South Africa’s state-owned power utility is working with the National Treasury to source more coal for seven of its plants that don’t have adequate supply, raising the specter of a return to rolling power cuts that have periodically slowed the economy since 2008.
South Africa’s anti-graft ombudsman has found Public Enterprises Minister Lynne Brown inadvertently misled parliament about contracts that existed between the state-owned power utility and a company linked to the Gupta family, and has given President Cyril Ramaphosa 14 days to take action.
“By inadvertently misleading parliament, Minister Brown violated” the executive ethics code, Public Protector Busisiwe Mkhwebane said in a report posted online.
In June last year, the anti-graft ombudsman started a probe into Brown after website amaBhungane reported power producer Eskom Holdings SOC Ltd. paid Trillian Capital Partners Pty Ltd. 266 million rand ($22 million) in fees even though the existence of a contract had been denied.
Trillian, a financial-services firm, is linked to the Gupta family through business associate Salim Essa, who was its principal shareholder until he sold out in July.
According to the information the minister received from Eskom, no payments were made, “but it subsequently emerged that Eskom had indeed made payments to Trillian,” the Department of Public Enterprises said in a statement on Thursday.
“When I became aware that senior Eskom officials deliberately misled me, I immediately informed parliament’s ethics committee and the Public Protector of the false information,” Brown said in the statement.
“I instructed Eskom’s board to take disciplinary action against those who conspired to mislead me, parliament and the country,” she said. “After the Eskom, Trillian incident I instructed the department to strengthen oversight mechanisms to avoid a repeat,” said Brown.
Ajay, Atul and Rajesh Gupta have been accused of using a friendship with former President Jacob Zuma and a business relationship with his son Duduzane to try and influence cabinet appointments and secure lucrative state contracts.
None of the siblings appears to be in South Africa and while the state has moved to prosecute Gupta associates in the days since Zuma was ousted, it’s unclear how the country will recover the billions of rand that are allegedly missing. Zuma and the Guptas have denied wrongdoing.
For years, brothers Ajay, Atul and Rajesh Gupta were ranked among South Africa’s most prominent businessmen and socialized with the ruling elite, including their friend, then-President Jacob Zuma.
They weathered accusations that they’d exploited their political connections to land an aircraft at a high-security military base to ferry guests to a private wedding, installed their allies in key positions at state companies, tried to influence cabinet appointments and looted billions of rand of taxpayer funds. Law enforcement agencies took no visible action against them, saying only that investigations were ongoing.
That all changed on Feb. 14, when Zuma quit as president under pressure from the ruling African National Congress the same day the police’s Hawks investigative unit staged a dawn raid on the Guptas’ sprawling luxury estate in Johannesburg’s Saxonwold suburb. Some of their top lieutenants were arrested and the eldest brother, Ajay, was declared a fugitive.
The timing of the two events was no coincidence, according to Mark Swilling, a professor at Stellenbosch University who convened an academics’ study last year that concluded that the Zumas, the Guptas and their allies had orchestrated “a silent coup.”
“There is a multi-pronged attack on the Zuma-Gupta network,” Swilling said. “One of these was a political attack launched from within the ANC to get rid of Zuma as the linchpin of that power elite. Linked to that is another set of actions initiated by the criminal justice system to nail the Guptas.”
The Guptas arrived in South Africa from India in the early 1990s and built up a business empire with interests ranging from mining to pay television. They acquired a private jet and mansions from Cape Town to Dubai. Their business partners included Zuma’s son, Duduzane, and they employed one of his four wives.
The Guptas became household names in South Africa in 2013 when they secured access to the Waterkloof airforce base for their wedding guests.
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The Bank of Baroda plans to exit South Africa as it faces a probe by regulators about its dealings with the politically connected Gupta family.
The state-owned Indian lender is in talks with the South African bank regulator to ensure an orderly withdrawal that won’t disadvantage any depositors, the Pretoria-based registrar said in an emailed statement on Monday. The central bank has no further comment on the matter, it said.
Bank of Baroda’s retreat comes less than a week after the company confirmed South Africa’s central bank is probing historical transactions.
Bank of Baroda, which is the only lender in South Africa still offering services to companies linked to the Guptas, last year sought a court order that will allow it to close their accounts.
The Gupta family, who are friends of President Jacob Zuma and in business with one of his sons, have been accused by politicians and civil society groups of using that relationship to influence state contracts and cabinet appointments. Zuma and the family deny wrongdoing.
Chief Executive Officer P.S. Jayakumar said in an interview with BloombergQuint that the lender is talking to regulators around the world to reduce its presence in countries where it doesn’t see a strong business case to rather focus on larger markets where it can better serve new customers.
He declined to comment on the Gupta allegations in the interview with the Indian TV venture, saying there are many factual errors in some of the reports.
A Mumbai-based spokesman for Bank of Baroda didn’t immediately respond to an email and phone call seeking comment.
The bank was said to have transgressed its own rules by being significantly exposed to one client.
The lender may hold as much as 1.75 billion rand ($146 million) on behalf of trusts for mines, linked to the Guptas, and by law that money must be used for environmental rehabilitation, according to the civil society group Organisation Undoing Tax Abuse.
South African prosecutors moved to freeze the assets of suspected allies of the politically connected Gupta family more than a year after the nation’s top graft ombudsman outlined the depth of state looting in the country.
The National Prosecuting Authority is targeting U.S.-based consultancy McKinsey & Co. and South African financial services firm Trillian Capital Partners Pty Ltd. for what it says was unlawful work for the state power utility.
It’s expected to be the first of many moves to tackle corruption more broadly. Trillian used to be majority-owned by an ally of the Guptas, who were accused by former Public Prosecutor Thuli Madonsela of wielding undue influence over the government to make money.
The three Gupta brothers, who are friends with President Jacob Zuma and in business with one of his sons, are alleged to have used those relationships to win contracts from state companies and influence government appointments. They and the Zumas have denied wrongdoing.
The NPA’s move “is good news, because people were becoming despondent as nothing was being done about corruption in the country,” Madonsela said by phone on Wednesday. “I hope that the bad guys will be taken to task and that people will start thinking twice before engaging in corrupt activities.”
The court filing by the NPA was made just two days before South Africa’s ruling African National Congress elected Cyril Ramaphosa as its new leader, picking him over Zuma’s preferred candidate and ex-wife Nkosazana Dlamini-Zuma.
Ramaphosa, 65, is now on track to become the country’s next leader and has promised to fight corruption as one of his main priorities, helping the rand rally by almost 6 percent against the dollar since his victory. The currency was little changed at 12.3099 per dollar by 7:23 a.m. in Johannesburg on Thursday.
“Ramaphosa has enjoyed a warm welcome by capital markets,” Adrian Saville, chief executive officer of Johannesburg-based Cannon Asset Managers, said on Wednesday. His “point of departure is rooting out corruption and purging the malicious agents of state capture. The steps taken by the NPA are pivotal to restoring the institutional credibility that has been decimated under Zuma’s presidency.”
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