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JOHANNESBURG — The Guptas are truly going global, but not in the way they perhaps would have liked. New York’s Wall Street Journal — which alongside the likes of London’s Financial Times is regarded as the world’s most influential and powerful business publication — has featured the Guptas on its front page today over their central role in state capture. The WSJ’s readership is massive with its website alone reaching a global audience of 42.4 million digital readers per month. The story on the Guptas then signals another major body blow for the Zuptas. The WSJ story summarises the drama surrounding the Guptas and state capture so far, but it also has some stinging lines that will ensure the corrupt Indian immigrant family is firmly etched in history as South Africa’s biggest shame since apartheid. Others who will also be sweating today will be KPMG, McKinsey and SAP who all make an appearance in the paper for their role in aiding the Guptas. The Guptas have now infamously appeared in the Financial Times, the WSJ and the BBC — the question now on many South Africans’ lips is when will the Zuptas appear in a courtroom to face charges of corruption? The WSJ have kindly given us permission to republish their full story here. – Gareth van Zyl
By Gabriele Steinhauser
The sprawling complex is the home and headquarters of the Gupta family, who moved to South Africa from India in the early 1990s as apartheid was ending and then built a business empire stretching from media to mining. Their riches and close ties to President Jacob Zuma have plunged the country into its gravest political crisis since the overthrow of white-minority rule.
— Democratic Alliance (@Our_DA) October 5, 2017
The Guptas are at the center of a corruption scandal that has entangled international firms from KPMG LLP to McKinsey & Co. to SAP SE, amplified calls for Mr. Zuma to resign and has become a battle line in the race to succeed him as leader of the African National Congress, the country’s ruling party since Nelson Mandela.
One party official said last year that one of the three Gupta brothers who oversee the family business offered him the cabinet-level job of finance minister at the Gupta compound while Mr. Zuma’s son was there. An investigation by South Africa’s ombudsman said President Zuma and other officials steered government contracts to Gupta businesses.
In the past five months, a flood of emails and other documents that appear to have been obtained from Gupta-controlled companies has buttressed longstanding suspicions among many South Africans that the family has used its connections to Mr. Zuma to help it amass gigantic financial gains.
“I could not help to wonder whether‚ unbeknown to me‚ democracy and the rule of law had somehow been suspended,” Pretoria High Court Judge Hans Fabricius wrote in a court ruling two weeks ago in favor of a bank that wants to stop doing business with the Guptas.
The judge suggested that South Africa’s future as the liberal democracy and free-market economy conceived of by Mr. Mandela is at risk because of the Gupta family’s political influence. The judge wrote: “Could it be possible that the future‚ so bright in 1994‚ was now only history?”
Mr. Zuma, who became South Africa’s president in 2009, has repeatedly denied any wrongdoing and pledged to establish a commission to investigate business influence on government.
A lawyer for the Guptas said they declined to comment, and a spokesman didn’t respond to questions. The family has previously denied wrongdoing and said they are victims of an attack by the country’s established, mostly white-owned businesses. Atul Gupta, who leads the Gupta businesses, has said “there is no authenticity” to the leaked documents, without being more specific.
Among the companies that have been drawn into the scandal, the U.K. operations of one of Europe’s largest public-relations firms, Bell Pottinger, collapsed in mid-September after revelations that it tried to discredit rivals of Mr. Zuma as defenders of “white monopoly capitalism” and “economic apartheid.” Bell Pottinger was hired by the Gupta holding company, Oakbay Investments.
SAP, the German software maker, and U.S.-based consulting firm McKinsey have put employees on leave and launched internal investigations of their dealings with Gupta-linked companies. Last month, KPMG cleared out its top management in South Africa after concluding it fell short of its own standards during the 15 years it audited Gupta firms.
— Gareth van Zyl (@GarethvanZyl) October 11, 2017
President Zuma has kept dissension within the ANC over the scandal under control. He survived a no-confidence vote in the National Assembly in August. His presidential term runs out in 2019, and the winner of December’s vote to lead the ANC will become the favorite in the presidential race.
The party’s top two candidates are Cyril Ramaphosa, the ANC’s deputy president and a critic of Mr. Zuma, and the president’s ex-wife and political ally, Nkosazana Dlamini-Zuma. Mr. Ramaphosa said in April that “state capture” by business, “if left unchecked, could well destroy our revolution.”
Atul Gupta, arrived in South Africa in 1993, months before the first democratic election swept away white-minority rule and the ANC into power.
Mr. Gupta said in a 2011 interview that his father, a businessman in the Indian state of Uttar Pradesh, believed “Africa would become the America of the world.” Atul Gupta started a computer-hardware distribution company, called Sahara Computers, and his brothers Ajay and Rajesh soon followed.
In 2007, Mr. Zuma won the ANC presidency. Eight months later, two of his roughly 20 children, Duduzane Zuma and twin sister Duduzile, then 26, joined Sahara’s board of directors, according to court documents.
Some outsiders saw the move as the culmination of a quest by the Gupta family to court connections in the party and convert them into personal wealth.
Duduzane Zuma didn’t respond to requests for comment, and Duduzile Zuma couldn’t be reached. She is no longer a Gupta company director.
The Guptas landed in the consciousness of most South Africans when a chartered Airbus SE A330 jet carrying more than 200 guests from India to a family wedding was allowed to land at an air-force base near Pretoria in 2013.
Police cars escorted the passengers to the wedding venue in Sun City, a gambling resort. The landing generated headlines across the country.
Invited guests included President Zuma and his ex-wife, 18 government ministers, 12 deputy ministers, the leaders of most South African state-owned enterprises, and prominent journalists and businessmen, according to documents that appear to have been obtained from Gupta-controlled companies and were made public.
President Zuma didn’t attend the wedding, but the chief executive of KPMG’s unit in South Africa did—and emailed a thank-you note to Atul Gupta. “I have never been to an event like that and probably will not because it was an event of the millennium,” wrote Moses Kgosana, the KPMG executive.
The thank-you note was among more than 100,000 emails, bank statements and other Gupta-related documents that surfaced in May. The documents were first reported by South Africa’s amaBhungane Centre for Investigative Journalism. The Wall Street Journal has reviewed some of the documents, and South Africa’s National Prosecuting Authority, which can bring criminal charges, has said it is investigating potential wrongdoing detailed in the leaked documents.
The documents also include an invoice for 30 million rand ($2.2 million) sent by an event organizer owned by the Gupta family to another Gupta-owned company for the wedding. The invoice showed $17,959 spent for a fireworks display and $34,301 for drinks, among other items.
Other documents show that money to pay the wedding costs flowed from a provincial government to a dairy farm for poor South Africans to various Gupta-controlled accounts in Dubai and then back to South Africa.
KPMG, the auditor of the Gupta event organizer, has said it failed to sufficiently question the origin of the wedding funds, though its internal review found no wrongdoing by the firm or its staff.
South Africa’s auditing regulator and Parliament have said they are scrutinizing KPMG, which has said it is cooperating and launched its own independent review. KPMG declined to comment for this article.
Mr. Kgosana left KPMG in 2015. He says the firm cleared his attendance at the wedding and that it didn’t affect KPMG’s work for the Guptas.
Later in 2013, the Gupta family launched a 24-hour news channel, ANN7, expanding their media properties beyond the New Age newspaper. Coverage of President Zuma was usually positive.
In 2014, a Gupta-controlled mining company made its debut on the Johannesburg Stock Exchange with a value of about $600 million. The government owned a 3.6% stake in the company.
As of last year, Atul Gupta was the richest nonwhite South African, with personal wealth estimated at more than $750 million, according to South Africa’s Sunday Times newspaper.
At least some of the family’s financial success came from its ties to relatives of Mr. Zuma, according to the leaked documents and a report last year by South Africa’s ombudsman, who investigates government misconduct.
In August 2015, SAP signed a contract with a 3-D printing company managed by Sahara Systems, leaked documents show. Sahara was co-owned by the Guptas and Duduzane Zuma, the son of South Africa’s president.
The contract promised the 3-D printing company a 10% commission if Transnet SOC, a state-owned railroad and port operator, signed a software contract with SAP for at least $7.3 million by year-end, according to the leaked documents.
Other documents show SAP paid the printing company last year almost as much as the contract’s total value. Duduzane Zuma has denied any wrongdoing and has said he couldn’t comment on the authenticity of the documents. Transnet declined to comment on whether it signed a contract with SAP.
SAP’s South African unit denied making any kickbacks, but the statement was removed from the company’s website. An SAP spokesman declined to comment on the removal. SAP has said it would release before the end of October the findings of an internal investigation into its dealings with the Guptas.
By late 2015, the country’s finance ministry was questioning some of the lucrative deals with government agencies and state-owned companies won by Gupta-controlled companies. Ajay Gupta tried to ease the pressure, according to the ombudsman’s report and an affidavit filed with the High Court.
In October 2015, Deputy Finance Minister Mcebisi Jonas met with Mr. Gupta at the family’s mansion in the Johannesburg suburb of Saxonwold. In the affidavit, Mr. Jonas said he was offered the post of finance minister—and 600 million rand ($44 million).
Mr. Jonas said he was told by Mr. Gupta that the family wanted to increase its income from government contracts to 8 billion rand from 6 billion rand, according to the affidavit. Mr. Jonas said he refused the job offer and money.
As the deputy finance minister was about to leave, Mr. Gupta tried one more time, according to Mr. Jonas. “If I had a bag that could carry R600,000 then I could get that amount there and then,” Mr. Jonas recalled Mr. Gupta saying. Mr. Jonas couldn’t be reached to comment for this article.
The lawyer for the Guptas says Ajay Gupta never met with Mr. Jonas. Duduzane Zuma, the president’s son, has said he arranged the meeting, but no bribe was offered.
In December 2015, President Zuma replaced respected Finance Minister Nhlanhla Nene with an untested lawmaker. The move sent the rand down nearly 10% before President Zuma replaced the new finance minister.
Mr. Jonas went public with his bribe allegations in March 2016. They were denied by the Guptas and the president’s political allies, but the rand sank again, a sign of growing discomfort with the family’s political influence. Newspapers published articles about their connections almost every day.
The Gupta family’s holding company turned to Bell Pottinger, the public-relations firm that has represented the wife of Syrian President Bashar al-Assad, authoritarian Belarusian President Alexander Lukashenko and Oscar Pistorius, the double-amputee South African track star sentenced to prison last year for murdering his girlfriend.
Leaked documents and a review by an outside law firm hired by Bell Pottinger show that the PR firm launched what it called an “economic emancipation campaign” and led a social-media campaign against President Zuma’s critics. Bell Pottinger also wrote speaking points for ANC officials.
A public-relations trade group said last month that Bell Pottinger’s work on behalf of the Guptas was “likely to inflame racial discord in South Africa and appears to have done exactly that.” The firm’s U.K. operations collapsed as other large clients withdrew their business from Bell Pottinger. The firm’s U.K. administrator declined to comment for this article.
Bell Pottinger dropped the Guptas in April, citing abusive and threatening comments against the public-relations firm’s staff as public acrimony about the relationship flared.
The Gupta family’s businesses are reeling from the scandal. Oakbay Resources & Energy Ltd. was delisted in July after firms needed to support its stock listing walked away from family-controlled mining company. The stock had lost about 70% of its value since the start of 2017, shriveling the family’s net worth. The Guptas sold off some mining and media holdings last month.
The family has said selling the assets would help it focus on clearing the Gupta name from “unfounded media allegations.”
On Monday, 20 Gupta-owned companies won a temporary reprieve in court to stop the South African unit of India’s Bank of Baroda from closing company bank accounts. All the accounts used by Gupta businesses at other banks in the country have already been closed.
If the court upholds its original ruling that Bank of Baroda can close the Gupta bank accounts, the companies would essentially be cut off from South Africa’s financial system and unable to pay employees.
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