Welcome to the Gupta’s racketeering enterprise, collect bribes at the door

By Michael Appel

The much-awaited second tranche of findings coming out of the State Capture Inquiry is blunt about the extent to which Transnet was sucked dry to the tune of at least R41.2bn by the Guptas and their cronies. I’ve been combing through this latest report so that you don’t have to. It’s complicated, infuriating, and incredibly detailed. I hope this provides you with a digestible snapshot of the feeding frenzy that went on at the entity with the taxpayers’ money, and who, the reports says, we should be pointing fingers at. The scale of malfeasance here is just what could be counted within a single state-owned entity (SOE). The grand quantum is definitely more as Zondo’s last report is sure to confirm at the end of February.



State capture genesis at Transnet

As a starting point, the report makes an interesting comment: “State Capture at Transnet began with the resignation of Maria Ramos as GCEO of Transnet in 2009 and the election of Jacob Zuma as president of the Republic of South Africa.”

The report, however, focuses mainly on the period between 2011 and 2018.

The systematic scheme of “securing illicit and corrupt influence or control over the decision-making” was helped along by a cast of characters South Africans should be familiar with by now: Group CEO Brian Molefe, Group CFO Anoj Singh, and CEO of Transnet Freight Rail, Siyabonga Gama. They became household names.

Molefe, in particular, tried to get us to drink the Cool-aid about there being a Saxonwold shebeen he was possibly frequenting. Said in jest or not, he has never offered any better reason for regularly cruising in that neighbourhood. It would be unkind to call Molefe a guest at the Gupta’s compound … the man was practically part of the furniture. It is estimated he visited the palatial Corruption HQ as many as 50 times in the four years he was GCEO at Transnet.

Three useful Gupta acolytes

These three Gupta stooges are named in the report as being the “primary architects and implementers” of unconstrained looting at Transnet.

The report states: “Molefe, Singh and Gama facilitated the conclusion of irregular contracts at inflated prices, variously through deviations, improper confinements and the changing of tender evaluation criteria, in order to facilitate entry for companies involved in the extensive money laundering scheme directed by Salim Essa on behalf of the Gupta enterprise.”

More magic available at www.zapiro.com.

Don’t forget Gigaba

There is, of course, another head honcho one cannot leave out: Malusi Gigaba. He was the minister of Public Enterprises from November 2010 until May 2014. Gigaba, together with Molefe and Singh, were found to be regular visitors to the Gupta compound in Saxonwold, “from where the corrupt enterprise operated in South Africa”.

It also found that Gigaba, who initially tried to downplay his relationship with the infamous family, had been close with them since the early 2000s when he was the ANC Youth League president. Gigaba was one of the many ANC faithfuls who attended the Gupta’s audaciously extravagant Sun City wedding that was allegedly paid for with siphoned Estina Dairy money laundered via the UAE.

Establishing a pliable board

On 8 December 2010, cabinet approved a new Transnet board. Sitting on this board was one Iqbal Sharma, a wealthy Johannesburg businessman. Guess who he was friends with? Gigaba had initially recommended Sharma be chairperson of the board but cabinet – surprisingly mind you – turned that recommendation down. The reason cabinet gave was Sharma’s inexperience, and “fears that he may be closely identified with the wealthy Gupta family”.

Molefe’s appointment to Transnet as GCEO in 2011 coincided with a key change in operations. Let’s call it the centralisation of power in key individuals and the board. Before 2011, the board of Transnet did not involve itself in procurement matters. But it wasn’t long before a new sub-committee of the board was established in February 2011 called the Board Acquisitions and Disposals Committee (BADC).

Sharma makes his move

Despite Sharma’s proximity to the Guptas, he was appointed as the chair of the BADC in August 2012. It was a very powerful position. Under the 2011 Delegation of Authority (DOA) framework, the BADC had the power to approve and conclude tenders in excess of R500m.

In April 2012, Transnet embarked on its market demand strategy (MDS) aimed at pumping R300bn into its five divisions in a counter-cyclical investment that the entity hoped would bear fruit when demand in rail, ports and pipeline infrastructure peaked in the coming years.

BADC’s R3bn cheque book

The report notes that the BADC’s authority and procurement powers closely tracked the upscaling of investment into the MDS with its tender approval authority increasing fourfold to R2bn. By 2016, the BADC’s authority had been extended, once again, to be able to adjudicate on bids, with a further expansion of its approval authority to R3bn.

“The increase in authority worked to the benefit of the Gupta enterprise. The evidence shows that many of the irregularities … between 2011 and 2017, took place within the BADC or at the insistence of the GCEO [Molefe] and GCFO [Singh],” the report notes.

Enter Gupta-linked Regiments and Trillian

When Transnet embarked on its multibillion-rand procurement of locomotives between 2012 and 2017, instead of relying on its internal staff complement of 40 experts, it hired “at enormous cost … financial advisors with links to the Gupta enterprise” despite all the skills residing in-house.

It is worth pointing out that Sharma was a business associate of Gupta-lieutenant Salim Essa who – besides being a backroom fixer of sorts – co-founded Trillian Capital along with Eric Wood. Essa also earned over 20% in fees from Transnet through so-called Business Development Service Agreements (BDSA), or ‘kickbacks’ for doing nothing.

In one deal focused on raising capital for Transnet’s locomotives procurement, Trillian invoiced the SOE to the tune of R93m for transaction advisory work already done and invoiced by another Gupta-linked company Regiments Capital. In effect, this was double-dipping.

Regiments was paid a R189m success fee for arranging a $1.5bn loan through the China Development Bank. Regiments then paid R147m to Albatime – a company owned by Gupta-fixer Kuben Moodley – who then paid R122m to Sahara Computers; naturally, owned directly by the Guptas.

“Ultimately, under Molefe’s watch, the Gupta enterprise received more than R3.5bn in proven kickbacks in respect of the locomotives procured,” states the report.

Molefe and his confidential confinements

Molefe, as GCEO, also had a handy spending-ace up his sleeve. He and he alone was able to approve R1bn tenders on the basis of something called “confidential confinements”. Confinements are a deviation from the generally open and transparent tender process permitted only in instances of urgency, limited supply or standardisation. Continually using confinements was a convenient way around having to publicise tenders.

In fact, the report finds that Molefe had confinement tenders go straight from the CEO of a division directly to his office for approval “without any prior review. This happened with the substantial tenders awarded to McKinsey and [Gupta-linked] Regiments for financial advisory services where substantial fees were laundered to the Gupta enterprise.”

The centralisation of power

The Group Governance division of Transnet was said to be concerned about the expanding delegation of authority to the BADC and executives as it allowed “individuals to act as an acquisition council” when what was needed was oversight by the finance, legal, compliance and tax divisions of Transnet.

But, alas, procurement recommendations were given directly to the board to approve, rather than benefiting from internal review and scrutiny. Much like what we know to have unfolded at the South African Revenue Service (SARS) when consultancy firm Bain and Co was appointed there in January 2015, “high-value procurement decisions by the [Transnet] board were often uninformed or made based on of advice received from external advisors and consultants”.

It’s over to law enforcement now

Based on the testimony presented by witnesses and the paper trail gathered by the State Capture Inquiry’s investigators, Chairperson Raymond Zondo says, “The evidence establishes convincingly that state capture occurred at Transnet in the period between 2009 and 2018.”

He recommends law enforcement agencies further investigate Molefe, Singh, Gigaba, Gama, Essa, Wood and others, on charges of corruption and racketeering. Many of the above-mentioned gentlemen are also alleged to have received regular cash payments during their visits to the Gupta’s compound.

Commissions of enquiry are inquisitorial proceedings that make findings. Those findings are not binding on anyone or anything. Think of them as suggestions for what should happen next. The South African taxpayer faces the prospect of – over a very long period – having some of these prima facie findings tested in a court of law through an adversarial process. And, that’s only if our law enforcement agencies can provide prosecutors with a docket presenting evidence that yields a reasonable prospect of success. Facing those prosecutors will be the very best defence teams money – genuinely earned or ill-gotten – can buy. There will be no quick victories as the master of avoiding his day in court, Jacob Zuma, has taught us … providing a blueprint for all who find themselves in his shoes.

Transnet has told BizNews it still going through the report and won’t be providing detailed commentary at this stage.

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