Zuma’s breathtaking hypocrisy: Hawks prepare graft charges against Gordhan.

In any functioning democracy, Jacob Zuma would be packing up his belongings ahead of a speedy departure from Mahlamba Ndlopfu, the South African President’s official residence. On a personal note, Zuma is perceived to be the spider in a web of deceit and corruption, the fulcrum in a ruthless network of patronage. And professionally, his party was given a nine percentage point hammering in elections earlier this month, with the opposition now controlling four of the country’s Big Six metros. It goes deeper. Allegations of Zuma’s criminal behaviour persist: widespread support for a silent but nationally televised hence very public protest showed many believe he raped a friend’s daughter. And there is a strong voice calling for the reinstatement of over 700 racketeering and corruption charges against him. To cap it all, Zuma’s most visible crony capitalist pals, the Indian immigrant Gupta Family, have now announced they are selling up and leaving the country. Zuma’s reaction was typically erratic. Instead of reflection, he chose to unleash an attack against the one man who stands between taxpayers and wholesale plundering by politically connected cronies. That’s no exaggeration. The crude attempt at instilling Zuma loyalists at the SA Treasury in December was termed “9/12” by staffers, a reference to the “9/11” attacks on New York’s World Trade Centre in 2001. With a trumped up charge shown short shrift, Zuma’s allies are rolling the dice again. This time the Zuma-loyal Hawks are preparing corruption charges against Gordhan relating to the employment of an executive at the SA Revenue Services. Zuma says he is “powerless” to stop it. The hypocrisy is breathtaking. – Alec Hogg

The cartoon speaks a thousand words. More magic available at www.zapiro.com
The cartoon speaks a thousand words. More magic available at www.zapiro.com

JOHANNESBURG, Aug 28 (Reuters) – South Africa Finance Minister Pravin Gordhan may be charged this week for graft, the City Press newspaper reported on Sunday, citing senior sources in the police, the National Prosecuting Authority (NPA), and the tax service.

Thirty witnesses had been lined up to testify against Gordhan and three former officials from the South African Revenue Service (SARS), the paper said.

Officials at the NPA did not immediately respond to requests for comment.

Police summoned Gordhan this week in connection with an investigation into a “rogue spy unit” set up in the revenue service when he headed the organisation, rattling South African markets and sending the rand down 5 percent.

The investigation first came to light in February and political pundits have said Gordhan is being undermined by a faction in the government and ruling African National Congress (ANC) allied to President Jacob Zuma.

The newspaper said Gordhan faced a graft charge for granting early retirement to Ivan Pillay, a former commissioner of the South African Revenue Service who is also under investigation.

Read also: Gordhan’s arrest = economic earthquake. 9/12 would pale in comparison.

Zuma said on Thursday he backed Gordhan but was powerless to stop a police investigation into him, signalling a prolonged tussle that could add to market volatility.

South Africa’s credit rating is set to be cut to junk status this year, according to a Reuters poll this week, with economists surveyed citing the heightened political risk around the Gordhan saga.

Gordhan commands huge respect in the markets and his departure would be a serious blow to Africa’s most industrialised country, teetering as it is on the brink of recession.

The Sunday Times said Gordhan had told a meeting of Treasury staff on Friday that he and his deputy Mcebisi Jonas could be removed in a cabinet shuffle. Treasury officials did not immediately respond to requests for comment.

ANALYSIS: Why the Hawks don’t have a case against Gordhan

By Safura Abdool Karim, GroundUp

Cape Town – The back and forth between Finance Minister Pravin Gordhan and the Hawks has finally come to a head with Major General Ledwaba instructing Gordhan to provide a warning statement and Gordhan effectively refusing, writes Safura Abdool Karim on GroundUp.

Given the protracted nature of this particular issue as well as the shifting focus, it is difficult to follow exactly what Gordhan is being accused of, or if he is even being accused of anything. A good place to start, in attempting to understand what is unfolding, is to look at what is being requested by the Hawks.

What is a warning statement?

Warning statements get their name from the statement of rights read to a suspect prior to arrest. The statement – derived from the US’ Miranda rights – informs a suspect that he or she has the right to remain silent and the right to counsel.

https://twitter.com/JohnAshbourne/status/769074683077652480

Individuals only need to be informed of these rights when they are suspects being questioned or detained by the police. Usually, a suspect has the option to remain silent, consult counsel or make a statement.

If the Hawks are instructing Gordhan to provide a statement, it is more likely than not Gordhan has gone from being a person of interest to a suspect.

If Gordhan is a suspect then, legally speaking, he is not obliged to appear or to provide any statement since he is protected under section 35 of the Constitution. The only way Gordhan can be compelled to appear before the Hawks is if he is arrested.

There are a number of reasons, however, why an arrest may not happen in the near future. One is that there isn’t sufficient grounds for a warrant to be issued. Another could be that the Hawks do not want the case brought before a court just yet.

In any event, legally speaking, Gordhan can elect not to respond, not to appear or even just respond to the extent he wishes, for as long as he is not under arrest. However, despite his co-operation, Gordhan seems to have become a suspect in the Hawks’ investigation.

What is he suspected of doing?

The first accusation was that he approved the early retirement and then rehiring of a deputy commissioner and the second was that he facilitated the creation of a unit involved in intelligence gathering.

These actions don’t appear to be criminal.

This primary Hawks’ allegation against him appears to be that the so-called ‘rogue unit’ was engaged in collecting covert intelligence and this was illegal.

Gordhan admitted that he oversaw the creation of a unit to investigate organised crime relating to tax and customs legislation. In 2007, the unit was set up to penetrate and intercept the activities of tax and customs crime syndicates.

As Gordhan described it, the work of the unit was to investigate non-compliance with tax legislation. In his words, “Non-compliance could include non-submission of a tax return, incorrect information on a tax return, different types of debt collection, aggressive tax avoidance, abuse of trusts, tax evasion, smuggling across borders, cigarette and other forms of illicit trade, trafficking of drugs, round-tripping to avoid excise duties and VAT etc.”

It does look as if some of the intelligence gathered by this unit was gathered ‘covertly’. Is that illegal?

The Sikhakhane Panel thought that the actions of this unit were a contravention of Section 3 of the National Strategic Intelligence Act which reads:

“3. (1) If any law expressly or by implication requires any department of State, other than the Agency or the Service, to perform any function with regard to the security of the Republic or the combating of any threat to the security of the Republic, such law shall be deemed to empower such department to gather departmental intelligence, and to evaluate, correlate and interpret such intelligence for the purpose of discharging such function: Provided that such department of State – other than the National Defence Force when employed for service referred to in section 227(1)(a), (b) or (e) of the Constitution or when discharging the counter-intelligence responsibilities entrusted to its Intelligence Division; and other than a police service established under any Act of Parliament, when a member of such service is investigating any offence relating to the security of the Republic or is performing any other function relating to the security of the Republic, shall not gather departmental intelligence within the Republic in a covert manner:”

Intelligence gathering

It is not a simply worded section but if you read it carefully, essentially it states that a department may investigate and gather intelligence relating to the security of the Republic as outlined in subsection 3(1) except when it comes to gathering intelligence within the Republic in a covert manner. In terms of subsection 3(1)(b), only the police service has the power to gather intelligence in a covert manner but only if the intelligence relates to the security of the Republic.

So, does the intelligence gathered by the unit relate to the security of the Republic?

While abalone poaching and smuggling syndicates are big problems, particularly for SARS, they do not specifically relate to the security of South Africa. In particular, it is clear that the unit gathered intelligence relating specifically to contraventions of tax and customs legislation which clearly falls outside of area of security of the Republic.

Even if we were to accept, however, that the investigations of the unit did contravene the National Security Act, that contravention falls on the department, not just the minister. More importantly, it is not a criminal offence.

The letter by Gordhan’s attorneys to the Hawks states, “Your interpretation suggests that it is unlawful for anybody to engage in the covert gathering of crime intelligence. But such an interpretation is clearly absurd. Very many public bodies engage in the covert gathering of crime intelligence such as most metropolitan local authorities, SAA, Eskom and Prasa to name but a few.”

It’s not clear what the Hawks are attempting to rely on in attaching criminal liability to Gordhan’s involvement in the unit but the links are tenuous, if not non-existent.

Then there’s the other thing…

Rehiring the deputy commissioner, Ivan Pillay

In Gordhan’s August 23 2016 statement to the Hawks, he admitted he received a memo requesting his approval for Pillay to take early retirement and be re-employed as a fixed-term employee. As a consequence, Pillay would obtain access to his pension fund but also retain his job.

Gordan approved the proposal and alleged this approval was based on his belief that the arrangement was above board.

In certain respects, this action seems a little strange, but that would not be enough for an arrest. The Hawks have to charge Gordhan with specific contraventions and criminal acts.

One of the key issues the Hawks rely on is that Sars paid an early-retirement penalty for Pillay. It is stated further, in Ledwaba’s letter of August 22 2016, that ordinarily this penalty is payable by the employee. As a consequence, the payment of this penalty amounted to an unauthorised expenditure under the Public Finance Management Act (the PFMA) and so Gordhan is guilty of an offence.

The starting point of the problems here is that the PFMA doesn’t apply to Sars. If the Act is not applicable, it would be impossible for Gordhan to contravene it. However, even if the PFMA was applicable, contravening it is not a criminal offence, so this allegation fails on the law alone.

It is further contended by Ledwaba that the approval contravened the Prevention and Combating of Corrupt Activities Act which, to put it politely, seems to be a last-ditch attempt to nail Gordhan on something. The offence of corruption is a pretty broad one (it is called the ‘General Offence of Corruption’ after all) so it makes sense for the Hawks to try to tack that accusation on as a kind of catch-all. But at the end of the day, catch-all charges also need to be proven.

Broadly speaking, it will need to be shown that (a) there was an acceptance or giving of some kind of gratification and (b) that this influenced someone to act in an improper way. While one may be able to stretch Sars paying the early retirement penalty for Pillay into ‘gratification’, it’s difficult to see how that would imply Gordhan influencing Pillay – or anyone else – to act in some improper manner.

At the end of the day, Pillay returned to Sars on the same salary he had before he took early retirement and continued performing the same duties, so we are in the dark about what influence resulted.

What happens now?

It’s clear that the Hawks don’t have much of a legal basis to successfully prosecute Gordhan on any of the allegations outlined in their letter of 22 August 2016, but these allegations are not set in stone. The danger is that the Hawks may reformulate the charges, and next time around, the legal arguments may not be as shaky. – GroundUp

Bloomberg’s story about Zuma’s power waning

By Sam Mkokeli and Mike Cohen

(Bloomberg) – Reeling from his ruling party’s worst-ever election performance and a public backlash over a police investigations into his finance minister, South African President Jacob Zuma’s room to maneuver appears to be shrinking.

Anxiety over whether Zuma will fire Finance Minister Pravin Gordhan in a cabinet reshuffle has hung over Africa’s largest economy since Aug. 23, when the news broke that Gordhan, 67, may face charges over allegations that he set up an illicit investigative unit during his time as head of the national tax agency. While Zuma expressed “full confidence” in the minister, he said he’s powerless to stop the probe.

Opposition parties and analysts have speculated that Zuma may use the case to install a more compliant head of the National Treasury and reassert his authority following the ruling African National Congress’s loss of control of major cities including Johannesburg, the economic hub, and Pretoria, the capital, in Aug. 3 local elections. This week, the cabinet said Zuma would be the chairman of a new committee to oversee state-owned companies.

‘Kamikaze Pilot’

“He is acting like a kamikaze pilot,” Susan Booysen, a politics professor at the University of Witwatersrand in Johannesburg, said by phone. “He is thinking about himself, and protecting his position and protecting the enclave of the ANC around himself.”

Zuma, 74, was pressured into appointing Gordhan to his post in December after his decision to replace the respected Nhlanhla Nene as finance minister with a little-known lawmaker sparked a sell-off in the rand and nation’s bonds. The two have been at loggerheads ever since, with Zuma brushing aside Gordhan’s pleas to fire the nation’s tax chief for insubordination and to replace the board of the loss-making state airline.

The markets may stay Zuma’s hand, according to Ralph Mathekga, a political analyst at the Mapungubwe Institute of Strategic Reflection, a Johannesburg-based research organization.

“The space for maneuvering for him, particularly when it comes to the Treasury, was maxed out last year when he removed Nene and had to bring back Gordhan,” he said by phone. “There’s no space for him to move whatsoever.”

Likely Replacement

Business Day, South Africa’s main business newspaper, said in an editorial Friday that Gordhan will probably be arrested and then replaced. His likely successor would be Brian Molefe, the chief executive officer of state power utility Eskom Holdings SOC Ltd., the Johannesburg-based Mail & Guardian newspaper reported on Friday, citing people it didn’t identify.

Fears that Gordhan’s job is in jeopardy pushed the rand to its lowest level in a month against the dollar on Thursday, while a day earlier yields on benchmark government bonds due December 2026 surged the most since Zuma fired Nene.

Read also: Who’ll replace Gordhan as finance minister? Four contenders

“If you wreck the economy, you destroy your political career, but it seems there is a disjuncture between economic and political power,” said Robert Schrire, a politics professor at the University of Cape Town. “He’s done virtually everything that ought to get a leader kicked out of office, and survived.”

ANC Support

Zuma, who is in Kenya for the summit of the Tokyo International Conference on African Development, has been dogged by scandal since he took charge of Africa’s largest economy in May 2009, including a ruling by the nation’s top court that he violated the constitution by refusing to repay taxpayer money spent on his private home. He fended off calls to quit with the backing of the ANC’s National Executive Committee, which is stacked with his allies.

Gordhan has drawn backing from Deputy President Cyril Ramaphosa, the ANC’s economic policy head Enoch Gdongwana, former finance minister Trevor Manuel and some of the country’s main business organizations, who have pleaded with Zuma to stop the probe of Gordhan. The president said he had no authority to halt any investigation.

“I just don’t think a country can chop and change ministers of finance, you need continuity,” Jacko Maree, the chairman of Liberty Holdings Ltd., one of Africa’s largest insurers, said in an interview in Nairobi, Kenya’s capital. “It would be a great pity if he were to be removed or asked to stand down, or pressurized to stand down.”

With Zuma scheduled to step down as ANC leader late next year and as the nation’s president in 2019, his grip over the party is loosening, according to Schrire.

“He has lost considerable influence and power,” Schrire said. “He doesn’t really have any capacity to now govern effectively and create a framework for growth. I don’t think he is going to get rid of Gordhan.”