Unpacking State Capture:

The Public Affairs Research Institute (PARI) have produced a report which unpacks the Capture of the South African State by Zupta Inc in a very clear and dispassionate manner that makes sense of and expands on, Thuli Madonsela’s (our ex Public Protector) State of Capture report and details very succinctly the manner in which Denel, Eskom, Transnet, Prassa, to name a few SOEs (State Owned Enterprises) and Treasury were taken over by Gupta surrogates and then milked.

Page 42 of the PARI report Betrayal of The Promise details the modus operandi for milking an SOE. We paraphrase:

New minister (say for energy) changes the SOE board composition

SOE embarks on new capital expenditure projects

The new board support radical economic transformation or has close personal links to bidders

Tender is awarded in circumstances of clear conflict of interest.

This is a process that can take years to put in place and clearly is part of a systemic process of looting compliant state coffers and public and private purses (for example, how much do you pay versus how much should you pay, for electricity?).

To add insult to injury, the DA’s Natasha Mazzone suspects that Eskom engineered the rolling blackouts (remember them?) in order to create a panic filled and compliant market place to ensure that the coal deals of Eskom’s choice and terms and conditions were met, as part of the milking process. Well, the Direct Democracy Forum (DDF) pretty much suspected that was behind the rolling blackouts, and it wouldn’t be the first time that Big Power (here and elsewhere) manipulated the market place to their profit. Wherever there is a monopoly these behaviours are pretty much a given.

Then came the email exposé about the extent of the state capture and President Zuma’s planned retirement bolt-hole in Dubai, and further still, the role Bell Pottinger had, (also see here) a UK PR firm contracted by the Gupta’s to run a disinformation campaign aimed at the South African public, duping the nation and creating red herrings to detract from the looting that was happening in front of our very eyes.

It is all pretty sickening, particularly given the state of the economy, wide-spread poverty and the terrible need for social, economic and administrative justice in South Africa.

South Africa is not entirely alone in this sense. If you haven’t heard of Operation Car Wash, a Brazilian equivalent to Zupta-Gate, read all about it, it is very informative. There are lessons to be learned from Brazil’s experience.

There is not much you or I or the DDF can do at the moment but they say that truth is stranger than fiction and there are upcoming elections and, while the DDF having the necessary political clout to do anything substantial about this is unlikely, sometimes the unlikely happens against all odds. We also think that the members of Zupta Inc should contemplate the fact that many in South Africa will be looking forward to seeing justice done when a government of integrity takes power from the ANC.

So, our message to them is, “You can run but you cannot hide”.

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Molefe Eskom-Tegeta Scam

 

An analysis of the State Capture Timeline of the events from 1st November 2011, when Glencore et al purchased Optimum Coal Holdings (OCH) and Optimum Coal Mines (OCM) to 1st January 2017, when Brain Molefe resigned from Eskom in disgrace, shows four clearly distinct sub-sets.

These are the periods 1) 1st November 2011 to 1st March 2015 2) 1st April 2015 to 8th April 2016 3) from 11th April 2016 to 14th April 2016 and finally 4) from 23rd May 2016 to 5th September 2016.

The first period 01/11/2011 to 01/03/2015 is an approximate three year and four month period during which Glencore and partners purchased Optimum Coal Holdings and found that the pre-existing twenty year Coal Supply Agreement (CSA) with Eskom was a loss-making deal to the tune of some R100M per month, which needed to be re-negotiated. Around 1st March 2015, a draft addendum to the CSA agreeing to sell coal to Eskom at cost through to 2018, was said to be approved by the Eskom Tender and Procurement Committees.

The second period runs from 1st April 2015 when Brian Molefe joins Eskom Holdings SOC Ltd, through his stewardship until 11th April 2016, when the Loan Consortium approved the business plan which saw OCH and OCM sold to Tegeta (aka Oakbay/Guptas).

During this period Molefe, (who Eskom assures all of us had no influence over board decisions) appears to have intervened to:

  1. force OCH/OCM into Business Rescue by refusing to approve the addendum to the CSA (see above) needed by OCM who were losing up to R120M per month on the Hendrina CSA, as well as having Eskom impose a R2.1765 Billion penalty on OCM,

  2. quash any hopes of sales to bidders other than Tegeta, and there were a few alternative bidders (any sale required Eskom approval, probably in terms of the extant CSA) as no approval was given except for the Tegeta deal,  and

  3. to force upon the sellers the sale of Optimum Coal Holdings and all subsidiary business assets, including the Koornfontein Mine and the Optimum Coal Terminal Concession (very significantly), as well as Optimum Coal Mines, to Tegeta. (see above – any sale required & etc ….. )

Also during this period,

  1. on 4/03/2016, Tegeta obtained a certainty letter from the Bank of Baroda as cover for the purchase of all shares in OCH, viz the Tegeta share of R2.15B as agreed.

  2. on 30/03/2016, Eskom signed a release on the agreement for OCH and

  3. on 8/04/2016 the Loan Consortium approved the underlying business plan (assuring them they would be repaid the outstandings on the revolving loan granted Glencore et al in January of 2011).

On 11th December 2015 an agreement was struck for the sale of OCH (as above) for R2.55B, payable to the Loan Consortium, R2.15B by Tegeta and R400M by Glencore.

Everything sort of looked ok.

The third period ran from 11th April, 2017 to 14th April 2016:

  1. 11th April 2016 Tegeta defaulted on the sale agreement (they were short R600M) and tried to re-negotiate the deal with the Loan Consortium, which effort the Consortium rejected.

  2. 13th April 2016, Eskom prepays to Tegeta a R659.5M pre-payment on a CSA for Arnot power station, supplied by OCM, but paid to Tegeta at a premium of R1.20 / GJ, being a profit to Tegeta which should have been for account of OCM under management of the BRPs,

    1. At that time OCM was still owned by OCH and managed by the BRPs whose mandate only expired 31st August 2016.

  3. 14th April 2016 Tegeta and Glencore settle their full monetary obligations to the Loan Consortium

The 4th period ran from 23rd May 2016 to 5th September 2016: This period can only be described as raiding the honey pot:

  1. 23rd May 2016 Tegeta transfered R280M from the Koornfontein Rehabilitation Fund to the Bank of Baroda.

  2. 21st June 2016 transfered what is variously reported as R1.4612B or R1.4699B from Optimum Mine Rehabilitation Fund Trust to the Bank of Baroda.

    1. The interest on these funds at 7% pa would amount to R122.5M

  3. 5th September 2016 Oakbay/Tegeta/Guptas sold the Optimum Mines coal export allocation at Richards Bay Coal Terminal to Vitol, an international coal trading firm, for a cool US $250M (R3.68B). The allocation was acquired through the purchase of OCH by Tegeta, paid for on 14th April 2016, a 5 month profit of R1.5B, while still retaining all the remaining assets of OCH.

Then of course, only on 31st August 2016 do the BRP’s relinquish responsibility and obligations for OCM. Until that point the BRP’s were still managing OCM.

The final chapter of this saga was Brian Molefe resigning as CEO of Eskom, in disgrace, having had his fraternisation with the Gupta’s publically exposed.

How to summarise this.

From 1st November 2011 to 1st March 2015 business was amiable between OCM and Eskom with emphasis on securing the coal supply for Eskom to the benefit of both parties.

From 1st April 2015 when Brian Molefe joined Eskom to 8th April 2016, relationships soured and OCM was pushed to the wall by Eskom’s unwillingness to negotiate mutually beneficial business deals with OCM, penalising OCM to the tune of R2.1765 Billion and OCM were forced to sell to the buyers of Eskom’s choice (viz Gupta’s Tegeta) on terms and conditions of Eskom’s choice (the Gupta’s wanted the Coal Concessions at Richards Bay Harbour for a song).

From 11th April 2016 to 14th April 2016 Tegeta tried to re-negotiate the deal as they were short of R600M and having failed to renegotiate, Eskom bailed them out by pre-paying Tegeta R659.5M on a CSA contract that was not even Tegeta’s to have (they had yet to close the OCM/OCH deal).

From 23rd May 2016 to 5th September 2016, even before OCM management had shifted from the Business Rescue Practitioners, the Gupta’s plundered the assets of OCH, including transferring some R1.75 Billion of Rehabilitation Trust Funds into Tegeta business accounts at the Bank of Baroda and selling the Richards Bay Coal Export Concessions at a R1.5 Billion profit.

Was this shrewd business dealings or a monumental multi billion Rand scam involving hundreds of millions of Rands belonging to a state owned public enterprise?

We at the DDF believe Molefe was the Gupta’s inside man at Eskom, and the scam plan from the outset was to defraud Glencore, owners of OCM and OCH, of their assets, in particular the Richards Bay Coal Terminal Concessions, and to profit thereby, because when it looks like a duck and walks like a duck and talks like a duck, that’s what it ducking well is, a duck.  So when a deal looks like a scam, there is no alternative conclusion to arrive at than it’s a scam.

Brian Molefe: This is the same man whom having resigned from Eskom in disgrace for fraternising with the Guptas, was offered an ANC seat in parliament, then offered a R30 Million severance package by the Eskom board after only 18 months of service, and when that last piece of chicanery was overturned, re-established as Eskom’s CEO.

This is the land we live in.

South Africa.

A land of infinite opportunities if you know the right Gupta.

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The Failure of BEE

Siya Khumalo lamented HERE at how BEE had been used to benefit the few instead of the many. BEE (Black Economic Empowerment) is a policy of giving preference to those previously excluded from the economy by the Apartheid policies of the Nationalist Governments between 1948 and 1994. While it is true that few benefited from it while many did not, his plea that BEE should be made to work for the many set me to thinking that it was just one of many ANC policies that did not work for South Africa because the ANC simply did not and does not work for South Africa, but for itself.

This was my response to the article:

I am leader of Direct Democracy Forum (DDF), a registered SA political party (http://ddforum.co.za).

Maybe it is just the circles I mix in but I do not and have not, for many years, known any white or black South Africans who are unwilling to share what they have in terms of time, skills, expertise and knowledge, with their fellow South Africans, so I think Siya Khumalo’s analysis of our dilemma is a bit simplistic.

First, BEE has not and will not work because it interferes with our constitutionally guaranteed freedom of association.. The only sound economic policy for South Africa is a colour-blind policy that seeks to lift all out of poverty by engaging all, fully, in the South African economy, irrespective of their race, colour or creed. That will allow us all to share our time, skills, expertise and knowledge with our fellow South Africans, irrespective of our race, colour and creed. This would be a multi-directional engagement by and between us all based on the freedom to choose and the freedom of association guaranteed by our constitution. ANC policies, if anything, have stifled that freedom for too long and need to be discarded as soon as possible.

The problem is far more systemic than to bee or not to bee. It is more correctly viewed as the extent to which government should be and has been allowed to intrude into the private, commercial and industrial lives of its citizens.

Thuli Madonsela’s state capture report epitomises the extent of the abuse of that relationship by certain government agents and certain private citizens for the enormous profit of the few and the general expense of the many. In the opinion of the DDF this is criminal, and if not so, it should be.

DDF policies, are intended to address the many problems faced by our country and its citizens, on many levels and in many ways, and to provide our citizens the freedom to engage with one-another free of government restrictions and limitations.

It is our perception that most folk have enormous good will for one-another, and that if allowed to engage with one-another free of restraint, will do so for the betterment of themselves and of all, and, as they do that, South Africa will start healing from the scars of its history.

John Barrington.

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Junk Status still on the table

Looming credit downgrades are but one symptom of the economic turmoil wrought by political infighting in the ANC. In lock step are market performances which are very much on a downward trend and have been for the past 9 months or so, after a brief period of recovery early in the year. And we are nowhere near being out of trouble with possible junk status ratings in sight as soon as June 2017, unless there are some substantially positive changes in the management of the economy. (time is running out)

Nene-gate, Gordhan-gate, and political leadership hell bent on programs of self-gratification instead of listening to sound fiscal advice from the very people they appoint to watch the economy for them, are all contributing factors to the prospects of an impending junk status.

One wonders if it is the intent of the ANC to actually destroy the economy and whether they realise that in doing so they will also destroy the lives of the tens of millions of South Africans who rely on the economy for their daily bread, and what they, the ANC will do, once they have achieved their goal, how they will appease the poor and starving who have had the wealth of their nation and their communities and their homes smashed and littered at their feet.

The Direct Democracy Forum (DDF) recognise the interdependence of the nation-state and the economy and will use economic indicators as useful benchmarks for measuring their success in governance. DDF policies for Basic Income Grant and a Sovereign Wealth Fund will enable all South African Citizens to share in the fruits of the economy. The DDF believe that a wealthy nation will be a happy nation and gaining and sustaining that wealth for all in the country will be the primary goal of DDF economic policies, where the integrity and acumen of people such as Nene and Gordhan will be respected and supported and harnessed to attain those goals.

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