Hello and welcome to the So What podcast in which political economic analyst JP Landman
discusses the issues uppermost in the minds of South Africans.
You can find a written version of this content on JP's website jplandman.co.au.
I am Ruda Landman and I am your host.
These first few recordings were done at our dining room table but we will soon be moving
into a studio.
Hello and welcome to another recording to go with JP's latest newsletter.
This one is dated the 20th of October 2022, corruption and consequences.
It is your annual corruption update if I can put it that way.
It's a bit later than usual, why?
Yes, normally I do it in August.
You're quite right.
This year I delayed it because in May the National Director of Public Prosecution, some
Shomina Bartoy and the head of the Hawks committed in parliament that they will bring nine high
profile arrests, nine high profile cases to the courts by the end of September.
So I delayed this note to see what the status was at the end of September.
And we start with the Gupta brothers.
Absolutely, a month after Ms. Bartoy made that commitment to parliament, the two Gupta
brothers were arrested in Dubai on a red notice from Interpol, of course initiated by South
Africa.
They are kept in jail.
They've applied for bail a number of times but they didn't get it.
Their extradition to South Africa is now dependent on the court decision in that country in Dubai.
The other case, the second case, the big one is the Freda Dairy Project, also known as
Estina.
They're 17 accused, including a former cabinet minister.
Mr. Zwane appeared as accused.
They appeared next to two Gupta companies as well as a host of other people.
One of the nice juicy parts of this was that Iqbal Sharma, an associate of Mr. Gupta's,
who had a very, very high lavish lifestyle in Pretoria, had to spend a few nights in
jail before he could get his bail.
That must have been uncomfortable.
So they've been prosecuted.
Zwane stepped aside from his positions in ANC, where he was a senior person, he was a member
of ANC, being a former cabinet minister and he's now out of the game, so to speak.
Then the other big free state case is the asbestos case, which involves Esh Mahashuleh
and 18 other accused.
Now the aronical thing here is Mr. Mahashuleh and some of his accused wanted to take the
prosecutor on appeal before the court started on certain technical points.
They lost in a high court and they're now appealing for those technical points to the
appeal court in Blumenbeet.
The aronical outcome of that is, as long as the court case is not settled, that takes
Mr. Mahashuleh out of any ANC elections, which will happen in December.
Then there are three other cases which are interesting because they go back a long time
and they're relatively small in state capture terms.
Money is still at stake, but the amounts are fairly small.
The one is the South African Express case, where people eight years ago in 2014 defrauded
the North West government of a 158 million round.
The NPA said they specifically took that case, or is bringing that case to court and arrested
the people concerned because it has all the elements of a typical state capture case.
Then another one, case number five.
Sorry, but how did SA Express get involved in North West?
Well it was about landing rights for SA Express from, I presume, where I'm able to be important
of West, I presume, in my king.
I don't know the details of the case.
Then a case that goes back even further, 12 years to 2010, is the case of the Winnie
Mardikis, the Zellam and the Elam Museum, which was built.
A number of people, including two firms of architects, have been arrested and are accused
by the NPA of defrauding the state.
The amount of money is not a lot, again in the context of state capture, only 700,000,
but the symbolic value of the Winnie Mardikis, Elam and Elam Museum speaks for itself.
Then the last one, which is case number eight, is quite interesting.
It's a former commissioner of police and three former generals in the police force in crime
intelligence who have been accused with a number of private sector business people for
procurement fraud.
The amounts were 33 and 54 million.
Aside from the criminal prosecution, what is really interesting is that the SIU, the
official investigating unit, have confiscated the assets of these police generals.
You will be interested to know that 19 immovable properties in Sant and Pretoria, Boxburg,
Springs and Sesselberg were confiscated, as well as 115 vehicles.
I can't imagine how one drives around in 115 vehicles.
Clearly the high life of the previous police commissioners, as well as those private business
people.
Clearly their high life is now over.
So that gives us six court cases of the nine that the director promised.
At Transnet there were some fairly big developments.
In total, 10 people that were previously headhunters like Brian Mulafi, who is the CEO and like
Anoy Singh, who is the chief financial officer, have been arrested and the 10 of them are
appearing caught on a number of corruption charges related to the purchase of locomotives
from a Chinese company.
We'll have to see how that case goes on the criminal side.
On the civil side, we can take comfort from the fact that Transnet and the SIU again were
successful in having a contract of 54 billion ram for those 1000 locomotives set aside.
The four companies involved in the case, one was Canadian, one American and two Chinese
companies refused to provide spare parts to the current Transnet locomotive fleet, as long
as there was a dispute about the 54 billion ram.
That dispute is now over because the contract was set aside and according to news reports,
Transnet is close to finalizing a deal with those four original equipment manufacturers
to supply spare parts.
The lack of spare parts is one of the reasons why Transnet is performing so poorly.
Hopefully, that will help to improve their performance.
Then I can just say for the sake of Transnet pensioners that the two Transnet pension funds,
the Transnet pension fund as well as the second defined benefit fund have both reclaimed more
than a billion ram that were paid to them from Regiments Capital.
The Regiments Capital you will know is a good associated company that creamed a lot of the
state capture funds.
Well it's actually not the only problem that is facing Regiments Capital, not so.
Absolutely.
Regiments Capital was put into liquidation.
They're fighting to get it out, but as they were getting out of liquidation, SARS brought
a 700 million ram claim against them and they're not out of it yet.
What I find interesting about the SIU Transnet on the one hand and SARS on the other hand,
the actions is that it indicates a degree of coordination between different state agencies.
I suspect, but I don't know this, Rida, that the Fusion Center, which was created 18 months,
two years ago, is playing a very big role in organizing this coordination.
That is exactly why this called the Fusion Center.
They bring together different law agencies, law enforcement agencies to pursue corrupt
people.
And there's also been action against another company, Bain.
Yeah.
Now Bain, way back in 2018, repaid the 164 million ram in fees that they got from SARS
for the rubbish advice that they gave there.
So that is done and dusted.
But what has happened this September is that Bain was banned by the National Treasury from
participating in any public sector contracts in South Africa for a decade.
Now private companies, of course, can still use Bain if they want to, but they're excluded
from all public sector work and that must be quite a blow.
Then we turn to Escom and here you say no recent high profile arrests, but one arrest
which did catch your eye.
Absolutely.
Two people that previously worked for the Swiss company ABP, Asiaban Bavieri, were arrested
together with their wives, so it's four people and they appeared in court.
Apparently what happened is there was a contract between ABP and Escom for 25 million and over
time that contract was increased from 25 million to 520 million through what is called variation
orders.
Now variation orders is a fairly standard thing, but the idea is that it must be justified.
And this was clearly not the case.
ABP is cooperating with the South African authorities, but they've already repaid 1.6 billion grand
to Escom and they've made provision in their latest set of accounts for another 6 billion
grand as possible damages for costs related to corruption at the Kusilip Power Station.
So we're talking really big money here.
Now ABP is a very big international company, been around for a long time and even they
were snared in this.
And it's very gratifying that they're working with the South African government, but like
Payne and like McKinsey and like other companies who had to repay money, well they also had
to do that.
Now the interesting thing about this case is although the two people that worked at ABP
and their wives are not high-profile individuals, they are now in court, they have been charged
and the rumors have it or reports have it rather that this contract could be linked to other
senior people that used to work at Escom.
And you can think of who the names are and hopefully we will see more arrests.
So that was a race number 8, not high-profile, but certainly in the race that was being done.
Escom is the big area of state capture.
I mean the Hawks and the SIU just this week have or gave an overview to parliament of their
work, the criminal work and the civil work on Escom corruption and it's a horrifying
picture of networks and plain old-fashioned stealing and looting, bomb threatening people
and so on.
The Hawks are working on something like 55 cases, they already have some 18 cases in
court.
The SIU on the civil side succeeded in setting aside two contracts for coal supply to Escom
worth 10.2 billion a round.
These were long-term contracts and they were found to be invalid and set aside.
The SIU is also claiming 3.8 billion round from former directors and managers that used
to be with Escom as well as a number of private companies.
So there's a lot going on at Escom, now they're by proper debt.
It just sounds, it was corrupt at every level.
It's not only the major big contracts.
It's also at individual power stations.
Oh no, absolutely, absolutely.
And to Tuka power station for example is fingered very prominently but it's not the only one.
Yeah, as you say, big fish and small fish.
There's one guy who was an Escom employee.
He then resigned, he became a supplier and Escom took action against him, fingered him
and within a couple of hours after he was fingered he repaid Escom 1.2 million.
Now it's not big money and if only all people were that cooperative but it proves your point
that some people were small fry.
So there's big fry, there's small fry and everybody is frying the consumer.
But there is one arrest that you say is puzzlingly going nowhere.
Yeah, that is in the first half of 2021, so it's about 15 months ago.
Four people were arrested for 1.2 billion a round and each wrote a kusili.
It included Mike Lomas who was a prominent South African businessman.
He was arrested in the UK along with three people in South Africa.
The four of them have been charged last year already and this case is constantly being
postponed.
It's not progressing.
Now part of the postponement was because the defense lawyers, some of them are pulling
all kinds of tricks but also because Lomas is still in the UK.
He was released by the UK court on a £100,000 bail.
It's quite a hefty bail and he's now claiming that he's in ill health and he cannot be extradited
to South Africa.
So there's a court case about that as well.
But the case has again been put on the roll for three November, two weeks down or so and
we will have to see whether it actually proceeds.
But it's puzzling that an arrest that was made, as I've said, about a year and a half
ago, 15 months ago, that that case is not proceeding.
And then apart from these high profile cases, the NPA is just generally getting on with
the job it sounds like.
Absolutely.
If you look at the annual report for the last year, which is the year to March 2022, and
dealing specifically with corruption, they brought 388 cases to court and they won 344
convictions.
That's a 90% conviction rate, which is quite good.
Interestingly enough, the number of government officials convicted of corruption increased
from 86 to 119, 38% increase.
But the conviction of people in the private sector for corruption increased by nearly
40% from 147 to more than 205.
Using all this to the value of 5.5 billion round were obtained by the NPA against many
of these accused.
Criminal conviction is one thing, getting the money back is a second objective.
And it's also, I mean, I think they're doing quite well.
And it's interesting to note that in June last year, just after the start of the financial
year, more than 800 posts at the NPA were filled.
Now that's a lot of people to a point in one go, and clearly the capacity will grow and
the ability to prosecute cases will grow.
So I think with these, the director promised, of which we have now seen eight of nine, well,
I think things are moving also on the criminal case side in the right direction.
And the special investigating unit, how's it going there?
Very good.
They've been on a roll now for about two years, most of the action against corruption
came from them.
I've written about this before and I've set up their role and their position.
In essence, the SIU can only reclaim money via civil action.
They cannot prosecute people.
They must bring a civil claim and in that way recover money.
And their work has been spread out quite a lot via a special tribunal which was created
by President Homo Horsan 2019.
Now the special tribunal are simply eight judges of the High Court, of the South African
High Court in the various provinces.
And when the SIU wants to bring a case before them, they act as the special tribunal presiding
officer.
So the big benefit of the special tribunal is you don't have to go the laborious route
of going through the courts.
As you know, our court system is very clogged and courts are just bureaucratic, slow and
time consuming.
This special investigating unit with its special tribunal is capable of hitting much quicker
and much faster.
Just to bring things together, Zverey McKeezy, the previous Minister of Health, was fingered
in the SIU investigation in the digital vibes scandal, 159 million.
There was no criminal charges there because of civil claim.
Now Mr. McKeezy wants to object to that finding and he has brought the case to the High Court
but there's been no finding in the High Court yet.
But that's a side issue.
The fact remains, the SIU is very active, they're very successful in reclaiming money
and although they can't put people in orange overalls, they are reclaiming money, public
money for the state.
And then leaving the state and the state employees aside for a moment, Stinoff, the big news.
Yes, I started writing about Stinoff simply because I think it is such a big story and
what's going on there.
And just as I finished it and as I send this note off, the news broke that the Reserve
Bank got in order to attach 1.4 billion round in assets, that's apparently all the assets
the Yoster family has for claims of more than 4 billion.
So the Reserve Bank is claiming much more than what is available but it's quite a substantial
amount.
And this was granted by the High Court in the Cape in September.
But that's on the civil side.
It's quite interesting to look at what's happening on the criminal side.
In June 2020, about two and a bit years ago, the Hawks asked the auditing firm PWC to do
a forensic report on the Stinoff case.
Apparently the report, according to the head of the Hawks, comprised 31 leverage files.
Now they were prosecuted that must work through that.
About a year later in July 2021, the Hawks reported to Parliament that they were in the
process of collecting 14 witness statements from people in foreign countries, individuals
living in Germany, France, Australia and the UK.
And the Hawks started what is called mutual legal assistance processes to source 30 foreign
bank accounts in foreign countries.
And this evidence from the witnesses and the bank accounts and so on will be used to do
a final forensic report.
The PWC one was a preliminary report.
In this July, three months ago, two, three months ago, the Minister of Justice reported
in Parliament that the first leg of the Stinoff matter has been finalised.
Now precisely what that means, I don't know.
Presumably it means that the forensic report is completed and that they can now proceed
to build a case on the basis of that.
He also said that the South Africa is seeking mutual legal assistance.
He didn't say with whom, but I presume it was the Germans, because that's where Stinoff
was incorporated.
Now it's worth remembering that the Stinoff officers in Germany were raided by the German
authorities in December 2015, at the dates.
Two years later, December 2017, the Stinoff bomb exploded.
It took three and a half years from December 2017 when the bomb exploded for charges of
balance sheet fraud to be brought against four people involved with Stinoff.
Now the Germans in Germany, yes, the German authorities brought the charges in Germany.
Now the Germans have a system in where a court conducts a pre-trial hearing to give an independent
opinion on whether there's a good chance of getting a conviction or not.
Normally in Germany too, that decision is taken by the prosecutor, but the Germans have
got this extra layer of decision making if you want, where the independent court must
also give an opinion on that.
And the court ruled last year, now exactly a year ago, in October 2021, that the case
must proceed against two of the four individuals, and those are two individuals living in Germany.
The other two individuals are not identified, presumably Marcus Eustace is one, but that's
just speculation, and they will appear in court later.
Now at the time of writing this note, which is October 2022, note no further developments
have taken place in Germany.
So if you think about it, a raid in December 2015, the bomb explodes in 2017, charges
brought in 2021, 2022 confirmation that four people must be charged, and then a year later
October 2022, and nothing has yet happened in Germany.
And I think that speaks to the fact that these cases are complicated, that legal processes
take time, and you must either conclude that Marcus Eustace is not guilty, or you must
conclude that the Germans are inefficient.
And I think those two propositions are both a bit suspect.
So legal processes take time, however impatient we may be for attribution.
So with all of that said, so what?
I think the big so what is, it's clear from the amount of detail that's in the note, that
we've seen a step change in South Africa in both criminal and civil prosecution of state
people, state capture, mass crimes.
The public, the director of public prosecution promised nine cases, we got eight, and clearly
a lot more is brewing and bubbling under the surface.
Secondly, I think it's important to point out that people that were formerly untouchable,
a cabinet minister, secretary general of the running of the ruling party, a commissioner
of police, senior generals in crime intelligence, high flying CEOs like Brian Mulafay, these
previously untouchable people are now in court as common accused.
And it's not something that I think one should just tread lightly over.
It is a very good thing that companies are being prosecuted as well, and that companies
are also paying the price, some by being charged, others by having to repay money, some
by being banned from public contracts.
It's a refreshing development because corruption always involves two parties, not just one
party.
Of course, this does not mean that all the cases will be settled satisfactorily, that
people will be found guilty.
But if you can have a 70, 80% conviction rate, I think that would be very gratifying for
the South African public.
And then lastly, we mustn't forget, and Mr. Zuma is a prime example of that, that when
you start in defending yourself in legal cases, it drains you.
It takes money, it takes energy, it takes focus away, and the more you appear in court
and have to go there and so on, the more your status diminishes.
And as I've said, I think Mr. Zuma is a prime example.
So the fact that people that actually is being taken against people mean that they are beginning
to pay a price for what they did.
Isn't there also a kind of sea change in the way corruption is viewed?
That previously people may have thought, well, you just have to get a contract on the side
and nothing will happen, you can just do it.
But all of this now means that's not the way South Africa is going to work.
I think that's a fair comment.
Africa will still work like that for a long time to come, it's a different value system
that must take hold.
But the fact is these prosecutions help to conceive and give birth and grow that alternative
value system.
Yes, I think that's a fair comment.
Yeah, how do you fight corruption?
Well, by fighting it.
There's no other way.
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