'They eat money': How Mandela’s political heirs grow rich off corruption

Since apartheid ended, African National Congress leaders have allegedly siphoned off tens of billions of dollars. Will South Africa’s new government confront such epic graft?

Norimitsu Onishi,Selam Gebrekidan
Wednesday 25 April 2018 12:24
A dairy farm turned out to be a fraud, with millions of state dollars vanishing in a web of bank accounts controlled by politically connected companies and individuals
A dairy farm turned out to be a fraud, with millions of state dollars vanishing in a web of bank accounts controlled by politically connected companies and individuals

With loudspeakers blaring, city officials drove across the black township’s dirt roads in a pickup truck, summoning residents to the town hall. The main guest was a local figure who had soared up the ranks of the governing African National Congress and come back with an enticing offer.

Over the next few hours, Mosebenzi Joseph Zwane sold them on his latest deal: a government-backed dairy farm that they, as landless black farmers, would control. They would get an ownership stake in the business, just by signing up. They would go to India for training, all expenses paid. The dairy would bring jobs to the impoverished, help build a clinic and fix the roads.

“He said he wanted to change our lives,” says Ephraim Dhlamini, who, despite suspicions that the offer was too good to be true, signed up to become a “beneficiary” of the project.

“This thing is coming from the government, free of charge. You can’t say you don’t like this thing. You must take it.”

But his instincts were right.

The dairy farm turned out to be a classic South African fraud, prosecutors say: Millions of dollars from state coffers, meant to uplift the poor, vanished in a web of bank accounts controlled by politically connected companies and individuals.

Almost nothing trickled down to the township or the scores of would-be beneficiaries after that first meeting in 2012.

Jacob Zuma, former president, appeared in court this month on corruption charges

In the generation since apartheid ended in 1994, tens of billions of dollars in public funds – intended to develop the economy and improve the lives of black South Africans – have been siphoned off by leaders of the ANC, the organisation that had promised them a new, equal and just nation.

Corruption has enriched ANC leaders and their business allies – black and white South Africans, as well as foreigners. But the supposed beneficiaries of many government projects, in whose names the money was spent, have been left with little but anger and deepening disillusionment at the state of post-apartheid South Africa.

The nation was governed for nine years by scandal-plagued President Jacob Zuma, whose close ties with the Gupta family – three Indian brothers at the helm of a sprawling business empire built on government contracts, including the dairy farm – outraged voters.

Their cosy relationship contributed to the ANC’s recent electoral losses and helped lead to Zuma’s ouster two months ago.

Promising a “new dawn,” Zuma’s replacement Cyril Ramaphosa has said he would make fighting corruption a priority. But he is also a veteran ANC insider, and the early signs have not been encouraging.

Having become party leader by a razor-thin margin, Ramaphosa has tried to keep together a fractured ANC by moving cautiously. He formed his first cabinet by appointing some well-respected officials, but also included allies – his own and Zuma’s – who have been accused of corruption by the Public Protector’s office and good governance groups.

Beyond that, politicians who long oversaw provinces rife with public corruption, including the one where the dairy farm is, now sit at the top of the ANC’s hierarchy.

National prosecutors, often criticised for being servile to the president, say they are trying to recover more than $4bn lost to corruption related to the Gupta family’s undue influence on Zuma’s administration.

And that is just a small measure of the corruption that has whittled away at virtually every institution in the country.

Almost no one comes out of this looking good.

At just under $21m, the money lost in the Vrede dairy farm may seem small. But it is a big test of whether South Africa’s new government has the power and the will to confront public corruption at its source.

While Nelson Mandela is still revered in the West, his legacy is regarded more harshly in South Africa

The police have apprehended some low- and mid-level officials involved in the dairy farm, the first arrests related to a high-profile case of public corruption during the Zuma presidency. But notably, they have yet to pursue any ANC officials. Zwane has not faced any charges.

What’s more, the provincial premier who approved the project, Ace Magashule, was recently elected secretary-general of the ANC.

The endless scandals have also raised serious questions about the complicity of major Western companies, with multiple investigations scrutinising the role they may have played in enabling corruption and weakening the country’s institutions.

Many trace the deep corruption in the nation to a fundamental flaw in South Africa’s transition from white rule to democracy. In the bargain struck between the apartheid government and the ANC, headed by Nelson Mandela, a transfer of power was carried out peacefully, disproving predictions of civil war and earning Mandela accolades as a visionary peacemaker.

Ace Magashule, ANC secretary general, has served as the party’s Free State leader since 1994

But the deal was reached on what many South Africans today consider Pyrrhic terms: the black majority was allowed to control politics, but much of the country’s economic resources, including land, has remained in the hands of white South Africans and a small group of other elites.

In the early years of ANC rule, Mandela and other top leaders, who had helped defeat apartheid but had no personal savings, received houses, vehicles and money from white business leaders – essentially bribes, critics say.

A smattering of influential figures, like the current President Ramaphosa, amassed extraordinary wealth. They were allowed to buy shares of white-owned companies on extremely generous terms and invited to sit on corporate boards. They acted as conduits between the governing party and the white-dominated business world.

The dairy farm case is emblematic of the many ills afflicting South Africa a quarter-century after the end of apartheid. It shows how corruption, in a government controlled at all levels by a single party, has entrenched old racial inequalities.

In Free State province is a small farming town named Vrede. A cemetery and a police station – buffers during the apartheid era – still separate Vrede from the neighbouring black township of Thembalihle.

In many ways, the area is a microcosm of the enduring economic imbalance in South Africa. Nationally, black people make up 80 per cent of the population, but most remain shut out of economic opportunities. White people, accounting for 8 per cent, retain an oversize influence on the economy.

Minister of mineral resources, Mosebenzi Joseph Zwane (left), tours a gold mine in 2015

Nearly all the commercial farmers around Vrede are white, as is the main government contractor. In the adjoining township, black people operate small taverns and basic carwashes.

But in Vrede itself, white people still own all of the faded buildings on the main street, where they – along with immigrants from other African nations, and countries like Pakistan and Bangladesh – operate shops. Black people, who were not allowed to live in the town under apartheid, own or rent only about 10 per cent of its residences.

In the late 1990s, officials were purged from city government and replaced by ANC appointees with little experience. The purge, which occurred at all levels of government across the nation, contributed to the corruption that emerged towards the end of Mandela’s term.

In Free State, one of the first post-apartheid cases of corruption in government revolved around Magashule, the ANC’s current secretary-general.

Magashule, now 59, has served as the party’s leader in Free State since the end of apartheid in 1994. He grew up in Parys, a small town in the province. During apartheid, he was an underground ANC operative whose boldness had caught the attention of Winnie Mandela, Nelson’s wife and an anti-apartheid activist.

After white rule ended, he oversaw economic development in the cabinet of the first post-apartheid provincial premier, Mosiuoa Lekota. In an interview, Lekota said he had caught Magashule stealing government funds – a charge Magashule, whose spokespeople did not respond to interview requests for this article, has long denied.

But Magashule went on to flourish inside Free State. He became premier of the province in 2009 just as Zuma became president.

To many, the dairy farm project appeared to be a swindle from the beginning. For starters, there were ample suspicions about the pitchman, Zwane.

“I know this guy,” says Dhlamini, the would-be beneficiary who was also the chairman of Vrede’s arm of the African Farmers Association, a national organisation for black farmers. “I don’t trust him.”

When Zwane became the provincial minister of agriculture, many black farmers in Vrede rejoiced. Like others in the country, they had neither capital nor land. With a local son heading the province’s Agriculture Department, they thought their “lives were going to change”, recalls Meshack Ncongwane, deputy chairman of Vrede’s African Farmers Association.

In 2012, Zwane and Agricultural Department officials arrived in Vrede to tout the dairy farm project. Flanked by his wife, council Speaker Roseline Zwane, and by longtime ally Mayor Tlokotsi John Motaung, Zwane told the crowd about a dairy farm that would empower black farmers and create 150 jobs.

Shortly afterward, his department signed the first of its two dairy farm agreements with a company called Estina.

This was a peculiar choice. Estina was to buy cows for local farmers and process milk at the farm. But the company was headed by a businessman from India who had a background in information technology – and none in farming. Yet, importantly, he had long worked for the Guptas.

Despite the project’s sketchy details, Zwane signed off on it and asked the provincial treasury to start paying Estina, according to an investigation by the national Treasury. Initially, he was overruled by lawyers in Magashule’s office, who deemed the contract invalid because procurement rules had not been followed.

The province signed another contract with Estina the following month – with the lawyers’ blessing. That agreement stated that Estina would invest just under $20 million in the project and the province would contribute about $30m over three years. Local farmers, the so-called beneficiaries, would retain 51 per cent of the shares.

There was “something fishy” from the start, says Doctor Radebe, who was a councillor for the opposition Democratic Alliance in Vrede. Zwane and the agricultural officials presented no business plan or budget for the project, but they and the mayor insisted on pressing ahead, Radebe says.

In an interview, Motaung, the mayor, says, “We had no doubt that the plan will work.”

But he acknowledges that Zwane presented no detailed plan or document about the proposed dairy farm. Even basic details were missing, the mayor says, acknowledging that his role in the project was now under scrutiny.

The payments to Estina began months later. Court documents show that the province deposited just under $21m in two Estina bank accounts over three years. Days after every payment, the company transferred the entire sum to other accounts. From there, prosecutors say, the money was withdrawn by individuals and other Gupta-linked companies that had little to do with the farm.

In fact, prosecutors say that only about 1 per cent of the money invested by the province actually went into dairy farming. Beyond that, the national Treasury found no evidence that Estina ever invested its own money in the project, despite its obligation to do so.

Emails leaked from a Gupta company server indicate that some of the money was sent to the United Arab Emirates and put into accounts registered to the Guptas. The money then made its way back to South Africa through a maze of bank transfers, according to spreadsheets, logs and an invoice in the email trove.

The top ANC officials at a party conference in December, including President Cyril Ramaphosa

Many of the problems surrounding the dairy farm could have been ignored, had the province not tried to tap into a national fund for struggling farmers. The national government initially agreed to give about $4m to the project on the condition that the province submit, among other things, a list of 100 poor farmers who would benefit from the farm.

When the government found no evidence that local farmers were involved, it sent national Treasury auditors to investigate in 2013. Though Zwane had held meetings to look for beneficiaries, no official list had been drawn.

After the auditors started asking questions, a list of beneficiaries – between 80 and 100, depending on the version – was hastily assembled.

Those who were serious about farming started to complain. At a meeting with officials in the provincial government, Dhlamini and Ncongwane, of the African Farmers Association, said that when they raised questions about the project, they were dismissed.

In early 2014, the national Treasury sent a scathing report to Magashule, the premier of Free State, and told the province to stop paying Estina. But it took Free State another six months to take the farm back. The province even continued to pay Estina another $11m after officially terminating the contract, court documents show.

In the end, a project meant to empower black farmers like Dhlamini further enriched the Guptas and one of the wealthiest white men in Vrede, Willie Basson.

It was a measure of how corrupt South Africa had become a generation after the end of apartheid that nothing was done about the Vrede dairy farm case for years.

The national police and prosecutors looked away even after the national Treasury raised alarms about the project.

In Free State, some who spoke out against public corruption were suddenly killed in circumstances that, even in a country with widespread violent crime, aroused suspicions.

As for Zwane, the dairy farm hardly hurt his career.

During Zuma’s presidency, the Gupta brothers increasingly acquired economic and political influence by forging close ties with the president, his son and political allies like Magashule.

The Guptas’ influence, and possibly direct role, in the appointment of important government officials has been investigated by the Public Protector and is expected to be a focus of a recently begun government inquiry into public corruption.

In August 2015, according to the leaked emails, Tony Gupta, the youngest of the three brothers, forwarded Zwane’s résumé to Duduzane Zuma, one of the president’s sons, who was a director of many companies operated by the Guptas.

Two months later, Zwane, whose highest qualification is a teacher’s diploma, became South Africa’s new minister of mineral resources, one of the most important – and potentially lucrative – portfolios.

The ‘Premier League’

In December, ANC delegates from all over the country chose Magashule, Free State’s longtime premier, as the party’s secretary-general – one of the top four positions in the party. Magashule had been one of Zuma’s fiercest backers, along with two other provincial premiers who became known in the South African news media as the “premier league”. They had endorsed Zuma’s chosen candidate as the ANC’s next president.

But, at the last minute, one of the premiers, David Mabuza, switched sides, handing a narrow victory to Ramaphosa. Afterward, Ramaphosa made Mabuza – whose province, Mpumalanga, became known for political killings and endemic corruption during Mabuza’s decade as premier – the nation’s deputy president.

With a new president in charge, the national police and prosecutors have started moving against some individuals involved in the dairy farm case. Eight people were charged with fraud, and others had their assets linked to the farm frozen. But a judge released most of the frozen assets in March. The next court hearing in the criminal case is scheduled for August.

Zwane, who was not appointed to Ramaphosa’s new cabinet, has kept out of the public eye in recent weeks. Neither he nor Magashule has shown any willingness to answer questions about the dairy farm from the news media or Parliament – reinforcing the public perception that ANC officials are above the law.

“What has gone wrong has gone wrong under their watch,” says Mathole Motshekga, a senior ANC official who is a member of the party’s decision-making body, the national executive committee, and is also chairman of Parliament’s Justice Committee.

“We expect, and the public expects, that they should take responsibility for what has happened. We are waiting to hear what they have to say, because we don’t expect people in such positions to be absentee landlords.”

© New York Times

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