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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Fake News

The American presidential election stirred a lot of mud in the USA and internationally. There are theories that Russia interfered in that election by hacking democratic party e-mail accounts and leaking the results through wiki leaks and other compliant avenues in an attempt to discredit the democratic campaign and in order to install a pro-Russia candidate in the White House. Sometimes theories can be concocted to match outcomes but in this case, my guess is that there is some credibility to the theory that Russia did its best to discredit Clinton and the Democrats and install a much more malleable candidate, namely, President Donald Trump of the USA.

Since then, there have been lots of reports of fake news, one for instance dubbed pizzagate, where the Democrats were alleged to be running a paedophile ring out of a Washington DC pizza parlour See here. Crazy? Yup! But apparently some idiot took it very seriously and went in there with a gun to check out the story. See here.

Some fake news is just motivated by greed. The more ludicrous the claims the more they are shared the more advertising revenue they generate for the web site reporting the absurd. To these sites and their owners it is just a money game. Many of the sites reporting fake news are allegedly run by East Europeans. See the transcript of this discussion between Craig Silverman of Buzz Feed and David Davies of NPR (US National Public Radio) Fake News Analysis Transcript. Wherever the site is based, the criteria is how many hits and revenue can a story generate and the truth of the matter is that the truth of the matter is of no concern.

So if a fake news story generates conflict between two nations who live on the brink of mutually assured destruction (only a slight exaggeration) as was reported on here between Pakistan and Israel, so much the better for the story. What is the big deal if some idiot shoots some of the staff at a pizza parlour (it didn’t but could’ve happened) or a nuclear conflict is precipitated (it didn’t but could’ve happened)? So what, they will argue, as the till clangs ‘k-ching’?

And in case you imagine for one moment that we in South Africa are immune to these machinations, may I draw your attention to the likes of Dr Eschel Rhoodie and the Information Scandal of the Apartheid era (he had a real PhD) and the current scandal surrounding Hlaudi Motsoeneng (who has a fake or no Matriculation Certificate at all), who, while in charge of the SABC (South African Broadcasting Corporation, South Africa’s public broadcaster), decreed that there had to be 70% positive news stories broadcast about South Africa by the SABC, and that there would be no coverage of unrest (of which there is a fair amount), and who decreed that SABC should broadcast 90% local content and who ruled the media department at the SABC in what has been described as a reign of terror, all of which demonstrates the relevance to South Africa of the curse of fake news and manipulation of the news and the media by the powers that be, past, present and future. It gets even more complicated when big business takes over government and the media serves their interests

Take the story of Iqbal Surve. Born in Cape Town in 12th February 1963 in poor circumstances he apparently pulled himself up by his own shoelaces and became a medical doctor (the facts are unclear – Cape Town U, or did someone mention Cambridge U, or does he even have a MBChB degree?) and confidant and medical advisor to Nelson Mandela (apparently while still a junior medical student) and a recipient of multiple awards from organisations who have never heard of him. His life appears to be a fabrication (see much posturing, political favour currying, more incredulity). In fact, he seems a bit of a charlatan who has got into bed with the ANC and who managed to con the Public Investment Corporation (or maybe they were complicit) into parting with R900 000 000 (Nine Hundred Million) of public pension funds apparently to buy the Independent Newspapers, which sum is alleged to be non-repayable, whatever that means. One’s head spins. And this person heads up the not so Independent Newspaper Group. The largest group of English language newspapers in South Africa is headed up by this apology for a media mogul and ANC stooge. And that is the relevance of Iqbal Surve to the topic of fake news.

Surve is not the only worm in the can.  If you only concern is how government departments spend your hard earned money, look no further than the new Nielsen report which highlights the Gupta owned New Age rag (I hesitate to imply it has a better status) having hooks into major government departments and parastatals, sucking them dry of their advertising budgets.  Read all about it here and be as appalled as I am..

As if that were not enough to make the average South African nauseous, the ANC has, apparently for years, run a black ops department, specialising in tailoring news and information for public consumption. One of the Black Ops contractors is now suing the ANC for unpaid fees for fake news activities. The ANC of course are claiming this is fake news, which is sort of the point of this entire blog. Who and what to believe.  See Lies will always out.

So when Putin says with a wink and a nod that no Russian regulars are engaged in military activities in the Ukraine, the media, in an effort to be non biased, print the assertion even though the evidence suggests otherwise.

The point of all this is, who in the world do we trust to keep us informed and not to misinform us. On what do we base our decisions on who to elect as future leaders and what if anything can we do to discredit and maybe punish purveyors of fake news? Is it not, after all, a question of fraud? But if you go after the news fraudsters you are bound to damage genuine media outlets as well, who could in self defence engage in self censorship. Dare we publish this or that story? Kind of self-defeating.

Of course, fake news is nothing new.  Britain used it on China to encourage China to Join against Germany in the first world war, Germany used it  in the second world war against the Jews and other non Aryans and against the Allies, Goering was Nazi Germany’s propaganda wizard. Fake news has always been with us.  What has changed is the method of delivery with media like twitter and Face-book and the news media trying to keep abreast of itself.  Fake news that took months or even years to plan and disseminate before now happens in moments on the Internet and has an avid global audience.

But some of the things we can do to protect against fake news are discussed here, here and here, and a good dose of skepticism will go a long way. You can also read up more here and here.  Sadly this is actually never ending. So let me at least end this now.

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The Age of Anger and the Educational Divide

The angst generated by Brexit and the Trump election is still generating much comment with all sorts of views being expressed.

Pankaj Mishra, writing in the Guardian in an article titled “Welcome to the age of anger” asserts that emotions of fear, anxiety and humiliation played a significant part in both Brexit and the election of Donald Trump and asserts further that a rigid contemporary belief that what counts is only what can be counted and what cannot be counted – subjective emotions – therefore do not (count). He points out that these emotions are also what drove Germany into the second world war and are driving anti-western sentiments in China, Russia and India.

He quotes Robert Musil speaking of the critics of Enlightenment rationalism, who observed that the problem was not that we “have too much intellect and too little soul” but that we have “too little intellect in matters of the soul”. This is a statement that resonates with me.

He further observes that seeking the “rational actor” we fail to see the individual as a “deeply unstable entity” particularly prone to ressentiment, a French word describing an emotion “caused by an intense mix of envy, humiliation and powerlessness” and resulting in a sentiment that can be expressed thus, “that it is not enough to succeed. Others must fail”. (Gore Vidal). So ressentiment “is poisoning civil society and undermining political liberty everywhere” which is further exacerbated by the inability of our “grotesquely unequal societies” to satisfy expectations of the equality of social conditions and individual empowerment presented as ideals of modern democracy.

Pankaj Mishra observes that “Never have so many free individuals felt so helpless – so desperate to take back control from anyone they can blame”. He concludes that we need a “radically enlarged understanding of what it means for human beings to pursue the contradictory ideals of freedom, equality and prosperity”.

Mishra says a lot more and is worth a read here.

In a related article, “How the education gap is tearing politics apart” David Runciman, also in the Guardian, observes that the chasm in education between the poorly educated and the well educated elite is ever growing and “has become a fundamental divide in democracy” and “how people vote is being increasingly shaped by how long they spent at school” and to a significant extent, this is what helped shape the Brexit results. Runciman succinctly states the fears that “democracy will mean rule by the poor, who will use their power to steal from the rich” and “rule by the ignorant, who will use their power to do the dumbest things” and that “both these worries go back as far as Plato” (428/427 bce – 348/347 bce) and recur “at times of political crises”.

Walter Lippmann, an American propagandist of the first world war, wrote of democracy that it was impossible to believe “that the knowledge needed for the management of human affairs comes up spontaneously from the human heart”. Evidence and reasoned argument mean little to the average voter, he argued, and that only specialist experts could rescue politicians from the dubious instincts of the people and direct them to what evidence required.

Runciman argues that to think that 2016 was a return to a democratic norm would be a big mistake. Runciman instead suggests that the educated tend to flock together and share common values and vote one way, and that the uneducated would do much the same but vote another way. Greater freedom tends to produce more social stratification rather than social diversity and this tends to support political choices of both groups, the educated and the less educated, with the divide highlighting alternative values ‘often characterised as opposition between libertarians and authoritarians” and this “represents a gulf in mutual understanding”.

Neither Runciman nor Mishra offer solutions, just analysis. That is more than enough. The solutions must come from those who heed their analysis.

How is this significant for the Direct Democracy Forum (DDF)?

First, the DDF senate proposal permits participation of ordinary citizens in the day to day political process. But the DDF’s Senate is not a legislative body. It is an approval element of a legislative body. So, the Senate cannot approve a law where the poor raid the rich unless the experts (the legislators) actually pass such a bill and send it to the senate for approval. Nor can a DDF Senate legislate something abysmally stupid unless the same legislators pass such a bill and send it to the Senate for approval. One would hope that the DDF Senate, even if presented with such a bill, will have the good sense to reject the bill, because it would have first to debate the pros and cons of such a bill and those presenting those pros and cons would also be part of the ‘learned elite’, who we believe will no doubt seek to alert the Senate members of the pitfalls surrounding such a bill.

Thus meaningful participation in the legislative process would be accessible to anyone who volunteers and is selected to sit. For details of the process and of the proposed Senate, see here. It will be obvious that the senate would have the power to quash any legislation or regulation that it feels was elitist or otherwise undesirable, no questions asked, and would need to be convinced of the desirability of any bill or regulation passed by the legislators or regulators but, importantly, would itself be unable to initiate legislation.

This should address in part, the sense of helplessness felt by so many referred to by Mishra and to enable human beings to pursue the contradictory ideals of freedom, equality and prosperity in a structured, peaceful and democratic manner.

Then there is the sense that society is being divided between the well educated and the not so well educated. The only way to address that is to ensure that all have the opportunity to be adequately educated, according to whatever their intellectual capacity is.

Here the DDF are proposing a number of interlocking policies which will support an education system, paid for from funds made available through a Basic Income Grant and available nationally to all South African citizens. Thus, government would no longer be the primary employer of education resources. Instead the students and the parents would be the employers and educators would, amongst other features, suddenly have their ability to blackmail all of society with threats of nationwide strikes, curtailed, because there would no longer be one service provider but thousands of service providers, all of whom would need to be negotiated with separately. In short, the DDF are proposing a free market solution where freedom of choice is paramount. If you don’t like the choices offered your child at school A, remove the child and the fees he is paying from school A to school B or C, whichever school works best for you.

OK, the solution is not a quick fix. There are no quick fixes in a process with a twenty five year cycle from entry into pre-school to exit from post-graduate school, but improvements to the entire system would be immediately available to scholars and students in the system, from pre-school to post-graduate school, from day one.

Of course, one cannot have education without qualified, competent and enthusiastic educators. So educators would be well paid and education would be a prestige occupation reserved for the competent.

The DDF do not claim that this would remove the education chasm that is growing year by year, but it first would slow the growth and later on, with more and more scholars having access to quality education through the whole process, there would be less of a divide between the highly educated and the not so well educated, and an education would be respected by all of South Africa and would be delivered as a right, not as a privilege.

As to fees must fall, there is no such thing as a free lunch so those receiving the benefit of a tertiary education will have to pay for it, before, during or after receiving their degrees.

All of this is not a perfect solution but is much better than what we currently have in South Africa.

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