Excerpts from Bloomberg Publishing’s 6,000 Word Expose
Yesterday was the worst day in what has already been a rotten year for the crony capitalist Gupta family. It started with Bloomberg publishing a 6,000 word expose’ targeted at the news giant’s massive global audience. Its title – The Brothers Who Bought South Africa – provides a taste of what’s inside.
But even worse came later for the plundering friends of president Jacob Zuma. At the request of the SA Parliament’s Portfolio Committee on Public Enterprises, a chunk of documents from the incriminating #GuptaLeaks have been made publicly available online.
Published by the Platform for the Protection of Whistleblowers in Africa (PPLAAF), a selection from hundreds of thousands of emails, documents and invoices is there for everyone to see, neatly divided into easily searchable sections. So if you ever fancied yourself as an investigative journo here’s your chance to “join the dots.”
“The Axe Has Fallen”
The beginning of the end of Nhlanhla Nene’s political career came on a warm Monday morning. He was catching up on email in his office in Pretoria’s neoclassical Old Reserve Bank building, where he was serving as South Africa’s minister of finance, when his deputy, Mcebisi Jonas, asked for an urgent meeting. Jonas had been desperate to speak to his boss for days, but what he wanted to tell Nene was far too sensitive to discuss by phone.
Nene, a veteran trade union activist, has heavily lidded eyes, the build of a retired rugby player, and a preternatural calm. He suggested to Jonas that they step onto an adjoining balcony, the better to avoid any listening devices. There, Jonas began his tale.
The previous Friday, Jonas said, he’d been summoned to a four-mansion compound in Johannesburg owned by the Gupta family—a clan of Indian-born businessmen known to wield substantial influence over South African politics. Ajay Gupta, the eldest of three brothers atop the family, was direct: Nene was becoming a problem. He explained that Jonas would soon replace Nene as finance minister and, in that capacity, would remove some senior officials who were also standing in the family’s way. Gupta spoke in the future tense, presenting Jonas’s appointment as a fait accompli.
Jonas was staggered. The Guptas have no governmental role, and ministers serve solely at the discretion of the president, Jacob Zuma. Jonas said as much and made his way toward the door. As he did, Jonas would later tell investigators, Gupta said his family could put 600 million Rand, or about $43 million, into an account of Jonas’s choice. And if Jonas happened to have a bag with him, he could have 600,000 Rand in cash right away. (The Gupta family denies the meeting occurred.)
As Jonas recounted this story on the balcony, Nene reacted dismissively. The Guptas might be well-connected and could roll over lesser officials, but the idea they could depose a sitting finance minister seemed absurd. “Nonsense,” he told Jonas. “Those guys can’t remove me.” The best response, Nene said, was to focus on their work. They had a budget to prepare and Africa’s most sophisticated economy to run.
Just over six weeks later, on Dec. 9, 2015, Nene was leaving a cabinet meeting when he received a call from one of Zuma’s advisers asking him to report to the president’s office. Nene turned around to return to the Union Buildings, the sprawling hillside complex that houses the presidential administration. Zuma was waiting for him. Speaking in a mix of English and his native Zulu, the president stood as he told Nene he was finished at the finance ministry, effective immediately, and should start preparing for a post at a government-backed bank. Nene, returning to his car, texted Jonas: “The axe has fallen.”
Within hours, Zuma named his new finance minister: Des van Rooyen, a member of Parliament from a small town outside Johannesburg. It was a strange choice. Van Rooyen was a backbencher with no financial experience, and many officials had barely heard of him. But there’s evidence he was well-known to the people who really mattered. Phone records later obtained by South Africa’s corruption ombudsman placed Van Rooyen in the vicinity of the Guptas’ compound—in a wealthy enclave of Johannesburg called Saxonwold—on at least seven occasions, including the day before Zuma told Nene he was out.
Since Nene’s firing, long-standing questions about the scale of the Guptas’ power in South Africa have exploded into the most severe political and economic crisis since the end of apartheid. The family has been accused by activists and opposition politicians of stacking the leadership of powerful state companies, rigging bids in favor of suppliers it controls, and even helping orchestrate a planned $70 billion nuclear-power deal with Russia, for which it could supply vast quantities of uranium—all while using an alliance with Zuma to neuter law enforcement agencies that would otherwise shut down its efforts. Blue chip companies including McKinsey, KPMG, and SAP have been embroiled in what’s fast becoming a global scandal.
South Africans, trying to come to grips with the astonishing scale of the crisis, have adopted a once-obscure political science term, “state capture,” as a staple of even casual conversation. It refers to the systematic perversion of government policy to benefit moneyed interests. It was first used widely to explain what happened in Russia in the 1990s, when politically connected oligarchs bought public assets at knockdown prices. Yet previous examples of state capture have almost always involved a broad cast of protagonists: an entire industry, for example, or wealthy businessmen as a group. In South Africa, it may have been pulled off by a single family.
The Guptas are widely famous in South Africa but also deeply mysterious. They almost never speak in public. In a rare appearance last year, Ajay Gupta, a stout, floppy-haired figure in a black suit and open-necked gray button-down, told a hand-picked interviewer that he wanted to give “a straight answer. … I am not a lobbyist. I am not a state capturer. … I am a friend only.” The only capturing going on, he joked in surprisingly rough English, was in forcing him to talk. He spoke for less than seven minutes.
In a statement, the Guptas said it is “patent nonsense to suggest that our family has captured the South African state,” and that less than 2 percent of their business is government-related. The family runs “its businesses and personal lives in an ethical manner,” they said, has never been criminally charged anywhere, and would welcome “a credible and independent” inquiry into any accusations against them.
The Guptas’ alleged hold on Zuma has driven much of South African society into open revolt. A broad spectrum of union and business leaders have demanded the president’s resignation; the head of Business Leadership South Africa, a lobby equivalent to the U.S. Chamber of Commerce, recently called him “a thief.” Zuma has hung on, empowered by a committed base in the African National Congress, the resistance-group-turned-political-party that dominates South African politics, and the loyalty of a large chunk of the electorate. The ANC will convene in Johannesburg in December to anoint a successor. Zuma, facing term limits, is pushing for his ex-wife to take over—which opponents claim would allow him to remain in control behind the scenes and avoid ever revealing the extent of his ties to the Guptas.
Modern South Africa was built with the best of intentions and a slate of admirable institutions, by people determined to create a new kind of country, leaving behind racism, theft, and violence as the defining principles of government. As Zuma entrenches himself ever more deeply, the question becomes whether the entire post-apartheid project could be at risk. If so, South Africa might come to look more like Vladimir Putin’s Russia, or even Robert Mugabe’s Zimbabwe, than the Rainbow Nation promised by Nelson Mandela after he emerged from 27 years in prison.
“What you have here is not the struggle of the kind we had before. It is not a racial struggle,” says Sipho Pityana, the chairman of mining group AngloGold Ashanti Ltd., who as a young ANC activist was tortured and sent into exile. “It is a struggle where the very country is being stolen.”
The One Who Laughs As He Grinds His Enemies
There is an almost fable-like quality to the Gupta brothers’ story. Their father, Shiv Kumar Gupta, was a trader of spices and soapstone powders in Saharanpur, a gritty industrial city on India’s northern plains. As his sons, born in the late 1960s and early ’70s, entered adulthood, he sent each of them in a different direction to seek fortune. Ajay went to Delhi, Rajesh to China, and Atul to Africa, which Shiv Kumar believed was on the verge of a transformational boom, like the U.S. a century earlier. Atul arrived in Johannesburg, South Africa’s largest city and commercial capital, in 1993.
On first impression, it was an unappealing place, a tangle of highways and tatty malls. The city’s defining architectural feature was (and remains) the electric fencing that rings even modest homes and businesses—a constant reminder of crime and the absence of trust. Even so, Johannesburg was the heart of a dynamic economy, blessed with a youthful workforce, solid legal and physical infrastructure, and fathomless mineral wealth. International sanctions were being lifted before Mandela was elected president in 1994. Foreign capital was flooding in, and the razing of racial laws that governed every economic interaction during apartheid was turning millions of black citizens into real consumers for the first time.
After a stint selling shoes, Atul saw an opening in the PC business. South Africa was years behind the West in putting a computer on every desk—particularly the kind of cheap, reliable machines that new black-owned businesses could afford. In 1994 he founded Sahara Computers Ltd., an importer and distributor of Windows PCs. In a rare departure from the family’s almost total public silence, Atul agreed in October to answer written questions from Bloomberg Businessweek about how the Guptas built their businesses. “We soon discovered a market that was so dominated by monopolies and other industry cartels that we were able to undercut the competition,” he wrote. Ajay and Rajesh Gupta shut down their interests elsewhere to join Atul in South Africa—“the ideal environment,” he continued, “for us to disrupt and exploit as entrepreneurs.”
Still, in these early years, little distinguished the three Guptas from thousands of other chancers in a booming economy. Their trajectory changed in 1996 with a single introduction. Essop Pahad was a member of the post-apartheid ruling class, a senior ANC party official. He was planning a visit to India by the deputy president, Thabo Mbeki, when an acquaintance suggested that a young Indian go-getter—Atul—should come along, in an accompanying business delegation. The trip exposed Atul to high-level political and corporate life for the first time. Afterward, Pahad also befriended Ajay, who struck him as ambitious, intelligent—he was gifted as a number cruncher, in particular—and committed to the success of South Africa.
When Mbeki succeeded Mandela in 1999, Pahad made other introductions that helped the Guptas enter the tiny top drawer of South African society. In 2002, Mbeki sent a private jet to Mali on a mission to protect the Timbuktu Manuscripts, a library of priceless ancient documents. Pahad invited Ajay to join the trip—the lone newcomer among a deputation of presidential officials and potential donors from the industrial elite. Pahad later got Ajay onto the board of the International Marketing Council, a prestigious group of business leaders that promoted South Africa abroad. Ajay has also claimed he served on a panel of economic advisers to Mbeki that included several of the country’s richest men. (Mbeki denied this last year.) By the middle of the 2000s, Ajay and his brothers were enjoying access to power they could have scarcely imagined as the sons of a spice trader in Saharanpur.
The Guptas nimbly turned access into profit. They stepped up efforts to sell Sahara computers and IT services to public schools and other government agencies. And they diversified into mining, the mainstay of the South African economy, by creating a coal company named Tegeta Exploration & Resources Ltd., which sold mainly to the state.
With a growing business empire to protect, the Guptas hedged their political bets at a moment when South Africa’s politics began to fragment: The unifying spirit of the Mandela years had cracked into bare-knuckle infighting. Mbeki, an austere, business-friendly conservative, was never much liked by the ANC’s left-leaning rank and file, and Zuma, at that time the deputy president, was shaping up as his successor. According to a former senior security official with direct knowledge of the matter, Ajay Gupta continued to court Mbeki’s camp, while Rajesh Gupta began to develop links to Zuma.
In 2005 the brothers began putting Zuma’s family on their payroll. They hired his son Duduzane, then in his early 20s, as an IT specialist; appointed Duduzane’s twin sister, Duduzile, as a company director; and made one of Zuma’s wives (polygamy is legal in South Africa, and Zuma currently has four) a communications officer.
Over the years, Duduzane became an integral node in the Guptas’ empire, both as a shareholder in uranium and coal mines and a director in a string of other companies. One recent visitor to Rajesh Gupta’s office found Duduzane sprawled across the couch, playing on his phone. It was Duduzane who set up Jonas’s Saxonwold meeting.
In 2005, Mbeki fired Zuma, and he soon found himself not only unemployed but facing rape and corruption charges. (He was acquitted of the former; the latter were thrown out, but the highest appeals court ruled in October that they can be reinstated.) Even so, Zuma remained formidable. He ran intelligence operations for the ANC in exile, giving him thick files on his colleagues, and his Zulu middle name, Gedleyihlekisa, translates roughly to “the one who laughs as he grinds his enemies.”
At a turbulent ANC conference in 2007, Zuma deposed Mbeki as party chief, then won the South African presidency in a general election two years later. His intimacy with the Guptas was soon on display. Zuma’s first state visit to Asia, in June 2010, was to India. He took a suite at the seaside Taj Mahal Palace hotel in Mumbai, using its sitting room to meet with investors. As they filed in, they found the president accompanied at almost all times by Ajay or Atul. According to a person familiar with the trip, the local Indians did not know what to make of their former compatriots. As far as they knew, the Guptas were nobodies.
“These Gupta Guys Need Your Help”
As Zuma consolidated power, awareness within the government of the Guptas’ influence spread gradually, and then all at once. Among the first to experience it directly was Themba Maseko, who ran the government office that coordinates public-sector announcements and advertising—an outlay of 600 million Rand a year. In late 2010, Ajay Gupta called Maseko, asking if they could discuss the family’s entry into the media business. The Guptas were starting a newspaper, called the New Age, and a TV station.
The day Maseko was scheduled to go see Ajay, his cell phone rang. He recognized the number immediately, he said in an interview, expanding on an account he has previously laid out for investigators. It was the switchboard at South Africa’s presidential residence. Zuma came on the line. “These Gupta guys … need your help,” he said in Zulu. “Please help them.” Maseko was alarmed. Why would the president himself be involved?
Later, in a formal sitting room in Saxonwold, Ajay explained to Maseko what kind of help he had in mind: He wanted the government’s entire advertising budget to be devoted to the Guptas’ media holdings. Maseko tried to explain that the request was inappropriate and, in any case, beyond his power—other officials and ministers could object. Ajay brushed off that concern, Maseko said. He left Saxonwold feeling queasy.
Soon Ajay called again. It was a Friday night, and Maseko was looking forward to a weekend out of town. Ajay asked to meet Maseko first thing Monday. Maseko refused. Ajay, unaccustomed to that, declared that the meeting should happen instead on Saturday morning. “That’s when I told him to go f— himself,” Maseko says. “Who the hell is he? He’s not my boss. I don’t work for him.”
Two months after that exchange, Maseko’s boss called him into an urgent meeting. Instructions had come down from the president: Maseko was to be fired or reassigned immediately. He was shuffled to another department and resigned shortly afterward.
Around the same time, three senior intelligence chiefs, including the heads of South Africa’s equivalents of the CIA and FBI, were also removed with no public explanation. The ousted head of domestic intelligence later told the Mail & Guardian newspaper that his organization had been investigating whether the Guptas’ apparent control of so many senior government officials presented a national security threat. Big agency or small, the pattern was clear: Get in the family’s way, and your career could be cut short.
The wider public discovered the Guptas on a cloudy Tuesday in April 2013, when a chartered Airbus A330 touched down near Johannesburg. The jet, carrying more than 200 Indians bound for the wedding of a 23-year-old Gupta niece, didn’t land at OR Tambo International, the region’s commercial airport. It touched down at the South African Air Force’s Waterkloof base, an ostensibly ultra-secure facility that manages transport and reconnaissance planes and presidential flights. The Indian nationals handed over their passports en masse, without the nuisance of individual screening.
As his extended family deplaned, Atul Gupta was waiting by a red carpet, wearing a pink T-shirt, a blue blazer, and a broad grin. Dozens of Range Rover SUVs were standing by to whisk the partygoers in a convoy to Sun City, a high-end resort, with a police escort flashing sirens to clear traffic. For the Guptas’ Indian relatives, the message was unmistakable: The brothers may have never amounted to much at home, but in their new country they lived like royalty.
Although Indian weddings are rarely less than lavish, Vega Gupta’s was exceptional. As her groom awaited her on a flower-garlanded raft, synchronized swimmers writhing in the pool beneath him, the military landing was already becoming a scandal. A local radio reporter had gone on air to report on the unprecedented appropriation of Waterkloof, and the story went swiftly viral. A guest recalls the brothers darting around the wedding, clearly agitated, taking call after call to manage the fallout. In Pretoria, the administrative capital, military officials frantically pointed fingers at one another. The Gupta family, in its statement, said it followed official processes in arranging the flight and that “no wrongdoing was ever found.”
South African media reported that the Guptas had pulled off the landing with the help of a little-known official—Mosebenzi Zwane, head of agriculture in the rural Free State province. According to emails from Gupta companies later published by local news outlets, Zwane also helped win government approval for about 114 million Rand in annual subsidies for a dairy farm associated with the Gupta family. But much of the money never went to the farm. Roughly 84 million Rand of the government’s cash moved through a chain of Gupta-controlled companies to accounts in the Middle East, and then two-thirds of it returned to South Africa, in part to pay wedding costs. This later proved disastrous for the accounting giant KPMG, which gave a clean audit to a key company involved. (KPMG denies that it facilitated money laundering and has said it was deceived about the funds’ source.)
The real scandal, however, was that by the time of the wedding, 114 million Rand was a pittance compared with other government transactions in which the Guptas were deeply involved.
Major chunks of South Africa’s economy remain in the hands of so-called parastatals—government-controlled companies that deliver power, manufacture weapons and move freight. In early 2014 the state railway operator, Transnet SOC Ltd., was shopping for $4.7 billion worth of new locomotives. Bids from General Electric Co. and Bombardier Inc. were clear front-runners for diesel and electric locomotives, respectively, according to a person familiar with the process. But in the final stages, Transnet decided to split the contract, handing half to two Chinese groups. Leaked emails would later show that one of them had formed a partnership with a company associated with the Guptas. According to one person familiar with the details, Transnet also increased the price it would pay per locomotive by more than 40 percent. Transnet said in June that it is confident its procurement process has “sufficient checks and balances to guarantee integrity”; the Guptas said the deal “had nothing to do with” their family.
After the deal, the railway’s chief executive officer, Brian Molefe, was moved to another lucrative job: running Eskom Holdings SOC Ltd., the state utility that generates 95 percent of South African electricity. With annual revenue of more than 150 billion Rand, it’s one of Africa’s largest companies. As Molefe arrived, Eskom was in the middle of a dispute with Glencore Plc, the $71 billion global mining company. (Peter Grauer, the chairman of Bloomberg LP, is a senior independent nonexecutive director at Glencore.) Glencore owned an Eskom supplier, Optimum Coal Holdings Ltd., and wanted to improve the terms of its deal—rising costs, Glencore said, had made the arrangement unprofitable. Eskom was sympathetic and was working on a compromise. But after Molefe took over as CEO, one of his first acts was to scuttle the negotiations and fine Optimum about 2 billion Rand for delivering what Eskom said was bad coal.
Seeing no short-term resolution, Glencore prepared to place Optimum in bankruptcy protection. Then, in July 2015, it received a surprising letter from KPMG. An unnamed client wanted to buy Optimum for a fraction of what Glencore had paid four years earlier. Glencore refused what it saw as an outrageously low price. It expected to eventually repair the rift with Eskom and restore the company to health.
Soon Tegeta, the Guptas’ mining company, stepped forward as the bidder. And events showed that the family was intimately involved with Eskom leadership, making sure no pact with Optimum was reached.
That September, says a person with direct knowledge of the matter, Atul Gupta went to see a couple of partners at KPMG. He was holding an internal Eskom document he shouldn’t have had access to a letter from Glencore emphasizing that the company needed better terms if it was going to be able to keep its mine producing. Gupta asked KPMG to draft a response for Molefe’s signature, making it clear the utility would never make peace with Glencore. The KPMG executives refused, but they also failed to alert their superiors or any government agency to the underlying activity. The Guptas were disrupting negotiations between a state company and another party so they could buy the resulting wreckage at a great price. In an interview, Molefe denied improperly helping the Gup s, and said Eskom was in financial crisis at the time and was right to stand firm against Glencore, a famously tough negotiator. He said he didn’t know how Atul got the letter.
The same month, Zuma made a surprising cabinet appointment. Zwane, the obscure official who’d helped the Guptas plan their niece’s wedding, was named the minister of mineral resources. He was supported in his new role by two advisers who, company records show, had indirect business links with the Guptas. Within weeks, according to South Africa’s mining-industry association, government inspectors were appearing regularly at Glencore mines, finding fault, and ordering temporary shutdowns. By December, Glencore—no stranger to geopolitical hardball—understood it was not in a fair fight. In a meeting in Zurich with Zwane and Rajesh Gupta, CEO Ivan Glasenberg agreed to sell Optimum. Before the deal was even completed, Eskom began paying more for the coal. Spokesmen for Glencore and Zwane declined to comment.
In South African business circles, a firm impression took hold that Molefe was in the Guptas’ camp. One local executive recalls attending a party at the residence of India’s ambassador to South Africa, held to celebrate the visit of an Indian government delegation, that was attended by both Molefe and the Guptas. Speaking in Hindi to a visiting official, one of the brothers motioned unmistakably toward Molefe and referred to him as a naukar. The word means, charitably, servant. (The Gupta family called this account “nonsense.”)
A Curious Purchase
By early 2016, KPMG was beginning to worry about the reputational risks of working with the Guptas. In January more than a dozen partners attended a tense crisis meeting to discuss three red-flag items: the episode with Atul and the letter; another incident in which Atul allegedly bullied a KPMG staffer into dropping questions about a tax issue; and a decision by a major South African bank to shut Gupta-linked accounts after flagging suspicious transactions. Despite the trouble, KPMG’s local chairman, Ahmed Jaffer, made the case with others for keeping the Guptas as clients, says a person present at the meeting. (Jaffer says he can’t comment because of the terms of his subsequent departure from KPMG.) KPMG also did the books for Eskom—a gargantuan account. Now that the Guptas were so visibly tied to the energy utility, firing them as clients could also mean losing Eskom. Several of Jaffer’s subordinates couldn’t believe it. After the meeting ended without a clear decision, one of the partners turned to a few others in dismay. Atul’s possession of the internal Eskom letter should have been enough to sever the relationship, he said—it was like “an atom bomb.” It took another two months for KPMG to cut off the Guptas.
Western consultants just couldn’t keep away from the Guptas’ affairs. Not long before KPMG began to extricate itself, McKinsey began pursuing its own deal with Eskom to help implement a modernization plan. McKinsey needed a partner: A government program called Black Economic Empowerment requires overseas companies to collaborate with businesses that have nonwhite ownership. McKinsey ultimately worked alongside a local consulting group called Trillian, which incorporation documents would later show was 60 percent owned by Salim Essa, a shareholder in Tegeta and other Gupta ventures. Numerous people who have dealt with the family say Essa is one of the Guptas’ closest advisers. Essa did not respond to voicemail messages asking for comment.
By January 2016, Eskom was the talk of McKinsey’s Johannesburg office. If cost-saving targets were met, McKinsey stood to earn billions of rand over several years, with Trillian in line for a substantial cut. The scale of the figures unnerved some senior partners, say people familiar with McKinsey’s operations. It wasn’t clear what they could possibly be doing to merit such compensation. And McKinsey had begun working with Trillian before it had passed due-diligence checks.
A number of McKinsey executives supported the deal, but its biggest backer was partner Vikas Sagar. In February he wrote a letter to Eskom to authorize it to pay Trillian directly for work undertaken as part of the McKinsey project—putting the imprimatur of the world’s most prestigious consulting firm on the potential transfer of state funds to a Gupta ally. (A McKinsey spokesman says the letter was inaccurate and that Sagar’s permission did not constitute approval from the firm for payments to Trillian, with which it never entered a formal contract. Sagar didn’t respond to several requests for comment.) By March, Sagar’s superiors had had enough, and stepped in to terminate the Trillian relationship; the company wasn’t providing straight answers about its ownership to McKinsey. A few months later, Eskom scrapped its overall McKinsey contract. For around six months of work, McKinsey received the equivalent of about $72 million, and Trillian $40 million. The McKinsey spokesman says the firm intends to pay back the funds in question. A spokesman for Trillian didn’t reply to requests for comment.
There was at least one more avenue by which money might flow from Eskom to Gupta-connected companies. In 2010 the family’s investment company borrowed about 250 million Rand from a state bank to buy a South African uranium mine. It was a curious purchase—there was no real buyer for the uranium because South Africa has only one ageing nuclear plant. In 2014, however, Zuma’s administration laid out a grand plan that would make the mine’s value soar: He proposed building six massive nuclear plants for Eskom at an ultimate cost that could exceed $70 billion.
The idea was controversial from the start. In addition to immense reserves of coal, South Africa has a vibrant renewable-energy sector and no obvious need for nuclear power. Zuma has dismissed the criticism, arguing the country needs to diversify its energy sources—and strategic alliances. In 2014, he and President Putin agreed that Russia’s state nuclear agency, Rosatom Corp., would provide technology for the plants.
The next summer, Zuma was back in Russia for an economic summit, joined by his senior ministers—including Nene, the then-finance chief. Toward the end of the conference, according to two officials who were present, Zuma cornered Nene in a briefing room about the nuclear deal. The president and several other ministers demanded that Nene provide financial guarantees that would allow Eskom and Russia’s relationship to move ahead. Nene refused; even under the most optimistic projections, he said, a nuclear project of the scale Zuma envisioned would severely strain South African finances.
Zuma complained bitterly about Nene’s resistance, the summit officials say. Not long afterwards, Nene’s deputy, Jonas, found himself in the Guptas’ sitting room at Saxonwold, being offered his boss’s job.
“We’ll Kill You, We’ll Kill Your Son”
At the Inanda Club, a polo ground on the edge of Johannesburg’s financial district, Thuli Madonsela orders a green tea with honey and opens up about the times people have threatened to kill her.
The first was early April 2016. At the time, Madonsela, a 55-year-old lawyer who helped draft South Africa’s 1996 constitution, was serving as public protector—a sort of national ombudsman. The role features the finest impulses of South Africa’s post-apartheid order. Entirely independent of partisan politics, the protector has the power to compel testimony, subpoena documents, and search buildings in response to citizen complaints, and may investigate any public-sector activity throughout a seven-year term.
Madonsela was in Cape Town with her kids to attend a jazz festival when her phone pinged. “It was an SMS that came and said, some known gangster has been contacted to contract a killer to kill me,” Madonsela recounts. Soon after, another message: “We’ll kill you, we’ll kill your son … we know you take a walk in the morning.” Madonsela quickly ended her daily strolls around her neighbourhood in Pretoria. Soon, cars that didn’t belong to anyone Madonsela could identify started parking outside her house at all hours. She informed the police, to little effect. “Nothing was done to beef up security,” she says, “because it was their own people.”
Shortly before the threats began, Madonsela had decided the focus of her last months in office would be a major inquiry into state capture, in particular, the Optimum coal deal and the events leading up to Nene’s firing. Zuma sued to block the release of Madonsela’s work, which she completed the day before her term ended, in October 2016. That legal effort failed, and Madonsela’s 355-page report went public.
Cellphone records she’d obtained backed up Jonas’s account of being summoned to Saxonwold and showed that Zuma’s son Duduzane was in the area at the same time. (Duduzane declined to comment. In a rare interview in August, he told the BBC he was not corrupt, and that he thought the Guptas chose to work with him because he is a “likeable guy.”) The records showed Molefe, while in charge of Eskom, called Ajay Gupta 44 times over a seven-and-a-half-month period, while an additional 14 calls went the other way; Molefe also paid repeated visits to Saxonwold. He says the calls to Ajay Gupta were to sort out an issue related to another mine the family controlled. When it came to coal, Madonsela wrote, “the only entity which appears to have benefited from Eskom’s decisions” about Optimum was the Guptas’ Tegeta. In sum, Madonsela says, “there was a prima facie case of state capture.”
Coming amid what was already a steady flow of new revelations about the Guptas from South Africa’s feisty press, the report was too much for the country’s elite to ignore. Molefe soon resigned from Eskom, and ANC heavyweights began calling openly for Zuma’s resignation.
For a short time after Madonsela’s report was released, the president’s ouster seemed like a real possibility to some—until he went back on the offensive. At the beginning of 2017, Molefe was given a seat in Parliament. And in March, Zuma fired Pravin Gordhan, another in a chain of finance ministers. Like Nene, Gordhan had resisted the nuclear deal with Russia, and according to two people with knowledge of the matter, he’d presided over investigations into the Guptas’ taxes.
On June 1, the first of a torrent of stories was published by the amaBhungane Centre for Investigative Journalism and the Daily Maverick news website, which had obtained a leak of emails and documents from a Gupta company server. The communications painted a picture of an intimate partnership between the Guptas, Duduzane, government ministers such as Zwane, and parastatal executives like Molefe. Around the time Glencore agreed to sell the Optimum mine to the Guptas, an email shows Zwane’s name on the passenger list for a flight on their private jet departing from Zurich to Delhi.
The leaks also precipitated a disaster for the companies that had become entangled with the Guptas. Eight top KPMG executives, including Jaffer, the country chairman, resigned. At McKinsey, global managing partner Dominic Barton apologized and Sagar left the firm. And the German IT company SAP SE has said it’s being investigated by the U.S. Department of Justice over payments of about 94 million rand to Gupta-controlled entities in exchange for help winning business from Transnet and Eskom.
The Guptas’ apparent grip on politics is resilient, but their freedom of movement has been significantly reduced—and doing business with them now carries potentially fatal risks. Bell Pottinger, a London public-relations company with a long record of representing clients with less-than-sterling ethical credentials, collapsed in September after a campaign blaming criticism of the Guptas on “white monopoly capital” backfired. No major South African bank is currently willing to take the family’s money, leaving only the Bank of Baroda, a midsize Indian lender, to handle their accounts. And it’s seeking a court order for permission to close them.
Still, real accountability—the kind that comes in a courtroom—may prove elusive. Although financial regulators have identified at least 72 suspicious transactions involving Gupta-linked companies, many people with knowledge of the matter say South African prosecutors, who answer to the president, aren’t seriously investigating any of the transactions. Even if prosecutions do occur, they won’t solve the broader problem of how to clean up what many South Africans now view as a brazenly corrupt state. If the Guptas’ influence is as pervasive as some critics say, the only practical solution might be a Truth and Reconciliation Commission–style amnesty in exchange for coming clean. You can’t put an entire government in jail, as the ANC acknowledged two decades ago.
The Guptas maintain, with more than a hint of racial subtext, that their critics are merely resentful. “They are businesses trying to hold on to their privileged status and dominant positions that many of them held during apartheid,” Atul Gupta wrote in his responses to Bloomberg Businessweek. The family’s greatest sadness, he said, is “that this potentially great country is being held back by those same vested interests that oppose economic emancipation.”
The South Africa of Tomorrow
“If it were up to me and I made the rules,” President Zuma told supporters at a rally outside Johannesburg last year, speaking in Zulu, “I would ask for six months as a dictator.” Remove the constraints of the democratic system, he continued, and “you’d see wonders.”
In South Africa, one of those constraints is term limits. Zuma must leave office after a general election scheduled for 2019. His preferred successor is Nkosazana Dlamini-Zuma, the mother of four of his more than 20 children. She appears to be an even bet to take over as president of the ANC at its December conference, with her strongest challenge likely to come from Cyril Ramaphosa, a businessman and the current deputy president, who enjoys the support of much of the country’s financial elite.
The electoral dominance of the ANC is such that the winner of its leadership race will probably become the country’s next president, but that’s less a certainty than it once was. The Economic Freedom Fighters, a splinter party led by a former student activist, has pulled away left-wing supporters. The more genteel Democratic Alliance is making a play for the centre, after taking control of the country’s three most important cities in municipal elections last year. The bloc’s leader, Mmusi Maimane, has positioned himself as Zuma’s chief antagonist on the Gupta issue, lodging one of the citizen complaints that prompted Madonsela’s report and making a formal request to the U.K.’s Serious Fraud Office for an investigation of McKinsey. (The SFO has not announced the opening of an investigation.) The Guptas, Maimane says, “are sordid people who found a vulnerable country and took advantage.”
With the government consumed by scandal, South Africa’s economic promise is slipping away. In April two of the three global rating agencies downgraded the country’s debt to junk status. The economy has exited a recent recession, but growth isn’t anywhere near fast enough to raise living standards for the bulk of the population. The threat of violent crime continues to be elemental. OR Tambo airport has seen a string of “follow-home” attacks in recent weeks, including one in which a busload of Dutch tourists was trailed out of the terminal, flagged down by a man dressed as a police officer, and robbed at gunpoint. The murder rate in Cape Town is almost 40 percent higher than that of Detroit and rising.
No one yet knows what kind of country the South Africa of tomorrow will be. There was nothing inevitable about the orderly transition to democracy that Mandela oversaw; in the 1980s, some of his compatriots feared the end of apartheid might split the nation in two or even spark a civil war. The new society he helped build was blessed in many ways: by its natural endowments, the energy of its citizens, and the sophistication of the institutions by which they agreed to be governed. But Mandela’s charisma papered over enormous social and economic divides. And as South Africans are learning to their chagrin, even the most thoughtfully constructed institutions are ultimately only as principled as the people who run them. —With Sam Mkokeli
By: Matthew Campbell and Franz Wild/BizNews