Capturing Treasury: OUTA connects the dots

Cape Town - In a document handed to Parliamentary representatives on Wednesday, civil action group the Organisation Undoing Tax Abuse (OUTA) describes attempts by National Treasury in the past to prevent public resources from being "plundered for the benefit of Gupta-linked companies".

OUTA said during a media briefing that the purpose of the document as a whole, is to try and convince members of Parliament why President Jacob Zuma should be removed from office. According to OUTA any one of the matters it raises in the document should be enough to have Zuma removed, let alone all the allegations taken together.

"After he was removed, Pravin Gordhan called on South Africans to connect the dots - and we have done that," said OUTA.

OUTA sets out what it describes as a sustained conflict between Gordhan and the Gupta family, which ultimately lead to Gordhan's removal from office by Zuma.

"Mr Gordhan was an effective Finance Minister. However, his second tenure as Finance Minister was characterised by conflict with President Zuma. On 27 March 2017, President Zuma dismissed Mr Gordhan and Mr (Mcebisi) Jonas. This occurred in circumstances where Mr Gordhan acted against Gupta interests," states OUTA.

"Mr Gordhan was replaced as Minister of Finance by Mr Malusi Gigaba, someone perceived to be close to the Guptas. The sequence of events relating to the president’s repeated replacement of the minister of finance leads unavoidably to the conclusion that his decisions in this regard have been influenced by the interests of the Gupta family and his son whose fortune is inextricably linked to theirs."

Denel

On 10 December 2015, the day after Zuma appointed Des Van Rooyen as minister of finance in the place of Nhlanhla Nene - who also opposed the nuclear build programme on the basis that it was fiscally irresponsible - Denel’s application to National Treasury for approval of the Denel Asia joint venture was submitted.

OUTA said at the time Zuma stated that he would deploy Nene to the African Regional Centre of the BRICS Bank as Director General. This never happened.

The Denel Asia joint venture was formally announced in January 2016. The joint venture was concluded by Denel without approval from the minister of finance or the minister of public enterprises, as prescribed by the Public Finance Management Act, OUTA points out.

The incentive for the deal was apparently a $4bn tender to deliver long-range artillery to the Indian army. However, the terms of the deal were weighted heavily in favour of the Guptas," states the OUTA document.

"Drafts of the joint venture agreement forwarded to the Guptas show that Denel gave up its intellectual property to Denel Asia in return for little more than a promise of a R100m marketing contribution from VR Laser Asia that was to be treated as an interest-bearing shareholder’s loan to the Company by VR Laser Asia."

Moreover, in relation to its Indian operations, OUTA said Denel Asia proposed to enter into a joint venture with an Indian investment company controlled by Anil Gupta and Adani Enterprises in terms of which the Indian investment company would have a right of first refusal to manufacture any products that Denel had licenced Denel Asia to manufacture or sell.

Estina

About mid-2011 to mid-2012, Mosebenzi Zwane - then MEC for Agriculture and Rural Development in the Free State - and Free State Premier Ace Magashule drove the conclusion of a mega-contract between the department and a company called Estina for what OUTA calls the "Vrede dairy project”.

According to OUTA, during or about October 2013, National Treasury investigated the department’s contracts with Estina.

"The results of this investigation were not published by Treasury, but some of the findings were disclosed by AmaBhungane after it obtained a transcript of an interview that the investigators had conducted with the department’s chief financial officer Seipati Dlamini," states OUTA.

"As Minister of Mineral Resources, Zwane appointed Dlamini as national deputy director general: Mineral regulation in November 2016, without following due process and without Cabinet approval."

OUTA says, despite repeated denials from the Gupta family and those involved in the project, it is evident from its document that the Gupta family and their associates "were intimately involved in, and benefited from, the project".

On 13 August 2014, following the Treasury’s investigation, the department cancelled its contract with Estina.

Zwane also appointed Malcolm Mabaso as his personal adviser in 2016. Mabaso is a former business associate of a Gupta associate, Salim Essa. He served with Essa as a director of Premium Security and Cleaning Services from July 2013 to October 2015.

"Mabaso was reportedly brought to National Treasury by Minister Des van Rooyen, on the first day of his fleeting spell in office as Minister of Finance," states OUTA.

"On his arrival at Treasury, Minister Van Rooyen also sought to ensure that Mr Mabaso was given a desk, despite Mr Mabaso not being a Treasury or Department employee."

OUTA said on Van Rooyen’s first day as finance minister, he arrived with two advisers, Mohamad Bobat and Ian Whitley.

"Both of these men were closely connected to Gupta family businesses. A few hours into his appointment, Mr Whitley sent an email attaching strategic Treasury documents to a series of close Gupta business associates. Mr Whitley’s covering email, comprised only two words: 'Gents, finally'.

According to OUTA, Bobat was expected to channel tenders from National Treasury to a team of experts, including persons employed by Trillian Capital, owned by Trillian Holdings, which is wholly owned by a Gupta associate, Salim Essa.

Due to the negative impact of Van Rooyen’s appointment, especially on the value of the rand, Zuma was "forced" to replace him with Gordhan on 13 December 2015.

Mcebisi Jonas

During 2015, Mcebisi Jonas was approached by Fana Hlongwane, who proposed a meeting with Duduzane Zuma. Although he had never met Duduzane Zuma, Jonas was already aware of his close ties with the Gupta family, states OUTA.

In the build-up to this meeting, Duduzane Zuma and Mr Jonas exchanged text messages, which were recorded in the State of Capture report.

On 23 October 2015, Jonas met Duduzane Zuma at the Hyatt Regency Hotel in Rosebank, as they had agreed. After a short while, Duduzane Zuma asked to move the meeting to a more private location for a discussion with a third party. Jonas agreed. Jonas and Duduzane Zuma left Rosebank in Duduzane Zuma’s vehicle. Using Duduzane Zuma’s vehicle, the pair drove to the Gupta family residence in Saxonwold. Jonas had never been there before.

OUTA continues to set out in its document that, when Jonas and Duduzane Zuma arrived, they were met by Ajay Gupta along with Hlongwane. Ajay Gupta informed Jonas that they had conducted several investigations into Jonas and his associates. Pursuant to those investigations they had discovered that Jonas was part of a faction that "sought to undermine President Zuma".

"Despite this, Ajay Gupta advised Jonas that they were going to make him Minister of Finance. Mr Jonas reacted with shock and irritation. He declined the offer, informing Ajay Gupta that only the president of the Republic was empowered to make such decisions. Mr Jonas stood up and left the meeting. As he was leaving, Ajay Gupta offered him payment of R600m in an account of his choosing and whatever amount of cash he could carry with him," OUTA continues.

Shortly after this incident, Jonas informed both Nene and Gordhan about the meeting. Both Nene and Gordhan confirmed this fact, states OUTA.

Coal contracts

OUTA mentions what it calls Treasury’s (due to Gordhan) robust investigation of the Eskom/Tegeta coal contracts, in the face of apparent obstruction from Eskom. Treasury, for instance, refused to authorise excess payments by Eskom to Tegeta worth almost R4bn.

Tegeta was formed in 2006 to identify and develop the mining assets of the Guptas' Oakbay Investments Group - especially coal.

During August 2015, Treasury declined Eskom’s request to increase the value of Eskom’s agreement with Tegeta’s Brakfontein Colliery by another R2.94bn. Later that month, Treasury declined Eskom’s request to extend Optimum Colliery’s supply agreement with Arnot Colliery by a further six months without going on open tender.

"Treasury had noted that Tegeta constantly overcharged Eskom for its coal supply and underperforms in the quality of coal it delivers to Eskom," states OUTA.

Gupta bank

Gordhan and the Registrar of Banks did not fast-track the application by the Gupta-linked company Vardospan to purchase the shares in Habib Overseas Bank Limited "and thus to enable the Guptas to obtain a South African Bank", states OUTA.

"One of the primary concerns in relation to this application was the failure of Vardospan Limited to prove that it had the financial resources necessary to underwrite a bank. In its application, it relied on no liquid capital and based its claim to financial resources on the interests of its ultimate controlling shareholder, Mr Salim Essa, in three companies, Tegeta Exploration and Resources, Trillian Capital Partners and VR Laser Services. The minister was understandably reticent to give Vardospan control over a banking licence on the basis of these assets."

Gupta transactions

On 4 August 2016, Gordhan received a letter along with a certificate from the Director of the Financial Intelligence Centre (FIC). The FIC certificate identified 72 suspicious transactions from various members of the Gupta family and entities within their stable of companies. The total value of these transactions was R6.8bn.

The largest suspicious transaction was a transaction of R1.3bn in respect of the Optimum Mine Rehabilitation Trust. The Department of Mineral Resources under Minister Mosebenzi Zwane had approved this transaction. The amount was to be transferred from a closed Standard Bank account to an account held with the Bank of Baroda.

"This transaction presented the real risk that the R1.3bn, which was meant to be used to rehabilitate the mine, was transferred out of the country and used for other purposes," states OUTA.

Gupta bank accounts

According to OUTA, the issue of sharpest conflict between Gordhan and the Gupta family concerned the closure of Gupta-linked accounts by various South African banks.

During April 2016, Oakbay announced that its bank accounts had been closed by the South African banks with which it held bank accounts and which were concerned about the possibility of money laundering transactions passing through their accounts.

On 8 April 2016, Oakbay approached Gordhan demanding his intervention to reverse this decision. On 13 April 2016, at a meeting convened and chaired by Zuma, Cabinet decided to intervene in the dispute between the banks and the Guptas.

Cabinet established an inter-ministerial committee (IMC) to investigate allegations that the closure of the Gupta family accounts was done “unilaterally and in collusion".

OUTA points out that this IMC was led by Zwane, who it claims it shows in the document, had "an improper relationship with the Guptas".

"For no apparent reason, Minister Muthambi, a close ally of the Guptas, took part in interviews conducted by the IMC, and on 1 September 2016, Minister Zwane issued a public statement falsely stating that Cabinet had agreed on the recommendation of the IMC that a judicial inquiry investigate why South Africa’s banks had blacklisted Gupta-owned businesses," states OUTA.

The Gupta companies were of the view that Gordhan had the power to intervene with the banks.

Gordhan then applied to the North Gauteng High Court in November 2016 seeking a declaration that he could not intervene in the dispute.

Gordhan’s application was heard in the week of 27 March 2017. In the same week, the application of Vardospan to compel the Gordhan to allow it to take over Habib Overseas Bank was heard in the High Court.

While both applications were being argued in court, Gordhan was recalled by Zuma from investor roadshow in the UK.

Zuma replaced Gordhan with Gigaba on the night of 31 March 2017.

Malusi Gigaba

According to OUTA, Gigaba "has a track record of exercising his powers in a manner that is advantageous to the Guptas".

Gigaba appointed "Gupta family allies" to the Board of Transnet where they presided over transactions "that diverted billions of rands in public funds to Gupta companies", according to OUTA.

"He also fast tracked the naturalisation process of Gupta family members," the OUTA document states.