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EDINBURGH — Behind-the-scenes, a large backstage crew helped the Gupta and Zuma families and friends suck billions of rands out of state-owned entities. Phetolo Ramosebudi is a name that has been rarely mentioned in the public domain. Expect to hear a lot more about him as investigations into Zuma era corruption ratchet up. In this investigation, Susan Comrie of amaBhungane starts piecing together the role of Phetolo Ramosebudi in hammering taxpayers and damaging the fabric of South Africa. She joins the dots between the Airports Company South Africa, SAA, Transnet and Eric Wood – the man who once proclaimed himself ‘SA’s greatest trader’. The report also raises concerns about the role of Nedbank and Standard Bank in Zupta graft. – Jackie Cameron
By Thulasizwe Sithole
For at least six years, Phetolo Ramosebudi was the “inside man” for controversial financial services firm Regiments Capital, reports the Daily Maverick.
Ramosebudi was group treasurer first at Airports Company South Africa (ACSA), then at South African Airways (SAA) and now at Transnet, where he controls one of the largest and most sophisticated corporate treasuries in the country, it notes in a piece produced by investigative unit amaBhungane.
“New evidence shows that during Ramosebudi’s time at these state-owned entities, he was a Regiments rainmaker: leaking confidential information, allowing the firm to dictate the terms of a tender, and rubber-stamping questionable fees running into hundreds of millions of rand.
“Seemingly in exchange for this extraordinary leg-up, Regiments was asked to pay at least R6.3 million to Ramosebudi’s private companies and those of a relative – via 14 invoices delivered to Regiments director Eric Wood,” says Comrie.
The invoices were for everything from “advisory” work to supplying liquor and the services of a personal trainer. Yet, says Comrie, amaBhungane has seen no evidence that these services were actually delivered, suggesting the invoices were a cover for undue payments to Ramosebudi.
Ramosebudi remains at his desk at Transnet, she says.
AmaBhungane says Ramosebudi’s use to Regiments emerge in December 2015, when Transnet was poised to enter into a series of interest rate swaps that would deliver R229 million in fees to Regiments.
But there was a problem. “I need to sort this one out,” Ramosebudi told Regiments’ Wood, forwarding him an internal Transnet email.
“It was 2 December 2015 and the source of Ramosebudi’s headache was Danie Smit, one of his colleagues at Transnet treasury who had taken it upon himself to prepare a ‘humble opinion’ questioning the wisdom of entering into the swaps,” narrates Comrie.
“Earlier, in November 2015, Transnet had secured a R12 billion ‘club loan’ to finance the largest purchase of locomotives in South Africa’s history.
“Ostensibly to hedge its risk, Transnet decided to enter into a series of complex financial transactions known as an interest rate swaps.
The deal would swap the “club loan’s” volatile floating interest rate for a fixed one. Incidentally, it would also channel enormous fees to Regiments and, it is alleged, onwards to the Guptas, she reports.
— Susan Comrie (@sajournalist) October 25, 2018
“But now, at the 11th hour, Smit, a seasoned official, was seemingly not convinced the interest rate swaps were necessary.”
Ramosebudi then recommended that Regiments be appointed to carry out all of Transnet’s interest rate swaps linked to the “club loan”, continues amaBhungane.
“On 4 December, Transnet entered into the first of a series of interest rate swaps, using a Transnet pension fund as the unfortunate counter party.
“The same day Regiments received R56.7 million in fees and quickly transferred R42 million into a Bank of Baroda account,” notes amaBhungane.
Who benefited from those funds remains in dispute, says the investigative journalism unit. “While Regiments maintains the money was for Albatime, a company that acts as a fixer for Regiments, the Public Protector’s State of Capture report identified one of the beneficiaries as Tegeta, the mining company co-owned by the Guptas, Salim Essa and Duduzane Zuma.
“Would the head of Treasury commit Transnet to an expensive deal it did not need, just to channel fees to Transnet’s politically connected advisers. Considering how complex forex risk can be, there is no easy answer,” continues the report.
AmaBhungane says this was not the first time Ramosebudi had reached down, opened a valve and allowed millions in questionable fees to flow to Regiments.
“In April 2015, he presented Transnet with a memo recommending that Regiments receive a R189 million “success fee” on a separate, Chinese loan, which a recent amaBhungane investigation showed was largely siphoned to the Guptas’ Sahara Computers.
AmaBhungane also highlights how ACSA was used to extract funds out of state coffers.
“In 2009, ACSA was facing a triple threat: a global recession, R17 billion of debt, and new regulations that precipitated a “cash crunch”.
“These conditions made debt difficult to access and/or extremely expensive,” spokesperson Hulisani Rasivhaga reportedly explained via email.
“To head off a liquidity crisis, ACSA needed to raise R3.5 billion immediately. Regiments was appointed as advisers and was promised a modest capital-raising fee, capped at R2.5 million over five years.
“But when ACSA’s treasury department, headed by Ramosebudi, decided to enter into a series of interest rate swaps on these same loans, Regiments saw an opportunity to exploit its position as ACSA’s trusted adviser,” says amaBhungane.
“In May 2009 and May 2010 Regiments entered into separate deals with Nedbank and Standard Bank, setting themselves up as intermediaries and asking the banks for an “introduction fee” for any deals it brought them.
“If the banks won the business to execute the interest rate swaps, Regiments would get upwards of R10 million per transaction – a cost that would be rolled into the fee charged to ACSA.
“[P]art of the narrative,’’ Nedbank’s head of corporate and investment banking Brian Kennedy told amaBhungane, was ”if you don’t deal with Regiments you’re not going to do any business with any of the state-owned entities’’.
The result, according to amaBhungane, was that between October 2009 and May 2010, Regiments extracted R46.3m in “introduction fees” from Nedbank and Standard Bank, invoices, spreadsheets and emails show.
“While Standard Bank told us it believed ACSA was aware that Regiments was acting as a broker and earning a fee from the banks, Nedbank claimed that Regiments was at all times ACSA’s trusted adviser and the fee was not an ‘introduction fee’ but an advisory fee that the bank merely paid on ACSA’s behalf.
“The one thing the two banks do agree on is their claim that the fees they paid Regiments were above-board for the simple reason that ACSA was aware of the fees, and happy to carry the cost,” says amaBhungane.
“Yet from ACSA, Standard Bank and Nedbank’s accounts it appears that Ramosebudi was the only person at ACSA who was told about these fees, and normally only over the phone. Nedbank told us it had reason to believe that others at ACSA were informed about the fees, but was unable to present evidence of this and said it was still conducting its own investigation.
“ACSA said it could find no record that Regiments or Ramosebudi disclosed these “introduction fees” to anyone else at ACSA.
“[ACSA] will need to commission a thorough audit to verify the accuracy of allegations… The documents we have reviewed thus far, i.e. swap agreements, do not disclose any fees that Regiments stood to earn from the swap transactions,” Rasivhaga reportedly said.
A week after Ramosebudi okayed Regiments’ R22.3 million “introduction fee” on the final ACSA swap, seven invoices arrived in Wood’s inbox from Ramosebudi’s Riskmaths email account, says amaBhungane.
Regiments allegedly profited from its relationship with Ramosebudi in his role as group treasurer and head of corporate finance at SAA.
In February 2014, SAA awarded the Working Capital tender jointly to McKinsey and Regiments.
“Despite the airline’s precarious financial position, the consultants asked to be paid 8% of any potential savings they identified, capped at R120 million. SAA, McKinsey and Regiments eventually settled on 7% capped at R80 million.”
Newly-discovered documents show that 20 percent of the total fee was earmarked for Essa, the Gupta partner, adds amaBhungane.
In January 2015, Transnet treasurer Mathane Makgatho resigned amid mounting pressure for her to sign off the Chinese loan that would eventually channel the R189 million “success fee” to Regiments.
A former Regiments employee told amaBhungane that Wood had offered to assist Ramosebudi with a discount organised through Regiments chairman Litha Nyhonyha, who owns a stake in Landrover Waterford, the dealership where the Range Rover was on sale.
amaBhungane has established that Ramosebudi did not buy this particular Range Rover but opted to buy a BMW X6 from a different dealer instead.
“We have seen no other evidence that Regiments continued supplementing Ramosebudi’s lifestyle after he moved to Transnet.
“What we can see is that he used his private email account to send at least one document to Regiments containing Transnet’s sensitive financial information. We also know that under his watch Regiments extracted hundreds of millions from Transnet.”
Ramosebudi reportedly refused to respond to the allegations against him. amaBhungane sent Transnet detailed questions but were told that they could not be answered as they were “subject to ongoing investigations”. Regiments’ two remaining directors, Litha Nyhonyha and Niven Pillay, also refused to comment, while Eric Wood, who left Regiments in 2016 to start Trillian, said the detailed questions had not provided him with “any particularity or context … to respond to what appear to be serious allegations”.
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