Zupta business model unravelling fast – death knell too for nuclear project

The Zupta business empire is unravelling like Ernest Hemingway described the way a man goes bankrupt – gradually then suddenly. Yesterday was a reflection that the Indian immigrant family’s once impregnable fortress is into “suddenly” stage. The Gupta business model was built on political patronage – from sales of computers into the public sector through to sweetheart deals – on advertising, mining rights and off take of minerals – with State-owned enterprises. Their biggest bet of all was Klerksdorp’s high cost underground uranium mine previously known as Afrikander Leases. Bringing the mine back into production was a huge long-term bet that South Africa would commit to an unaffordable Russian deal to build nuclear power stations – thus providing a profitable market for Gupta uranium. But such pillaging of the public purse only works if your pals control the levers of power. The Gupta family’s pal-in-chief is President Jacob Zuma. But as South African media published one expose’ after another to expose the heavily compromised Zuma family, the President’s grip on power slipped to the point of no return. Ever since Mcebisi Jonas and Vytjie Mentor spoke out, the Guptas have known the game was up. Yesterday they confirmed this reality when family members and Zuma’s son Duduzane stepped off their companies’ boards. On the bright side, the nuclear programme is now a dead duck. And anyone attempting to repeat their business model will think twice. The young Constitutional Democracy’s centre is holding. Viva. – Alec Hogg

By Tiisetso Motsoeneng and Zandi Shabalala

JOHANNESBURG, April 8 (Reuters) – South African President Jacob Zuma’s son said on Friday he would sell his investments in a mining firm owned by friends of his father amid speculation that the wealthy family is wielding undue political influence.

Duduzane Zuma’s announcement came days after First National Bank, a unit of FirstRand, joined three other South African companies in quitting as bankers and auditors of companies owned by the Indian-born Gupta family.

"I'm nobody's puppet". Some more magic from Zapiro.com.
“I’m nobody’s puppet”. Some more magic from Zapiro.com.

In a memo to staff seen by Reuters, Oakbay Investments – a holding company for Gupta businesses in South Africa – said it had approached government departments including Zuma’s office to express “deep disappointment” over decisions by banks to close its accounts.

The Presidency and Oakbay did not immediately respond to requests for comment on the content of the memo.

Citing “aspersions” against his own family, Duduzane said he would also step down as a director of Shiva Uranium, the main subsidiary of Oakbay Resources, which houses the Gupta family’s mining assets.

“I have decided to relinquish all positions that I hold at Oakbay companies and am exiting investments to preserve the jobs of Oakbay’s thousands of employees and to de-politicise my participation in business,” he said.

The mine is 26 percent-owned by Islandsite 255, a company of which Duduzane is also a director. It employs 648 people, the family said last month.

Last month deputy finance minister Mcebisi Jonas said the Guptas offered him the position of finance minister shortly before Zuma sacked then finance minister Nhlanhla Nene, in December, a move that sent markets into a tail-spin.

Zuma has denied suggestions the Guptas wield undue political power. The Guptas have also dismissed such reports, saying they are pawns in a political plot to get Zuma out of office.

Oakbay Resources said in a statement that chairman Atul Gupta and chief executive Varun Gupta had resigned with immediate effect. “This decision follows a sustained political attack on the company,” it said in a statement.

The firm said it had created 3,500 jobs in South Africa’s mining sector.

“SMOKE AND MIRRORS”

Oakbay Resources’ statement did not say if the resigning members of the Gupta family would reduce their shareholdings in the company.

South Africa’s elite police investigating unit, the Hawks, said last month it had launched a corruption probe into Duduzane and the Gupta family.

South Africa’s main opposition party, the Democratic Alliance (DA), dismissed the resignations of Duduzane and the Guptas as an “exercise in smoke and mirrors” to protect their assets and profits.

Citing association risk, the local unit of global auditing firm KPMG cut ties with Oakbay Resources last month. Other companies that have severed links are investment bank Sasfin and lender Barclays Africa.

Oakbay Resources said it was being serviced by an Asian bank that did not want to be named.

The three Gupta brothers moved to South Africa from India at the end of apartheid in the early 1990s and went on to build a business empire that stretches from technology to the media to mining.

Zuma survived an impeachment motion by the opposition on Tuesday thanks to his African National Congress party’s majority in parliament.

Damage control in reaction to “growing political toxicity”

By Andre Janse van Vuuren and Franz Wild

(Bloomberg) — Members of a family with ties to South African President Jacob Zuma resigned from management positions in the companies they control following a wave of controversy surrounding the Guptas’ alleged influence over the country’s leader. The resignations of Atul Gupta and Varun Gupta from Oakbay Resources and Energy (Pty) Ltd. came after financial-services groups including accounting firm KPMG LLP dropped the company and other Gupta-controlled businesses as clients as questions about the family’s influence over Zuma mounted.

Sasfin Holdings Ltd. has ceased being Oakbay’s broker, while Barclays Africa Group Ltd.’s Absa unit and FirstRand Ltd.’s First National Bank stopped providing banking services to all businesses of Oakbay Investments, the holding group. Zuma’s son, Duduzane, stepped down as a director of the company’s Shiva Uranium unit, Oakbay said.

The company contacted Zuma and the ministers of finance, labor, mines “to express deep disappointment over the decisions of our banking partners and to make it very clear that livelihoods are at risk if we are unable to restore these important banking relationships,” co-director Nazeem Howa said in letter to staff which was obtained by Bloomberg.

The decision comes as pressure is mounting on Zuma to resign as president following a court ruling over his response to a graft ombudsman report and after allegations by senior officials of the ruling African National Congress that the wealthy Indian family offered them cabinet posts in exchange for business concessions. The claims have spurred probes by the party and the Public Protector. The Guptas deny any wrongdoing.

“The scrutiny has been considerable over the course of the last few months,” Mike Davies, an analyst with Kigoda Consulting in Cape Town, said by phone. “It doesn’t look like this is going to dissipate soon.”

Atul Gupta stepped down as non-executive chairman of Oakbay Resources, a listed-unit of Oakbay Investments, while Chief Executive Officer Varun Gupta is also leaving the company, the mining group said in a statement Friday. Oakbay said in a separate statement that a major Asian bank, which preferred to remain anonymous, was servicing the company.

“This looks like somewhat of a strategic retreat,” Anne Fruhauf, vice president at New York-based risk adviser Teneo Intelligence, said in an e-mailed response to questions. It is “a damage limitation exercise in response to the growing political toxicity of the Gupta’s business affairs,” she said.

Some of the comments posted under the link to this story on Alec Hogg's Facebook page
Some of the comments posted under the link to this story on Alec Hogg’s Facebook page