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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Carpet Bombing South Africa

Ian Von Memerty laments in the Daily Maverick, (here, High Speed Politics), about the onslaught on our senses of all the divisive and contentious issues that South Africa is being lambasted with. Hawks playing politics, SAA, Eskom, NPA, SABC, Guptas, SARS, issues that flood our media like a barrage of artillery designed to confuse and subdue, put one off balance and disable and dishearten one.

What is this, part of a sinister campaign intended to render South Africa’s opposition to the ANC impotent and shell shocked, preparatory to the 2019 general elections? It almost seems like it.

Put more simply, it is the response of a bunch of crooks who have been caught with their hands in the cookie jar, trying to discredit anyone and everyone who has the power and the integrity to stand up to them and do anything about it, the Scorpions, Glynnis Breytenbach, Nene, Gordhan and Madonsela, to name a few notables, and that response could well turn into an on-going barrage intended to soften up and weaken the opposition. The military have a term for it. Saturation or Carpet Bombing.

We dare not let this happen. We dare not let the ANC have another go at the cookie jar because when they have finished another round of thievery, there will be even less for all the ordinary folk of South Africa to survive on than at present, which is already hopelessly inadequate.

The DDF will take every issue and deal with it separately, and indicate, by contrasting with DDF policies, just how unacceptable these issues are, and how, this time around, integrity is going to win the day.

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