Is Gigaba Mr State Capture?

Report shows how new finance minister paved the way for Gupta control.

An explosive report released this week reveals that state capture is moving up a gear with the “takeover of the National Treasury now made possible” by the appointment of Malusi Gigaba as minister of finance.

The report, titled Betrayal of the Promise: How South Africa is Being Stolen, which was released on Thursday, states that Gigaba has acted firmly in the interests of President Jacob Zuma’s friends, the Gupta family, since he was appointed minister of public enterprises in 2010.

He also, the report states, set about restructuring the boards of state-owned enterprises (SOEs), enabling businesses owned by the Gupta family to milk them. The report also found that since Pravin Gordhan was moved from the finance minister position and Gigaba elevated to it, the “confidence and brazenness of the Gupta networks on SOE boards and in senior management” has increased.

The 64-page report, compiled by academics from the universities of Stellenbosch, Cape Town, the Witwatersrand and Johannesburg, was a response to Gordhan’s exhortation after his axing by Zuma in March for South Africans to “join the dots” to establish how the county was being looted.

Appointed as minister of public enterprises on November 1 2010, Gigaba, the report states, took his first steps to repurpose the SOEs into vehicles of state capture, and to benefit the Gupta family.

“Throughout his tenure until 2014 as public enterprises minister, Gigaba was engaged in the restructuring of SOE boards, which became broadly representative of ‘Gupta-Zuma’ interests.”

By the 2014 election, a kleptocratic culture had been in place in government and SOEs “for more than a decade”.

An analysis of fraud and corruption cases between 2010 and 2016 relating to SOE and state procurement found that fraud and corruption “proliferated during the 10 years leading up to 2014, peaking in 2012”.

And while Gordhan as finance minister moved to shut the corrupt networks down – especially in Limpopo, which was placed under administration in 2011 – Gigaba sought to elevate them.

Loophole

The report found that Gigaba, after his appointment in 2010, began a “systematic process of reconfiguring the boards of SOEs to ensure compliance, starting with his attempt to get little-known department of trade and industry official and known Gupta associate Iqbal Sharma appointed as Transnet board chairperson in 2011, and the successful appointment of Brian Molefe as Transnet CEO [chief executive officer] that same year”.

“Throughout his tenure until 2014 as minister of public enterprises, Gigaba was engaged in the restructuring of SOE boards. This, however, was only the first step in the repurposing of the SOEs. The second was to exploit the loophole in the Public Finance Management Act that made it possible to use the procurement procedures of SOEs to benefit selected contractors who had been sanctioned by the Gupta network,” the report found.

“The loophole is that SOEs are not required to table their budgets and expenditure plans in Parliament, unlike government departments, which means they cannot be scrutinised in the same way as departmental budgets and expenditures. The details of SOE expenditure can, therefore, be hidden from public scrutiny.”

Molefe’s appointment to the position of Transnet CEO was swift. A Mail & Guardian report at the time said the job advertisement was published on January 26 2011, and closed on February 1. Although 63 applications were received, Gigaba announced the appointment of Molefe on February 16.

However, three months before his appointment, the Gupta-owned newspaper The New Age revealed that Molefe was about to get the job. “The paper correctly predicted other appointments to the new Transnet board, including Don Mkhwanazi and Ellen Tshabalala,” the report states.

The report states that while Molefe was Transnet boss, Gupta-owned businesses won tenders worth billions from the SOE, including subcontracting deals from a R50bn contract to build 1 064 locomotives, as well as lucrative deals for its financial services company, Trillian.

Also in 2011, Gigaba made wholesale changes to the board of Eskom, packing it with Gupta business associates, their relatives or their wives. These include former Oakbay director Mark Pamensky, Mineral Resources Minister Mosebenzi Zwane’s adviser Kuben Moodley, and Nazia Carrim, the wife of a relative of close Gupta associate Salim Essa.

Under this board, Eskom later funnelled billions of rands in coal-supply contracts to Gupta-owned mines, including Optimum in Mpumalanga that Eskom, under Molefe, literally forced Glencore to sell into Gupta hands.

State capture set to become even worse

The report also charges that, in 2012, Gigaba, as minister of public enterprises, delayed support for a turnaround strategy for SAA put forward by then board chair Cheryl Carolus, causing financial damage to the airline.

After Carolus resigned, Gigaba brought back Vuyisile Kona as both acting CEO and board chair after a meeting at the Guptas’ Saxonwold house with Rajesh Gupta, Duduzane Zuma, and Ace Magashule’s son Tshepiso.

About how state capture works, the report states that the phenomenon in South Africa is presided over by the “controllers”, the “patrons of resources”, who include Zuma and the Guptas who sit at the top of the pile and “secure access and maintain control over resources”.

Kona later reportedly turned down a R500 000 bribe from the Guptas, to whom he had been taken by Gigaba’s adviser.

Beneath them exists a group called the “elites” – which the report states includes Gigaba, Molefe, Free State Premier Ace Magashule, Public Service and Administration Minister Faith Muthambi and Zwane.

This group is “responsible for establishing and maintaining patronage networks, which facilitate the distribution of benefits”.

Zuma appointed Gigaba to the public enterprises ministry 18 months after he became president, after he “removed Barbara Hogan from the position in October 2010, coincidentally following her push-back against alleged presidential interference in state-owned company board appointments; and after Vytjie Mentor refused an offer for the position thereafter, apparently made to her at the Guptas Saxonwold home on condition she would drop the SAA flight route to Mumbai”, the report stated.

In March last year, after former deputy finance minister Mcebisi Jonas confirmed that the Guptas had offered him the job of finance minister if he “worked with” them, Hogan confirmed she had been placed under pressure while she was public enterprises minister by a Gupta-owned company.

Now that Gigaba is minister of finance, the report states, state capture is set to become even worse.

“Now that they have control of National Treasury via Gigaba, the power elite assumes they will have the wherewithal to centralise and control rent-seeking,” the report states.

"A key condition of success is a compliant ANC."