South Africa: 10 facts to know about the Zondo Commission reports

By Xolisa Phillip, in Johannesburg
Posted on Friday, 27 May 2022 12:23

South Africa's former President Zuma faces a state corruption inquiry, in Johannesburg
South African Deputy Chief Justice Raymond Zondo attends the Judicial Commission of Inquiry into Allegations of State Capture, where South Africa's former president Jacob Zuma is summoned to face a state corruption inquiry, in Johannesburg, South Africa, February 15, 2021. REUTERS/Siphiwe Sibeko

South Africa’s R800bn ($50.9bn)-a-year public sector spend on goods and services is the conduit between corrupt tender practices and political party funding, according to the Judicial Commission of Inquiry into State Capture (Zondo Commission) reports.  

“Such a link can represent an existential threat to our democracy,” says the Zondo Commission. “It is inconceivable that political parties should finance themselves from the proceeds of crime, and yet there is alarming evidence to that effect.”

If you haven’t been following the reports closely, here are 10 things to know about the Zondo reports.

1. Facilitators

The Zondo Commission has so far released four reports comprising 12 volumes that focus on the efforts of former president Jacob Zuma, the Guptas, and associates to capture the state and its entities.

The affected institutions and entities are the National Treasury, Transnet, the South African Revenue Service (SARS), the South African Airways (SAA) Group, Denel, and Eskom.

Complicit parties to state capture include McKinsey, Regiments, Trillian, Bain, and EOH.

Erstwhile ministers and heads of government departments, who served under the Zuma administration, as well as former executives and board members of state-owned enterprises (SOEs), are also implicated.

2. ‘Nenegate’

The economy took a R500bn ($31.9bn) knock in the aftermath of Zuma firing Nhlanhla Nene as finance minister on 9 December 2015, according to National Treasury calculations submitted to the Zondo Commission.

Furthermore, the move cost the country 1.1% of GDP while the economy shed 148,000 jobs and Johannesburg Stock Exchange market capitalisation suffered a R378bn reduction.

On 8 December 2015, Nene, supported by senior Treasury officials, resisted signing a binding commitment compelling South Africa to enter into a R1trn new nuclear build deal with Russia.

Nene had also fallen out of favour with former SAA chairperson Dudu Myeni, a Zuma confidante implicated in the destabilisation of Eskom and a central figure in the crises that engulfed the flagship carrier.

Either she [Dudu Myeni] leaves or I leave

On 2 December 2015, Nene vetoed Myeni on an SAA-Airbus swap transaction, which, if not entered into, would have triggered cross-defaults and an immediate call on the airline’s debt.

On 3 November 2015, Nene had told a sitting of an African National Congress (ANC) Study Group that: “Either she [Dudu Myeni] leaves or I leave.”

3. National Treasury

Nene and National Treasury officials stood in the way of the Guptas’ ambitions of growing the proceeds of their business dealings with the state from R6bn to R8bn, according to witness testimony to the commission.

The installation of Des van Rooyen as Nene’s replacement was part of a broader “clean up” of the National Treasury, the aim of which was the removal of officials who had blocked unfeasible deals, including the new nuclear build programme, and had been on the Guptas’ trail at SOEs.

The commission notes that Nene met with the Guptas prior to his appointment as finance minister, but found no evidence he aided the Zuma associates once he took office. Instead, he proved himself an opponent of the Guptas.

4. Transnet

Between 2009 and 2018, Transnet awarded an estimated R41.2bn in irregular tenders, amounting to 72.21% of total state “payments in respect of contracts tainted by state capture”.

Transnet’s procurement of 1,064 locomotives (599 electric and 465 diesel), and the funding and financing arrangements thereof, under the guise of a R300bn Market Demand Strategy, lies at the heart of the schemes devised to enrich the Guptas and their associates.

The Guptas and their associates scored R7.34bn ($469m) in kickbacks from Transnet.

Original equipment manufacturers (OEM) Bombardier, 240 electric locomotives; China South Rail, 359 electric locomotives; China North Rail, 232 diesel locomotives; and General Electric, 233 diesel locomotives; were the winning bidders.

The initial price for the 1,064 locomotives was R39.94bn, but ballooned to R54.5bn.

“Transnet is in the process of launching legal action against the four OEMs contracted to provide the 1,064 locomotives. The intention is to set aside the contracts as unlawful,” the commission reports say.

The Guptas and their associates scored R7.34bn in kickbacks from Transnet. McKinsey generated R2.2bn in fees. Regiments and, later, Trillian were introduced to Transnet as McKinsey’s supplier development partners.

Transnet’s reliance on consulting and advisory services from McKinsey, Regiments, and Trillian contributed to “the weakening of internal controls and the payment of substantial fees for work that should have been done internally”.

5. SARS

Between August 2012 and July 2014, Zuma held 17 meetings with Bain’s Vittorio Massone, a senior representative at the consultancy firm’s Johannesburg office.

The capture of SARS “is one of the few instances where President Zuma was directly and personally involved in the activities and plans to take over a government entity. Another was Eskom”, the Zondo Commission reports say.

The commission has recommended that, “in light of Bain’s unlawful role in SARS”, all Bain contracts with government departments and organs of state be re-examined “for compliance with the relevant statutory and constitutional provisions”.

The Zondo Commission has also recommended that the SARS Act of 1997 as amended, be amended to provide for “an open, transparent, and competitive process for the appointment of commissioner of SARS”.

6. EOH

The listed EOH Group volunteered information to the Zondo Commission to the effect that the IT company had been involved in a kickback scheme for City of Johannesburg tenders.

EOH admitted there had been wrongdoing on its part and informed the commission about what corrective steps the company was taking to prevent future lapses in its processes.

Under previous executive management, EOH facilitated donations to the ANC in the Greater Johannesburg region, the proceeds of which were used for the party’s 2016 local government elections campaign.

The central figure in the scheme, Geoff Makhubo died of Covid-19 in July 2021.

Former EOH executive Jehan Mackay “lent” Zizi Kodwa, an erstwhile ANC national spokesperson and the ex-deputy minister of state security, R1.7m.

It is untenable for the deputy minister of state security to find himself in a position where he is beholden to a suspect

The Zondo Commission has determined that the “loans” were intended to buy Kodwa’s influence. Kodwa says he used a R1m loan from Mackay to purchase a Jeep and the rest of the money went towards the payment of luxury accommodation for Kodwa.

Kodwa has conceded that he is not in a position to repay the money, but has denied impropriety. Kodwa is now the deputy minister in the presidency.

“It is untenable for the deputy minister of state security to find himself in a position where he is beholden to a suspect in multiple criminal investigations,” says the commission.

City of Johannesburg is the only municipality investigated by the Zondo Commission.

7. The evidence

The drivers and protection officers of former Transnet and Eskom executives provided the Zondo Commission with detailed accounts of their principals’ movements and whereabouts during the period under investigation.

Drivers logged meetings, which were not recorded on the executives’ diaries; testified about calls between the executives and the Guptas; and captured Google Maps data of trips taken.

The Guptas’ compound in Saxonwold, an upmarket suburb in Johannesburg adjacent to Rosebank, was where political and executive fortunes were made and destroyed.

When the Gupta empire was under threat in South Africa because of increasing scrutiny, the Oberoi Hotel in Dubai became their meeting place of choice with compromised ministers and SOE executives.

The commission also relied on cellphone records and an e-mail trail to piece together its evidence against implicated parties.

8. Buying influence

The R200 note has become synonymous with the Guptas’ cash-for-favours regime.

The Guptas stuffed bundles of R200 notes bound together using rubber bands in backpacks, sports bags, travel bags, suitcases, and refuse bags.

Former deputy finance minister Mcebisi Jonas testified that the Guptas offered him R600,000 cash as a good faith gesture in exchange for him accepting appointment to Nene’s post.

Why don’t you take the money?

The Guptas also said they would pay Jonas R600m, which he could “stash in Dubai,” if he became finance minister. Jonas rejected the Guptas’ money and their request that he take over from Nene.

Recipients of the Gupta cash bribes rented safety deposit boxes at Knox Vaults, in Killarney Johannesburg, to store their loot.

Former Denel CEO Riaz Saloojee testified that the Guptas asked him: “Why don’t you take the money?”

9. The Gupta empire

The Guptas’ New Age newspapers was Zuma’s idea, according to testimony before the commission. The Guptas’ media assets included a 24-hour satellite news channel, ANN7.

Entities within the Gupta stable included Oakbay Investments, Oakbay Resources and Energy, Sahara Computers, Tegeta Resources and Exploration, and Shiva Uranium.

10. Remedy

The Zondo Commission says SOE board appointments “should no longer be left solely to ministers”. The commission takes an adverse view of the ANC Deployment Committee’s role in the appointments to SOEs.

South Africa requires an anti-corruption body free from political oversight

Given what happened between 2009 and 2019, the Zondo Commission says “there is a pressing need to strengthen the monitoring capability of the procurement system”.

“South Africa requires an anti-corruption body free from political oversight and able to combat corruption with fresh and concentrated energy,” says the commission.

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