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Hitachi, ANC deal typical 'marriage of convenience'

Sep 30 2015 12:10
Fin24 correspondent
Extract from the damning SEC document on Hitachi P

Extract from the damning SEC document on Hitachi Power Africa's efforts to enter the South African market.

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Johannesburg - In a slap in the face for meaningful black economic empowerment, Chancellor House, the investment arm of the African National Congress (ANC), was happy to be a passive partner in its controversial deal with Hitachi Power Africa.

The US Securities and Exchange Commission has made public damning details of one of the most controversial and secretive business deals in post-apartheid South Africa. This is one scandal which, despite the best efforts of the main players, has refused to go away.

The emergence of the details demonstrates the single-minded determination of companies to land big public and private contracts, while exposing possible manipulation of the tenders.  

Hitachi's search for a partner began when it became clear that Eskom was on the verge of a massive capital investment programme. But they were not looking for any partner. Hitachi needed someone to exert political influence on Eskom. As the US Securities Exchange Commission said this week, engineering or operational capacity was not necessary. In Chancellor House, Hitachi saw that potential partner.

"Hitachi was fully aware of Chancellor's operational shortcomings, and sought a partnership with Chancellor precisely because Chancellor would not provide it operational support," says the Commission.

The shareholders' agreement expressly provided that Chancellor's "contribution" to Hitachi would include, among other things, "lobbying the public and the private sector in the Republic for new business and to promote (Hitachi Power Africa's) expansion initiatives and to enhance and/or protect (Hitachi's) existing and future business interests within the Republic" and "assistance in the identification, preparation, processing, monitoring, support and procuring of tenders from central, provincial and local, parastatals and the private sector."

It was a typical marriage of convenience. Chancellor House was not interested in meddling in operations. The Commission has alleged that Chancellor House did not have capacity to be involved in operations and preferred "networking at board level".

By agreeing to pay US$19m in order to make the matter go away, Hitachi has put pressure on the ANC to salvage its reputation.

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