Scarlet Sky Investments 60 (Pty) Ltd (“Scarlet Sky”). Investec further confirms that Scarlet Sky was never a client of the bank and that it (Scarlet Sky) at no stage held any accounts with the bank.

[sidebarContentSingleImage target=modal url=https://amabhungane.org/wp-content/uploads/2021/12/alexbay_bc-11760-scaled.jpeg]The Alexkor diamond factory on the Alexander Bay coast. In the background excavators load rocks that were used to build a coffer dam onto trucks, 24 August 2021, (Photo: Barry Christianson.)[/sidebarContentSingleImage]

“A 2015 letter, intended to convey confirmation of the availability of funds on behalf of two long-standing clients, erroneously recorded that Scarlet Sky was a client of Investec. This was incorrect. Furthermore, the letter clearly stated that it was not a letter of guarantee. No payment was facilitated by Investec for or on behalf of Scarlet Sky.

“Investec has deposed an affidavit to the Zondo Commission of Inquiry detailing the misstatement of fact in the 2015 letter.”

Investec and the Nathans also part ways on the exact circumstances under which this “misstatement” came about but they both try to characterise it as not being material.

AmaBhungane sent questions to the Nathans regarding Daniel Nathan’s reliance on the Investec letter and the impression that there may have been an attempt to mislead the commission.

In response, their lawyers labelled our questions “consistent with (and are a further perpetuation of) your previous discourteous, accusatory, reckless and defamatory engagements with our client”.

Regarding the Investec Bank letter, the Nathans’ lawyers said it contained “immaterial inaccuracies (by Investec Bank and not our clients)” — and that there had always been sufficient funds available to SSI, inter alia through Selwyn Nathan’s relationship with Investec.

Round two 

SSI’s tender was initially intended to be a short-term gig, so in 2016 the tender process was renewed. Again, SSI was appointed, this time for 5 years.

By now, a new board was in charge. Bagus had resigned and been replaced by Hantsi Matseke, the Free State Development Corporations (FDC’s) chair.

There are traces of evidence in the appointment of SSI for a second term that suggest Gupta-linked Trillian had something to do with tender number two.

Two pieces of information suggest Trillian involvement.

The first is an email sent on 28 March 2016, two days before bids for the second tender closed, from a Trillian employee. SSI’s proposal for bid number 02/2016 — the second diamond marketing contract — was attached to the email and included Daniel Nathan’s CV.

The employee wrote in her email “I’ve done a grammar check and added the health and safety statement to the proposal. Please find attached all the information required… Please add pictures under the relevant sections and potentially use graphics to enhance layout.”

The second exhibit that points to Trillian involvement is slightly more feint — two emailed meeting notifications.

The first notification, with the subject “Diamond Tender discussion”, was scheduled for 16 March at 10:15 AM at ICM’s Melrose offices. It was sent by ICM’s Chipkin to Daniel Nathan, and two Trillian employees.

The second notification for a meeting on 22 March was sent to the same group of people.

The Nathans, through their lawyer, flatly denied that they knew the Trillian employees, or that ICM was in any way involved in the second tender.

“Mr Daniel Nathan has no links whatsoever to the Guptas or their associates,” they said.

One of the Trillian employees, who asked not to be named, told us: “Clive Angel, whom I met due to the move to Trillian, asked… if my colleague… and I could assist with collating a proposal for Scarlett Sky.

“Mr Angel introduced us to Scarlett Sky management, whose persons were previously unknown to me, at the ICM offices in Melrose Arch. Our role was to collate the proposal using information primarily provided to us by Mr Nathan, at the ICM offices. Once we were done, there was no further involvement from my side.”

More Gupta fingerprints

In amaBhungane’s initial story, we reported that only three people sat on the panel to decide on the final selection in the first tender — they were Bagus, longtime Alexkor director Roger Paul, and Duncan Korabie, one of the independent directors representing the community on the joint venture’s board.

Korabie gave SSI a full 100 percent score which, as our initial article noted, “is normally regarded as an attempt to skew a panel score in favour of one bidder”.

The issue of SSI’s scoring became even more charged when Korabie fell out with Alexkor. He later submitted a complaint to the Public Protector alleging various irregularities in the tender, despite his own 100 percent score.

Representatives of the community in the Richtersveld Mining Company, Alexkor’s partner in the PSJV, were also concerned.

After a complaint by the RMC in late 2015, Lynne Brown, who had replaced Gigaba as minister, tasked Alexkor’s audit and risk committee with investigating the tender.

The committee concluded its investigation and came back to the board in February to say that all was well. There were no major problems with the tender.

But based on what we now know, the committee either did not look hard enough, or was wilfully blind to the problems.

One of the three committee members was Trevern Haasbroek, whose appointment as a board member of Alexkor in August 2015 bore the Guptas’ fingerprints again.

In a now familiar pattern in the Guptas’ state capture enterprise, the month before Haasbroek’s appointment, minister Brown’s personal assistant sent an email to infoportal1@zoho.com. The address was prominent in the #GuptaLeaks and is now known to have almost certainly belonged to Essa.

The email, titled “Trevern’s CV”, is addressed to “Saleem” — clearly a misspelling of Essa’s first name. In it, the PA writes: “Herewith cv for Alexkor board as discussed”.

Haasbroek did not respond to a request for comment.

At the Zondo commission Brown denied influencing board appointments in favour of the Guptas and said she was unaware of her PA sending emails to the infoportal1 (Essa) address.

A festering sore

The SSI tender became a festering sore on the Richtersveld diamond mines.

Craythorne and some other marine diving contractors claimed that the company was ill-suited to the task of valuing, marketing and selling the joint venture’s diamonds.

They claimed SSI’s appointment was not transparent, that the company did not have the requisite experience, and that diamonds were being undervalued and miners short-changed.

Claims about the undervaluing of diamonds and anomalies in the diamond sales process have been laid out in detail at the state capture commission, and have been met with vehement and at times compelling refutations by both Nathan and the joint venture chief executive, Carstens.

Both have also pointed to detailed separate reports on the SSI operation issued by two diamond industry experts and another Alexkor mining contractor.

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All three said that SSI appeared to run an effective marketing and selling operation that extracted good value for Alexkor – in contradiction to the claims by Bishop and Craythorne.

Nathan alleged the commission investigators had made grievous errors.

“[They] made statements of fact and have arrived at conclusions in their affidavits concerning me, SSI and DNT which are untrue, inaccurate and unsubstantiated, defamatory and reckless,” he said in his own affidavit.

His lawyers told us: “If, as you record, amaBhungane really wants to understand ‘what happened at Alexkor’ then perhaps you should be reporting on the fact that during SSI’s tenure as the entity to market, sell and beneficiate the PSJV’s diamonds, the PSJV’s diamond revenue from sales convened by SSI increased from R276 million in 2014 (the year prior to SSI’s appointment) to R414 million in year 1.

“AmaBhungane should perhaps be considering what became of this diamond revenue (which SSI actually generated in terms of its agreements with the PSJV) as opposed to unjustly interrogating our clients.”

That the Alexkor issue appears to have been left in limbo by the commission has not helped in getting to the bottom of a very complicated matter.

A more clear-cut problem, as far as the contractors are concerned, seems to be in the lack of transparency of the diamond sales made through SSI, which has only fuelled the contractors’ suspicions that they are being short-changed.

A report by forensic accounting firm Gobodo, which was submitted to the department of public enterprises in late 2019, underscores these concerns.

Though the report was criticised by Zondo for its sloppiness, it did raise some noteworthy points around the lack of transparency in the marketing and selling of the diamonds.

The Gobodo report claims that SSI kept important information about this classified, even from the PSJV, on whose behalf it was selling the diamonds.

In the rush to complete their report, Gobodo’s team appears to have made a number of errors and ignored some evidence that contradicted their findings.

One thing that stands out, however, is their findings concerning the assessments of the bids and how bidding companies were scored in the original tender process that selected SSI.

The report notes that the weighting of various categories of scores was changed after three bidders, including SSI, were shortlisted. Notably, the weighting of scores for local economic development, job and ownership commitments was reduced.

The report states that “the changing of the points and evaluation criteria is irregular and constitutes and unfair and uncompetitive practice”.

Between mid-2015 and mid-2019, the year before SSI’s contract was eventually cancelled, Gobodo calculated that over R1.5-billion worth of PSJV diamonds passed through Nathan’s company.

Given the huge turnover, the original 2014 procurement process that led to SSI’s appointment appears to have been, at best, extraordinarily amateurish.

Infighting

The relations between the small-scale contractors and the joint venture’s board and management became so strained that several contractors, including Craythorne, did not have their contracts renewed.

In January 2018, a team from the department of public enterprises (DPE) stepped in to attempt to resolve what had become an intractable conflict.

One of the issues that the contractors “raised vigorously” was the SSI contract.

The contractors also questioned the prices that the diamonds were fetching and the lack of transparency in the marketing and sales of the stones.

The DPE team compiled a briefing report of their engagements with the parties, which left no doubt as to who the team felt was more to blame for the falling out — it was scathing of the board and management team.

“There seemed to be a determination to manage by fear in order to drive home the message to contractors that no dissent shall be tolerated.”

The team found that the board had been “economical with the truth” when it claimed that its decision not to renew some mining contracts was based on a legal opinion.

They also drew attention to what was at stake for diamond contractors like Craythorne, who says he has now lost everything.

“The contractors have a substantial skin in the game. The contractor literally mortgages all they have to be on the sea during the sea days with an expectation that they will have a good mining day and be able to cover their costs.”

The problems that the department’s team had seen up close, only worsened. In September of the following year, Alexkor was under administration.

When, in 2020, the administrator reported to parliament on the state of Alexkor, he said many of Alexkor’s problems were traced to weak governance.

The administrator noted: “Because the PSJV is an Unincorporated Joint Venture, it has significant governance challenges, as it does not have to comply with the Companies Act and/or the Public Finance Management Act (PFMA), neither has it adopted any of the best practices contained with either of the Acts mentioned above.”

Carstens, the PSJV CEO, relied on precisely this argument — that the joint venture was not beholden to the PFMA – to explain the decisions taken in appointing SSI.

“The allegations of apparent irregularities in the tender process stems from a mistaken view that the PSJV is somehow obligated to comply with the PFMA”.

“The PSJV most certainly had a procurement process which was adopted by the Board of the PSJV [which] allowed for the Board to be flexible in its approach.”

Others, including departmental officials, were uneasy with this freestyling approach.

The departmental team had said that the PSJV, “by virtue of the fact that it is an unregistered entity which utilizes Alexkor SOC Limited legal status to trade and conduct its business… is bound by the same standards of conduct expected of a state-owned business”.

“Moreso, as the resource that is being exploited by the affected miners is the marine diamond deposit whose mining right belongs to Alexkor SOC Limited and by extension the State.”

But to the state capture crowd, the loopholes created by the PSJV structure seemingly represented just another opportunity.

Years later Alexkor and its issues continue to drive a wedge through what was an already divided community.

On 19 May this year the parliamentary committee on public enterprises reported on their oversight visit to Alexkor, noting a concern about government’s failure to facilitate the election of legitimate community structures and a perception that they were still subject to divide and rule tactics.

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The committee also consulted mining contractors on their challenges with Alexkor.

“The contractors raised a number of concerns which included the following: the company has been destroyed by corruption and state capture… There is high unemployment rate and lack of development programmes for young people in the community, and that has given rise to high levels of poverty, drug and alcohol abuse.”

The Richtersveld land claim settlement was supposed to deliver justice and development, but its intended beneficiaries seem to have been left as high and dry as the windswept dunes.

Read more investigations by Micah Reddy here.

The post All that glitters: how state capture hobbled Alexkor appeared first on AmaBhungane Centre for Investigative Journalism.

Transnet, then headed by chief executive Brian Molefe and chief financial officer Anoj Singh, both Gupta associates, awarded the contracts, worth some R54-billion, to original equipment manufacturers General Electric, Bombardier Transportation, China South Rail (CSR) and China North Rail (CNR) in 2014.

Transnet and the SIU said in a statement that their papers, filed today, show that the procurement “was based on a flawed market demand strategy … and that the laws, government instructions and Transnet policy were deliberately ignored to make the tender awards, conclude the contracts and effect payment to some of the [manufacturers].”

They said the manufacturers were “not entitled to benefit from locomotive supply agreements that were awarded to them in an irregular and illegal manner, and particularly not when the [manufacturers] conducted themselves in the manner that CSR and CNR did”.

Echoing amaBhungane and its #GuptaLeaks partners’ exposés since 2017, Transnet and the SIU referred to kickback agreements concluded with Hong Kong-based Gupta fronts Regiments Asia and Tequesta Group. “It is argued that given the nature of the kickback agreements concluded by the parent company of CSR and CNR, they cannot claim to be innocent.”

Our reporting has shown that the two Chinese manufacturers concluded contracts to pay the Guptas and their associates R9-billion in kickbacks on R42-billion of contracts from Transnet. These spanned the lion’s share of the 1 064 procurement and further locomotive orders. By late 2016, Gupta fronts had already received R3.7-billion.

CSR and CNR have since merged to form CRRC Corporation, the world’s largest rail equipment supplier. It is listed in Hong Kong and Shanghai with the Chinese state as controlling shareholder.

Transnet and the SIU also claimed General Electric and Bombardier could not “claim that they did not or could not reasonably have known that the procurement process and subsequent contracts were irregular and unlawful”.

The court action is much delayed. Transnet said in a December 2019 statement that it would “approach the court to declare unlawful and set aside all four locomotive contracts”. After that, however, new management was appointed and it appears Transnet went back to the legal drawing board.

Transnet and the SIU said their application “is lengthy. The founding affidavit is over 800 pages and the annexures stretch into many lever arch files. The application is based on the extraction and analysis of over 29 million documents.”

In December, the Revenue Service convinced the high court to freeze R2.8-billion in local CRRC accounts, following an earlier temporary Reserve Bank freeze.

The post Breaking: Court asked to cancel 1064 loco contracts, scene of the Guptas’ greatest heist appeared first on AmaBhungane Centre for Investigative Journalism.

An additional R1.5-billion will also remain frozen pending a bank guarantee, meaning a staggering R2.76-billion will remain preserved while Sars finalises a tax claim against CRRC.

The taxman had rushed to court to prevent the release of the funds that the South African Reserve Bank froze three years ago “based on irregular outflows and inflows from an Exchange Control perspective”.

Underlying the Reserve Bank’s action at the time was evidence first revealed by amaBhungane and our #GuptaLeaks partners that CRRC companies were paying a fifth of their revenue from Transnet locomotive contracts to Gupta offshore fronts as kickbacks.

The Reserve Bank later blocked additional amounts which currently stand at a total of R4.2-billion, but the initial tranche of R1.26-billion was due to be released this coming Saturday, 12 December under a rule that funds must be unfrozen after 36 months.

Sars — which has been preparing a multi-billion-rand tax bill against local CRRC subsidiary CRRC E-Loco Supply based largely on evidence that the company had deducted the kickbacks from its taxable income — argued that “that the moment the funds are released it will be externalised”.

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Yesterday’s court order, the result of an agreement between Sars and the Chinese company’s local subsidiary, CRRC E-Loco Supply, also ruled that an additional R1.5-billion be preserved in Sars’ favour.

AmaBhungane understands that Sars asked for this amount to be ringfenced based on preliminary assessment of the company’s tax bill. Although the 36-month period for freezing the remainder of the R4.2-billion frozen by the Reserve Bank is not due to expire anytime soon, the Bank could decide to unfreeze the money before that time.

The legal challenge is a victory for Sars, though the combined amount of money preserved under the order, R2.76-billion, is less than the R3-billion-plus that Sars said in its founding papers that it believed “on reasonable grounds” to be due including penalties and interest.

Sars had also in its papers asked the court to appoint a curator to take over CRRC E-Loco. However, no curator is to be appointed in terms of the final order.

The Reserve Bank’s reason for the initial freezing of the CRRC billions was that the company had broken exchange control rules by claiming to be exporting money only for the import of locomotives, while in fact it was using 21% of the funds to pay Gupta kickbacks offshore.

Sars, in its attempt to ensure the money stays in the country, argued that it was left short-changed by CRRC when the company included kickbacks in its tax-deductible cost of sales.

Sars’ own investigation drew on amaBhungane’s comprehensive exposé in June this year on the Guptas’ loco heist.

Also read

At a minute to midnight, Sars attempts to secure R4bn state capture loot

Locorruption reloaded: We reveal Gupta kickback contracts worth R9bn

How the Guptas’ R9-billion loco heist went down

The post Update: Sars freezes R2.8-billion from Chinese rail company that paid Gupta kickbacks appeared first on AmaBhungane Centre for Investigative Journalism.

It was June 2017, and the Bank cut a lonely institution holding out against state capture. It must have taken some resolve for its officials to target an industrial group controlled by a friendly state and alleged to be in a corrupt relationship with friends of the South African head of state.

In later correspondence with CRRC, the Bank referred to a 7 June 2017 meeting with its representatives, called “to, inter alia, discuss the allegation that ‘kickbacks’ were paid to Tequesta”. The Bank complained that its officials were “not furnished with any plausible explanation of the rationale for the transaction”.

In our first #GuptaLeaks story seven days before, we had revealed that CRRC predecessor China South Rail, which won contracts to supply Transnet with hundreds of locomotives, agreed to divert billions to Gupta offshore fronts, including Tequesta Group in Hong Kong.

We had posted online a copy of a kickback agreement in which China South Rail promised to pay Tequesta 21 cents in each rand it received from Transnet for an order of 359 electric locomotives.

CRRC then, as it seems to have maintained since, “stated that it was not aware of any [kickback] agreements” – though the Bank went to the effort, according to its correspondence, of commissioning a forensic handwriting analysis. This appeared to verify the signatures of Gupta lieutenant Salim Essa and China South Rail official Guo Bingquang on the Tequesta agreement.

CRRC, the Guptas and Essa have consistently failed to respond to amaBhungane’s requests for comment.

The big freeze

Before the year was out, on 12 December 2017, the Bank froze R1.26-billion it found in the accounts of CRRC E-Loco Supply, the local CRRC subsidiary that was contracted to supply Transnet.

The Bank did so under exchange control regulations permitting freezing orders and eventual forfeiture using a simple logic: If CRRC offshore was paying 21% of the proceeds of the 359 locomotive contract to Tequesta, CRRC E-Loco had not told the Bank the full truth when it applied to send forex to CRRC offshore for the importation of locomotives and parts.

The forex transfers, the Bank held, must have been inflated by 21% to pay kickbacks – a purpose the Bank had not approved.

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The amount the Bank froze constituted 21% of the almost R6-billion that CRRC E-Loco had sent abroad by then. According to the Bank’s correspondence, “CRRC E-Loco … applied for and caused foreign currency in the amount of R1 255 058 117.48 (21 per cent of R 5 976 467 226.08) to be transferred … out of the Republic, which foreign currency was to be used for, or applied to a purpose other than stated in the relevant application.”

In its annual report a year later, CRRC Corporation, the group parent company listed in Hong Kong and Shanghai, declared a contingent liability related, so it said, to the establishment of the Zondo commission into state capture and South African media reports referring to “violation of laws related to multiple procurements for the supply of locomotives by South African train operator, Transnet”.

It declared that “bank balances totalling approximately RMB600-million [about R1.26-billion then] held in two bank accounts of the Group in South Africa are the subject of freezing orders issued by the South African Reserve Bank”.

In subsequent regulatory filings, the frozen amount CRRC declared grew: RMB1.27-billion (about R2.6-billion) in June 2019, RMB2.2-billion (about R4.4-billion) in December 2019, and RMB1.88-billion (about R4.6-billion) in June this year.

Which is to say that as Transnet paid CRRC E-Loco for more locomotives, the Bank kept freezing more. The Bank ignored amaBhungane queries earlier this year despite CRRC putting the freezing orders in the public domain.

A steaming deadline

But the clock was ticking. The Currency and Exchanges Act and exchange control regulations provide that money frozen on suspicion of a forex contravention must be released after 36 months, unless the Bank confirms its suspicion and makes an order forfeiting the money to the national fiscus.

Here, the Bank had the opportunity to recover the largest pot yet of state capture loot for the public.

But with Saturday 12 December, the deadline to release the first R1.26-billion, bearing down on it, the Bank appears to have blinked. The Government Gazette, where forfeiture orders must be published to take effect, has remained silent week after week.

A forfeiture order is reviewable in court. Whether the Bank was concerned about the strength of its case, was happy for another organ of state to take the lead or has a last-minute trick up its sleeve is not known.

Whatever the Bank’s plans, the South African Revenue Service (Sars) has stepped in with a last-minute attempt to preserve the pot.

Sars last month filed an application which it wants the Pretoria high court to hear on an urgent basis on Tuesday 8 December, four days before the deadline.

The application is for an interim order preserving all of CRRC E-Loco’s assets and appointing a curator to take control of them. The curator will be specifically authorised to transfer any funds unfrozen by the Bank to his trust account.

Sars’ application motivates the intervention on the basis that it is preparing a R3-billion-plus claim in taxes, penalties and interest against CRRC E-Loco and that “a preservation order is required … to secure CRRC E-Loco'[s] realisable assets to be available for the collection of the said tax that may be due”.

If the court grants the interim order, CRRC E-Loco will be entitled to argue against it being made final at a full hearing in February.

Not tax-deductible

Sars’ claim is largely founded, like the Bank’s before, on the cover-up that accompanied the kickbacks.

Whereas the Bank effectively said CRRC E-Loco broke forex rules by failing to disclose that part of the money it took out of the country was meant for kickbacks, Sars is saying that the company broke tax rules by including kickbacks in its cost of sales. Put differently: Corrupt payments are not tax-deductible.

And like the Bank, Sars relies heavily on information amaBhungane put in the public domain.

In his affidavit motivating the application, Deon Boshoff, an investigator with Sars’ illicit economy unit, says Sars was investigating Essa, the Gupta lieutenant, but that the focus started shifting to CRRC E-Loco after Sars obtained a report on the Bank’s freezing orders in May this year.

Sars governance structures approved an investigation by the unit into CRRC E-Loco in August.

Boshoff states that he studied information in Sars’ possession and in the public domain. “I specifically considered an article appearing on the amaBhungane website on 1 June 2020 titled ‘How the Guptas’ R9-billion loco heist went down‘… The amaBhungane article contains several electronic links to documents that are relevant to the discussion below.”

Our article revealed that CRRC group companies had entered contracts to pay Gupta offshore fronts a staggering R9-billion in kickbacks on Transnet locomotive deals worth about R42-billion.

Based on our analysis of evidence including eight kickback contracts and flows into offshore accounts, all of which we posted online, we concluded that by October 2016 the CRRC companies had already paid R3.7-billion to the Gupta fronts. After that the offshore data went dark but the payments likely continued.

Sars’ view

Boshoff’s 96-page affidavit examines each of the three contracts for electric locomotives – 95, 100 and 359 – that CRRC E-Loco won from Transnet, returning repeatedly to amaBhungane’s information.

Commenting on the kickback contracts, he says: “Sars is of the view that these agreements were concluded to extract funds from Transnet, the largest procurement vendor in South Africa together with Eskom, to line the pockets of Mr Essa, the Guptas and other high profile individuals, to the detriment of the South African taxpayer and the South African economy in general.”

In the end, he identifies R2.65-billion in kickbacks that CRRC E-Loco irregularly deducted in its 2014, 2015 and 2016 tax returns. It is less than the R3.7-billion identified by amaBhungane, among other reasons as the Sars dragnet did not include a CRRC E-Loco sister company which won a separate contract for 232 diesel locomotives from Transnet and where kickbacks were also paid.

It is not known if Sars is separately investigating the sister company, CRRC SA Rolling Stock.

Boshoff proceeds to recalculate CRRC E-Loco’s tax returns, disallowing the kickback deductions and some other items. With penalties and interest, the “total probable tax debt” comes to R3.17-billion. But the tax audit, he says, is not complete and the figure may change.

Others circling

Boshoff says that the funds frozen by the Bank last month amounted to R4.19-billion – it had come down from the about R4.6-billion frozen at its height after the Bank acceded to a CRRC E-Loco request to release some of the funds “to pay its debts, as it is entitled to”.

Boshoff draws the court’s attention to the fact that the currently envisaged SARS claim is about R1-billion less than what the Bank has frozen.

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He adds, “However, SARS is not fully informed regarding exactly what the position is regarding all of these funds or whether there may be other persons or entities who have a claim against these funds. Under the circumstances, SARS asks for the entire amount, together with the other assets of CRRC E- Loco to be preserved.”

Indeed, amaBhungane understands that Transnet, the Asset Forfeiture Unit and possibly other state organs are preparing applications of their own. The recovery race is on.

The post At a minute to midnight, Sars attempts to secure R4bn state capture loot appeared first on AmaBhungane Centre for Investigative Journalism.

Likewise, the glitzy launch of a number of major property developments in Uzbekistan would normally not make the local news. Except that these multi-billion-rand developments are being undertaken by the self-same Jalan, in co-operation with members of the Gupta family.

Jalan has via his lawyers denied any “relationship, business or otherwise”, with the infamous brothers Ajay, Atul and Rajesh Gupta, or that he acted as a front for them. He admitted to employing two of their children, their nephew and their son-in-law.

Jet Airways

Last year, Jet Airways entered what in India is called a corporate insolvency resolution process – something akin to South Africa’s business rescue.

A number of consortia made bids, but on Saturday, creditors voted in favour of a consortium consisting of Jalan and a UK venture capital outfit called Kalrock. The price was reportedly in the region of R2.2-billion.

Kalrock did not respond to questions. The company is part of the Fritsch Group, an investment vehicle founded by German entrepreneur Florian Fritsch. The group website calls Fritsch “a true conscious capitalist who ensures a positive impact to society”.

Last year amaBhungane revealed how the broader Jalan and Gupta families cemented ties through one of the Gupta clan’s signature mega-weddings, which saw Shivangi Jalan marry Atul Gupta’s son Shashank Singhala, then 21.

Murari Lal Jalan is Shivangi’s uncle.

London law firm Kobre & Kim, which boasts of its “aggressive” approach to solving client problems, replied on Jalan’s behalf for this article. It wrote: “It is a matter of public record that Mr Jalan’s brother’s daughter is married into the Gupta family. Mr Jalan accordingly knows some of the Gupta family through that extended family connection in India.

“However, the private marriage carries no business link or interest between the Jalan family and the Guptas. Mr Jalan and his brother maintain separate business entities. Their personal relationships have no connection with their business activities, which are separate and distinct.”

There was at least one reason to ask whether the Guptas were involved in any way in Jalan’s bid for Jet Airways: their alleged efforts to lobby on behalf of Jet in the past.

Former ANC MP Vytjie Mentor testified at the Zondo commission that she was offered the post of minister of public enterprises in 2010 if she got SAA to scrap its Mumbai route so that Jet could take over.

This offer was allegedly made by Ajay Gupta at the Gupta compound in Saxonwold.

Mentor testified she refused to take the bait and instead Malusi Gigaba was appointed.

Former SAA chief executive Sizakele Mzimela told Zondo that, shortly after her appointment, Gigaba called SAA executives to a meeting with controversial Jet founder Naresh Goyal on 10 January 2011.

They waited for two hours only to have Goyal show up and angrily demand that SAA cede the route. Gigaba said nothing, she testified.

Jet was also the airline used by the Gupta family to land their guests at the Waterkloof air base for the infamous Sun City wedding in 2013.

Jet’s bankruptcy coincides with Goyal’s fall from grace. The man who allegedly felt entitled to shout at SAA bosses in front of a sitting minister is now being investigated for money laundering in India.

Jalan, via his lawyers, said he did not know Goyal and that amaBhungane’s questions were the first time he had heard about the Guptas lobbying for Jet in South Africa.

He also denied that any member of the Gupta family has anything to do with his Jet bid. “None of the individuals connected with the Gupta family … are either directly or indirectly involved in the Jet Airways bid. The Gupta family, extended or otherwise, is not funding the bid.”

From SA to Uzbekistan

The Gupta brothers may not be involved with the Jet rescue, but the broader family have joined the Jalans embarking on a truly epic project: property development in Uzbekistan.

This venture appears to have drawn in a big chunk of the extended Gupta family and at least one notorious middleman.

[sidebarContentSingleImage target=modal url=https://amabhungane.org/wp-content/uploads/2020/10/201013-MJ-Developers-the-Jalans-and-the-Guptas-3.0-1-smaller.png][/sidebarContentSingleImage]

The vehicle is MJ Developers, a property group set up in the Central Asian country with four mega-developments already announced. The sheer scale of these plans make them seem almost fantastical.

*See Minerva City and Lake City and Namangan Square

Murari Lal Jalan has evidently invested heavily in his public image in Uzbekistan as a benevolent billionaire investor and philanthropist. On his group’s website there are articles describing him as “intelligent investor in diverse sectors”, “an eminent figure in the business fraternity”, “a man who has a global vision” and “leader, chairman and visionary” among other things.

Jalan is the face of the group, but glued to his side and representing the company at public events is Gupta in-law and Aakash Garg of Sun City wedding fame. That extravaganza saw Garg marry Vega Gupta, the Gupta brothers’ niece Achla.

According to press releases and media reports from Uzbekistan, Garg is the “vice-president of the marketing department” of MJ Developers.

Jalan’s lawyers called Garg a “marketing advisor to MJ Developers” in response to amaBhungane’s questions. On a company website he is described as a “part of the family” and one of the “core contributors to convert Mr Jalan’s ventures into grand success”.

At one stage Garg was touted as more than just an employee or advisor.

AmaBhungane previously showed that he was recorded as the 50% shareholder of at least part of the new Uzbek property empire, dubbed “Minerva World of Knowledge”.

Minerva entails a proposed academic city-in-a-city sporting multiple colleges, residential areas and sports grounds in the Uzbek capital, Tashkent.

Garg’s shareholding was reflected in company registration documents dating from last year. The co-signatory and other shareholder in this document is Murari Lal Jalan.

Garg was also present at an event in August to lay the foundation stone of the first building at the promised sprawling Minerva site.

[sidebarContentSingleImage target=modal url=https://amabhungane.org/wp-content/uploads/2020/10/2.-Group-photo-of-Murari-and-Ankit-and-Garg-for-Minerva-project.jpg]Ankit Jalan (second from left), Murari Lal Jalan (middle) and Aakash Garg (far right).[/sidebarContentSingleImage]

Jalan’s lawyers denied that Garg or any other member of the Gupta family funded or held shares in MJ Developers or its subsidiaries like Minerva.

“We are instructed that Mr Garg and Mr Jalan considered a 50/50 joint venture in Uzbekistan. However, Mr Garg withdrew from the project before the company began trading. Mr Garg did not invest any funds and has no investment or ownership interest in MJ Developers or any of its projects or entities,” the lawyers said.

“MJ Developers and its associated entities are 100% owned by Mr. [Murari Lal] Jalan (save for one project which is owned by his nephew), and have never received any funding or investment from the Gupta family, directly or indirectly.”

Jalan’s version does not account for the obvious involvement of several other members of the Gupta family and a key associate, amply demonstrated by MJ Developers’ own promotion of its projects in Uzbekistan.

Photos from one glitzy MJ Developers event in Uzbekistan in February this year show them posing together with Uzbek politicians.

[sidebarContentSingleImage target=modal url=https://amabhungane.org/wp-content/uploads/2020/10/4.-14-Feb-2020-Meeting-with-Garg-and-Varun.jpg]Aakash Garg (far left) and Varun Gupta (third from left), pictured at a February 14, 2020 meeting.[/sidebarContentSingleImage]

Apart from Garg, this event included Kamal Singhala (Ajay Gupta’s son) and Varun Gupta (son of Achla, the sister of the more famous three Gupta brothers).

A more surprising presence is Ashok Narayan, the one-time “advisor” to Ace Magashule; he was the Guptas’ point man in the Estina dairy scandal and a key cog in the Gupta machine.

Photos from another launch event for a MJ Developers project show Srikant Singhala (Atul Gupta’s son) joining the two Jalans on stage alongside Uzbek dignitaries.

After initially skirting the question, Jalan’s lawyers admitted that Srikant, Kamal and Varun were in fact employees of MJ Developers.

They denied that Narayan or another apparent Gupta associate seen in the pictures had “any role” in MJ Developers, and played down the importance of the Gupta children in the organisation.

[sidebarContentSingleImage target=modal url=https://amabhungane.org/wp-content/uploads/2020/10/5.-Namangan-ceremony-with-Singhala.png]Srikant Singhala (far left), Murari Lal Jalan (second from left) and Ankit Jalan (far right).[/sidebarContentSingleImage]

They said, “With respect to the referenced event, the five individuals named were part of a large gathering of more than 200 people from India and the Middle East at the launch of one of MJ Developers’ projects.

“These individuals did not share the stage with Mr Jalan and, following the launch events, many individuals came to meet and shake hands with Mr Jalan and were photographed in the process. This is not an indication of any special business or personal relationship with Mr Jalan and/or any unique privilege(s) granted to the individuals photographed.”

But in another indication of seniority, on at least one occasion Kamal Singhala (Ajay Gupta’s son) was the one showing the governor of Namangan region around the building site of the Namangan Square development.

In the background: more deals

In its previous reporting amaBhungane showed how the Guptas were kept informed of a Jalan deal with one of the Gupta associates as far back as 2015.

Recent court proceedings involving Garg in Bermuda have revealed more interactions.

In January 2018 Garg’s Dubai-based company AGEV Investment signed a loan facility for $5-million with Jalan’s company AgioImage. The next month Jalan reciprocated by extending a loan facility of $20-million to AGEV.

A month after that loan agreement was signed, AGEV proceeded to try and buy the Guptas’ airplanes stuck in South Africa as an ostensible independent investor. The attempt was thwarted by the Reserve Bank, as amaBhungane reported.

“The loan extended by Mr Jalan to Mr Garg [or] to entities controlled by him was a commercial, arm’s length transaction. Mr Jalan denies any suggestion of impropriety in respect of that transaction,” said Jalan’s lawyers.

Jalan also cut the Guptas a cheque for R12-million to help pay for another of the family’s mega-weddings early last year.

The lawyers have an explanation for this too. According to them “Mr Jalan’s brother wished to make a contribution as is a common custom between Indian families associated by marriage or engagement”. Jalan however paid on behalf of his brother because the latter owed Murari money, they said.

[sidebarContentSingleImage target=modal url=https://amabhungane.org/wp-content/uploads/2020/10/201013-Where-are-the-Guptas-Now_-3.3-with-designations-fixed-smaller.png][/sidebarContentSingleImage]

In other words, Jalan did not really give the Guptas money despite having written the cheque.

Then there is another plane-related deal from 2018, again tying the Jalans to the Guptas.

In India, Gupta investment company LCR Investments owned 68.5% of another company called Heritage Aviation, a licensed carrier with a single jet registered in its own name. The company has however functioned for many years as the operator of aircraft owned by the Gupta family via companies in Dubai under lease agreements.

On 13 July 2018, LCR Investments entered into an agreement with a Jalan holding company in India, Bengal Orion Financial Hub.

The Guptas were selling their stake in Heritage to Bengal Orion for INR68.5-million (R13-million at the time). Ankit Jalan, Murari’s nephew, signed on Bengal Orion’s behalf and then became a director of Heritage.

There is some dispute over whether the transaction involved Murari Lal Jalan.

Share registers from India seem to show Bengal Orion was still under his control, with a 78% stake, on 26 November 2018, months after the agreement was signed.

Murari’s shares were at some stage transferred to his brother Vishal, the father of Shivangi, who married into the Gupta family. Vishal is one of three Jalan brothers. Murari’s acolyte Ankit is the son of the third one, Narayan Jalan.

Jalan’s lawyers claimed that Murari had in fact transferred his shares to Vishal in 2017 already and was thus not a shareholder when the Heritage deal with the Guptas took place and that he had “no involvement in or knowledge of” it.

Contemporaneously with that deal the Jalans and Guptas were also setting up two new companies in India called Patanjali International and Patanjali India Distribution respectively.

The former was registered on 10 December 2018 with Shashank Singhala (Atul Gupta’s son who married into the Jalan family) owning 49.4% while Ankit Jalan owned 33% and Achla Gupta (the mother of Vega Gupta, who married Aakash Garg at Sun City) 17%.

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Patanjali India Distribution was registered in January last year with Anil Gupta, Achla’s husband, owning 99.4%. Shashank Singhala, Murari Lal Jalan and others owned nominal shares.

Jalan’s lawyers said this was “a not-for-profit company incorporated specifically for doing charitable work … which never got off the ground”.

A few false starts aside, it is becoming clear that, far from bunkering down in Dubai, the Gupta family’s next generation has gone into the fray with greater ambition than ever.

*Members of the extended Gupta family have consistently failed to respond to requests for comment from amaBhungane. We no longer solicit comment but welcome any that may be offered retrospectively.

The post After state capture, Guptas and friends are flying high appeared first on AmaBhungane Centre for Investigative Journalism.

The four year contract, which was capped at R22.4-million in the service agreement, went to ZAM Projects under highly suspicious circumstances.

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Seleke was alleged to have worked with ZAM and its owner, Zola Key, when Seleke was head of the Free State department of economic development, tourism and environmental affairs.

The contract produced a failed TV programme and a conference that never happened, with the auditor general subsequently calling out fruitless and wasteful expenditure of over R700 000 (and another possible R1-million) relating to ZAM.

In 2018, Seleke left the DPE after arch Gupta opponent Pravin Gordhan took over as minister.

The #GuptaLeaks had revealed that, before he was appointed, Seleke’s CV was forwarded to former president Jacob Zuma’s son Duduzane via the infamous “infoportal@zoho.com” account.

The email address also known as “Business Man” was almost certainly controlled by Gupta lieutenant Salim Essa.

Seleke was appointed director general in November 2015.

The Zondo Commission has since heard claims that as early as  2011 Seleke was summoned to the Gupta compound and presented as a candidate to head the Free State department of economic development, a post to which he was appointed in 2013.

Following Gordhan’s appointment in February 2018, allegations were raised suggesting that there may have been irregularities in the manner in which ZAM was engaged.

The DPE launched an investigation and appointed Abacus Financial Crime Advisory to investigate.

Leaked reports, marked “draft” or “confidential” and obtained by amaBhungane, set out in detail the Abacus findings of how Seleke allegedly interfered in the procurement process and placed undue pressure on officials to ensure that ZAM received the contract  even though their bid was initially described by one evaluator as a “poor”, “dishonest” and “unacceptable” “cut and paste job”.

The reports describe a “fundamentally flawed and irregular” process, whose roots could allegedly be traced to Seleke’s office, to appoint ZAM.

Investigators also found that ZAM’s contract was poorly managed by the department’s officials resulting in irregular as well as fruitless and wasteful expenditure for work performed by ZAM.

Abacus conducted interviews with former and current officials who were involved in ZAM’s procurement and overseeing the company’s work. The process also included a review of documents related to the bid, financial documents such as invoices and quotations for work conducted and email exchanges.

Abacus’s investigation took place between February and August this year.

Abacus states that it was unable to reach Seleke for comment on two different cellphone numbers before submitting its draft reports.

AmaBhungane sent detailed questions to Seleke and Key.

Seleke said he had not heard of the investigation and denied that attempts were made to get hold of him. He also declined to respond to amaBhungane’s questions unless he was provided with the reports. AmaBhungane provided him with extracts relevant to the claims made in this article, but Seleke still did not respond.

Key referred questions to his lawyers stating that ZAM and the DPE were currently engaged in litigation. His lawyers also asked to be provided with the reports before responding. AmaBhungane provided his lawyers with relevant extracts but they too failed to respond.

The set-up

Abacus reports DPE staff told its investigators that after Seleke arrived in December 2015, there were complaints “from the leadership of the department” about the standard of events arranged by the communications unit.

Seleke, Key and the powerboat festival

Abacus’s investigators were not able to establish a direct relationship between ZAM Projects, its owner, Zola Key, and former public enterprises director general Richard Seleke But officials told them that the company had worked with Seleke in the Free State.

Before moving to public enterprises, Seleke was head of provincial department for economic development, tourism and environmental affairs, a role he was appointed to in 2013.

According to ZAM’s website, the company provided event management services to the Free State government for its annual Phakisa powerboat festival that ran from 2011 to 2015. The festival is hosted by an entity of the department, the Free State gambling, liquor and tourism authority, and Ngwathe Municipality in Parys.

Powerboat South Africa’s president, Christo De Jager, whose organisation worked with Key on the events, told amaBhungane that when Powerboat SA asked about some of Key’s budgeting or payments, Key would decline saying, “I can’t show you that because I have to take care of certain people.”

De Jager claimed “Richard’s” name “came up regularly”. “He specifically said I need to take care of the [head of department] and I have a good relationship with him or whatever the case may be.”

Subsequent to the 2014 event De Jager said Powerboat SA took the decision to stop working with Key, declaring him as a “persona non grata”.

Because of this experience, the association made a resolution to not use external event managers for any of their events. Neither Key nor Seleke responded to questions about de Jager’s claims.— Tebogo Tshwane[/sidebarContentStory]

When a DPE official argued that the department’s communications team was adequate, he was told that the complaint had come from Seleke.

Abacus records, “We were informed that Seleke took a personal interest in the appointment of an external communications and events management service provider. [Redacted] informed us that the procurement process, that ultimately led to the appointment of ZAM, was initiated by Seleke shortly after he joined the DPE, and that decisions and instructions relating to work to be performed by ZAM emanated from the office of Seleke.”

Abacus says several DPE officials informed it that Seleke and Zola Key, the owner of ZAM, had a pre-existing relationship.

“Although we were unable to identify a direct relationship between Seleke and ZAM, we determined that Seleke was employed within a Free State provincial department at the same time that ZAM rendered events management services in the Free State.”

While Abacus took the link between the men no further, amaBhungane did (see Seleke, Key and the powerboat festival).

Instead it was Seleke’s interventions during the bid evaluation process that investigators concluded “strongly suggest conduct influenced by a conflicted relationship”.

In simple terms, the evaluation is done in two stages in line with the department’s procurement policy.

The first stage looks at the functionality scores of the bidders. Those who meet the minimum threshold progress to the second stage where price and empowerment standing are evaluated.

All the evaluation committee members are then required to sign off a document with all the consolidated scores and make a recommendation for the bid adjudication committee.

The adjudication committee will hold its own meeting to consider the recommendation of the evaluation committee against all supporting documents. At this stage the committee will either forward a final recommendation to the director general or, if the recommendation is declined, refer it back to the evaluation committee.

Round 1: ZAM is on the floor

For this specific contract the minimum functionality threshold was 70%; this meant that a bidder had to score at least 665 points out of a possible 950 to be considered for further evaluation.

In February 2016 the evaluation committee met to consider 29 bid proposals.

At the end of the first stage only two companies had met the functionality criteria and ZAM was not one of them.

In fact, ZAM scored only 281.67 points on functionality, the Abacus report states.

One of the committee members made the following comment on their scoresheet:

“Poor proposal. Evidence in document of cut & paste job .. .no attention to detail. Documents not authentic. Dishonest. Require 3 months lead time in advance that the DPE doesn’t have. Unacceptable.”

C-Squared Group and Change Strategies with 806.67 and 751.67 respectively were the only ones to proceed to stage two of the evaluation where C-squared was recommended as the winning bidder after scoring 98 points on price and B-BBEE.

The bid evaluation process had been finalised. The next step would be to forward the recommendation memorandum to the bid adjudication committee.

But six days later, at the beginning of March, members of the evaluation committee received an invitation to convene a re-evaluation process.

Abacus states: “The first recommendation of the [evaluation committee], which did not include ZAM – which was formally documented and approved, was questionably not submitted to the [adjudication committee] for approval, but rather shared directly with Seleke.”

The report states that at least one panellist said he was told they had to reconvene because the “boss”, which he understood to be Seleke, wanted to appoint a panel of service providers to spread the risk of the contract.

Remember, the procurement policy allows for a re-evaluation only if the adjudication committee rejects that initial recommendation. “In this instance,” the report says, “the adjudication committee] could not have rejected the [evaluation commmittee] recommendation as it has not received it,” the report reads.

 “This interference by Seleke was improper and irregular.”

The events of the re-evaluation meeting would be even more irregular.

Round 2: ShaZAM! One score more than doubles

Whereas in the February evaluation only two bidders met the minimum threshold, after the re-evaluation ZAM’s points increased a whopping 390 points, from 281.67 to 671.67.

The panellist who made strong unfavourable remarks during the first evaluation and gave ZAM a score of 270 in round 1 ended up changing this to a final score of 720 during the re-evaluation.

“We were not able to find an acceptable and agreeable rationale for this significant increase,” the investigators noted.

In an interview with one of the committee members, investigators heard how he was placed under “undue pressure” to change his score for ZAM when he scored the company under the functionality threshold. A heated debate ensued where he was told that if he did not want to amend his score he “should go and tell the DG that [he] no longer wanted to be part of the process”.

The investigators point out that this was key to pushing ZAM’s score over the qualifying threshold.

Round 3: ZAM scores a knockout

Now the evaluation committee had three qualifying bidders which it recommended to the adjudication committee to be considered for a panel of service providers. The final decision on how many service providers would be appointed on the panel was left to Seleke as director general in consultation with stakeholders.

But the adjudication committee was not informed or given documentation about the first evaluation process.

This means the adjudication committee was not aware of the initial evaluation and the different outcome.

Documents from the first evaluation were also initially not provided to investigators until they questioned a February 2016 date on one of the scoresheets that did not correlate with the ones they had from March.

The adjudication committee meeting was held via round-robin on March 15. Four panel members were in support of the evaluation committee’s recommendation while two others asked for clarity on why the department was outsourcing expertise it already had in-house.

These queries were not responded to and the bid adjudication committee did not in fact make a recommendation to Seleke.

But the supply chain management representative prepared a recommendation memorandum in which it said a panel of service providers should be appointed.

This document  was submitted to Seleke for approval despite not being signed by the adjudication committee chairperson as required by the procurement policy.

On the same day, March 15, Seleke made the decision to appoint “the highest scoring bidder” instead of a panel as recommended. ZAM had the highest score on cost and empowerment of the three, so once it was pushed over the functionality line, it came out top.

The investigators noted, “[After] Seleke’s initial improper and questionable influence and interference which led to the [evaluation committee] reconvening … with the purpose of appointing a panel, he inexplicably only approved the appointment of one service provider, being ZAM.”

Fruitless and wasteful

Investigators uncovered other irregularities in the manner that ZAM’s services were engaged by the department.

Even though ZAM’s approval letter, dated March 16, states that ZAM should not proceed with any work prior to a contract being finalised, documents reviewed by investigators show that this was disregarded.

ZAM’s contract was completed on April 28 but documents show that the company had already started working under the letter of award. As a result the department had to account for R1.35-million in irregular expenditure which was condoned by Seleke without a contract in place.

In its 2018/2019 report on the department, the auditor general’s office confirmed R713 000 in fruitless and wasteful expenditure after ZAM’s contract was extended to produce a failed TV series called Econonetics as part of Seleke’s strategy to profile the work of the department and its state-owned companies.

Meeting minutes show that Seleke tabled the idea at an  executive committee meeting in June 2016 and ZAM made a presentation on it. Investigators believe Seleke abused the committee to push this idea through because the structure was asked to approve the idea despite having “no decision making powers”.

But the 10-episode TV programme which was meant to air on the SABC never took off.

ZAM provided the department with at least three broadcasting dates which were not met due to delays in finalising a formal contract agreement with the SABC. In emails to the department, Key put the blame on the “state of affairs” at the SABC which at the time was contending with internal issues, including a labour dispute over the unfair dismissal of journalists.

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Following delays stretching into 2018, including an aborted attempt to air the show on ANN7, the production was suspended.

In its recommendations, Abacus said the department should consider submitting the findings in its reports to the Special Investigation Unit and the SIU Tribunal to set aside ZAM’s contract and potentially recover losses.

The firm said this could possibly include remedial action against Seleke and other officials in the department.

The post Instructions from the boss: Gupta-linked public enterprises DG in ‘irregular’ R22m procurement  appeared first on AmaBhungane Centre for Investigative Journalism.

But for the most part, these warnings were ignored, former SAP Africa chief financial officer Deena Pillay told the Special Investigating Unit (SIU).

Pillay is one of the three executives who resigned from SAP after our #GuptaLeaks investigations revealed that SAP had paid over R100-million in commissions to Gupta-controlled companies for help securing software deals at Transnet and Eskom.

So far Pillay has refused to talk about his role in the scandal. But in July, the SIU and the department of water and sanitation filed a civil case against SAP with the Special Tribunal, the court set up to fast-track state capture cases. Included was a 20-page affidavit from Pillay and almost 200 pages of internal emails and SAP documents.

The SIU and department want SAP to repay R413-million for software licences they allege the department procured irregularly and were never used.

*Read New evidence points to corruption in SAP’s R1-billion water deals

Pillay states in his affidavit that he became concerned about the practice of paying commissions to “business development partners” soon after he joined SAP in 2012. Business development partners are outside companies that are rewarded with commissions for bringing new business to SAP or for being what SAP documents describe as the “effective cause” of concluding new contracts.

Pillay told the SIU that he took his concerns to a senior executive in SAP’s Europe, Middle East and Africa (EMEA) region.

“[H]e said if I knew monies were being paid as bribes, we should not use [business development partners]. I told him I would never know if bribes were being paid and that all I could do was rely on the [business development partner] signing an anti-corruption questionnaire” and rudimentary due diligence reports.

Pillay said he raised his concerns again in 2013 at a conference in Germany but that a senior member of SAP’s global compliance team told him that the practice of paying business development partners was a “global policy”.

Pillay told the SIU that by 2016 “SAP Africa had the highest cost globally for the use of [business development partners].” He claims he approached Peter David, SAP’s new chief financial officer for the EMEA region, to warn him that commissions paid to business development partners were getting out of hand.

“I told [David] that every public sector deal was being concluded with a [business development partner] and that the cost was impacting both the local subsidiary and the EMEA expense budget.”

At the time, SAP had just agreed to pay 29.8% of the water department software deal to two business development partners. This would have amounted to R134-million in commission on a single deal, although only R86-million was ultimately paid.

“He suggested that we limit the percentage being paid, it did not resolve my concern as to whether bribes were being paid. I therefore requested that he discusses the matter with [SAP global chief financial officer] Luka Mucic … to seek cancellation of this programme … but there was no feedback whatsoever to this request,” Pillay claims in his affidavit.

It was only after allegations were first made in February 2017 that SAP paid kickbacks to secure the water department deal, that Pillay got the opportunity to speak to Mucic at another conference in Germany. “I raised my concerns once again … and asked him if SAP was still going to continue with the programme. His response was, yes – applied correctly it could add value.”

Three months later, the #GuptaLeaks scandal broke, bringing to light evidence that SAP had paid more than R100-million in “commission” that looked like kickbacks to Gupta-controlled front companies for help securing contracts at Transnet and Eskom.

Pillay, whose signature was on some of the commission agreements, was suspended along with three other executives. While two of his colleagues resigned, Pillay fought to keep his position.

In his affidavit to the SIU he alleges that, on the day of his disciplinary hearing in February 2018, he was bullied by a senior SAP executive. “He told [me] that if I continue to defend the matter, even if I was successful in defending myself, SAP would contest the outcome and drag out the process until I was financially bankrupt.

“I could never compete against the resources of a multinational giant like SAP, I gave into the threat and resigned.”

How deep does the rot go?

Pillay cannot entirely recast himself as a whistleblower though; an email included in his affidavit shows he motivated for SAP to make advance payments to two business development partners seemingly in order to secure the water department deal:

“Due to the size of the deal the partners are asking for an advance payment of €600k (€300k each) to defray expenses they have already incurred. As a principle, we do not pay commission in advance on [business development partner] led deals – following this request I have received an exception from the compliance team subject to your approval,” Pillay told David in a 27 June 2016 email marked “Confidential”.

“If you are in agreement to this advance payment we will get the signed contract from the customer (DWS) tomorrow.”

David agreed, provided the department “irrevocably signed” the contract first.

Instead Pillay’s goal in co-operating with the SIU seems to be to show that corruption was an ever-present risk considering how how SAP did business all over the world, and not – as SAP has suggested – a breach by a few rogue executives in South Africa.

Pillay declined to speak to us, but on this point, he has backup from SAP’s own documents: The standard sales commission agreement has many clauses asking new business development partners to promise that they will not engage in corruption, but few explaining what business development partners will do to earn their fees.

From the water contract we know that one of the tasks SAP set was to “meet informally with the Minister” in order to sell the deal, even though ministers have no legitimate role in procurement.

Then minister Nomvula Mokonyane is adamant that these meetings did not take place, but the business development partner was nonetheless paid R86-million.

New business development partners were also required to undergo a due diligence to ensure, according to the SAP handbook, that they were “a properly licensed/registered, legitimate business” and “not merely a shell company … recently created for the purpose of channeling payments”.

While this approach seems prudent, it also raises the question: Did SAP expect corruption at every turn because often the reason for paying millions to business development partners was otherwise so paper-thin?

As SAP conceded in a leaked 2016 memo: “Commissions are the highest risk method of engaging with partners largely because the partner’s role in the deal is usually not transparent. It is possible the customer may not even know the partner was involved, which would make the likelihood that the partner performed legitimate, value add services unlikely.”

As a result, business development partners “could hide entirely behind the scenes – unknown to competitors or the end customer as having participated in the deal. Therefore, this model is subject to abuse and is most often at the centre of corruption cases you may read about globally.”

But what SAP admits to internally is different to what it is willing to say in the public domain.

SAP goes dark

In March 2018, SAP gathered a handful of South African journalists for a press conference and announced its investigation had found “irregularities” and “question marks” in deals secured with the help of Gupta-linked companies.

“For us at SAP this has been a deeply humbling and humiliating process. There’s no doubt we have considered it to be an extremely serious incident in our business… We understand many of our partners and customers have been disappointed and let down by SAP,” said Adaire Fox-Martin, a member of SAP’s global board, adding that SAP was “absolutely committed” to uncovering wrongdoing.

By this point, SAP had already self-reported possible violations of the Foreign Corrupt Practices Act to the US Department of Justice.

In an accompanying press statement, the company said: “SAP continues to investigate the public sector business in South Africa going back to 2010. If SAP identifies any further matters of concern, it will address them with the same attention and robustness as the Transnet and Eskom investigations.”

Asked why SAP had apparently failed to investigate the water deal when allegations first emerged in February 2017, then chief compliance officer Philipp Klarmann said: “There was an audit done… The audit [had] not been concluded until July, and then the new story broke. So [it] is still under investigation… We prioritised Transnet and Eskom but we are continuing the water [investigation] as part of this overall public sector review.”

During the press conference, Fox-Martin committed to provide a list of all commissions paid on public sector contracts as soon as SAP’s investigation was done, which SAP said should take roughly six months.

But when amaBhungane followed up in November 2018, SAP said the investigation was “still ongoing”.

In May 2019, we sent more detailed questions about the water deal to SAP. But by this point, President Cyril Ramaphosa had signed a proclamation instructing the SIU to investigate the deal.

“SAP’s compliance-related investigation into all public sector contracts in the region, going back to 2010, is still ongoing,” an SAP spokesperson told us, adding: “We recognise that the investigation is taking longer than anticipated… SAP cannot comment further, until the completion of the government-led inquiries.”

Since then, both the local and global office of SAP have refused to answer questions about the water deal, instead recycling the same statement first provided in November 2018:

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“SAP Africa will follow due legal process and continue to cooperate with both South African and US authorities in their ongoing investigations. SAP remains committed to the highest standards of business ethics. Our policy is, and always will be, to carry out all company activities in accordance with the letter and spirit of applicable laws in the more than 180 countries in which we operate.”

None of the current SAP employees that Pillay named in his affidavit responded to a request for comment routed via their employer. Instead SAP sent a statement: “Our commitment is to continue to cooperate fully with the relevant authorities and their investigations. SAP cannot respond further, until the completion of these government-led inquiries.”

The post Former SAP exec implicates global software business in corruption probe appeared first on AmaBhungane Centre for Investigative Journalism.

The SARS letters were to inform Linkway that its assessments for income tax and VAT had been massively adjusted for the tax years 2013 to 2016.

SARS alleged that Linkway had effectively underdeclared taxable income by R197.5-million and had reclaimed R24.5-million in VAT it was not eligible for.

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That translates into a tax liability likely in the region of R80-million, excluding interest and penalties.

Linkway’s main claim to fame is being the conduit through which R30-million came into the country from Dubai to pay for the infamous and absurdly lavish Sun City wedding of 2013.

The extravaganza was claimed as a business expense using some creative accounting and the connivance of KMPG audit partner Jacques Wessels, as previously reported by amaBhungane and our #GuptaLeaks partners.

The money was diverted from the Estina dairy project in the Free State before being routed through a Dubai company called Accurate Investments back to Linkway in South Africa.

SARS has now finally taken action against this brazen abuse. The Independent Regulatory Board for Auditors deregistered Wessels last year for his role in the scandal.

Part of SARS’s threatened adjustment to Linkway’s taxable income is that the entirety of the wedding expense will be disallowed as a “business expense” and become taxable.

“It appears that Linkway Trading was merely a conduit or directly and indirectly acting as an agent of Islandsite and the four directors,” SARS notes in one of its letters.

Linkway is a subsidiary of Islandsite Investments 180, the company that also owns the Gupta family’s luxury properties, jet and other assets in South Africa.

The four directors of Islandsite that SARS referred to are two of the Gupta brothers, Rajesh “Tony” and Atul, and their wives, Arti and Chetali.

Beyond Sun City

The infamous wedding is seemingly far from the only use Linkway was put to, the SARS audits reveal.

The company was mostly active in the 2013 and 2014 tax years (1 March 2012 to 28 February 2014). The total amount of cash that moved through its account dwarfed the amount spent on the nuptials.

In the 2013 tax year the company received deposits of R113.2-million and made payments of R112.6-million, SARS found.

In the 2014 tax year it received R106.1-million, which includes the money from Dubai for the wedding.

The striking thing about the 2013 year is that almost the entire amount of money that moved through Linkway’s account, R105-million, arrived in a brief 12 day period between 29 June and 10 July 2012.

There is convincing evidence that Linkway lied about what this money was for.

It supposedly consisted of payments made by yet another Gupta company, Confident Concept, for unidentified “goods or services” it was buying from Linkway.

However Linkway was buying the selfsame “goods and services” from Islandsite with a negligible profit margin of 0.33%.

Confident Concept is owned by the four Guptas who own Islandsite.

A set of invoices were produced on the exact same day for both sides of the supposed transactions: i.e. Linkway issued an invoice to Confident Concepts and simultaneously received an invoice from Islandsite. But this was only done some seven months later only, in February 2013.

The actual payments in the previous June and July, and the justification for the payments, do not line up at all.

For the taxman this means that the supposed business expense of buying things from Islandsite was “overstated” insofar as it did not exist at all. This R105-million then becomes taxable.

There were also other problems SARS flagged on the taxation front like the absence of invoices for supposed purchases from Gupta TV channel ANN7.

Given that the same company, Linkway, was the recipient of laundered money mere months later, the R105-million raises an obvious question: why was it moving through a known Gupta money-laundering vehicle in the early days of the family’s state capture adventures?

The dates for the payments into Linkway do not correspond to any of their well-known projects or scandals.

Who pays?

Linkway was given 21 business days to challenge the SARS audit findings, failing which it will be liable for the adjusted tax. That grace period ran out on the 15th of this month and it is unclear whether the company took up the offer.

The process started on 19 November last year when SARS first asked for information in order to conduct an audit. Linkway cooperated until a further request for information on 17 July. Linkway went quiet which led to SARS dispatching the letters of findings last month.

It is unclear why the company initially cooperated and then broke off communications. The SARS letters were sent to Linkway attorney Michelle Du Preez.

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Du Preez confirmed to amaBhungane that she acted for the company, but said she could not answer questions due to taxpayer confidentiality.

If the tax adjustment is confirmed, it remains to be seen how the money might be recovered and not simply add to the billions of rands’ in damage the Guptas wrought on the South African economy.

Linkway is in the process of being deregistered, which means SARS may pursue its directors for the taxes it says are owed.

Even though Rajesh Gupta and other recurrent Gupta executives had previously been directors of Linkway, the only directors during the period covered by the audits were Gupta loyalist Ronica Ragavan and one Kevin Thysse.

*This story was amended after publication to correct an interpretation of what SARS had found in relation to the R105-million.

For more #GuptLeaks exposés click here.

The post SARS hits Guptas with major tax bill and unearths R105m in mystery payments appeared first on AmaBhungane Centre for Investigative Journalism.

The order allowed the IDC’s lawyers in New York to subpoena 17 banks the Gupta family, their associates and several connected companies had used to transact in dollars as part of the family’s global money machine.

Payment systems work in such a way that Dubai-based transactions through the branches of the same banks could also be exposed.

The consequences of this order could reach far wider than only giving the IDC the ammunition it needs to win its civil claim to R287-million on a 2010 loan it handed the Gupta family to purchase Shiva Uranium.

And the Gupta family knows it.

Through its flagship local company, Oakbay, they are seeking to intervene in the Southern District of New York case, having caught wind of the order when notice of it was served on the company and its Mauritius-based partner, Action Investments.

Oakbay wanted an undertaking that the records the IDC obtain would only be used in the ongoing litigation between the IDC and Oakbay in a South African high court and furthermore, that the records be kept confidential.

The IDC was not opposed to the relief sought, according to court papers, but said it wanted the right to approach the court in future if it wanted to use the records elsewhere.

A teleconference with Judge Katherine Polk Failla was scheduled for 22 September and the issues were to be ironed out.

But the subpoenas had already been served, and according to the court papers, the IDC was asking for financial records, instructions and wire transfer notes relating to:

• Oakbay Resources and Energy
• Oakbay Investments
• Shiva Uranium
• Action Investments
• Ajay Gupta
• Atul Gupta
• Rajesh Gupta
• Islandsite Investments 180
• Gateway Ltd
• Fidelity Enterprises
• Estina
• Accurate Investments
• Unlimited Electronics and Computers
• Saranya Investments

Or, in short, the most prominent of the Gupta empire’s Dubai and SA money boxes.

For the Gupta family, the stakes are high – the records could put paid to their protestations of innocence over allegations of share price manipulation in the listing of Oakbay Resources, and allegations that the family round-tripped and laundered government funds from the Estina project and Transnet kickbacks to pay for the whole affair.

The IDC alleged in court papers that the Guptas had broken an anti-fraud covenant made to it by round-tripping Estina money. This was first exposed in the amaBhungane-Scorpio-News24 #GuptaLeaks collaboration.

Our #GuptaLeaks reports also showed how money from kickbacks paid to the Guptas on Transnet’s locomotive procurement apparently was used to manipulate the Oakbay Resources share price.

Warpath

The litigation between the IDC and Oakbay has been dragging on since 2017. Oakbay filed an exception in 2018, but the court ruled in favour of the IDC in November 2018.

An unopposed motion to compel discovery of documents was placed on the roll by the IDC in October 2019 after Oakbay failed to file responding affidavits on time, only for the IDC to withdraw the matter days later.

Fast forward to July 2020 – and the New York application.

“In discovery in the South African proceeding, the IDC has reviewed documents detailing unlawful conduct with respect to the allegations in the IDC claim, in part, through the improper use of multiple international bank accounts,” the IDC stated in its notice of motion filed in the US.

The IDC explained that it had discovered that monies flowed freely between Estina’s accounts held in the Bank of Baroda and Standard Bank – money that was paid to Estina by the Free State government for the Vrede dairy farm project.

Gupta holding company Oakbay Investments (OIL), it told the court, had produced an extract from its own Baroda account which showed that, on 25 September 2013, it received two payments totalling roughly R31-million from Dubai-based Gupta front, Fidelity.

Fidelity was part of the money laundering machine that the Gupta family used to channel funds back into South Africa from Dubai.

“OIL asserts that it received payments from Fidelity relating to an arms-length share sale transaction with it. The IDC believes that the funds evidenced in these two transfers flowed from the Estina accounts, through Gateway and Fidelity, and ultimately into OIL’s account as part of a round-tripping money laundering exercise,” the IDC said.

“Upon information and belief, the payments from Estina through the UAE entities, and ultimately to OIL, were made in part in US Dollars. The discovery indicates that at least one such payment, made in March 2014, was via a New York Bank,” it added. Fidelity, the IDC posited, used Mashreq Bank to route money in dollars to Oakbay Investments.

The net result of the IDC’s submissions was that the records could prove multiple instances of securities fraud in both South Africa and the US.

“Given the abundance of existing evidence that the South African defendants and those acting on their behalf regularly transacted in US Dollars in scenarios in which criminal activity has been credibly alleged, the New York banks will likely reveal presently unknown evidence of activities that would constitute further breaches of the Loan Restructuring Agreement and, in turn, justify the IDC’s decision to terminate the agreement and seek redress in the South African court,” the IDC submitted.

For prosecutors in South Africa, these records could prove to be an invaluable resource in shoring up its case against the Gupta family in the Estina matter and other investigations – if they could gain access to them.

The state had tried, and failed, to prosecute the Estina case once before.

“For obvious reasons, the defendants have not been forthcoming with documents that incriminate them,” the affidavit of IDC’s lead counsel Nazeer Cassim read.

He added that the IDC would be seeking to subpoena further documents from South African banks, the JSE and the Bank of Baroda.

The IDC granted a R250-million loan to Oakbay to purchase Shiva Uranium in 2010, but when the loan repayment became due and the Gupta’s couldn’t pay, the loan was restructured.

The terms of the restructured agreement were so favourable to the Gupta family that it led to one expert labelling it “commercially inexplicable“.

The Gupta family maintained their innocence and denied in court papers that they manipulated the share price of Oakbay.

It was now up to the IDC to prove their allegations, and the New York banking records could be the deciding factor.

*For more #GuptLeaks exposés click here.

The post New York court grants IDC access to Gupta financial records from 17 international banks appeared first on AmaBhungane Centre for Investigative Journalism.

2020

15 January 2020 The dirt on Deloitte’s consulting deals at Eskom, Part 1

16 January 2020 The dirt on Deloitte’s consulting deals at Eskom, Part 2

17 February 2020 Mkhwebane intent on destroying office of the public protector, senior official tells Parliament

20 March 2020 Deloitte agrees to #PayBackTheMoney to Eskom

9 April 2020 Update: In the wake of Eskom scandal, two Deloitte directors resign

1 June 2020 Locorruption reloaded: We reveal Gupta kickback contracts worth R9bn

1 June 2020 How the Guptas’ R9-billion loco heist went down

1 June 2020 Listen: Stefaans Brümmer unpacks his ‘Locorruption’ investigation

8 June 2020 Eskom demands PwC pay back R95-million in consulting fees

16 July 2020 Premiers, ministers, Guptas: the mysterious powers of VBS fixer Danny Msiza

5 August 2020 Update: Here are the papers in Eskom’s multi-billion state capture summons

21 September 2020 New York court grants IDC access to Gupta financial records from 17 international banks

21 September 2020 SARS hits Guptas with major tax bill and unearths R105m in mystery payments

23 September 2020 Obituary: Regiments Capital

7 October 2020 Update: VBS finance boss Truter strikes deal with NPA

22 October 2020 After state capture, Guptas and friends are flying high

2019

17 January 2019 Update: Chinese rail supplier returns R618m to Transnet

8 February 2019 Guptas drop millions on double wedding

24 April 2019 Listen: Susan Comrie discusses the latest corruption allegations against Transnet

3 May 2019 Update: My big fat Gupta wedding – the movie

12 July 2019 Another Gupta wedding brings shadowy in-laws into the fold

2 September 2019 R349m ‘stolen’ from pensioners in four days

5 September 2019 The barren Sahara: a lesson in money laundering

5 September 2019 Capitec blocks state capture payback

6 September 2019 Watch: Susan Comrie takes Colombian journalism students behind the scenes of covering the #GuptaLeaks

15 December 2019 State Capture 2.0 Part 1: Spies instructed public protector on SARB report

15 December 2019 State Capture 2.0 Part 2: Mkhwebane ordered investigator to ‘remove information’ on Ace, Zwane in Estina report

21 December 2019 Exclusive: Meet the whistleblower taking a stand against Public Protector Busisiwe Mkhwebane

2018

19 January 2018 #GuptaLeaks: Meet the money launderers

19 January 2018 #GuptaLeaks: Liverpool company owns 49% of Indian firm implicated in kickback scheme

19 January 2018 #GuptaLeaks: Indian politician’s deal with Gupta partner

7 February 2018 #GuptaLeaks: How Bank of Baroda’s misadventures dragged it into SA’s political crisis

6 March 2018 Mediosa management mum, on the run

8 March 2018 SAP’s #GuptaLeaks investigation finds “irregularities” and “question marks”

9 March 2018 The great train robbery Part 1 – the Zurich tryst

9 March 2018 #GuptaLeaks: The high altitude hijack

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23 March 2018 The great train robbery Part 2 – The choo-choo switcheroo

28 March 2018  The Nkonki Pact Part 1: How the Guptas bought themselves an auditor

29 March 2018 The Nkonki Pact Part 2: Eskom’s new billion-rand consulting deal for Essa & Co

13 April 2018 Nkonki CEO resigns after we expose Gupta fronting deal

23 April 2018 The Nkonki Pact Part 3: Eskom funded Essa’s capture of audit firm

3 June 2018 A total train-smash: the R16bn ‘Gupta premium’

30 July 2018 The “Gupta Minyan” and the R647-million Transnet scam

15 August 2018 The Trojan horse that wheeled R600m out of state-owned entities

10 September 2018 Guptas siphoned R100m-plus from China loan, evidence shows

20 September 2018 #Guptaleaks: How Gupta companies faked their way around visa restrictions

25 October 2018 The insider: Booze, bogus invoices and a Range Rover Sport

12 November 2018 Guptas ‘tried to use front’ to extract Sahara assets

23 November 2018 Behind coal tug-of-war, more Gupta strings

27 November 2018 Update: Gupta suitor loses claim to Optimum

[sidebarContentVideo id=168 url=JTUaJpxYwuw][/sidebarContentVideo]2017

9 February 2017 Read the Eskom report: A R20m investigation into the state-owned utility was cut short by its board

16 February 2017 Gupta-owned newspaper in line of fire of new Nielsen report

19 February 2017 EXPOSED: The Guptas and the ‘box of gems’

22 April 2017 R10bn in 15 days – another massive Eskom boost for the Guptas

23 April 2017 Tegeta’s R7-Billion Bonanza

16 May 2017 EXCLUSIVE: How Brian Molefe ‘helped’ Gupta Optimum heist

18 May 2017 Advocacy: AmaB wins access to information battle over Gupta Waterkloof landing

18 May 2017 EXCLUSIVE Gupta mine grab: how Brown misled Parliament

1 June 2017 Editorial: The #GuptaLeaks revealed

1 June 2017 #GuptaLeaks: Guptas and associates score R5.3bn in locomotives kickbacks

1 June 2017 #GuptaLeaks: Guptas pushed Eskom for R1.68bn prepayment

1 June 2017 #GuptaLeaks: Did Gigaba and officials grease Gupta gears?

1 June 2017 #GuptaLeaks: Duduzane Zuma, Kept and Captured

1 June 2017 #GuptaLeaks: UK PR firm tried to push ‘white monopoly capital’ agenda to save Zuma’s reputation

1 June 2017 #GuptaLeaks: The R331m Dubai Mansion

3 June 2017 #GuptaLeaks: Duduzane Zuma’s UAE residency confirmed

5 June 2017 #GuptaLeaks: Despite denials, Free State dairy farm was huge cash spinner for Guptas

5 June 2017 #GuptaLeaks: The ‘Gift’ that keeps on giving

5 June 2017 #GuptaLeaks: How Guptas went behind government’s back on Dalai Lama

5 June 2017 #GuptaLeaks: The Zuma at the Gupta gate

6 June 2017 #GuptaLeaks: How Bell Pottinger sought to package SA economic message

6 June 2017 #GuptaLeaks: How Sun City had to fight the Guptas for wedding payment

7 June 2017 #GuptaLeaks: Guptas planned to buy Primedia and build a government-supported media empire

7 June 2017 #GuptaLeaks: Oakbay ‘doing the right thing even when no-one’s watching’

8 June 2017 #GuptaLeaks: Guptas tipped off about SARS investigation unit

9 June 2017 #GuptaLeaks: How Eskom was captured

9 June 2017 #GuptaLeaks: Emails offer further proof of Gupta racist attitudes

10 June 2017 #GuptaLeaks: How the Guptas screwed Denel

12 June 2017 #GuptaLeaks: Delhi Daredevils staff member contacted Guptas for visa assistance

12 June 2017 #GuptaLeaks: How captured ambassador lobbied the Dutch

14 June 2017 #GuptaLeaks: Another CV, another Eskom chief – then cash for the Guptas

16 June 2017 #GuptaLeaks: Bell Pottinger, ANCYL and MK veterans – the early days

18 June 2017 #GuptaLeaks: How Guptas picked up military vets’ conference tab

19 June 2017 #GuptaLeaks: The captured presidency

23 June 2017 #GuptaLeaks: Direct evidence Gupta henchmen prepared fake race-baiting tweets

25 June 2017 #GuptaLeaks: Guptas spied on Manuel, Malema and bank bosses

28 June 2017 #GuptaLeaks: More racism exposed in email

30 June 2017 Key findings from Budlender’s damning Trillian dossier

30 June 2017 McKinsey caught up in Trillian lies

30 June 2017 #GuptaLeaks: The Dubai Laundromat – How millions from dairy paid for Sun City wedding

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30 June 2017 #GuptaLeaks: How KPMG saw no evil at the Sun City wedding

5 July 2017 #GuptaLeaks: Working for the Guptas, where sexual harassment was part of the job

5 July 2017 Video: #GuptaLeaks Ep.1 – A roundup

11 July 2017 #GuptaLeaks: Software giant SAP paid Gupta front R100m “kickbacks” for state business

15 July 2017 Video: #GuptaLeaks Ep.2 – Bell Pottinger’s PR campaign unpacked

17 July 2017 #GuptaLeaks: More multinationals ensnared in Transnet kickback web

17 July 2017  The almighty dollar – a #GuptaLeaks game-changer?

17 July 2017 #GuptaLeaks: Sacked CSA chief Gerald Majola had cosy relationship with Guptas

21 July 2017 How Gupta associates ‘fleeced’ Cosatu in HQ deal

21 July 2017 Eskom admits lying on Trillian

22 July 2017 gupta-leaks.com: Everything you ever need to know about #GuptaLeaks in one place

24 July 2017 #GuptaLeaks: Gupta spin machine commissioned BLF’s Mngxitama

25 July 2017 #GuptaLeaks: Another software giant implicated in ‘kickback’ payments

26 July 2017 #GuptaLeaks: Indian IT guru linked to fake WMC sites

27 July 2017 #GuptaLeaks: Let’s hear it for the good guys

28 July 2017 #GuptaLeaks: Top Zuma bodyguard in kickback scandal

2 August 2017 #Guptaleaks: How the family encircled Lynne Brown

3 August 2017 #GuptaLeaks: How the Canadian government helped the Guptas buy their private jet

8 August 2017 #GuptaLeaks: How the Guptas paid for Zuma home

9 August 2017 Why you should care about the #GuptaLeaks — an international view

9 August 2017 The woman who blew the whistle

11 August 2017 #GuptaLeaks: How Ajay Gupta was trusted with crafting SA’s global image

14 August 2017 EXCLUSIVE #GuptaLeaks: Guptas’ blue lights mystery solved

23 August 2017 #GuptaLeaks: Questions surround Guptas’ minimal tax returns

23 August 2017 #GuptaLeaks: Tegeta buyer ‘hid’ Gupta assets before

6 September 2017 #GuptaLeaks: How Anoj Singh sang for his supper

14 September 2017 The McKinsey dossier part 1 – how McKinsey and Trillian ripped R1.6bn from Eskom

18 September 2017 #GuptaLeaks: A third Gupta-Transnet ‘kickback’ contract unearthed

27 September 2017 Whistleblower: How Trillian scored big by connecting officials and consultants

3 October 2017 The McKinsey dossier part 2 – contract to pay McKinsey and Trillian R1.6-bn ‘invalid’

6 October 2017 The McKinsey dossier part 3 – Eskom tells McKinsey and Trillian to #PayBackTheMoney

8 October 2017 The Trillian playbook: How Oliver Wyman nearly got ensnared

11 October 2017 The McKinsey dossier part 4 – bending over backwards for Trillian

23 October 2017 The McKinsey dossier, part 5 – how Transnet cash stuffed Gupta letterboxes

25 October 2017 The McKinsey dossier part 6 – five strikes and you’re IN

10 November 2017 #GuptaLeaks released to journalists worldwide

14 November 2017 Exclusive: Gupta ‘negotiator’ and the R4bn Transnet IT deal

24 November 2017 #GuptaLeaks: How MultiChoice paid the Guptas millions

26 November 2017 #GuptaLeaks: KPMG missed more money laundering red flags

1 December 2017 #GuptaLeaks: How family hijacked (and then lost) a Lesotho diamond mine

13 December 2017 #GuptaLeaks: A tale of two captures – Alexkor, Gupta Inc and ‘WMC’

15 December 2017 #GuptaLeaks: The confidence game

2016

5 February 2016 Guptas conquer state arms firm Denel

5 February 2016 Gupta ties are Zuma’s undoing

19 February 2016 Zuma Jnr hits the big time with Optimum deal

18 March 2016 The president who tossed away the rule book

24 March 2016 The ‘Gupta owned’ state enterprises

24 March 2016 Evidence of state capture mounts

1 May 2016 Guptas “backed” Maine’s R140k-a-month bond

15 May 2016 Guptas sue for 27.5% of Independent Media 

30 May 2016 How Denel was hijacked

6 June 2016 Guptas’ media bid rebuffed

28 August 2016 Gupta-linked firm’s R167m Transnet Bonanza

30 August 2016 Tegeta coal quality hopelessly noncompliant, says report

18 September 2016 Transnet’s shady Gupta loan deal

19 June 2016 Guptas’ R51bn train grab

24 July 2016 Gupta-linked company set to score R800-million in Transnet IT solution tender deal

01 Sep 2016 Treasury blocks Eskom’s Tegeta contract

19 September 2016 Questions over new Denel partner

21 October 2016 R587m in six hours – how Eskom paid for Gupta mine

15 October 2016 Gordhan blows whistle on Guptas’ R6.8bn ‘suspicious and unusual payments’

29 October 2016 State Capture – The Guptas and the R250 million “kickback laundry”

3 November 2016 Zwane and his new appointment go way back

4 November 2016 State approved Guptas’ raid on mine rehab fund

8 December 2016 From Zuma Inc to the Zuptas – a story of perseverance

8 December 2016 Video: amaBhungane explain the explosive Gupta money-laundering allegations

8 December 2016 Analysis by Sam Sole: Zuma’s treasonous alliance with the Guptas

8 December 2016 Exclusive: Guptas “Laundered” kickback millions – here’s the evidence

2015

31 July 2015 – ‘Kickback’ scandal engulfs Transnet

24 September 2015 Gupta past haunts new mines minister

23 October 2015 State fumes as Sascoc steals its ball

20 November 2015 Gupta Inc’s Dubai secret

20 November 2015 Zuma’s ‘deal’ with Cape gang bosses

20 November 2015 Editorial: Zuma gangs up on democracy 

2014

7 February 2014 Free State dairy project damned in treasury investigation

14 February 2014 Cow heap attracts Blue Scorpions

5 June 2014 Estina’s cows come home to roost

20 June 2014 State adviser’s R5m Gupta house

4 July 2014 Transnet tender boss’s R50-billion double game

29 August 2014 Ombudsman rejects Transnet tender boss’s complaint

24 October 2014 Row over Eskom’s R43m Gupta breakfast deal

24 October 2014 SAA’s boundless flights of fancy

24 October 2014 Editorial: Nene hobbled by old tusker

28 November 2014 Auditors rap Eskom Gupta splurge

28 November 2014 Editorial: Eskom hand-out gets red card

5 December 2014 Another state bonanza for the Guptas

19 December 2014 Editorial: Yet another state body under threat

2013

25 January 2013 Parastatals squeezed over New Age

22 March 2013 R10-billion contract behind SAA dogfight

21 May 2013 ‘Guptas’ farm cash cows in Free State

7 June 2013 “Gupta” dairy project milks Free State project

14 June 2013 “Gupta” dairy flouts treasury rules

12 December 2013 Concourt puts Sishen mining right dispute to bed

2012

30 November 2012 Guptas ‘bankroll’ Mrs Zuma’s bond

2011

5 February 2011 Steel of a deal for Zuma Jnr

4 March 2011 Going off the rails

4 March 2011 Striking Gupta workers held

18 March 2011 Plum Gupta job for Zuma fiancée

1 April 2011 Veterans official in private deals

29 July 2011 All the president’s assets

29 July 2011 Sishen row: Hawks’ raids rattle top politicos

16 August 2011 Kumba launches broadside against Imperial’s prospects

9 September 2011 Row over “unpaid” bills at Gupta family’s mine

21 October 2011 Erwin’s company lands tender-free coal deal

15 December 2011 Sishen rivals braced for verdict

2010

19 March 2010 Keeping it in the family 

14 May 2010 Zuma “meddled in mine buyout”

13 August 2010 Zuma Jnr heading for first billion

20 August 2010 Guptas key to ArcelorMittal deal

29 October 2010 Govt to apply ideology to adspend

26 November 2010 Sishen row: Govt targets steel prices

The post Special report: the #GuptaLeaks and more — all our stories on State Capture appeared first on AmaBhungane Centre for Investigative Journalism.

The 73-page summons, released today, paints a picture of how former executives including chief executive Brian Molefe, chief financial officer Anoj Singh and head of generation Matshela Koko, as well as former board chair Ben Ngubane used their positions to direct business and financial benefits towards Gupta companies.

Also included as an alleged conspirator is Mosebenzi Zwane, the former mineral resources minister and now an ANC MP.

Although many parts of the Gupta saga are included in the summons, the main allegations emanate from the take-over of Optimum Coal Holdings, the struggling group of coal mines owned by Glencore. This is where Zwane allegedly played a key role.

Eskom alleges that the conspirators strong-armed Glencore into selling Optimum, and then effectively financed the acquisition by providing guarantees and prepayments to the Gupta-controlled buyer, Tegeta Exploration and Resources.

Once Tegeta was in control of the mine, Eskom heaped further benefits on the Guptas by allowing Tegeta to under-deliver on its loss-making coal contract at Hendrina Power Station – which freed up that coal to be sold at a higher price elsewhere. Eskom now alleges that it had to spend R2.4-billion to source coal for Hendrina from other suppliers.

Another significant part of the claim – R722-million – is the difference between Optimum’s historical penalty that Tegeta inherited when it bought the mine, and the sweetheart settlement negotiated with the new politically-connected owners.

Also included in the claim is the R595-million that Eskom tried but failed to recoup from Trillian, Essa’s company which partnered with global consulting giant McKinsey.

There are also smaller amounts attributed to poor quality coal delivered to Hendrina, and R1.2-million spent to put guarantees in place that assisted the Tegeta to seal the deal with Optimum.

There is a lot more though: There are details about how an Eskom board member, Chwayita Mabude, allegedly channelled payments between the Free State government and a Gupta letterbox company, and details about the stream of confidential correspondence leaked by Koko to the anonymous email address “Businessman”, allegedly an alias for Gupta lieutenant Essa.

Eskom, which describes the Gupta brothers and Essa as “fugitives from justice”, says that it will bring an application to attach their assets.

The total R3.8-billion loss that Eskom says it has suffered is claimed jointly and severally from each of 12 defendants: Molefe, Singh, Koko, former Eskom official Suzanne Daniels, Zwane, Ngubane, Mabude, former Eskom director Mark Pamensky, the three Gupta brothers and Essa.

AmaBhungane’s stories over the years have provided the breaks and the background for the present action.

Here are some of them:

How Brian Molefe ‘helped’ Gupta Optimum heist

How Anoj Singh sang for his supper

The McKinsey Dossier: How McKinsey and Trillian ripped R1.6-billion from Eskom

How Eskom was captured

Guptas pushed Eskom for R1.68bn prepayment

*Also read how amaBhungane’s work is contributing to the recovery of billions in state capture loot.

The post Update: Here are the papers in Eskom’s multi-billion state capture summons appeared first on AmaBhungane Centre for Investigative Journalism.

It was a two-page court order, the details of which I’ll come to because it tells an important story about amaBhungane’s advocacy work.

AmaBhungane is known for its long-form investigations of money, politics, and abuse of power in South Africa. This dogged approach — taking weeks, months or even years to chase down a story — has resulted in major exposés and more than a few awards over the years.

In 2019, the group was part of a consortium of news organisations that received the Global Shining Light Award for the #GuptaLeaks investigation into the sprawling network of corruption surrounding South Africa’s former President.

But many people don’t realise that the organisation also hosts an advocacy programme, which adopts the same tenacious approach, to slowly push for reforms in policy and law to improve the climate for journalism itself.

Through its unique approach to advocacy, a staff member — part researcher, part policy wonk, part campaigner — works mostly on a parallel track to amaBhungane’s investigators, to secure the information rights that are the lifeblood of investigative journalism.

In South Africa, access to information and freedom of expression are mostly protected in law, but bureaucrats, politicians, and private firms often flout the rules all the same.

But over the years, amaBhugane’s programme has blossomed into an impressive portfolio of work, including submissions on legislative amendments (four last year), access to information requests (13 in 2019) and share-register inquiries (more than 40 last year), and strategic litigation on media-freedom issues (four active cases at the moment).

Access our advocacy work plus our legal documents via our Virtual library. 

It is also important to understand what the programme isn’t: amaBhungane does not do “advocacy journalism” or advocacy about its journalism. Many who read amaBhungane’s investigations of former president Jacob Zuma’s corruption organised protest marches calling for his resignation — but amaBhungane did not join them.

The slow road to transparency

Much of the work is as unglamorous as the animal for which amaBhungane is named — ibhungane — the dung beetle.

Like many of their global counterparts, amaBhungane’s journalists use freedom of information requests as part of their investigative toolkit. But in a climate where close to two-thirds of information requests are refused or simply ignored, many information requests drag on long after any story has been filed.

Someone needs to work the phones, to ensure recalcitrant officials eventually file a response, and should the response not be positive, someone needs to draft the appeal.

By having a designated advocacy coordinator who is not tied to conventional newsroom duties, amaBhungane is able to pursue information requests not only in service to a story, but in pursuit of the principle of transparency itself.

This brings me back to the court order that landed in my inbox in March. Since 2015, amaBhungane has been trying to get details about coal-mining rights nationally. It started with an information request, which was refused. AmaBhungane filed an administrative appeal, which succeeded, but the documents never arrived.

In 2017 a court ordered that amaBhungane should get the documents. Still they didn’t come. Finally, in late 2019, a judge ruled that the officials responsible were in contempt of court. At long last, in March, our lawyers got a copy of that contempt order, which directed those two officials to hand over the documents or pay R100 000 in fines. Personally.

The outbreak of Covid-19 may have bought those officials just a bit more time, and perhaps if those documents eventually arrive, they’ll never make it into a story. But the next journalist who calls up the mining department asking for information may find a much more thoughtful official on the other end of the phone. It took five years to happen, but like I said: long-form.

Policy fights big and small

Some of amaBhungane’s advocacy work is the stuff of major, history-making, precedent. Its current constitutional court challenge to South Africa’s surveillance law, for example, seeks to overturn years of abuse and secrecy in the state’s spying machinery, after the revelation that state spies had bugged the phone of Sam Sole, one of our managing partners .

If the organisation can uphold the landmark victory it won in the lower courts, it would result in major privacy reforms to protect investigative reporters and the public at large.

But most of amaBhungane’s advocacy work takes place out of sight and without fanfare — wonkish submissions to policy processes in Parliament, asking for a secrecy clause to be struck from an energy bill, say, or proposing better transparency provisions in party-funding regulation.

All this it has done without compromising its journalism. The advocacy work and the investigative work run parallel to each other, though there is not the hard “firewall” that one hears about at, say, the news and opinions operations at The New York Times. We talk and keep one another updated.

In the very early days of amaBhungane, the advocacy work was a part-time role; amaBhungane’s first advocacy coordinator split her time between advocacy and reporting. It was an unhappy arrangement, which worked to the detriment of both.

By having a dedicated advocacy coordinator, the organisation can ring-fence both the work (so that amaBhungane’s journalists do not have to involve themselves in lobbying and campaigning) and the workload (so that the journalists can get on with, well, journalism).

But the organisation and its journalists are especially sensitive to the risk of being seen as partisan, even more so after the emergence of coordinated disinformation and smear campaigns against amaBhungane and other media organisations that started in the lead-up to the #GuptaLeaks reports, and never really went away.

It’s ironic that amaBhungane with its declared advocacy programme could be seen as partisan and campaigning, when many of South Africa’s commercial newsrooms appear to have been drawn into messy factional wars that have led to an industry-wide ethics inquiry.

I’ve worked alongside amaBhungane’s advocacy programme for nearly a decade as an information-rights activist, and have seen the organisation prove its integrity over and over again.

If anything, my sense is that the organisation’s reluctance to be seen as “crusading” creates a silence about its advocacy work, in which Twitter trolls are more than happy to craft their own narratives.

Covid-19 clampdowns

The global crises sparked by Covid-19 suggest that advocacy for journalism is more important than ever. For starters, the pandemic has brought new obstacles to the flow of information.

For example, despite strong legal protections for the principle of open justice, the pandemic has led to serious transparency challenges in South Africa’s court systems. Access to court records had been unreliable even before Covid-19 restrictions, now they are even more so.

As court hearings have moved to video call platforms, Cherese Thakur, who succeeded me as amaBhungane’s advocacy coordinator, has been haunting the phones and inboxes of court officials to try get schedules of court hearings published online ahead of time as a basic condition of ensuring court processes remain open.

Out in the streets, in the chaotic weeks following South Africa’s “lockdown”, journalists documented appalling brutality by police and soldiers sent out to enforce it, and in several instances were harassed, stopped from filming, and even fired at with rubber bullets.

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But surely the greatest crisis for journalism in this moment is economic, and media advocacy to address the economic devastation being felt in newsrooms is urgently needed. Though many have risen to meet the reporting challenge of our time, many may not survive it.

Even before the pandemic, it already seemed unlikely that mainstream journalistic outlets would “innovate” their way out of the harsh financial climate without major regulatory interventions: to provide public grants to media organisations, give tax credits to companies that buy ads or levy taxes off the tech giants, or any manner of other policy response.

AmaBhungane’s advocacy work has yet to venture into this space although Sanef, the South African National Editors’ Forum, has initiated research into the policy questions in recent years. If there was ever a role for advocacy work in support of journalism, this is it.

Traditional investigative journalism has sought to keep advocacy out of the newsroom. But this is a time in which doing journalism is not enough to secure journalism’s future. Now more than ever, journalism needs to be able to fight for itself. And amaBhungane’s unique advocacy model allows the group to do just that.

*Murray Hunter is a media consultant and digital rights advocate, and was previously a coordinator of the Right2Know Campaign in South Africa, and author of a children’s book about digital surveillance. Hunter writes here for the amaBhungane Centre for Investigative Journalism, where he was acting advocacy coordinator in February and March 2020.

The post Comment: Should journalists do advocacy? appeared first on AmaBhungane Centre for Investigative Journalism.