Oakbay’s shrinking net – more SA companies join Gupta exodus

The trading environment for the Gupta-owned Oakbay group just got tougher as more South African companies pull the plug on business ties. Mutual and Federal joined an ever growing list after it withdrew cover for the investment group. Barloworld and Eqstra are also named in the Reuters piece below. How much more can the group withstand before the doors are closed? – Stuart Lowman

By Tiisetso Motsoeneng

JOHANNESBURG, May 10 (Reuters) – More South African companies, including a subsidiary of Old Mutual, have stopped doing business with Oakbay Investments, the company at the centre of a political influence scandal.

According to a company document, Mutual and Federal joins several other companies in cutting links with firms associated with members of the Gupta family, who are alleged to have used their friendship with President Jacob Zuma to win political favours.

Nazeem Howa, CEO of Oakbay Investments, a Gupta-family owned company, during an interview with Bloomberg at their Johannesburg offices in South Africa on Monday, April 11, 2016. Pic: Waldo Swiegers / Bloomberg
Nazeem Howa, CEO of Oakbay Investments, a Gupta-family owned company, during an interview with Bloomberg at their Johannesburg offices in South Africa on Monday, April 11, 2016. Pic: Waldo Swiegers / Bloomberg

Companies began cutting links with the Gupta-owned companies in December last year when Barclays Africa’s retail banking business, Absa, quit as a banker for Oakbay Resources and Energy, a mining firm associated with the family.

Last month, Standard Bank, Nedbank, Sasfin and the local division of KPMG cut ties with company, prompting Atul Gupta and Varun Gupta to resign as respective chairman and chief executive of Oakbay Resources and Energy.

Oakbay has interests spanning mining, engineering, media and information technology.

Mutual and Federal, through its underwriting arm Credit Guarantee Insurance Corporation of Africa, has withdrawn its cover for Oakbay Investments, the document, which was corroborated by a source with direct knowledge of the matter, showed.

“An Oakbay insurance broker was called in by Mutual and Federal to be told it will no longer provide cover because they are concerned about their reputation,” the source said.

Mutual and Federal did not immediately respond to requests for comment.

In addition, South African fleet management company Eqstra has cancelled its car rental lease agreements with Oakbay with 14-days notice, the source said.

Eqstra declined to comment.

Oakbay approached local logistics company Barloworld, which operates the Avis car rental brand in southern Africa, for car rental services but the New York-listed company refused take its business, the source said.

“There is no directive in place instructing such action to our Avis rental branches, management is investigating the matter further,” Avis in South Africa said in an email response to Reuters questions.

The Gupta’s relationship with Zuma has been a source of controversy for years, but in March senior figures went public to say the family had exerted undue sway, including offering cabinet positions.

The president and the Guptas reject the claims of undue influence that has become known as “state capture.”

Oakbay Investments’ Chief Executive Officer Nazeem Howa, who has been trying to restore banking ties, has said the company would not be able to pay its workers from June 7 if it cannot restore banking relations.

Oakbay Investments had failed to repair relations with at least two banks as of Tuesday with one of them having already refused to meet the company executives led by Howa, the source said.

Last month, the government appointed a ministerial team to find a solution to the stand-off. The team is due to report back on its progress at this week’s cabinet meeting, Minister in the Presidency Jeff Radebe told Reuters.

“Government meets private sector all the time,” Radebe said. “Those who are talking about state capture need to explain that. As far as I am concerned our government is not being captured by anybody at this present moment in time.”