SA Democracy Incorporated Corporate fronts and political party funding Vicki Robinson and Stefaans Brümmer1

ISS Paper 129 • November 2006 Price: R15.00

Research question and methodology ties to disclose such information. The litigation formed part of a broader campaign to lobby for transparency The research that informs this paper is based on the in, and regulation of, private funding to political par- thesis that unless it is regulated, party funding will ties by a group of civil society organisations such as become the biggest test to the country’s sanctified the Black Sash, the Institute for Security Studies (ISS), separation of power as enshrined in the Constitution: Transparency South Africa, the South African Catho- if state power is abused to direct resources to support lic Bishops’ Conference and the South African Coun- political parties, the basis of fair political contesta- cil of Churches. tion is undermined. Access to the democratic deci- sion-making process is put up for sale, which not only Judge Griesel found that access to records of private undermines the management of political parties but donations was not required for the exercise and pro- also the overall governance project at national level. tection of the constitutional Section 19 right to free One of the explicit aims of this study was to uncover political choice. But the court also held that the judg- some of the sources of political party funding and ment did not mean “that political parties should not, possible links to corrupt transactions. as a matter of principle, be com- During the course of writing this pa- pelled to disclose details of private per, researchers became aware of a donations made to their coffers”.2 new corporate front used by the rul- Unless it is The court was certain that private ing African National Congress (ANC) regulated, party donations should be regulated by to seek profit on its behalf. This is means of specific legislation. provided as a case study of the funding will become broader thesis. The research includes the biggest test to The political parties argued that a a quantitative analysis of funding to legislative process was the best way the Democratic Alliance (DA). The the country’s to design the regulation of private views of the smaller parties were not sanctified separation donations. The ANC said that such canvassed for the purpose of this re- of power as legislation should embody national search and will feature in a forthcom- policy perspectives and balance the ing monograph to be published by enshrined in the interests of all people, including the the Institute for Security Studies. Constitution. electorate, political parties and their donors. The ruling party buttressed Introduction its argument with reference to Arti- cle 10 of the African Union Con- On 20 April 2005 Judge Benjamin Griesel dismissed vention on Preventing and Combating Corruption of a high court application by civil society group the 2003. As a signatory, South Africa would be obliged Institute for Democracy in South Africa (Idasa) aimed to adopt measures to “incorporate the principle of at forcing the DA, the ANC, the Inkatha Freedom Party transparency into funding of political parties,”3 it said. (IFP) and the former New National Party (NNP) to re- veal their major private financial donors. The ANC has been promising to legislate the private funding of parties since 1997, when the Public Fund- Idasa took the litigation route using the Promotion of ing of Represented Political Parties Bill was enacted. Access to Information Act after failing to convince At the party’s National General Council (NGC) in July parliament to pass legislation that would compel par- 2005, a proposal was floated suggesting more rigor-

SA Democracy Incorporated • page 1 Paper 129 • November 2006 ous regulation of party funding as a result of increas- legislative process either. While the DA repeatedly ing awareness among the party’s membership of the argues that it submitted a private member’s Bill to Par- risk that its policies, and even its soul, might be mort- liament in 2002 calling for the prohibition of dona- gaged to the highest bidder. The resolution stated: tions above a certain threshold, this party, like the IFP (the NNP has since disbanded), appears to be biding To safeguard the integrity of the ANC, and our its time waiting for the ruling ANC to take the lead, system of multiparty democracy, there should after which reform should follow. be a significant increase in public funding for political parties in parliament, operating at both It is the reluctance to legislate that goes to the heart national and provincial level. The ANC should of the private funding debate: as political parties seek explore measures to increase transparency and to protect the identity of their benefactors they are accountability about private donations to po- condoning the lurking danger posed to South Africa’s litical parties.4 democracy by the corrupting tendency of undisclosed funding. An ANC task team – consisting of Trevor Manuel, min- ister of finance, Sankie Mthembi-Mahanyele, deputy It is an accepted fact among advocates of party fi- ANC secretary-general, Frank Chikane, director-gen- nance regulation in South Africa that political parties eral in the Presidency, and Saki Macozoma, business- are never going to be funded through state alloca- man and National Executive Commit- tions and members alone. In October tee (NEC) member – has tentatively 2006 the ANC tabled a proposal in been discussing how to regulate private Parliament’s Chief Whip Forum to ex- funding in the context of a debate about The ANC has pand the treasury’s annual financial al- concerns that certain party members become location to political parties repre- were making fast money on the strength sented in parliament by about a third.8 of party connections.5 The ANC has be- increasingly This was in line with a decision taken come increasingly alarmed by the mar- alarmed by the at its July 2005 NGC to call for more riage of the ruling party and business. marriage of the state funding of political parties in par- There are fears that the redistributive liament. The proposal was still being aims of black economic empowerment ruling party and debated at the time this paper was (BEE) are being perverted by govern- business. published, but if it is accepted the ANC ment officials, politicians and party of- alone will stand to gain R310 million. ficials wanting to get rich quickly. The official reason given by the ANC was that it needed to beef up the capacity of its MPs In conjunction with developing a code of conduct to to carry out their constituency work. However, specu- regulate the relationship between ANC officials and lation was rife that the money would be used to fund business, the task team is also looking at regulating its party work.9 party political funding because of the obvious inter- connections. It is equally accepted that the purpose of regulating private funding is not to stop such funding, but rather “We run into difficulties when the intent of the donor to ensure that parties are sufficiently funded from is not the same as [that of] the recipient,” said Manuel. sources that are neither corrupt nor potentially cor- “You’ve got to recognise that you can’t have full trans- rupting. parency or total opacity – it’s going to have to be some- thing in the middle.”6 The work of the task team is Mendi Msimang, treasurer-general of the ANC since being done ahead of the ANC’s policy conference in 1997, justified the lack of legislation in South Africa June 2007. While party- specific rules of this nature by stating that we “are not a settled democracy”.10 are fundamentally important, they won’t necessarily “We in the [ANC] are duty bound not to take any translate into the long-anticipated parliamentary proc- money that is not kosher. People do things for the ess to legislate party political funding. ANC out of their own volition. People must under- stand that the ANC has always been clean,” he said.11 More than a year after Judge Griesel’s judgment, when the various political parties pledged to set the legisla- But the murky relationship between money and poli- tive ball rolling, there has been no movement. Eshaam tics has been at the heart of almost every major scan- Palmer, chief legal adviser in parliament, confirmed dal faced by political parties and the government since this fact. “Usually the ruling party would lead the 1994. The blurred nexus between party, government charge on such a matter, but there has been nothing and state has become the defining struggle of the yet,” he said.7 democratic era, as the following examples illustrate:

None of the opposition political parties involved in • Arms deal: In 1998 the government decided to the Idasa litigation have made moves to begin the purchase about R30 billion worth of new defence

SA Democracy Incorporated • page 2 Paper 129 • November 2006 equipment as part of the biggest arms procure- chief executive of mining companies JCI and West- ment package in the democratic South Africa. This ern Areas, Kebble helped establish a string of BEE ultimately resulted in the country’s largest politi- deals spanning mining, telecommunications, fi- cal fallout since 1994, as ANC cadres were pitted nance, property, pharmaceuticals and engineer- against each other after tender irregularities and ing.14 Many of these deals benefited ANC-aligned political patronage blew into the open. (See more individuals, most famously the ANC Youth League. details on page 12.) Forensic investigators tasked with unravelling Kebble’s estate have uncovered records of well • Jacob Zuma-Schabir Shaik drama: ANC Deputy over R25 million paid to the ANC and its struc- President Jacob Zuma has been implicated for his tures by him.15 “generally corrupt” relationship with his economic adviser Schabir Shaik, who was found guilty in It would be disingenuous to assume that the former 2005 on two counts of corruption and one of fraud ruling National Party (NP) did not also rely heavily for his profiteering in the arms deal through his on private party funding that involved similar politi- company Nkobi Holdings. Shaik offered Zuma fi- nancial favours to the value of R1.1 million, which cal trade-offs. For example, the Afrikaner Broederbond the former deputy president allegedly accepted in – the secret society that guided NP policy under apart- return for political endorsement of Nkobi Hold- heid – formalised covert elite networks of Afrikaner ings during the arms deal procure- political and economic power “that set ment process and later political out to capture the strategic heights of immunity during the investigation. the state and the economy by deploy- (See more details on page 12.) The blurred ing members into the public service, 16 nexus between corporations and the judiciary.” • Oilgate: An investigation by the These individuals then carried an un- South African weekly newspaper party, defined and undisclosed debt of loy- Mail & Guardian in 2005 into pri- government and alty to the movement. vate party funding revealed how R11 million of public money was state has become While the problem of private funding diverted to ANC coffers ahead of the the defining of political parties in South Africa is 2004 elections.12 (See more details struggle of the historical, the focus on it is more acute on page 12.) now, partly because there is the politi- democratic era. cal space for the media and civil soci- • Peter Marais/David Malatsi case: In ety to interrogate it and partly because 2003 former Western Cape premier there has been a growth in corporate Peter Marais and the province’s power compared with the power of the government former environment MEC David Malatsi, both and the ruling party. members of the former NNP, were accused of re- ceiving donations totalling R400,000 on behalf of Specifically, BEE has inadvertently created the oppor- the party from Italian developer Count Riccardo tunity for connectivity between some in the moneyed Agusta in 2002. The donations were allegedly made to secure environmental approval by the and political classes that by its nature carries offsets province of Agusta’s proposed Roodefontein golf that may well be party funding arrangements – a lurk- estate development at Plettenberg Bay. In Octo- ing danger that political parties have recognised. ber 2006 Marais was found not guilty on two counts of corruption and Malatsi was convicted Black Economic Empowerment explained on one count of corruption.13 This paper should not be read as an assault on the • Jurgen Harksen scandal: German fraudster Jurgen principles of BEE but rather as an attempt to focus on Harksen provided R500,000 funding to the DA in the potential risk for the subversion thereof for nar- 2000 at the time that he was a fugitive from jus- row political or personal benefit. Such action under- tice. Gerald Morkel, the DA mayor of Cape Town, mines a policy that is designed to play a meaningful received the funding on behalf of the party. No role in transforming the South African economy. It is link to corruption was identified by the Desai Com- therefore also important to understand the background mission of Enquiry appointed to investigate the to BEE. scandal. The advent of South Africa’s democracy in 1994 trans- • The life and death of Brett Kebble: The slain min- ferred political power to the black majority but it left ing magnate’s use of BEE to support ruling party economic power largely in the hands of the white factions financially, in exchange for political pro- minority. BEE, one of South Africa’s most instrumen- tection, is well documented. During his tenure as tal policies, aims to rectify this inequality by increas-

SA Democracy Incorporated • page 3 Paper 129 • November 2006 ing black ownership, control and management of classes have kicked against this precisely because they state, parastatal and private economic activity in the have both tended to prefer the unaccountable status formal sector.17 While the concept of BEE emerged as quo since they have so much to hide.19 early as 1994 it was only legislated in 2004 when it became clear that persuasion to transform was not There is no shortage in South Africa of examples where enough as some sectors of the economy were imple- both elements of corruption – gratification (money or menting narrow forms of empowerment based only other benefit) extended by one party in exchange for on ownership and management. Under the Broad (political) influence unduly exercised by another – are Based Black Economic Empowerment Act promul- alleged to be present, but where the opacity of the sys- gated in January 2004, ownership is only one of the tem has prevented the public from judging for itself.20 seven main criteria upon which empowerment cre- dentials of businesses in South Africa are assessed (out Politicians have a stock response: our finances are of a total score of 100). The others are management secret; but trust us, we never accept donations with control (10%), employment equity (10%), skills de- strings attached. In an interview, ANC treasurer-gen- velopment (20%), preferential procurement (20%), en- eral Mendi Msimang was insistent that the ANC “never terprise development (10%) and corporate social in- accepts donations with strings attached” and justi- vestment (10%). Through the newly formed Financial fied Oilgate (detailed later in the research) as “an iso- Services Charter Council, compa- lated example and something that nies undergo annual evaluation and won’t happen again…Sandi Majali earn certificates of compliance with approached the ANC offering to help the Department of Trade and Indus- Politicians’ stock us and we accepted that”.21 try. Government and parastatals are obligated by law to award tenders response is: our This is not a good enough explana- or state contracts only to companies finances are secret; tion for an electorate that is becom- that are fully BEE complaint. but trust us, we ing increasingly cynical about the political system as they have ob- Central to BEE is state intervention, never accept served a string of corrupt party fund- which is intended to promote black donations with ing transactions (see examples in the ownership and management of the strings attached. introduction). economy. But it is precisely the cen- trality of the state to BEE that has led Whatever the identity of private do- to the common charge of cronyism, nors, there is a widespread percep- influence-peddling and the creation tion – real or imagined – that money of a black aristocracy against a backdrop of increas- buys influence and politicians and elected officials ing poverty. The argument generally follows the line are beholden to those who fund them. In 2005, for that the black capitalist class that has been promoted the second year running, Transparency Internation- by BEE is highly dependent on state policies, protec- al’s authoritative Global Corruption Barometer found tion and preferences and operates extensively through that political parties are viewed by citizens as the most political networks.18 Where BEE has been misapplied corrupt sector. In 2005, of the 69 countries surveyed either for political or personal financial gain – and 45 ranked political institutions at the top of the chart. there are many examples – this criticism is justified. At four on a scale of one to five, with five considered But there are as many examples, if not more, of how “extremely corrupt”, political corruption was a domi- the policy has pulled thousands of poor up by the nant concern of respondents.22 In a country as un- bootstraps – a fact that is often lost in the clamour equal as South Africa, political corruption also has a over its abuse. BEE is seminal to South Africa’s de- grave impact on social progress. mocracy, this paper is based on that premise, and where the policy is open to abuse it is in the public The argument for legislation generally follows the interest to bring it into the open. same line: allowing the wealthy, whether individuals or corporations, to buy political influence by secretly Background: The debate since 1994 donating as much as they want to political parties may result in further marginalisation of the poor who The lack of accountability in the private funding of are unable to buy such influence. In addition, with- political parties in South Africa is a sign of a deeper out transparency on private donations, citizens would malaise. As party funding scandals have become more never be able to make an informed assessment of gov- visible since 1994, so the desire and need to con- ernment policy decisions. front the problem have increased. Yet the harder the media and civil society have fought for exposure and At the heart of the funding debate is the question of transparency, the harder the political and capital political inequality:

SA Democracy Incorporated • page 4 Paper 129 • November 2006 The one time citizens experience true equality the national and provincial legislatures. Up to 90% is when they cast their vote at the ballot box. of the funding is distributed proportionally, with the Where there is no control over the private fund- remaining 10% allocated on the basis of a threshold ing given to political parties a situation of un- payment. Parties are prohibited from using public fairness and distortion of electoral competition funds for electoral campaigns and are required to may arise[,] ultimately undermining the equal close their books and return any unspent money to value of each person’s vote. When wealth is the IEC 21 days before an election. allowed to buy influence and access by un- regulated secret donations the effect on politi- However, as observed elsewhere, this public funding cal rights and participatory democracy could arrangement provides only a fraction of what parties lead to the average citizen’s voice being want and need in South Africa, making rich benefac- eclipsed by the undue influence wield[ed] by tors a financial lifeline and leaving ample space for wealthy donors.23 influence-peddling.

In the authoritative Centre for Public Integrity’s Glo- The case for increased public funding is the most ob- bal Integrity Survey released in 2004, South Africa vious and strongly argued mechanism to reduce the ranked a commendable sixth out of 25 countries. But potential for corruption, as the expense to sustain po- in one category, “electoral and po- litical parties would fall on the state litical processes,” it fell to 18th place and therefore the taxpayer. – well below countries like Panama, Nigeria and Ukraine – as a result of Public funding In 2002 South African Constitu- the near-zero score on “political tional Court Judge Albie Sachs led party finances”.24 The survey meas- arrangements a commission into constitutional ured six categories: civil society and provide only a and electoral reform in Mauritius. media, electoral and political proc- fraction of what His final report was unequivocal in esses, branches of government, civil its recommendation that to elimi- service, oversight mechanisms and parties want and nate the potential for political cor- anti-corruption mechanisms. The need. ruption, private funding of parties survey carried a clear message: the should be heavily proscribed and absence of enforceable party fund- more state funding should be made ing legislation was a measurable available:27 threat to the integrity of South Africa’s democracy. Even though we were only concerned with It is estimated that political parties spent between public funding of political parties by the State, R300 million and R500 million during the 1999 elec- we have thought it necessary to recommend tion period, but only R66 million of this was public that companies should only be allowed to make money.25 The key source of state funding is an annual donations in favour of political parties through payment based on the number of seats held and votes [a] Fund as created by law. Monies so donated won by each party in the previous election. In 2005 by companies are to be distributed to no par- the Political Parties’ Fund stood at R74,1 million, with ticular political party but to all those who would the ANC getting R49,3 million, the DA R9,3 million qualify for funding under the law. There is no and the balance divided between the 16 smaller par- need to insist on how powerful and rich cor- ties represented in parliament and the provincial leg- porations have, through financial pressure, tried islatures.26 the world over to influence those likely to ex- ercise political decisions. This explains why State funding of parties in South Africa is governed many democratic countries have thought it wise by the Public Funding of Represented Political Par- to ban altogether any possibility of political pa- ties Act 103, which came into effect on 1 April 1998. tronage by powerful Companies. Suffice it to According to this Act, the administration and man- say that we had the advantage of receiving agement of public funding is vested in the chief elec- somebody who has exercised ministerial re- toral officer of the Independent Electoral Commission sponsibility and who had the courage to invite (IEC). The funding is provided annually for those par- us to recommend the banning of political pa- ties represented in parliament and therefore does not tronage by the Chief Executives of important cover newly established political parties without rep- companies with shareholder’s money. He re- resentation in the legislature, until they make it to marked: “they never give something for noth- parliament through the electoral process. The major- ing”. ity allocation of public funding to political parties is We therefore recommend that every politi- determined by the proportion of their seats in both cal party should be made accountable to [an

SA Democracy Incorporated • page 5 Paper 129 • November 2006 electoral] commission for its campaign ex- publicly. Maree is an advocate of transparency in po- penditure for electoral purposes during the litical party funding, but believes, against the grain of campaign period and that lavish overspending his business colleagues, that the responsibility for dis- by any political party should henceforth invali- closure should lie equally with donors and the politi- date the election of its candidates just as lavish cal parties. “The responsibility to disclose funders overspending by any candidate exposes his/her should not only fall on political parties, but on the election to the danger of being declared null companies themselves in upholding good corporate 32 and void”. governance,” he said.

Idasa is facilitating consultation between business, At present, private donors may support a political party without either entity being obliged by law to disclose civil society and political parties towards reaching this financial support. consensus on managing party donations. Yet the proc- ess is painfully slow, and without the support of the At a party-funding symposium facilitated by Idasa in country’s legislative powers any consultations spear- October 2005, which brought together business, po- headed by civil society will achieve limited success. litical parties and civil society as a first step towards finding consensus on the rules for party funding – both Sixteen large corporations voluntarily disclosed do- voluntary and statutory – business nated money to political parties in indicated that disclosure should lie 2004. While this set a precedent in with the recipient political parties. terms of encouraging transparency, business was primarily concerned Private donors may The Johannesburg Securities Ex- with avoiding damage to their corpo- support a party change (JSE) has already attempted rate image if the information leaked to entrench a culture of transpar- out. The majority of the companies without any ency and disclosure through its vol- that disclosed also tended to donate obligation to untary Social Responsibility Index proportionally to the political parties, disclose their (SRI), the first of its kind in a devel- making it easier for them to disclose, oping country.33 The SRI aims to arguably to lessen the chances that support. increase an awareness of compa- an ANC-run department or council nies’ social responsibility and a would penalise them. Among the commitment to measuring their “tri- businesses that disclosed were Stand- ple bottom line”34 performance. The ard Bank, Liberty Group, Anglo Gold, Sanlam, index is an attempt to get companies to disclose vol- Mvelephanda, Sappi, Kumba, Cell C, MTN, Absa and untarily as much information as possible – and be Gencor. rated on it – about their commitment to social upliftment and good corporate governance. In the lat- Jaco Maree,28 CEO of Standard Bank, explained that est (2005) version, SRI companies are encouraged also until the 2004 general election the bank had a blan- to disclose any donations made to political parties.35 ket policy not to fund political parties. But in that year “we were put under enormous pressure and decided Yet the reality remains that civil society’s efforts to that we had to do something.”29 He said the bank promote transparency are constrained by the lack of developed a formula based on the proportion of par- legislation, which also protects big business and po- liamentary seats each party held, and announced their litical parties from disclosing too much information. plans publicly. “We didn’t want to play God and say half the money would go to the ANC and the other South Africa’s raft of anti-corruption laws (although half to the DA. So we decided to do it proportion- partly emasculated by the lack of implementation and ally.”30 The bank implemented a minimum cap of enforcement) are a partial disincentive to the abuse R10,000 per parliamentary seat. “By doing it this way of office by politicians for personal gain because they there was no element of political favouritism, rather are legally bound to disclose publicly all personal we were representing the will of the electorate.”31 financial interests. But the lacuna is that political par- ties have no similar obligation, which means that poli- Maree said that, based on the success of their fund- ticians or officials who make biased decisions to ad- ing formula in 2004, the bank had taken a decision vance the commercial interests of their parties are to fund political parties annually, not only in an elec- unlikely to be caught out. “[This] gives tremendous tion year, and make this part of their annual financial incentive to party fundraisers to extort ‘donations’, reporting. This will have significant ramifications in including shares, from companies that compete for terms of formalising a culture of party funding and in state contracts; or for companies wanting state con- compelling other companies to record their donations tracts to offer to share the spoils with the party.”36

SA Democracy Incorporated • page 6 Paper 129 • November 2006 Party funding in South Africa: The potential for in 135 entities, 24 of which are JSE listed. Also scor- the co-optation of government and party by ing high in listed entities were senior employees in business the departments of justice (41), labour (25), trade and industry (27) and foreign affairs (10).38 Auditor-General Shauket Fakie dropped a political bombshell with the release in March 2006 of his re- The report divided government employees into two port called Performance audit on declarations of in- categories – designated (chief director level and terest by ministers, deputy ministers and government above), and non-designated (the rest). Designated employees.37 This document, which revealed an en- employees are required by the Executive Members’ demic amount of business moonlighting by civil serv- Ethics Act to make annual disclosures of any finan- ants who had circumvented the panoply of anti-cor- cial interests, while non-designated employees, the ruption legislation, pitted Fakie against the ANC, gov- biggest culprits identified by the Auditor-General, are ernment leaders, civil servants, and the legislature. only obliged to obtain permission before performing external remunerative work, which they generally fail The report revealed that more than 52,000 govern- to do. The Auditor-General has called for legislation ment employees have interests in 20,000 close cor- to regulate this situation, which is untenable given porations, private companies or public companies. the potential for conflicts of interest. Of these interests, 655 are held in JSE-listed compa- nies. At least 14 ministers and deputy ministers and Fakie came under attack from various quarters, most more than 1,600 provincial ministers and other des- vociferously from parliament’s ethics committee, ignated employees were found to have 3,747 which all but rejected his report, arguing that it was directorships in 3,600 entities. Twenty-nine senior based on outdated information from the Companies employees at the Presidency had 139 directorships and Intellectual Property Registration Office (Cipro),

An overview of South Africa’s anti-corruption legislation

Preventing and Combating of Corrupt ally to the office of the Public Service Commission. Activities Act 2004 Non-designated employees (below director level) This Act codifies offences of corruption and brib- are only required to obtain approval before per- ery, extending this from the offices of corrupt pub- forming remunerative work outside their govern- lic officials to corruption in corporate boardrooms. ment employment. Financial disclosures are not It also deals with the role of private capital as a required for non-designated employees. source of public corruption. It makes provision for the protection of witnesses and places a duty on individuals holding positions of authority to report Protected Disclosures Act 2000 corrupt activity. This provision, in particular, ensures This Act protects whistle blowers, particularly in that senior managers in government, parastatals and the public sector. The South African Law Reform the private sector can blow the whistle on corrup- Commission has been drafting recommendations tion. Failure to report corrupt activities carries a to tighten the Act so that it better protects whistle maximum penalty of 10 years’ imprisonment. blowers. This process has been underway for five years. Executive Members Ethics Act 1998 This Act and the pursuant Code of Ethics published Promotion of Access to Information Act in the Government Gazette requires Cabinet min- 2002 isters and deputy ministers to disclose to an official This Act gives effect to the constitutional right of in the office of the president, and members of ex- access to any information held by the State and ecutive committees to disclose to an official in the any information that is required for the exercise or office of the premier, all their financial interests when protection of any rights. assuming office. The Act provides for both annual and transactional disclosure, which relates to a trans- action that a public servant may be involved in. Public Funding of Represented Political Parties Act 1997 Amended Public Service Regulation of 2005 This governs the annual disbursement of public This requires designated civil servants (director level funds to political parties according to a stipulated upwards) to declare their financial interests annu- formula. See the introduction for more details.

SA Democracy Incorporated • page 7 Paper 129 • November 2006 a database of all registered companies and their eign, but also, in particular, established sector directorships.39 This was despite the fact that the Au- of domestic capital…Its parasitism is reflected ditor-General’s report included a qualifying clause in its reliance upon and symbiotic relation with stating that the Cipro information could be outdated.40 the upper echelons of the state apparatus (BEE charters, with their ownership quotas and ten- The criticism from the ethics committee, which was der policies) that are driving the emergence of echoed by the ANC’s NEC, its highest decision-mak- this class faction, putting pressure on estab- ing body outside conferences, was in the opinion of lished capital to cut this emerging faction “a these researchers an attempt to deflect attention from slice of the action” in order to remain in favour the fundamental principle embodied in the report, with the “new political reality”…Political ten- namely that an increasing number of public officials sions within the state and ANC leadership are brazenly pursuing business interests, most of group are “resolved” (i.e. managed) by allow- which are undeclared and a significant proportion of ing some to be “deployed” into the private sec- which have the potential for conflicts of interest as tor. However, the converse of this is that the the companies of these officials are cropping up in leading financial and mining conglomerates are business transactions with the government. increasingly reaching into the state and the upper echelons of the ANC and its Leagues – The Auditor-General has started probing the extent of actively backing (betting on) different factions corruption involving government ten- and personalities, and seeking to ders awarded to businesses with pub- influence electoral outcomes and lic officials and members of the execu- presidential successions.44 tive as directors. “This points to the An increasing heart of the problem and for me is the number of public In his thought-provoking speech deliv- serious stuff,” he said. “We are already officials are ered at the fourth Nelson Mandela aware of quite a number of such annual lecture at the University of cases.”41 pursuing business Witwatersrand in July 2006, President interests that Thabo Mbeki added his voice to the The South African Communist Party growing concern about the rise of crass (SACP), the ANC’s partner with the have the potential materialism in South Africa:45 Congress of South African Trade Un- for conflicts of ions (Cosatu) in the Tripartite Alliance, interest. With reference to this lecture, the expressed its concern about this trend central point made by [economic in a statement released in April 2006 historian] Karl Polanyi is that the to commemorate the 13th anniversary capitalist market destroys relations of the death of Chris Hani:42 of ‘kinship, neighbourhood, profes- sion and creed,’ replacing these with the pur- We need to reaffirm our commitment to serve suit of personal wealth by citizens who[,] as the public without expectation of personal gain. he says, have become atomistic and individu- To this end the SACP is concerned about the alistic. Thus every day and during every hour rapidity with which many of our public repre- of our time beyond sleep, the demons embed- sentatives and civil servants are engaged in pri- ded in our society, that stalk us at every minute vate business activities, declared or undeclared. seem always to beckon each one of us towards We reiterate our call that we need to strengthen a realizable dream and nightmare. With every the culture of serving the public without mix- passing second, they advise, with rhythmic and ing this with private business activity. At this hypnotic regularity – get rich! get rich! get rate, the single biggest threat to our national rich!…It is perfectly obvious that many in our democratic revolution will soon be that of pub- society having absorbed the value system of our lic interest being submerged by private busi- capitalist market, have come to the conclusion ness interests. that, for them[,] personal success and fulfilment means personal enrichment at all costs…46 In a seminal discussion document written by the SACP’s secretary-general Blade Nzimande and printed In the United States the co-optation of political par- in the party’s monthly political journal Bua Komanisi ties and government by business, is acute. For exam- in May 2006, he again notes the “excessively ple, every one of the 10 largest contracts awarded for compradorist and parasitic” nature of “emerging black work in Iraq and Afghanistan after the destruction fol- capital (as the key faction most closely associated with lowing the United States invasions of those countries the ANC and the state).”43 went to companies employing former high-ranking government officials, and all top 10 contractors are Its compradorism reflects its reliance on the established donors in American politics, contributing patronage of established capital, not just for- nearly $11 million to political parties since 1990.47

SA Democracy Incorporated • page 8 Paper 129 • November 2006 Charles Lewis, the director at the Washington DC patronage, influence-peddling, cronyist practice and based Centre for Public Integrity, remarked as follows party funding emerging. about the cancerous contamination of politics by pow- erful financial interests in the United States in his pub- In 2003 the former Sasol chief executive Pieter Cox lication The buying of the President: faced the wrath of President Thabo Mbeki after he cited BEE as an investment risk factor in a document Hundreds of former public officials routinely the company had to compile in terms of the New shill for powerful corporate interests, well-paid York Stock Exchange regulations. Mbeki lashed out fixers who facilitate the successful synergy of that Sasol was guilty of “bigotry” and had an “out- mixing politics and business – in which public dated mindset”.50 Minister in the Presidency Essop and private sensibilities are blended until Pahad later developed Mbeki’s argument: “…BEE they’re almost indistinguishable – produces a should be viewed as the engine of our economic fu- natural, if not essential, elixir that practically ture and the factor that, more than any other, will link all real “players” by definition must drink.48 our two disparate economies.”51

In South Africa, the same dangerous cocktail may be The strong response from the Presidency reflected the gaining momentum as many political personalities government’s belief that big business was too slow to with impeccable political credentials buy into economic transformation. have moved into the private sector fol- Cox’s follow-up explanation, on the lowed by top public servants. This has Increasing other hand, demonstrated the di- been facilitated predominantly by BEE, lemma that faces South African cor- which is increasingly being distorted by examples of porate capital: “We believe empow- some government officials, politicians, political erment is a risk. But we also know that corporate capital and party officials patronage, it is an even bigger risk if we don’t do seeking different forms of connectivity empowerment.”52 rather than the more noble intentions influence- of BEE: to ensure that a transfer of peddling, With the dawn of democracy corpo- wealth takes place from the top ech- cronyist practice rate capital was acutely aware that to elons of white capital to the mass base remain competitive it had to eschew of poor black people. (See the introduc- and party its apartheid allegiances and gain fa- tion for information about BEE.) funding vour with the new ANC-led govern- are emerging. ment – all within an increasingly com- This does not mean that all black capi- petitive and globalised environment. talists and corporate managers are paid- up members of the political elite, for Its attempts to adapt to this new po- there are significant streams of BEE transactions, busi- litical economy, with BEE at the apex, threw capital nesses and individuals who have emerged from other into a state of extreme uncertainty – a situation it ab- routes – professional, educational and recruitment – hors. This was exacerbated by the fact that BEE, for- and others who may be connected to the ruling-party mulated in the spirit of compromise and pragmatism but do not trade on it. This paper also recognises that that has characterised the best of the ANC since 1994, participation in the market in South Africa has, for had moved from being largely persuasive with hardly well over a century, been politically and racially struc- any direct government involvement in the 1990s to tured and at the heart of BEE is the difficulty of how becoming more intrusive and regulatory with the to redress the legacy of racial inequality without in- promulgation of the Broad Based Black Economic Em- hibiting economic growth. “Critiques of the current powerment Act of 2004. The Act places a host of ob- restructuring of the South African capital market there- ligations on companies that want to do business with fore need to be historically and sociologically aware, government and the state provides substantial sup- concerned with a search for an appropriate combi- port to empowered businesses through tenders, per- nation of legitimacy (racial redress) and efficacy (does mits and procurement as well as the allocation of it inhibit or promote economic growth?).”49 share capital in state-owned enterprises.

Having said this, there are increasing examples of how [Corporate capital] might, ideologically, preach BEE is being debased by a capitalist class that oper- the need for the state to minimise regulation of ates within a sphere of capital accumulation fostered the market. However they were acutely aware, by close connections to the state, usually through the not just of the precedent of Afrikaner economic direct involvement of senior ANC members in busi- empowerment (of which some of them were a ness. This has created a porosity between party, busi- product), but of the way in which the corpo- ness and state, with increasing examples of political rate structure of South Africa had been affected

SA Democracy Incorporated • page 9 Paper 129 • November 2006 by the imposition of sanctions in the 1980s. black economic empowerment. These were the black They were therefore acutely aware of the need upper middle class that dominated the political life to adjust to the new style, rules, impositions of the country, and the economic chiefs, the owners and demands of democratic politics, and most and controllers of minerals and energy firms. While notably those of the ANC, which were to take he spoke specifically of this relationship between the 53 centre stage after 1994. two classes in the context of the country’s minerals- energy complex, it applies generally across the coun- The best way that corporate capital knows to create try’s economic sectors. certainty is to buy it, and so it was that throughout the 1990s and up to the present it has gained access The effect of this voluntary wealth distribution on the to the powers-that-be through “such devices as loans country has been the emergence of a new class of to, and joint ventures with, BEE companies, as well “unproductive, rich black politicians who have be- as scrambling to compete for the dismally small pool come key political allies of the economic oligarchy,” of qualified black managers”.54 Moeletsi Mbeki said.59

While BEE has gone some way towards fulfilling its Hence it is that several leaders within the Tripartite ideals of broad based empowerment – according to Alliance and the ANC itself – Jeremy Cronin, deputy the most comprehensive study to date on the rising secretary-general of the SACP, Cosatu general secre- black middle class, this group makes tary Zwelinzima Vavi, Archbishop up 10% of the black adult popula- Desmond Tutu, finance minister tion and accounts for 23% of total The best way that Trevor Manuel and President Thabo consumer power in South Africa55 – Mbeki himself – have decried in it has also converged politics and corporate capital recent years the fact that South Af- business as the capitalism being pro- knows to create rica is in danger of moving towards moted by the ANC-led government a state of crony capitalism where certainty is the black capitalist class operates through BEE is highly-dependant on within a sphere of capital accumu- state policies, protection and pref- to buy it. lation fostered by close connections erences and operates extensively with the state. through political networks associ- ated with the ANC. Oilgate (detailed below) is a classic example of this dangerous cocktail. It was alleged that before empow- Hence BEE at some levels has come to serve both the erment company Imvume’s donation to the ANC, party moneyed and the political classes as an elite group secretary-general Kgalema Motlanthe wrote a letter of entrepreneurs whose skills lie not only in fulfilling in support of a trip by Imvume principal Sandi Majali the demands of their particular industry, but also in to Iraq, where he asked for allocations of Iraqi oil to lending certainty and new business opportunities – supply South Africa through Imvume. The Deputy from the state or state opportunity – to companies President, Phumzile Mlambo-Ngcuka, in her former that have empowered them. These BEE entrepreneurs capacity as minister of minerals and energy, also au- trade on their political access, which has suited cor- thorised her most senior officials to accompany Majali porate capital well because it has brought certainty on this trip. Imvume later got the requested oil allo- where it had none. cations.

60 A 105-page report called Money and morality released In his book Bus stop for everyone, political analyst in October 2006 by the Institute for Justice and Rec- Tom Lodge cites the former treasurer-general of the onciliation warned of anxiety among ordinary South ANC, Makhenkesi Stofile, telling an audience in Africans about corruption by government officials and Mafikeng in 1997 that R2 million donations to the ANC had become customary among black business their connections in the private sector.56 “It is a truism people. In return for this generosity “we opted for the among the masses that it is the well-connected few role of facilitators for black business in the country,” who are getting rich as a result of political or other Stofile said.61 connections,” noted the report.57 Several ANC senior leaders who spoke on condition The incestuous relationship between largely white- of anonymity said that in addition to political endorse- controlled business, government and empowerment ment of selected BEE groups and individuals by the was reinforced in a public lecture delivered by Presi- ruling party there was a growing trend for individual dent Thabo Mbeki’s brother, Moeletsi Mbeki,58 at the party members to use their positions of power to ad- Wits Institute of Social and Economic Research in April vance their personal business interests.62 2006, where he told his audience that the ruling class had developed into two dominant classes through Trevor Manuel said one of the key reasons the party

SA Democracy Incorporated • page 10 Paper 129 • November 2006 was currently formulating a code of conduct to gov- now become a mechanism vulnerable to abuse in ern the interface between party and business was to political endgames. ensure “that certain standards are put in place to pre- vent any member of the ANC owning the party.”63 During the arms deal investigation, one inves- “We need to ensure that at no time do ANC members tigator acknowledged that the investigation [in business] trade on their political capital. I’m not faced a “grey area” that flowed from a politi- sure if you can stop ANC officials seeking remunera- cal process in which ANC cadres were con- tion [outside the party], but if you go around trading sciously “deployed” by the party to wrest con- on your full-time position as an ANC member, that’s trol of the areas of the economy that were con- what we’re trying to stop,” he said.64 sidered strategic – like the arms industry. In that process, “mistakes” were made. The very “mis- This fluidity between state, party and business has takes” for which [Jacob] Zuma was investi- allowed politicians in government and party officials gated, and Schabir Shaik charged, flowed from to build networks of patronage (and arguably to ex- an attempt to politically manage and control tort kickbacks if they are that way inclined). And along- the transfer of economic power – or at least side this mix there is tremendous space for straight strategic elements of it – from the alliance of party funding deals. Afrikaner nationalism and big business to an alliance of the ANC and big business. So al- Mendi Msimang, treasurer-general of though Zuma may have over- the ANC, said: “The BEE arrange- stepped the line, the line itself ments [legislation] are there because The fluidity is a very wide and dirty smudge, of the work done by political par- within which fall myriad em- ties…We appeal to the good sense between state, powerment deals – and the and the patriotism of the ANC mem- party and funding of the ANC itself, as bers in business to help the party. well as its pet projects and com- These people belong to branches and business has peting factions.67 have consciences.”65 allowed politicians Where ANC politicians in govern- The implicit suggestion here is that in government ment or in the party structures party members in business are mor- and party nominate people for BEE deals, for ally expected to provide funds to the officials to build example, one of the expected off- ANC. This is in line with the histori- sets, given this history of loyalty, cal tradition of loyalty to the ANC networks may be party funding arrangements above all else and is also in recipro- of patronage. – the “good sense” and “patriot- cation for the financial leg-up BEE has ism” that Msimang talks about. In provided these business people. The addition there is no reason why the ANC still has a top-down structural ANC wouldn’t be deploying cad- mindset, harking back to the struggle years, where res into the private sector (witness the use of nomi- loyalty to the political cause is prized above almost nee shareholders in the Transet/Skotaville example de- everything else, often even including competence. tailed below) in the same way that the party deploys cadres into government, state and parastatal positions. There is endless debate within the party, but once an internal “consensus” is reached, eve- President Thabo Mbeki chided party members at the ryone has their orders. As one diplomat and ANC’s NGC meeting in July 2005 over the growing long-time observer of the party says, “People conflation of party, state and business and the blatant are deployed to do jobs that they are not fit to potential this creates for corruption, including finan- do, and the ‘consensus’ means a loyalty to peo- cial support to the party: ple who do not work, or who are not effective…clientism hinders rational distribu- To be a ruling party means that we have ac- tion of resources.”66 cess to state resources. It means that those who want to do business with the state have to in- A major sticking point in South Africa’s democracy is teract with those who control state power, the the ANC’s continued policy of deploying cadres to members of our movement who serve in gov- institutions in a manner in which they retain party ernment. It means that those of us who serve loyalty that may undermine or even trump their new in the organs of the state have the possibility to independent institutional loyalty. While deployment dispense patronage. It therefore means that we was necessary in the formative years of democracy have the possibility to purchase adherents, with when the ANC needed to gain control of the com- no regard to the principles that are fundamen- manding heights of the civil service and parastatals, tal to the very nature of the African National these goals have been achieved and deployment has Congress.

SA Democracy Incorporated • page 11 Paper 129 • November 2006 All this makes control of state power a valu- The essence of Oilgate was that PetroSA, and ulti- able asset. It makes membership of the ANC mately the taxpayer, subsidised the ruling party’s elec- an easy route to access state power. It makes tion campaign: a blatant abuse of public resources. membership of the ANC an attractive commer- cial proposition. It makes financial support for The arms deal and party funding the ANC an investment for some of those who want to generate profits for themselves by do- The so-called “arms deal scandal” is another exam- ing business with government.68 ple of the murky relationship between state, business and party. The most famous example of this intersection, and the biggest party funding scandal in South Africa since In 1998 the government decided to purchase about 1994, was the media exposé known as Oilgate.69 R30 billion worth of new defence equipment as part of the arms procurement package in a democratic Oilgate and party funding South Africa, which ultimately resulted in the coun- try’s largest political fallout since 1994 as ANC cad- An investigation by the South African newspaper the res were pitted against each other after tender irregu- Mail & Guardian in 2005 into private party funding larities and political patronage blew into the open. revealed how R11 million of public money was di- The arms deal essentially led to the fall from grace of verted to ANC coffers ahead of the the country’s deputy president, 2004 elections.70 South Africa’s state Jacob Zuma. oil company, PetroSA, advanced R15 The essence million to Imvume Management – a of Oilgate was Zuma was fingered by Judge Hilary company with close ties to the ANC – Squires for his “generally corrupt” to pay for oil condensate it had to sup- that PetroSA, relationship with his economic ad- ply to the PetroSA production plant at and ultimately viser Schabir Shaik, who was found guilty in 2005 on two counts of Mossel Bay after winning a lucrative the taxpayer, corruption and one of fraud for his tender to do so. Imvume then trans- profiteering in the arms deal ferred the lion’s share (R11 million) to subsidised through his company Nkobi Hold- the ANC in the run up to the 2004 the ruling party’s ings. general elections. This left Imvume election with inadequate resources to pay for Shaik allegedly offered Zuma finan- the condensate, prompting PetroSA to campaign. cial favours, which the former release another R15 million directly deputy president allegedly ac- to Gencore, the Swiss-based supplier. cepted in return for political en- PetroSA partly justified its relationship with Imvume dorsement of Nkobi Holdings during the arms deal as an empowerment partnership: procurement process and later political immunity during the investigation.73 The cornerstone of this deal is the policy adopted by PetroSA, which is a national initia- The National Prosecuting Authority found during its tive, black economic empowerment. PetroSA investigation of Shaik that the ANC owned a 10% has a mandate to introduce hitherto disadvan- stake in Nkobi Holdings, which meant that the ruling taged South Africans into the oil and gas in- party probably stood to benefit from the arms deal.74 dustry. PetroSA had a choice: to continue busi- The charge sheet against Shaik stated that Floryn In- ness as usual and exclude historically disad- vestments, a 10% shareholder in Nkobi Holdings, be- vantaged South Africans from the mainstream longed to the ANC. economy and prolong, if not propagate, the two-economies concept, or use our procure- There is every reason to suspect that the arms ment muscle to bring fundamental change to deal suffered from the same intentional confu- the industry.71 sion of national, party and personal interests. With regard to businessman Schabir Shaik, the overlap between private and party interests — Imvume’s role as an ANC “front company” first and indeed the blurring of the boundary be- emerged in February 2004, when the Mail & Guard- tween the two — was built in from the start. ian exposed its oil dealings with Saddam Hussein’s His company, Nkobi Holdings, was named af- Iraq. Imvume principal Sandi Majali obtained lucra- ter the ANC’s late treasurer-general, Thomas tive crude oil allocations from that regime when he Nkobi, and Zuma has explicitly acknowledged travelled to Iraq with top ANC officials between 2000 that Shaik played a role in raising and manag- and 2002. Later, companies in the Imvume group de- ing funds for the ANC. In fact, it is arguable scribed Majali as ANC secretary-general Kgalema that all Shaik did was devise a business plan Motlanthe’s “economic adviser”.72 based on “unwritten rules of the game”, which

SA Democracy Incorporated • page 12 Paper 129 • November 2006 in effect institutionalise corruption on the ba- The South African Oil Company and party sis of both funding the party and extending its funding control from the political to the economic sphere.75 Another large government deal that appeared to ben- efit the ruling party came to light when the media Zuma was later also charged with corruption but the revealed in 2003 that an offshore company, the South case was struck from the roll in September 2006 for African Oil Company (SAOC), had benefited from a administrative reasons. Nigerian government oil contract issued in South Af- rica’s name.84 There were allegations at the time that Skotaville Press and party funding the party was a shareholder or beneficiary in SAOC, which was mysteriously registered in the Cayman Is- Nominee shareholding arrangements are often used lands, both a tax haven and a haven of corporate ano- to hide the real shareholders in a company because nymity.85 The party never confirmed nor denied this such arrangements are so difficult to penetrate. In claim. However, it was clear that neither the oil, nor 2003 the Johannesburg High Court awarded millions the revenue, was to benefit South Africa. Instead, rul- in damages to a printing company that claimed it had ing party-aligned interests were lined up to benefit in lost a Transnet privatisation tender to a company called a classic example of what appeared to be political Skotaville Press (now renamed Afri- leverage from ruling-party government officials and can Impression Media) because it politicians in exchange for financial had refused an approach from an benefit. ANC treasury representative, Most of these Zwelibanzi “Miles” Nzama, to hand Kase Lawal, the man who provided examples the technical and financial muscle over 15% of its shares to the party.76 demonstrate an behind the South African-Nigerian oil deal, was quoted in a 1999 in- Nzama, together with ANC treasurer- incestuous terview as saying that to team up general Mendi Msimang and relationship with local partners is the best way Nomazizi Mtshotshisa, the chairper- between the ANC, to navigate “cumbersome”86 govern- son of Telkom, are the trustees of an ment bureaucracy. Lawal’s United ANC fundraising vehicle called the business, States-based Camac Group held a ANC Fundraising Trust. The trust was parastatals, 75% shareholding in the South Af- registered in 2000 and has as its pur- 87 government and rican Oil Company. “We add fi- pose not only to accept donations but nancing and technical expertise, also to hold shares in companies.77 empowerment. and they provide political land- scape experience, relationships and The use of the Trust is a contro- credibility,” he said.88 versial fundraising mechanism as a potential conflict of interest arises every time What most of these examples demonstrate is an in- a government official who is also an ANC mem- cestuous relationship between the ANC, business, ber has to make a decision on a government parastatals, government and empowerment, which or parastatal contract for which one of these suggests that the government’s commitment to good companies has tendered.78 corporate governance is politically expendable. The point about these connections is not to suggest that Nomazizi Mtshotshisa, for example, also served on they indicate corruption; however, they do raise com- the board of Admiral Industries, which supplied plex questions about the use of economic power to Telkom with clothing for workers. Telkom paid the capture political space, and the use of political power company R5,4 million for the financial year ending to obtain economic benefit, whether for individual 31 March 2004.79 Mtshotshisa resigned as director of party members, or for the party itself. Admiral Industries on that date.80 As stated earlier, political parties have no legal obli- In the Transnet scandal it emerged that a man called gation to declare their private interests, which means Thlalefang Sekano allegedly held the Skotaville Press that politicians or officials who make biased decisions shares on behalf of the ANC.81 A recent company to advance the commercial interests of their parties search showed Sekano is still a director of African are likely to get away with it. Impression Media.82 Sekano, who is also the execu- tive chairman of the Communication Workers Invest- Smuts Ngonyama, the head of the Presidency in the ment Company, represented employees on Telkom’s ANC, is unapologetic about the right of party offi- board, but is also a director of Telesafe Security, which cials to have business interests and the concurrent was paid R39,9 million for security services by Telkom concentration of wealth in the hands of those who in 2004.83 are politically connected. “It is the right of any per-

SA Democracy Incorporated • page 13 Paper 129 • November 2006 son to get into business. There is no law barring peo- But party members have always been relatively un- ple from getting into business by virtue of them being important for the income of the party and there is talk members of the [ANC] National Executive Council. that, as part of an overhaul strategy the party is cur- There is nothing wrong with it,” he said.89 rently developing, it will phase out paid-up party membership altogether. Instead, to bind supporters But it is the accumulation of connection, seen in so more closely to it, it will use a sophisticated commu- many of these deals, that creates tremendous space nications network – a mechanism the DA can capi- for party funding deals – a you-scratch-my-back-and- talise on given that the bulk of its members are from I’ll-scratch-yours scenario – as Oilgate, the life and the middle class and would generally have access to death of Brett Kebble, and the Chancellor House case electronic communication. study (see page 17) illustrate. Already the party relies on structured mailing lists and Funding the opposition: The DA and double electronically generated personalised letters from party leaders to contact citizens and ask for dona- standards tions. This strategy has carved out a new class of do- nors among young professionals and corporate busi- “I’ve got to go and meet a donor,”90 says Tony Leon, ness officials. The letters include Tony Leon’s weekly leader of the opposition DA standing up and ending SA Today, which replicates President Thabo Mbeki’s an interview at the five-star Park Hyatt ANC Today, and DA@Work, which Hotel in Rosebank, Johannesburg. is sent regularly to members and The hotel’s ritzy boardroom is where supporters of the party. Leon courts many current and poten- “There is an tial donors – as party leader he is re- The DA has a permanent flow of sponsible for a team comprising the exclusive list of cash from its officials. MPs and DA’s senior leadership that interfaces donors to which MPLs are required to pay a levy to with the most lucrative benefactors. the party that is a percentage of their “Delegations are sent to specific [DA] MPs have no annual parliamentary income. This companies,” said a senior MP. “The access.” varies between 5% and 10%.96 Lo- kind of company involved deter- cal government councillors are ex- mines who goes on the delegation. pected to pay a smaller levy.97 There is an exclusive list of donors to which MPs have no access.”91 But if party leaders National Assembly are to be believed, contributions from members – or “grass-roots” financing – make up the bulk of the par- The DA has 50 MPs in the National Assembly. Ac- ty’s war chest. cording to the Independent Commission for the Re- 98 According to a senior party official, donations of vary- muneration of Public Office Bearers: ing sizes from individual members account for about two-thirds of the party’s funds. It is alleged that in • The average salary for MPs for the 2005/2006 fi- 2004 – the year of the last national election – the DA nancial year was R415,176 (the salaries range be- raised about R21 million from private funders, in ad- tween R388,005 at the lower end and R426,811 92 dition to the R7,1 million it received from the IEC. at the upper end depending on experience). • The leader of the opposition, Tony Leon, is paid an According to the DA’s court papers submitted in the annual average parliamentary salary of R534,844. litigation brought by Idasa to compel political parties • The chairperson of a committee or a joint com- to disclose their funders in 2003, the party said that mittee is paid an annual average of R501,787. between January and 21 August that year, it had re- None of the committees are chaired by the DA. ceived eight donations exceeding R50,000.93 In an election year the number of donations would increase. • The chief whip of the official opposition, Douglas Gibson, and the deputy chief whip of the official Grassroots financing comes from the following: (a) opposition, James Ellis, are paid an annual aver- membership dues, i.e. the gross amount of income age of R486,301. from regular subscriptions of party members; (b) vol- untary donations from formal party members in ex- Based on these figures, using the lower end of the cess of membership dues; and (c) contributions from levy required by the DA (5%), the party would annu- other supporters (loyalists), including those who con- ally receive: tribute through fund-raising events.94 • an average of R1 million from MPs; • an average of R26,000 from Tony Leon; and The DA’s annual subscription fee is R10. With a signed • an average R48,000 from the chief whips. up membership base of about 60,000, the party would earn about R600,000 annually from its members.95 This comes to a total annual figure of R1,074,000.

SA Democracy Incorporated • page 14 Paper 129 • November 2006 Provincial legislatures continues to hang over the DA and is an example of the money the party may be receiving from question- The DA has 47 MPLs across the nine provinces. Ac- able sources. cording to the Independent Commission for the Re- muneration of Public Office Bearers:99 It is also important to note that major party funding scandals are generally linked to the leverage provided • The average annual salary for the leader of the by political office. The DA doesn’t hold political power opposition in each province is R486,301. in any of the provinces, although it does have a rea- • The chief whip and the deputy chief whip in each sonable power base at the local level – for example, provincial legislature is paid an annual salary of the party has control, together with a coalition of other R458,019. parties, of the Cape Town Metropolitan Municipality. • MPLs are paid an annual average salary of It therefore cannot offer benefactors very much by R384,894. way of access to power, a return they often seek. Pri- vate donations would generally come in the form of Based on these figures, and using the lower end of funds from either large companies who donate pro- the levy required by the DA (5%), the party would portionally or individuals who are ideologically annually receive: aligned with the DA.104 • an average total of R200,000 from the party’s pro- vincial leaders; In principle the DA has been op- • an average of R400,000 from the posed to unregulated private politi- chief whips; and cal party funding – the party’s chief • an average of R900,000 from the The DA has whip, Douglas Gibson, submitted a MPLs. not been without its private member’s bill to parliament party funding in 2002, calling for the prohibition In total, excluding the contribution of donations to political parties from from local government councillors, scandals. foreign governments, the prohibi- the DA would receive about R2,5 mil- tion of anonymous donations from lion annually from contributions by any source if the amount in one fi- MPs and MPLs. nancial year exceeds R50,000, and the declaration of the name and address of any donor whose dona- In addition, MPs and MPLs are expected to raise an tion in one financial year exceeds R50,000.105 annual contribution for the party from their constitu- encies, or to pay that out of their pockets. This aver- But in 2005 it did an about turn and withdrew from a ages R25,000, amounting to an additional total an- comprehensive party-funding symposium organised nual contribution to the party of about R2,4 million. by Idasa as part of its Party Funding Campaign.106 The Every election year each MP and MPL is required to symposium brought together business, civil society donate an additional R20,000 to the party’s coffers. and representatives from every other political party to kick start the process of developing a formula, suit- But all of this is still a pittance in comparison with the able for all affected sectors, to regulate the private annual running costs of the party, which are about funding of parties – a legislative lacuna in South Af- R50 million in total, according to one senior MP. Yet rica that threatens the fabric of the country’s democ- the party generally “manages to meet its needs,” said racy. DA chief executive officer Ryan Coetzee.100 Idasa accused the party of a “superficial” commit- The party receives minimal access to credit because ment to democracy. The DA said that they did not see banks are wary of lending money to political parties. the campaign to be in their interests and that dona- “We can’t get a credit line from banks,” said tions made to the party were done privately and con- Coetzee.101 Generally individual DA officials put up fidentially. More specifically, the party was concerned their personal assets as surety to obtain loans, he that by participating in the debate it would fuel po- says.102 tential and current donors’ insecurities about being exposed. Ryan Coetzee said: “While we stand against The DA has not been without its party funding scan- private funding on principle, we would die as a po- dals. In 2002 the party was accused of receiving about litical party without it.”107 Essentially the party has R500,000 from extradited German fugitive Jurgen made a choice between protecting its financial ben- Harksen. In addition it was alleged that Harksen had efactors and participating in a multi-stakeholder proc- paid former DA Western Cape premier and Cape Town ess seeking greater transparency in an area that is criti- mayor Gerald Morkel’s rent of R55,655 during De- cal to the sustenance of democracy. cember 2001 and the payment of his legal fees of R219,182 during 2001.103 The National Prosecuting Gregory Krumbock, executive director of the DA who Authority later exonerated the DA from allegations of filed the responding affidavit in response to Idasa’s money laundering and corruption, but the scandal application, wrote:108

SA Democracy Incorporated • page 15 Paper 129 • November 2006 I oversee the DA’s fundraising activities and “Any big business is going to give more money to the have dealt personally with a number of donors. ANC – it’s instinctive for business to make friends with From personal experience I can say with con- the [ruling party],” says DA CEO Ryan Coetzee. fidence that disclosure of the donation records Coetzee says that small, medium and micro enter- sought from the DA would [cause] existing and prises are more willing to donate to the opposition potential donors to refrain from making future because they don’t necessarily have “an institutional 109 donations to the DA or to reduce the amount relationship with the ANC”. of their donations…The DA’s donors regard their support for [the party] as a private matter On the other hand, opposition political parties could and would be distressed and embarrassed to use this reasoning as a convenient defence to avoid have this information made public. Although or delay legislating the flow of private donations to this concern is more pronounced in the case parties. of private individuals, it is also shared by cor- Big business in South Africa must be credited with porate donors and by the persons who repre- taking the initial steps toward greater transparency, sent them. and corporations such as Standard Bank and Anglo It is for this reason that the DA, as a stand- American have developed formulae whereby each ard feature in its telephonic fundraising cam- political party receives donations according to its par- paigns, expressly mentions to potential donors liamentary representation. This ar- that confidentiality will be ob- guably cuts out any scope or sus- served. Larger donations (such picion of favouritism. By Coetzee’s as those in excess of R50,000) It is a global own admission, big business generally involve personal con- concern among largely has a long-term view of the tact between the donor and a economic and political value of senior representative of the opposition maintaining a multi-party democ- party. In these dealings it is of- parties that business racy, thereby avoiding the poten- ten expressly stated that the do- tial self-destruction of supporting nation is to be treated in confi- is reluctant to only the ruling party. dence. donate to them for Secondly, corporate donors Interestingly, it is alleged that the flow have a natural concern that dis- fear of economic of donations to the DA tends to ebb closure of their support for the reprisal from and flow with the political climate. DA may prejudice them in bid- government. For example, in 2000 when the Zim- ding for contracts awarded by babwean land grabs began the DA organs of state controlled by experienced an increase in donations other parties, particularly the from business.110 ANC…It is not germane whether there would as a probability be discrimination in the event Ironically, however, the DA’s stonewalling of efforts of disclosure…Even if donors believe that the to regulate private donations to parties could perpetu- risk of discrimination is slight, they (or at least ate the problems of the dominant party syndrome that some of them) are likely to consider that the it accuses the ANC of entrenching. Without legisla- risk is worth taking. Even if the concern were tive parameters, the ruling party has adequate room regarded by others as unfounded or irrational, to use state resources and receive donations from opaque sources, thus enfeebling opposition parties, it would…influence donor conduct. Again, I who by their own admission cannot compete with am able to say from experience that such con- the ruling party’s power advantage for donations.111 cerns do exist among corporate donors. An attempt to interview David Maynier, National Di- It is a global concern among opposition political par- rector of Fundraising for the DA, about the party’s ties that they are disadvantaged by the fact that busi- funding strategy and its donors was unsuccessful. ness houses are reluctant to donate to them for fear “Concerning a meeting to discuss party funding re- of economic reprisal from government. search for the Institute for Security Studies. The party does not discuss any matters relating to party funding On the other hand, ruling parties appears to have un- or donors. Unfortunately, therefore, it will not be pos- limited access to the use of government financial and sible to meet you to discuss same,” he wrote in an human resources, including vehicles and control of email.112 the public media. The opposition has argued that this has created an uneven political playing field, to their The DA, as the biggest opposition party, needs to ful- detriment. fil its obligation to fight for transparency and should

SA Democracy Incorporated • page 16 Paper 129 • November 2006 be leading from the front to legislate this difficult ter- Imvume Management as effectively a ruling party rain. It is essential to avoid the preservation of short- business front. Imvume landed sweetheart deals in term interests and in turn allow the perversion of de- Saddam Hussein’s Iraq after a lobbying effort involv- mocracy. ing senior ANC officials. And it diverted R11 million of South African state oil funds to the party before the Case study: Chancellor House, a front 2004 elections (see previous section for more details). company Chancellor House: About the company Introduction It is no coincidence that Chancellor House’s name- This case study exposes a new corporate front used sake housed a small law firm that opened in down- by the ANC to seek profit on its behalf. town Johannesburg half a century before the “em- powerment” group – in fact, as this article will show, The Chancellor House group of companies has qui- a ruling party business front – was formed. In 1952 etly accumulated “empowerment” stakes in miner- former ANC presidents Nelson Mandela and Oliver als, energy, engineering, logistics and information Tambo rented office space in a building called Chan- cellor House. Mandela wrote in his autobiography, technology (see below for details of these invest- 113 ments). More often than not, these business opportu- Long Walk to Freedom: nities have been dependent on the government’s discretion – the award “Mandela and Tambo” read the of state tenders, mineral rights and brass plate on our office door in the like. The ANC, as ruling party, Chancellor House Chancellor House, a small build- has been both player and referee. ing just across the street from the has focused marble statues of justice stand- The case study reveals how the gov- strongly on the ing in front of the magistrates’ court in central Johannesburg… ernment awarded rights to strategi- minerals and energy cally important manganese reserves For Africans, we were the firm to a consortium that included both sector, where of first choice and last resort. Chancellor House and a Russian empowerment In March 2003 Chancellor House oligarch, Viktor Vekselberg (see de- 114 tails of the manganese rights below). oportunities Holdings was established. To- have mushroomed gether with a number of like-named President Thabo Mbeki, whom subsidiaries it occupies space in a Vekselberg is understood to have since 2004. modest office block in Rosebank, met when he first visited South Af- Johannesburg. This research reveals, rica looking for mineral sector op- as will be seen, that Chancellor portunities, later appointed House has entered business on be- Vekselberg – Russia’s third richest man – to his inter- half of the ANC and is answerable to the party‘s treas- national investment council. It is unclear whether this urer-general, Mendi Msimang. The Chancellor House meeting with Mbeki specifically included a discus- group has quietly accumulated “empowerment” sion about such mineral sector opportunities. stakes in minerals, energy, engineering, logistics and information technology (see details below). The South African government’s embrace of Chancellor House has focused strongly on the min- Vekselberg comes in spite of well-publicised allega- erals and energy sector, where empowerment oppor- tions of racketeering and corporate lapses against him tunities have mushroomed since 2004, when the new (see details below). These allegations appear to have Mineral and Petroleum Resources Development Act been overlooked in the glow of the growing relation- and its associated empowerment charter came into ship between South Africa and Russia, of which Presi- effect. The group’s biggest known deal to date has dent Vladimir Putin’s visit in September 2006 was only been as part of a consortium that won prospecting the latest sign. Vekselberg was central to the business rights to strategic and potentially very lucrative man- delegation accompanying Putin. ganese reserves in the Kalahari in 2005 (see below). A separate consortium in which it has shares has ten- When it came to the manganese prospecting rights dered for the construction of an Eskom power station awarded to Vekselberg’s company, Renova, and the worth R26 billion in Limpopo (see details of Chan- ANC’s company, Chancellor House, diplomatic ex- cellor House’s investments). pediency and the party’s funding needs may well, in our view, have trumped the public interest. According to one well-placed official who wants to remain anonymous, Msimang approached representa- This exposé of Chancellor House follows the Mail & tives of the Department of Minerals and Energy (DME) Guardian’s outing in 2005 of “Oilgate” company as early as 2002 seeking opportunities for Chancel-

SA Democracy Incorporated • page 17 Paper 129 • November 2006 lor House, which was only formally constituted the Department of Public Enterprises until about the time following year. By 2004, said the official, Chancellor Chancellor House was founded, and Irene Charnley, House “kept trying to get deals [from the DME]. It the unionist turned MTN director. Both Charnley and said the money was for the ANC”.115 The official had Gounden have since resigned as directors.122 little doubt: “You can speak to any senior ANC leader. There is no question, Chancellor is regarded as an The managing director is Mamatho Netsianda, the ANC company…It is officially supposed to be an en- former deputy secretary of defence. Netsianda’s rela- tity for ANC funding.”116 tionship with Msimang, the ANC treasurer-general, goes back to at least the late 1980s, when he served On paper, the beneficial ownership of Chancellor in the ANC London office under Msimang, who was House Holdings is deliberately vague. A “charitable then the ANC’s chief representative to the UK and trust”, the Chancellor House Trust, is the sole share- Ireland.123 Other directors are Edith Kuzwayo, formerly holder of Chancellor House Holdings, according to a legal adviser in the defence secretariat, and Tebogo the company’s share register.117 Subsidiaries Chancel- Makgatho, who chairs the NGO information network lor House Mineral Resources Investments, Chancel- SANGOnet and serves on the Black Information Tech- lor House Marine Investments and Chancellor House nology Forum.124 Energy Resources Investments are all 100% owned by Chancellor House Holdings,118 which means that The Chancellor House Holdings board is chaired by the group is fully owned for “char- Professor Taole Mokoena, a sur- ity”. geon who read for a doctorate in immunology at Oxford. Mokoena The Chancellor House Trust deed, In practice, was appointed in 2001 to chair the lodged with the Master of the High the proceeds Medical Research Council by Court, specifies no beneficiaries. But health minister Manto Tshabalala- the deed does give a whiff of politi- of the Chancellor Msimang.125 Mokoena is said to cal purpose, saying that the “princi- House Trust are have tainted his ANC credentials in pal object” of the trust: the 1970s when his personal am- intended for the bition superseded the demands of shall be to promote, encourage ANC treasury. the struggle, but to have made and facilitate the participation peace with alienated comrades in and involvement in all economic the 1990s. He is said to be close to and political sectors of South Af- Tshabalala-Msimang, who is mar- rican persons and entities which ried to the ANC treasurer-general.126 have been historically disadvantaged.119 Mokoena’s proximity to Msimang himself is apparent In theory, the trustees have the discretion to “donate” from an intriguing item recorded by the Bahrain News the money to whomever they choose within the broad Agency on 20 March 2005. On that day, it said, Sheikh confines of this principal object. Our investigations Hamdan bin Rashid Al Maktoum, the Dubai deputy show that in practice, however, the proceeds are in- ruler and minister of finance and industry, had “re- tended for the ANC treasury. The trustees, according viewed with Mendi Msimang and Taole Mokoena, to the trust deed, are Popo Molefe, the ANC NEC advisers to President Thabo Mbeki of South Africa, member and former premier of the North West Prov- means of enhancing bilateral commercial, tourism ince, and Salukazi Dakile-Hlongwane, the chief ex- and cultural ties.”127 ecutive of Nozala Investments, a leading BEE com- pany.120 Detailed questionnaires about the Chancellor House group and trust, as well as their role in ANC funding, Perhaps appropriate to the historical reference of the were sent in August 2006 to trustees Molefe and name “Chancellor House”, the founder of the trust is Dakile-Hlongwane, to Chancellor House chair Professor Bernard Magubane, the ANC historian-ac- Mokoena and managing director Netsianda and to tivist.121 Magubane has headed the Road to Democ- ANC treasurer-general Msimang. They were not an- racy in South Africa project – an official history of the swered.128 struggle – as well as government’s classification and declassification review committee, appointed to de- Approached for comment, Chancellor House Trust cide the status of sensitive historical documents. founder Magubane said: “Your assumption that it’s a front for the ANC is a bit far-fetched.” 129 He then put Chancellor House Holdings’ directors are of similar the phone down. pedigree. The founding directors in 2003 included Henry Makgothi, the treason trialist and former Na- During the course of this research, accounts of three tional Council of Provinces ANC chief whip, Sivi business people who have close knowledge of the Gounden, who had served as director-general in the Chancellor House group have been obtained. From

SA Democracy Incorporated • page 18 Paper 129 • November 2006 these accounts it is clear that they regard Chancellor ceptionist said: “Chancellor House has had some deal- House as a source of funding for the ANC. Details of ing with us; that is why people get confused as to the accounts are not provided here as it may com- whether they have their offices [here].”136 promise the informants who provided them.130 Chancellor House’s investments Apart from these three, others have also spoken about their knowledge, direct or indirect, of Chancellor’s Perhaps the biggest investment notched up by Chan- ANC connection. One business person who entered cellor House is the Kalahari manganese deal in part- a deal with Chancellor said: “We did know that Chan- nership with, among others, Russian oligarch Viktor cellor House was linked to the ANC…We don’t see it Vekselberg’s Renova. Detailed below are some of its as a concern because we are satisfied as to their cred- other investments. ibility.”131 Another, who was involved in a deal one step removed from one of the transactions described Energy on these pages, said: “I think it is common cause that Chancellor is the ANC’s – that it owns it. I have heard Chancellor House is a 25% shareholder in Hitachi that Mendi [Msimang] chairs it.”132 Msimang does not Power Africa, the local subsidiary of Babcock-Hitachi chair Chancellor House, but this comment is consist- Europe.137 Hitachi Power Africa was formed in 2005 ent with information that the group answers to in response to Eskom’s programme to install new gen- Msimang. eration capacity, which will rely heavily on the construction of new Two persons who should have inti- coal-fired power stations. Hitachi mate knowledge of Chancellor Did Renova Power Africa is 30% black-owned, House claimed to be unaware of its have to meet with with 25% reportedly belonging to ANC funding role. Gounden, one of Chancellor House Holdings.138 the founding directors, stated: “Dur- the ruling party in a ing my tenure as director at CH, the process that was Hitachi Power Africa has tendered shareholder of CH was the CH Trust, government run? for Eskom’s flagship project under and the objectives of the trust were the new electricity plan – a R26 bil- to promote the development of black lion contract to construct a 2,250- women and youth, in particular. I was megawatt coal-fired power station unaware and remain same, of any at a site near Lephalale in link to the funding of the ruling party.”133 It is not clear Limpopo.139 According to Fani Zulu, the Eskom why Gounden maintains that “black women and spokesperson, as of 23 October 2006 the tender had youth, in particular” are the intended beneficiaries, still not been awarded although industry expectations as the trust deed makes no mention of this. had been that it would be awarded by the end of Sep- tember. “These long-term supply agreement negotia- Robinson Ramaite, the former public service direc- tions seem to take a lot longer than expected,” said tor-general, is involved in the Kalahari manganese Zulu. “We’ve learnt not to put a timeframe on them.”140 deal alongside Chancellor House. “I don’t know about any links to the ANC,” he said. “I have not met with While Hitachi Power Africa waits for news about the Uncle Mendi in any of my relations with [the manga- Eskom tender, it has been working on a R400 million nese consortium]. I know him only as the [treasurer- deal to supply a medium-sized steam generator for general] of the ANC.”134 an independent power producer in Vanderbijlpark, Gauteng.141 Robin Duff, Hitachi Power Africa’s man- Again, it is not clear why Ramaite should deny all aging director, preferred not to comment on the links knowledge of ANC links. Others in whose interests it between Chancellor House and the ANC.142 may have been to deny all, gave at least a glimpse. Dilmar Abdoulaev, locally a director of Russian- Mining headquartered Renova, which partners Chancellor House in the Kalahari manganese deal, confirmed that The chair of Chancellor House Holdings, Taole his company had met at least once each with Msimang Mokoena, is also the deputy chair of newly listed gold and Kgalema Motlanthe, the ANC secretary-general. mining company Wits Gold. Mokoena represents Wits “We met to discuss how to align Renova’s social pro- Gold’s largest BEE shareholder, the Continental Af- grammes with the ANC’s,” he said.135 There seems to rica Gold Resources Consortium. When Wits Gold be no obvious reason why Renova would have had listed in April 2006, Continental held about 23%, ac- to meet with the ruling party in a process that was cording to Wits Gold’s listing prospectus.143 supposed to have been government led. Chancellor House appears to be one of the partners And in a call to Msimang’s office at ANC headquar- in the Continental consortium, although the size of ters asking for the Chancellor House offices, the re- its stake could not be established. Wits Gold chief

SA Democracy Incorporated • page 19 Paper 129 • November 2006 financial officer Derek Urquhart confirmed: “I under- Afgem company secretary Robert Summers confirmed stand that Chancellor House is part of Continental that Chancellor House was originally to have taken a but I have no details about [what their share is]. Con- direct empowerment stake in Afgem, but said that he tinental has a direct share in Wits.”144 had subsequently heard that Chancellor House would hold its stake through Simeka, which he said held Wits Gold appears designed to exploit the empower- 11.8% of Afgem. He was not sure whether that had ment demands of the new Mineral and Petroleum happened.150 Ramaite is also involved, alongside Resources Development Act and its associated em- Chancellor House, in the Kalahari manganese deal. powerment charter, which require BEE targets to be met as old order mineral rights are converted to new. Engineering In May 2004 Bateman, the global engineering and Wits Gold acquired mineral assets from AngloGold project management company headed by former pub- Ashanti, Gold Fields and the ARMGold-Harmony lic enterprises director-general Sivi Gounden, an- Freegold Joint Venture Company – established com- nounced the establishment of an empowered local panies that may have struggled to meet the required subsidiary, Bateman Africa. The new company’s an- BEE targets. As a 40% empowered company, Wits ticipated annual turnover was R1 billion.151 Bateman Gold then applied for new order rights on these prop- said the new entity was 51% owned by BEE groups – erties from the Department of Minerals and Energy.145 including Chancellor House Holdings, which it said held 10%.152 At the time, Gounden The established companies have the was not only Bateman’s chief execu- option of taking back a 40% share tive and a director of the new sub- once Wits Gold takes the proper- Wits Gold sidiary, but also a director of Chan- ties to bankable feasibility stage. cellor House Holdings.153 This suggests that Wits Gold in part appears designed provided an “outsourced BEE” so- to exploit Bateman declared the new company lution to the established mining the empowerment had been created to “embrace the companies. By the time it listed, principles of South Africa’s new min- Wits Gold had already been granted demands ing charter and to work with the lo- new order gold prospecting rights of the new Mineral cal industry in the development of to six of the nine areas it had ap- mineral resources”.154 Bateman is a plied for, covering an area of almost and Petroleum major supplier of equipment and 80,000 hectares in the Witwaters- Resources services to the mining industry. rand Basin.146 Bateman is also active in the power Development Act generation sector, which is heavily The company has stated that its re- and its associated regulated by government. Parastatal serves were thought for the time empowerment tenders are the sector’s lifeblood. being largely uneconomic to ex- ploit, but it has estimated them to charter. In late 2005 Bateman entered a be the world’s fifth largest, repre- memorandum of understanding with senting a highly leveraged option Renova, the Russian-based company available on future moves in the involved in the Kalahari manganese gold price and exchange rates.147 The market ap- deal, to provide for “long-term cooperation between proved, valuing Wits Gold at R1.8 billion by August the two companies to promote and develop Renova’s 2006. projects in the South African mining and metallurgi- cal industry”.155 The chair of Wits Gold is Adam Fleming, the brother of Roddie Fleming, a key player in the Kalahari man- Asked whether it was not problematic for Bateman ganese deal. Adam Fleming previously chaired Har- Africa, as a company partly dependant on govern- mony Gold, a position from which he resigned in ment opportunities, to be co-owned by an entity in- 2003. tended to fund the ruling party, Gounden said:

Chancellor House is also alleged to be a shareholder I was unaware and remain same, of any link to in listed diamond company Afgem.148 Afgem is best the funding of the ruling party…For the record, known for its earlier ownership of the world’s biggest Bateman Africa is a Process Engineering com- tanzanite mine, in Tanzania. In 2004 it sold the pany that supplies process engineering and tanzanite rights. In 2005 it bought three diamond construction related services to the mining in- mines in South Africa and simultaneously entered a dustry in South Africa. BEE deal with the Simeka Mining Consortium led by Our clientele are therefore the mining Robinson Ramaite, the former public service direc- companies in South Africa, and not government tor-general.149 departments or state entities.156

SA Democracy Incorporated • page 20 Paper 129 • November 2006 Bateman, however, is on record as stating that it seeks revenue service and the departments of minerals and power utility contracts in South Africa, from both the energy, trade and industry, and justice.168 private and public sectors. A media release in 2005 said Bateman Africa “focuses on the provision of in- A Tsohle representative said in reply to questions: “We novative solutions to the natural-resources, power- have no knowledge of the alleged purpose of Chan- generation, infrastructure and industrial sectors”.157 cellor House. However, at no time that Chancellor The main Bateman website states that Bateman “op- House was a shareholder was TTH [Tsohle Technol- erates primarily in the South African power and en- ogy Holdings] ever awarded a tender in respect of ergy sector…both the traditional power-generating any Government contract. TTH has only been ap- and the independent power producers.”158 pointed as a subcontractor by successful tenderers who were awarded the prime contract.”169 Another Bateman subsidiary, Bateman Howden, won a contract in 2005 worth an initial R34 million, to The representative did not deal with Tsohle’s active supply equipment to an Eskom power station.159 pursuit of the SARS contract through Tatis Africa.

Information technology Logistics Until August 2006, Chancellor House co-owned In July 2003 shipping group Grindrod formed an em- Tsohle Technology Holding.160 powered subsidiary, Grindrod J&J Logistics. Grindrod’s announcement of the deal described Tsohle Technology Holdings, in its new empowerment partner turn, has two subsidiaries that have merely as “a consortium led by the pursued significant government “As a South African J&J Group”.170 The J&J Group is contracts. The one is Tatis Africa, a chaired by Jay Naidoo, who was joint venture with Swiss-based Tatis, company we communications minister in former which supplies software solutions were just hoping President Nelson Mandela’s cabinet. for customs and other law enforce- this provides ment authorities.161 Chancellor Grindrod chief executive Ivan Clark House Holdings’ chair, Taole a better South Africa, has confirmed that the consortium Mokoena, is among the founding whether included Chancellor House, holding directors of Tatis Africa.162 5% of Grindrod J&J Logistics. Clark political said, “we were not told” that Chan- Tatis Africa is part of a consortium or broad-based.” cellor House was owned by an ANC that has tendered for the South Af- funding trust, but that “we did not rican Revenue Service (SARS) tax inquire heavily”.171 Asked if it would and customs modernisation project, not concern him, he said: “At the end worth in the region of R500 million, of the day, as a South African com- according to a source close to the company.163 pany, we were just hoping this provides a better South Africa, whether political or broad-based.”172 Charles Upchurch, chief executive of Tatis in Swit- zerland, commented: Grindrod J&J Logistics provides services including warehousing, bonded warehousing, container facili- In our due diligence to choose Tsohle as our joint ties and transport.173 Bonded warehouses are private venture partner we were aware that a principal but government-licensed customs warehousing facili- investor in Tsohle is Chancellor House. We are ties. not aware of any political connections of Tsohle or of Chancellor House, nor does Tatis In November 2003 Grindrod announced a second Africa…need these political connections. Our BEE deal involving the J&J Group and Chancellor software and our tenders for software are adjudi- House, among others. In this case, the BEE consor- cated on technical and cost considerations only.164 tium would have acquired a 10% stake in Grindrod at holding company level. The deal collapsed, appar- The second subsidiary is Tsohle Business Solutions.165 ently because a rise in Grindrod’s share price made it Its directors have included Chancellor House direc- unaffordable.174 tors Tebogo Makgatho and Henry Makgothi.166 It is heavily dependant on government work, its website Manganese prospecting rights: Chancellor stating: “One of Tsohle’s main focus areas is the pub- House’s biggest investment lic sector.”167 “Renova masters Africa”, a Moscow headline shouted In a separate web posting, it boasted about govern- in November 2004.175 It was journalistic hyperbole ment contracts ranging from the Presidency to the perhaps, but the progress of Viktor Vekselberg, the police, the State Information Technology Agency, the oligarch behind the Russian investment group, has

SA Democracy Incorporated • page 21 Paper 129 • November 2006 been remarkable. When Vekselberg visited South Af- increased by 6,8% in 2004 as a result of higher sales rica in February 2004, he got to meet the president driven by strong demand.180 among others. Eighteen months later he co-owned rights to strategic manganese reserves in the Kalahari. During the second half of the 1990s, the government started laying the groundwork for mineral reform This is the story of how government, through the De- through, among others, the 1998 Minerals and Min- partment of Minerals and Energy (DME), awarded ing Policy White Paper.181 In the ensuing years it prospecting rights to a consortium set to benefit both brought pressure to open the Kalahari reserves to new Vekselberg, a man accused of gross lapses in corpo- entrants.182 In February 2003 Manne Dipico, then pre- rate ethics, and the ANC treasury. The story is impor- mier of the Northern Cape, said in his state of the tant because it might suggest that the government was province speech: “We are also working on a strategy swayed by a mix of diplomatic expediency – it was to unlock iron ore and manganese reserves, and I trust keen to improve economic relations with Russia in that this will lead to meaningful black economic em- tandem with growing ties of friendship – and by the powerment in our province”.183 It was this impetus to ruling party’s funding needs. open up, combined with the “use it or lose it” and empowerment provisions of the Mineral and Petro- Vekselberg is ranked as Russia’s third-richest man by leum Resources Development Act of 2002, which Forbes magazine, which estimates his personal wealth would provide Vekselberg and his local partners with at $10 billion.176 But just how he ac- their gap.184 Around the time that quired this fortune is contentious. Dipico made his speech, Vekselberg He and other defendants are ac- was laying the groundwork to ex- cused of racketeering and asset theft Government pand his by then already extensive in multi-billion-dollar lawsuits in the awarded mining and metals business out of United States and Russia (see page Russia. 30). prospecting rights to a consortium At a January 2003 press conference The ANC’s financial interest in the set to benefit a in Moscow, Roddie Fleming, heir to manganese deal is held through the Scottish Fleming banking dy- Chancellor House, which, this re- man accused of nasty, announced that he was go- search shows, is a corporate front gross lapses in ing into a joint venture with the Si- for the ruling party. Named after the berian-Urals Aluminium Company downtown Johannesburg building corporate ethics, (SUAL), Russia’s second largest that housed Nelson Mandela and and the ANC bauxite and aluminium company.185 Oliver Tambo’s law practice in the treasury. SUAL is majority owned by 1950s, Chancellor House has accu- Vekselberg’s multi-billion dollar in- mulated investments in minerals, vestment and management group, energy, engineering, logistics and in- Renova.186 The plan at the time was formation technology. to create a diversified SUAL Inter- national, to which Fleming and some co-investors The manganese assets, the subject of this case study, would have brought, inter alia, Mozambican tanta- are located in the Kalahari Manganese Field in the lum rights and a ferronickel mine in Cuba. SUAL In- Northern Cape. About 80% of the world’s known, ternational, more attractive to investors because of commercially exploitable reserves are found in this its geographical and asset spread, was to have been area. Vast as these reserves are, they remain largely listed on international markets the following year.187 untapped: South Africa accounts for less than one fifth of world production.177 If the pull of international capital was one reason for Vekselberg to get out of Russia, arguably another was Two companies, Samancor Manganese and Assmang, the Kremlin’s attempts to cut the oligarchs down to have dominated extraction from the Kalahari Manga- size.188 These men faced claims of billions of dollars nese Field and have been accused of hogging its un- in unpaid taxes on the spectacular wealth they had tapped wealth. Along with Brazil’s CVRD and France’s amassed since the collapse of the Soviet Union, of- Eramet, they dominate the world trade too – cartel- ten through forced acquisitions and hostile takeovers like if one believes the critics.178 associated with the county’s flawed privatisation pro- gramme. Manganese is a strategic resource, essential in manu- facturing steel. A new player with significant access On 25 October 2003 Mikhail Khodorkovsky, the CEO to the Kalahari’s reserves is in a strategic position, be- of the oil group Yukos and one of the world’s richest cause of the sheer volume of manganese waiting to men, was arrested by masked gunmen. He was sen- be mined, to make a major impact on the world mar- tenced to nine years in prison for fraud and tax eva- ket.179 South African manganese ore production and sion and ordered to pay $613 million in back taxes exports rose by 22,3% in 2004, and local sales value and fines. Khodorkovsky’s fate shattered the oligarchs’

SA Democracy Incorporated • page 22 Paper 129 • November 2006 political immunity and came as extra motivation for On 1 May 2004 the Mineral and Petroleum Resources them to externalize their asset base.189 Development Act of 2002 finally came into force. As of then the state owned all mineral rights. Existing It may be no accident that Vekselberg looked to South rights-holders would have to convert their “old or- Africa. His new partner, Fleming, already had a foot der” rights over time to “new order” rights, progres- in the door through his brother Adam, who had moved sive empowerment targets would have to be met and to South Africa in 1991 to represent family interests. rights not used would be lost.196 No more hogging of Adam Fleming was well ensconced in local mining, reserves by the likes of the Samancor and Assmang having served as the chair of Harmony Gold between old boys’ club. 1999 and 2003.190 That same month Fleming and Mark Buzuk, an asso- Perhaps more importantly, the Flemings also had a ciate of Vekselberg, were in South Africa. If they were long-standing relationship with the ANC treasurer- going to go for manganese rights in the Kalahari, they general, Mendi Msimang, whom they knew from his would need BEE partners – and where better to get exile days in London, according to confidential source “guidance” than from the same department that would “X”, who is acquainted with some of the players in adjudicate the applications? this saga.191 According to confidential source X, DME director- A later foot in the door for general Nogxina and senior official Vekselberg was to be Brian Debbie Ntombela arranged a Gilbertson, the South African who From 2002 “beauty parade” to introduce a had led the 2001 merger that dozen or more prospective BEE part- formed the world’s premier re- the state owned ners to Fleming and Buzuk. The de- sources company, BHP Billiton. all mineral rights partment showed no preference for Vekselberg hired him in August any particular company from among 2004 to head SUAL, briefing him to and existing these, the source said.197 “successfully develop [it] into a rights-holders leading international company”.192 had to convert Nogxina has confirmed the intro- Because BHP Billiton was the ma- ductions. He too maintained that jority shareholder in Samancor their “old order” there was no favouritism and said Manganese, Gilbertson must have rights to that the DME’s involvement went no known only too well the opportu- further – “the DME does not partici- nities hidden beneath the Kalahari “new order” rights. pate in the selection of the parties soil.193 with whom a deal may or may not be struck”.198 But it was Roddie Fleming who set the ball rolling in February 2004. When Vekselberg Nogxina held that there was “nothing untoward nor visited South Africa that month, Fleming is understood conflicting” about such introductions. They were jus- to have taken him to meet Mbeki. Fleming also facili- tified in terms of the Act’s provision that “the minister tated meetings with the then minerals and energy min- may facilitate assistance to any historically disadvan- ister, Phumzile Mlambo-Ngcuka “and the ANC”.194 taged person”.199

Mlambo-Ngcuka and DME director-general Sandile Much rode on Buzuk and Fleming’s selection of BEE Nogxina confirmed in response to questions that they partners. The DME insisted that only BEE companies had met Vekselberg in the context of: could apply for the manganese prospecting rights. Vekselberg’s Renova would have to enter the deal as the promotion of increased investment in the “financial and technical partner”.200 minerals and energy sectors…At this meeting, Mr Vekselberg expressed his interest with re- At the time, a so-called “clarification document” is- gard to investing in the South African resource sued by the DME was in force, supposedly to cover sector and therefore wanted to know the avail- areas not dealt with by the new Act and its related able opportunities and the procedures that pro- empowerment charter.201 The document specified that spective investors had to follow… Manganese in cases where the mineral rights were historically rights applications, however, were not men- state-owned – which included the Kalahari Manga- tioned specifically as Mr Vekselberg showed nese Field – “the state in its capacity as owner will interest in a wide range of commodities.195 require Black Economic Empowerment participation of not less than 51%”. Interpreting this to the maxi- Whatever other commodities they may have been in- mum, the DME specified that applicants for the Kala- terested in, Vekselberg and Fleming wasted no time hari manganese prospecting rights had to be 100% pursuing manganese. empowered.202

SA Democracy Incorporated • page 23 Paper 129 • November 2006 Although it went way beyond the empowerment char- [the] South African mining industry…The Renova ter’s specification of 15% in five years and 26% in 10 shareholders after having made sure that this policy years, the DME justified the requirement on the basis fully meets the basic business principles of the Renova that where the state was the unencumbered owner, it group of companies, made a strategic decision to fol- could set the empowerment bar as high as it chose.203 low all the initiatives of the South African government DME decided on 100% because it felt “this house is in this industry.”211 Renova, in other words, had grap- mine; it belongs to me,” said Jacinto Rocha, DME’s pled with the demands of an enforced BEE partner- deputy director-general of mineral regulation.204 The ship, and decided to embrace it. But the question was: “clarification” was abandoned in 2005.205 who to embrace? Buzuk and Fleming’s request for the DME to provide “guidance” on BEE partners was The Act requires the minerals and energy minister to the first step. adjudicate any prospecting application on a first- come-first-served basis, with a key criterion being Confidential source “Y”, who was close to the un- whether the applicant “has access to financial re- folding events, remembers three specific BEE com- sources and has the technical ability to conduct the panies included in the DME’s “beauty parade”: the proposed prospecting operation optimally…”.206 ANC’s Chancellor House, Dirleton Minerals and En- ergy, whose principals included ANC stalwart The financial and technical capacity would tend to Zwelakhe Sisulu, and Kalahari Resources, a company be that of the established miner, not that, as will be seen, seems to have of its BEE partners. But the DME’s enjoyed a close relationship with policy to award the prospecting ANC secretary-general Kgalema rights to the BEE component meant Established Motlanthe.212 two things: BEE companies were in companies a stronger negotiating position vis- Nogxina confirmed that Chancellor, à-vis their established partners.207 were arguably Dirleton and Kalahari had been And established companies were motivated to seek among the BEE companies intro- arguably motivated to seek BEE part- BEE partners duced.213 It was these three compa- ners “acceptable” to the authorities, nies with whom Fleming and the since their success depended so “acceptable” to the Russians pursued negotiations to heavily on the BEE partners’ success. authorities. form a consortium.

Nogxina disputed this, saying “your Following the beauty parade, Buzuk argument of acceptable BEE does wrote to Sisulu’s Dirleton. He said not hold water. Renova did not have to comply with Renova regarded Dirleton as “one of the most per- BEE requirements, because it never applied for any spective [sic] partners among a number of BEE groups rights.”208 According to his version, Renova did not with whom we are carrying [on] negotiations con- enter the equation as the BEE applicants were free to cerning the project, and we would be very glad to choose their technical/financial partners once they continue our co-operation in case all necessary per- were awarded prospecting rights. mits, licenses and approvals as required for the project are granted by the government of South Africa.”214 This is contradicted not only by the Act’s requirement that the DME take financial and technical ability into Buzuk pledged Renova’s “technical, expert and finan- account, but also by a 2005 article in the Russia Jour- cial support”, backing Dirleton’s application for man- nal, quoting Nogxina as saying during the adjudica- ganese rights. tion process that he had dispatched three DME ex- perts to Russia “to assure themselves that Renova has At the time, Chancellor was also a firm favourite to the technical capacity”.209 be included in the consortium, said confidential source X. According to this source, Fleming brought In July 2004 Renova registered a subsidiary in South it to the deal as Msimang, the ANC treasurer-general, Africa, Renova Investments, whose “primary goal”, had “recommended” it and because Fleming’s brother, according to a contemporaneous press release, was Adam, was close to Professor Taole Mokoena, the “selecting prospective investment projects in the Re- chair of Chancellor House Holdings.215 public of South Africa mining and metallurgy indus- tries”.210 In October that year Renova drafted an agreement for signature between it and three prospective BEE The Renova release said that the group’s experts had partners, who were confirmed in separate correspond- been assessing projects in South Africa for six months ence to be Dirleton, Kalahari and Chancellor.216 The already – in other words since February, when draft envisaged a joint venture with a share break- Vekselberg visited – and that they had “closely stud- down of 49% Renova and 51% the BEE partners. ied the practical implementation of principles of the Renova, it said, would bear the initial funding and broad-based socio-economic empowerment policy in technical responsibilities.

SA Democracy Incorporated • page 24 Paper 129 • November 2006 Renova’s draft also outlined the scope of the project: include Kalahari but not Chancellor.223 If this is true, a $300-400 million investment resulting in a project why would Motlanthe have argued against the inter- worth $1 billion, incorporating not only prospecting ests of an ANC business vehicle answerable to his and mining, but also beneficiation. The latter would colleague, Msimang? The composition of Kalahari pro- have been music to the ears of government as it meant vides a clue. adding local value and job creation. Smelting facili- ties to produce manganese alloys were to be built in Daphne Mashile-Nkosi, the chair of Kalahari, refused the Kalahari or at the Coega Industrial Development access to the company’s share register, by law a pub- Zone, according to the draft. lic document.224 But what appears to be an early in- formation sheet on its shareholder composition, pre- While the stated intention to beneficiate locally may pared by Kalahari, reveals a picture of proximity to well have helped win prospecting rights from the both Motlanthe and the ANC.225 Motlanthe declined DME, there have been questions about whether to answer detailed questions, including whether he Renova had really intended to go through with this.217 had intervened on behalf of Kalahari and whether this In late 2004/early 2005 Vekselberg and fellow oli- was because of his relationship with some of its share- garch Alexander Abramov tried to buy the Nikopol holders.226 smelter in Ukraine from Victor Pinchuk, the son-in- law of the president whose chosen successor had just The shareholders listed on the information sheet in- lost power in the Orange Revolution clude Mashile-Nkosi, her husband, (see the background to the Russian Stan Nkosi, and Siyanda Mining partners on page 29). There have been Corporation, a sister company of Imvume Management, the ANC- It is not clear why Vekselberg would questions about linked company involved in the have needed smelters in both coun- whether Renova Oilgate scandal.227 Stan Nkosi and tries. Nikopol reportedly has more Motlanthe were close comrades than twice the capacity that Renova really intended during the struggle – they formed an said it wanted to install in South Af- to go through ANC cell in Soweto, were arrested rica.218 In the end, Vekselberg and in 1976 and were tried and sen- Abramov’s bid for the smelter in with beneficiating tenced together on terrorism Ukraine got bogged down in brib- locally. charges.228 Siyanda and Imvume are ery allegations and political ma- both led by Sandi Majali. News re- noeuvring (see below). ports in 2004 and 2005 exposed de- tails of Motlanthe and Majali’s close Renova failed to answer detailed questions sent dur- relationship. They travelled to Iraq together when ing the course of this research. Majali sought oil allocations there, and company pro- files described Majali as Motlanthe’s “economic ad- On 6 September 2006, during Russian President viser”.229 Vladimir Putin’s state visit to South Africa and in a blaze of publicity, Vekselberg signed memoranda of Amid the jockeying between Chancellor and Kala- understanding with the Coega Development Corpo- hari, relations between Renova and Dirleton also de- ration (CDC) and Eskom regarding the proposed clined. Renova had wanted to guarantee itself 49% smelter.219 This, however, brought scant certainty. A of the joint venture with 51% shared by the BEE part- CDC statement at the time said Renova was still con- ners, as envisaged in the October draft agreement. ducting a “feasibility study”.220 Vekselberg was quoted Dirleton, however, held out against fixing a percent- by Business Day as saying a “pre-feasibility study” age. was being completed for the smelter.221 “We believe such a commitment and such a discus- The October 2004 draft agreement between Renova, sion would be premature until the manganese permit Dirleton, Chancellor and Kalahari was never signed. is awarded, and we can then assess what each party The year was drawing to a close and still SUAL Inter- brings to the table,” Dirleton wrote to Renova. “All national remained unlisted, contrary to the plan when we seek to do is to extract value for empowerment, Fleming had joined forces with Vekselberg in January which is the objective of government’s policies.”230 2003. The relationship between Vekselberg and Fleming soured. As it was Fleming who had brought As the DME was to award the prospecting rights to Chancellor to the table, Renova’s relationship with the BEE partners, Dirleton seems to have been confi- Chancellor deteriorated too.222 dent it could negotiate maximum advantage for it- self. But Dirleton appears to have overplayed its hand And from ANC headquarters, it seems, the messages – and Renova had an ace up its sleeve. were mixed. According to confidential source X, Kgalema Motlanthe, the ANC secretary-general, pre- Although the formal adjudication process was still sided over a meeting aiming to influence Renova to pending at DME, Renova appears to have obtained

SA Democracy Incorporated • page 25 Paper 129 • November 2006 parallel political assurances. In Russia, Buzuk was That same day, 24 November, the DME registered a quoted as saying that sometime during the summer manganese prospecting application by Pitsa ya (South African winter) of 2004 a “closed presenta- Setshaba Holdings, a company less than a month tion” had been made to Mbeki and his government.231 old.241 Dirleton, Chancellor, Kalahari and other BEE The Presidency failed to answer detailed questions hopefuls had lodged their applications months ear- submitted in preparation for this article.232 lier.242 Pitsa ya Setshaba was soon to emerge as Renova’s choice to replace Dirleton in the consor- In September Lulu Xingwana, then deputy minister tium. Its founding director was one Lazarus Mbethe, of minerals and energy, visited Moscow, where she formerly with Ditswammung, another BEE group vy- reportedly met with Renova officials and publicly en- ing for the manganese rights. Incidentally, dorsed their plans.233 Nogxina confirmed Xingwana’s Ditswammung had been represented in its applica- visit, but denied she had “endorsed any particular tion to the DME by Pulane Kingston, daughter of company”.234 Msimang.243

In November, the deal was sanctioned (or in the DME’s Mbethe was soon joined on Pitsa’s board by, among view “welcomed”) at a political forum still well re- others, Robinson Ramaite, the former Public Service moved from the DME and its pending formal adjudi- and Administration director-general, and Jackie cation. The occasion was the fourth session, held in Sedibe, the widow of late defence minister Joe Pretoria, of the bilateral commission Modise.244 between South Africa and Russia, called the Inter-governmental Com- Pitsa’s ownership structure is mittee on Trade and Economic Co- Pitsa’s opaque. Repeated attempts to dis- operation (ITEC). It was presided ownership structure cover the company’s full over by foreign affairs minister shareholding have been thwarted, Nkosazana Dlamini Zuma and the is opaque which means that widespread ru- Russian natural resources minister, and repeated mours that influential individuals Yuri Trutnev.235 A business delega- were “cut in” could not be dis- tion accompanying Trutnev report- attempts to pelled.245 edly included Buzuk and Renova discover its full Moscow office head Alexander shareholding were On 7 December Dilmar Abdoulaev, Zatulin. Vekselberg also visited locally a Renova director, wrote to South Africa around that time.236 thwarted. Dirleton formally terminating their relationship on the grounds that The minutes of the ITEC session Dirleton would not guarantee it a stated that the “parties welcomed percentage shareholding in ad- and supported the intention of the Russian group of vance.246 He sent a separate notification of this to the companies [Renova] to develop the project of pros- DME official responsible in the Northern Cape, where pecting, mining and processing of manganese ores the applications were formally handled, and copied in the Kalahari manganese basin”.237 both missives to the DME’s Ntombela and the direc- tor-general, Nogxina.247 According to Renova’s website, “Russian and South African officials approved the project” at ITEC.238 Dirleton had overplayed its hand and was out. In spite Nogxina, who participated in the ITEC session, de- of Motlanthe’s alleged intervention, and for reasons not clear, Kalahari had also fallen by the wayside. nied this was accurate, saying: Chancellor’s position was ambivalent, tainted as it was by the fallout between Vekselberg and Fleming. For a The welcoming of a project does not necessar- while it explored an alternative without Renova; on ily translate into approval thereof…We wel- 10 December it signed a memorandum of understand- comed the intent expressed by Renova that they ing with Dirleton and another prospecting hopeful, were prepared to do an empowerment deal the Northern Cape Manganese Company, to pool involving beneficiation, prospecting and explo- whatever prospecting rights they could get from the 239 ration in the South African resource sector. DME.

Whatever the correct interpretation of what had tran- The memorandum made no mention of Renova, say- spired at ITEC, Renova was confident. Five days later ing: “Upon being granted the manganese permit, the it wrote to Dirleton, giving notice that it wanted to parties will begin a process of interviewing prospec- terminate their relationship because the latter would tive strategic partners.”248 The ink was barely dry on not agree to Renova’s demand for 49% of the joint the memorandum, however, when Chancellor was venture. “We are compelled to clarify the situation back with Renova – according to some versions after and make our own decision as to whom with and tough negotiating by Fleming, who felt that he had how we will act.”240 been key to the facilitation of the entire deal and

SA Democracy Incorporated • page 26 Paper 129 • November 2006 would have neither himself nor Chancellor ex- tax income. The Bahamian ownership could also de- cluded.249 feat transparency, as share registers there are not pub- licly available. According to a confidential source, In late January/early February 2005 Chancellor House however, the Bahamian company’s shareholding had Holdings’s managing director, former deputy defence been split more or less equally between entities be- secretary Mamatho Netsianda, reportedly joined longing to Vekselberg, Fleming and Buzuk. Fleming Pitsa’s Mbethe as Renova’s guest in Moscow. Renova has since exited the Bahamian company and UMK introduced them to Trutnev’s natural resources minis- altogether.258 try.250 At the time that Renova Manganese Investments took On 16 February 2005, Chancellor and Pitsa signed a up its 49%, says the source, Renova injected $10 memorandum of understanding not unlike the one million into UMK, which was then valued at about Chancellor had entered with Dirleton and the North- $20 million.259 Based on this figure, the ANC’s Chan- ern Cape Manganese Company two months earlier, cellor, with its half of the 51% BEE shareholding in envisaging that they would pool all prospecting rights UMK, was the owner of shares instantly worth about they got from the DME. This MoU, however, clearly $5 million (then about R31.5million). This will shoot identified Renova as the technical partner and set sky-high if the project reaches a value, as predicted aside a 49% shareholding for it in the consortium to by Renova, of $1 billion. be formed.251 There appears to be widespread On 30 March Mlambo-Ngcuka, in unhappiness among the other BEE her then capacity as minerals and Pitsa applied players who competed with Chan- energy minister, signed an approval for three of the cellor and Pitsa. They feel that UMK, granting prospecting rights jointly to farm portions the joint venture of these two com- Chancellor and Pitsa.252 This was panies, got more than it deserved.260 consistent with the DME’s policy to two months after award the rights to the BEE compo- any other serious One of the fundamental principles nent, but it appears the DME took of the Mineral and Petroleum Re- no chances: a subsequent partner- contender, sources Development Act is that ship with Renova was a condition yet bagged rights are awarded on a first come written into the prospecting title first served basis.261 But records of deed when it was formally regis- them for the applications and awards show tered by the DME on 17 May.253 UMK. that UMK got eight farm portions, more than anyone else did, even Nogxina denied this was a “condi- though on five of those portions nei- tion”, claiming it was no more than ther Chancellor nor Pitsa had put in “information that was incorporated into the [prospect- the first application.262 ing title deed] which was taken from the memoran- dum of understanding between Pitsa ya Setshaba and Three of the farm portions, Botha, Smartt and Rissik, Chancellor House”.254 This is belied by the text of the were the most heavily contested, which means that deed, which states that there must be compliance with they were probably regarded as most attractive. Pitsa, the shareholding provisions of the MoU and that any the new kid on the block, applied for them two months departure must be authorised by the minister.255 after any other serious contender, yet bagged them for UMK.263 The deed registered rights to eight farm portions, to- talling some 15,200 hectares in the Kuruman district Nogxina commented that the DME was not aware of of the Kalahari, to an entity called United Manga- unhappiness: nese of Kalahari (UMK). This was the name for the joint venture formed by Chancellor and Pitsa and in All groups of applicants were granted different which Renova was to receive a 49% share.256 properties. Pitsa was formed as a result of a split that happened in Ditswammung. Some The partnership was consummated in September shareholders of Pitsa therefore formed part of 2005, when the 49% was transferred. UMK’s share the original application. As part and parcel of register shows that contrary to what was envisaged in solving the problems of disagreements between the MoU and the prospecting title deed, the recipient the two parties we allowed Pitsa to lodge their was not Renova Investments, the South African sub- own application on all the properties in respect sidiary of the Renova Group. The shares were trans- of which Ditswammung had applied.264 ferred to Renova Manganese Investments, a company incorporated in the Bahamas, a corporate tax haven.257 Nogxina’s answer arguably reveals an extraordinary accommodation of Pitsa. When some shareholders, This switch could arguably deprive South Africa of including Mbethe, left Ditswammung to form Pitsa,

SA Democracy Incorporated • page 27 Paper 129 • November 2006 the DME recognised the latter’s belated application In August 2006 Nogxina was in Moscow again for a as dating from when Ditswammung had applied. This, conference on Russo-African relations.271 Nogxina’s at the very least, gave an unfair advantage to new pervasive involvement in the developing relationship stakeholders in Pitsa – Ramaite for example – who underscored the importance of economic relations, had not been part of the earlier applications. And it and specifically minerals and energy, to wider diplo- may well have disadvantaged other applicants who matic ties. now had to compete with two companies where previ- ously there had been one. In any case, it appears that Putin’s visit to South Africa in September 2006 has Kalahari or Dirleton, and not Ditswammung, had lodged been seen by commentators as sealing a relationship the first applications on Botha, Smartt and Rissik.265 built on a shared interest in strategic minerals and South Africa’s need to ally with emerging – or in Rus- If UMK – in other words, Vekselberg’s Renova and sia’s case, re-emerging – powers. Russia’s member- related interests, the ANC’s Chancellor, and the ship of the G8 and the UN Security Council are spe- opaque Pitsa – were unfairly advantaged in the rights cifically attractive to South Africa.272 allocation process, what accounted for it? Vekselberg and his place in geopolitics could have much to do South Africa’s ambition to take up a permanent seat with it. As graphically illustrated by the Khodorkovsky on the United Nations Security Council – declared debacle, the Kremlin has a love-hate relationship with by President Thabo Mbeki as far back as 2004273 – Russia’s oligarchs. They are regarded was dependant on the support of alternately as potentially useful or Russia, one of five permanent mem- as a political threat. There are diver- Vekselberg has bers on the council who have veto gent views about Vekselberg’s sta- power. In October 2006 South Af- tus vis-à-vis the Kremlin. According positioned rica was voted to take up a non-per- to one international Russian expert, himself to assist and manent seat on the council as re- who asked not to be named, gional representative for Africa.274 “Vekselberg is allowed to exist in exploit the rapid Russia, and that means something thaw in relations On the second day of Putin’s visit at least, although not much”.266 he and Mbeki attended a “round between Russia and table” of Russian and South African But whatever his status back home, South Africa. business people. Vekselberg stole Vekselberg has positioned himself the show, signing not only memo- to assist and exploit the rapid thaw randa relating to Renova’s Coega in relations between Russia and smelter promise – which Putin South Africa. This culminated in Vekselberg occupy- openly punted – but also an agreement between the ing pride of place in the business delegation that ac- business chambers of the two countries.275 Vekselberg companied Vladimir Putin on his visit to South Africa heads the foreign relations committee of the Union in early September 2006. of Industrialists and Entrepreneurs, which represents big business in Russia.276 As detailed above, Vekselberg had enjoyed high-level contact in South Africa as early as February 2004, In mid-September 2006, back in Russia, Vekselberg when he was introduced to Thabo Mbeki. What fol- met Putin again. There, according to a Moscow news- lowed was a flurry of “economic diplomacy”, which paper, Putin immediately asked about Africa: “With that year included Xingwana’s visit to Moscow, the the recent goings on, a visit, your contracts; how do reported “winter” briefing to Mbeki, and the endorse- you evaluate the results of our joint work? What has ment of Renova at the fourth ITEC session in Pretoria. to be done now? What other assistance [is needed] from the government?”277 In 2005 Nogxina visited Moscow in late February/ early March.267 In October delegates at another ITEC Vekselberg replied: “South Africa in particular, as a session, according to a Department of Foreign Affairs state and as a field for sensible economic expansion, press release, “confirmed their support and mutual is a very important element of foreign policy, for the interest in the further implementation of [Renova’s] state as well as for business, I hope.”278 manganese project”.268 And in November 2005, Mbeki appointed Vekselberg to his International In- Vekselberg, it seems, had positioned himself to be vestment Council, an honour described by one com- “Mr South Africa” in Russia, and “Mr Russia” in South mentator as “a sign of a maturing relationship between Africa, straddling both business and diplomacy. This the two countries”.269 backdrop could explain why authorities here may have been motivated to regard Renova’s pursuit of In March 2006 Nogxina visited Moscow again as part mineral rights in the Kalahari favourably. of the preparations for the G8 summit held there in July 2006, and which was attended by Mbeki as one But if South Africa’s desire to boost ties with Russia of a handful of non-G8 head-of-state observers.270 helped motivate the decision to grant choice pros-

SA Democracy Incorporated • page 28 Paper 129 • November 2006 pecting rights to UMK, what about Chancellor’s role? His stated intention was to return to his country “one The November 2004 ITEC support for Renova came of its most revered treasures,”281 but the purchase al- at a time when Chancellor’s position in the consor- legedly also protects a portion of Vekselberg’s wealth tium was ambivalent because of Vekselberg and – their legal title is reportedly vested in the “non-profit Fleming’s deteriorating relationship. This suggests that cultural historical fund Time Connexion”, keeping Renova and Pitsa may have succeeded without Chan- them out of the grasp of Russian tax authorities.282 cellor forming part of the consortium. Under Vladimir Putin’s presidency, the state has tried But the impact of the ANC company’s presence should to wrest back some of the proceeds of the oligarchs’ not be discounted. During the South African winter asset grab. of 2004, Chancellor was still well entrenched in the consortium to be formed. At this time Renova needed Vekselberg’s first business was reportedly involved in all the help it could get, in what was clearly a politi- the importation of goods, mainly computers. His in- cal process, to gain a foothold in South Africa. And vestment holding group, Renova, was established in by the time Mlambo-Ngcuka and the DME awarded 1991 and is currently registered in the Bahamas. It is UMK its prospecting rights in 2005, Chancellor was currently worth about $9 billion.283 again firmly part of the consortium, at Fleming’s in- sistence. Through Renova, Vekselberg orchestrated Russia’s first successful hostile takeover, namely If Fleming and Chancellor had not of the Vladimir Tractor Factory in 284 played a significant role in the proc- Renova needed 1994. Later he bought medium- ess leading to the award of the pros- sized aluminium smelters and baux- pecting rights, would Renova have all the help ite mines and in 1996 united them allowed them to share in the spoils it could get into Siberian-Urals Aluminium – as it did in the end? Company (SUAL) Holding, Russia’s to gain second-largest aluminium company. Nogxina and Mlambo-Ngcuka de- a foothold nied in a shared answer that diplo- Vekselberg reportedly made the bulk matic expediency or Chancellor’s in South Africa. of his fortune when he and Mikhail ANC ties had played a role in UMK’s Fridman’s Alfa Group took over success: Tyumen Oil Company (TNK), which merged with BP in 2003 for cash and BP shares worth It is only those requirements that are specifi- about $7 billion each. TNK-BP is now one of Russia’s cally stated in the law that inform the decision largest private oil companies.285 In recent years, to grant, or not, prospecting rights, and diplo- Vekselberg’s methods of wealth accumulation have matic considerations are not [among] such re- been challenged in courtrooms in Russia and the US. quirements…Membership of a particular party is also not a consideration that the law stipu- Nikopol lates as far as taking a decision in this regard is In civil litigation currently before the United States concerned.279 District Court in Massachusetts, Vekselberg and Al- exander Abramov, a member of the board of Evraz Background to the Russian partners Holdings, Russia’s second largest steel maker, have Viktor Vekselberg, the 48-year-old Russian oligarch, been accused of jointly paying a $25million bribe to is not known for his corporate ethics. Described by officials in the Ukrainian government.286 The bribe was Forbes as a “deal junkie”, Vekselberg is ranked the allegedly paid in a bid to reverse Ukrainian govern- third richest Russian and the 44th richest person in ment efforts to renationalise Nikopol, the world’s sec- the world by the magazine. His net worth is about ond-largest ferro-alloy smelter, used primarily for man- $10 billion, accumulated predominantly through met- ganese smelting. als and oil.280 The civil complaint, filed by Nikopol minority share- Vekselberg is one of Russia’s infamous oligarchs – a holders under US racketeering law in March this year, tiny group of entrepreneurs who exploited the disin- alleges287 that in December 2002, soon after billion- tegration of the Soviet system to amass tens of bil- lions of dollars. aire Victor Pinchuk married the daughter of then Ukrainian President Leonid Kuchma, the Ukrainian In 2004 Vekselberg bought the largest private collec- government announced it was prematurely lifting a tion of Fabergé imperial eggs. No price was disclosed moratorium on the privatisation of Nikopol. Three for the private sale, which was clinched before the months later, the government announced the intended eggs were due to be auctioned by the Forbes family, sale of a controlling interest in Nikopol. A consor- but it is rumoured that Vekselberg paid about $100 tium led by Pinchuk won a tender process designed million for them. to favour him.

SA Democracy Incorporated • page 29 Paper 129 • November 2006 During the ensuing years Kuchma’s regime became which they sold on to BP in September 2003 to form infamous for its “official robust criminal culture” and TNK-BP, one of Russia’s largest oil companies. The “the near-total corruption of its official economic BP merger is the source of most of Vekselberg’s life”.288 In 2004 Ukrainian voters took to the streets in wealth.293 support of what has become known as the Orange Revo- lution – so named for the campaign colour of its leader, The Norex court challenge queries whether the TNK opposition candidate Victor Yushchenko. Yushchenko assets that Vekselberg and his associates sold BP were ultimately defeated Kuchma’s successor-designate, Viktor properly theirs to sell. In a first ruling in 2004 a New Yanukovish, and took office in early 2005. York judge rejected United States jurisdiction over the case, but an appeal court overturned that judgment Once elected president of Ukraine, Yushchenko ap- in 2005.294 The appeal court ruling summarises part pointed another leading opposition figure, Julia of Norex’s claim as follows: Timoshenko, as prime minister. She immediately set about reversing “the most obviously influenced and During the 1990s, Norex acquired a 60% in- corrupt privatisations, including Nikopol’s”.289 Pinchuk saw the writing on the wall and tried to sell terest in Yugraneft...Norex alleges that, by the his stake to Vekselberg and Abramov. But Timoshenko end of the decade, defendants had hatched a warned them not to because court rulings were af- scheme to take over Yugraneft by means of vari- firming the government’s position and it would ous Rico [Racketeer Influenced and Corrupt Or- renationalise. ganizations Act] predicate acts of mail and wire fraud, extortion, As a final court verdict loomed, interstate and foreign travel in Abramov reportedly met with Renova did aid of racketeering enterprises, Yushchenko, who then appears to not answer and money laundering.295 have backed him and Vekselberg. detailed questions Renova and Vekselberg have denied Upon information and belief, in submitted in Norex’s claims and are opposing an attempt to block the new gov- preparation for them in the case, which is pending. ernment’s efforts to undo this paper. Nikopol’s privatization, Pinchuk, Renova did not answer detailed Vekselberg, and Abramov con- questions submitted in preparation spired to pay up to $50 million for this paper.296 in bribes to top Ukrainian government officials, with Vekselberg and Abramov paying $25 mil- Volgograd lion and Pinchuk paying another $25 million.290 Vekselberg’s multi-billion dollar aluminium company SUAL is also in the dock in the Russian courts for an When the final court verdict ruled in favour of the alleged $20 million share fraud.297 Shota renationalisation, President Yushchenko promptly Mikhelashvili, the major shareholder (before it was fired Timoshenko as prime minister. allegedly stolen) in the Volgograd Aluminium Plant – one of Russia’s biggest smelters – has brought the case The plaintiffs are claiming multi-million dollar dam- against Vekselberg’s company.298 ages from the defendants for allegedly looting Nikopol. The case is being contested by Abramov and In 2004 a Volgograd court ruled in Mikhelashvili’s Vekselberg, who deny its allegations and have brought favour, invalidating a share emission for the plant, al- a motion to dismiss the claim. legedly manipulated by SUAL shareholders to favour SUAL’s takeover of the smelter.299 Mikhelashvili has Renova did not answer detailed questions submitted warned that this was only the start of a bid to recover 291 in preparation for this paper. a stake in the smelter worth about $20 million.

Norex Norex Petroleum of Canada is demanding about $2 Conclusion and recommendations billion in compensation in a lawsuit filed under US racketeering laws against Vekselberg, Renova and oth- Experience worldwide shows the immense difficulty ers. Norex’s complaint alleges the defendants had of installing an effective system of party funding that used fraud, bribery and a variety of strong-armed tac- is not open to abuse. Nonetheless, there is an esca- tics to appropriate Yugraneft, a Siberian oil company lating international discourse calling for the reform of which it was the majority owner.292 of party financing. This is driven largely by the recog- nition that regulation is necessary in order to sustain Once they had acquired Yugraneft, Vekselberg and democracy. Scholars such as UK labour law profes- his partners allegedly rolled it into Tyumen Oil (TNK), sor Keith Ewing have made a strong case for global

SA Democracy Incorporated • page 30 Paper 129 • November 2006 standards to regulate party financing as a core ele- sponse when challenged on the potential for conflict ment of the quality of democracy.300 of interest is that “there is no law barring us from en- tering business”. There are no shortages of regulations and subsidies concerning political money. International experience This is precisely what makes the space for party fund- includes bans or limits on private contributions, larger ing, political patronage, and influence peddling so state subsidies for political parties or their candidates, large: without legislation it is extremely difficult to control over political expenditure, and transparency expose corrupt transactions, and when they are un- rules for private contributions. covered, or the nexus of influence is clear, it is equally impossible to chastise those responsible because they have not done anything illegal. While regulation goes some way towards disincentivising corrupt activity, loopholes are found South Africa’s world-class anti-corruption jurispru- even in countries that have strict regulations. In Ger- dence is a mockery without legislation to govern party many, Chancellor Kohl was forced to resign as the funding. This legislation should embody the univer- honorary chairman of the Christian Democrat Union sal principle of disclosure and should limit expendi- following revelations of illegal donations to his party. ture and the types of donors, bolster state funding, However, this case also illustrates that regulation at and provide for legal retribution in the case of non- least ensures that there is an improved chance of high- compliance. lighting and rooting out instances of corruption when it does occur, by The necessity for effective party promoting disclosure and the right funding legislation to preserve the to know.301 The necessity integrity of South Africa’s democracy for effective party cannot be overstated. However, the What possibly makes South Africa funding legislation difficulty in drafting such legislation unique, and which has opened up cannot be underestimated, not only an uncharted wilderness, is the to preserve because international best practice policy of Black Economic Empow- the integrity of has shown that no amount of regu- erment. lation in this respect is fail-safe, but South Africa’s also because South Africa is in a It must once again be reiterated that democracy cannot state of social transformation and the analysis of BEE in this research be overstated. economic flux as the ANC-led gov- paper begins from the premise that ernment attempts to deracialise in its true form the policy is a requi- ownership and control of wealth site piece of legislation to equalize through black economic empower- ment. South Africa’s vast economic dis- parities based largely on race. But it has, as the ex- To advance these objectives, the ANC has identified amples given have demonstrated, opened up easy op- the motive forces as follows: portunities for personal enrichment ahead of a drive for entrepreneurship and productive investment. As The black masses, those classes and strata that a result there is increasing evidence of crony capital- objectively and systematically stand to gain ism and influence-peddling encouraged by the more from the victory and consolidation of the [Na- 302 unscrupulous elements of established business. tional Democratic Revolution]. It identifies the working class and the poor – in both rural and Any legislation developed to regulate the private fund- urban areas – as the core of these forces…These ing of political parties in South Africa would have to motive forces include the black, emergent capi- take into account the reality that BEE has created an talist class whose interests are served not only unregulated connectivity between corporate capital, by the formal democracy, but also by the pro- the state and the ruling party in which the flow of gramme to change apartheid property political trade-offs, whether in the form of money or relations…At the same time, the ANC needs to patronage, cannot be underestimated. win over…all other sections of South African society, including the white workers, the mid- The need for specific party funding legislation goes dle strata and the bourgeoisie.303 beyond the important need to regulate the revolving door syndrome – in which many political personali- Simultaneous to this necessary class project, the ANC ties with impeccable political credentials have moved has warned: into private enterprise, mostly into sectors they over- saw in their government positions – because BEE has The rising black bourgeoisie and the middle resulted in politicians who are still in government strata are objectively important motive forces entering massive empowerment deals. Their stock re- of transformation whose interests coincide with

SA Democracy Incorporated • page 31 Paper 129 • November 2006 at least the immediate interests of the majority. stract, the accumulation of wealth by our peo- But some are dictated to by foreign or local ple should not run counter to the progress of big capital on whom they rely for their the revolution. advancement…without vigilance, elements of The problem lies in the fact that, in our ef- these new capitalist classes can become wit- forts to make up for the debilitating weight of ting or unwitting tools of monopoly interests, apartheid, many of us appear only too quick or parasites who thrive on corruption in public to sacrifice the moral and ethical standards that office…Examples abound in many former colo- have characterised our movement. Moral de- nies of massive disparities in the distribution generation, linked to the accumulation and of wealth and income between the new elite control over resources, is not a consequence and the mass of the people…In South Africa we can accept, since it threatens to extinguish [there is ] …a coterie of mainly black men co- the torch of freedom that our people have car- opted into the courtyard of privilege.304 ried for so long. Because of their hopes and aspirations we are duty bound to act, as the In the main, South Africa’s economic transition is cre- ANC, in the vanguard of the struggle against ating a capitalist class that operates within a sphere moral decay and corruption. of capital accumulation fostered by close connections These problems are not confined to a par- to the state and the ruling ANC. There are two as- ticular sphere of government or geographic pects to this:305 first, the direct po- area. Their pernicious influence litical involvement of senior mem- and unacceptable conse- bers of the ANC – whether party or quences are apparent at local, government officials – in business The conflation of provincial and national level. while maintaining their official po- politics and Our position as a ruling party sitions; second, members of the makes us particularly suscepti- emergent black elite who have left business is ble to such influences. Profes- the government for business but who becoming such a sionals within the public service naturally retain their political con- are chosen because of their par- nections and clearly benefit from concern in South ticular skills and talents. When these associations in business. Africa that the ANC their time in public service has Secretary-General come to an end it is only natural While these connections do not nec- that they seek to continue to essarily indicate corruption they do described it as the work in the spheres of society suggest a fluidity and intimacy be- party’s “central with which they are most familiar tween business and politics, which and best equipped to contribute. provides for a constant flow of ex- challenge”. But these are circumstances that changes, including enormous space create fertile ground for corrup- for straight party funding deals. The tion and graft. How can we act to conflation of politics and business is becoming such ensure that those exiting from the public service, a concern in South Africa that the ANC secretary-gen- either as professionals or public representatives, eral described it as the party’s “central challenge”: 306 are prevented from using public resources to in- vest in their personal fortunes later in life? The central challenge facing the ANC is to ad- Those who engage in business within our dress the problems that arise from our cadres’ ranks should do so openly and in a transpar- susceptibility to moral decay occasioned by the ent manner. Insidious practices such as sleep- struggle for the control of and access to re- ing partners should be avoided. Leaving pub- sources. All the paralysis in our programmes, lic service to conduct private business after hav- all the divisions in our structures, are in one ing placed reliable partners in leadership posi- way or another a consequence of this cancer tions still in the public service is a malprac- in our midst. tice, which is hard to prove but clearly preva- The constitution of the country allows for lent. We should ask, whenever a public serv- all citizens to engage in legitimate business ac- ant or representative leaves office and opens a tivity. Indeed, the Freedom Charter itself de- business in the same line of work, shouldn’t manded that “All people shall have equal rights there be an automatic review by a dedicated to trade where they choose, to manufacture and government agency in order to eliminate the to enter all trades, crafts and professions”. It basis of suspicion and insinuations?307 did so because apartheid and colonialism has systematically suppressed the entrepreneurial Unless the fluidity between politics and the private talent of our people. Any path to the accumu- sector is controlled, South Africa will end up on a lation of assets amongst black people in gen- slippery slope where politicians, government officials eral was ruthlessly crushed. Therefore, in ab- and political parties are pawns for wealthy corporate

SA Democracy Incorporated • page 32 Paper 129 • November 2006 interests, rather than representatives of the people. political parties will become a means to achieve this Serious policy battles will be overshadowed by a fight end – a business expense to advance financial self- about access to economic benefits, and donations to interest.

Endnotes 27 A Sachs, Report of the Commission on Constitutional and Electoral Reform in Mauritius, Electoral Institute of Southern Africa, 2001/02, p 68. 1 Stefaans Brümmer co-authored the Chancellor House 28 J Maree, telephonic interview, 24 January 2006. case study contained in this paper as part of the col- 29 Ibid. laboration between the Mail & Guardian newspaper 30 Ibid. and the Institute for Security Studies. 31 Ibid. 2 J Griesel, Judgment delivered in the High Court of South 32 Ibid. Africa (Cape of Good Hope Provincial Division), Case 33 JSE SRI Index, Johannesburg Securities Exchange, 16 no. 9828/03, 20 April 2005, p 38. October 2005. 3 African Union Convention on Preventing and Combat- 34 Ibid. ing Corruption, adopted by the 2nd ordinary session of 35 Ibid. the Assembly of the Union, Maputo, 11 July 2003. 36 S Sole and S Brümmer, The ANC “shares” racket, Mail 4 African National Congress, National General Council, & Guardian, 14 to 20 February 2003. 29 June to 3 July 2005, Consolidated report on the stra- 37 S Fakie, Performance audit on declarations of interest tegic context of the national democratic revolution and by ministers, deputy ministers and government employ- the state of organisation, 5 November 2005. ees, Report 19, 2006. 5 V Robinson, We must preserve ANC’s soul, Mail & 38 Ibid, p 15. Guardian, 11 to 17 August 2006. 39 V Robinson, Cabinet ethics: Fakie hits back, Mail & 6 T Manuel, minister of finance, telephonic interview, 8 Guardian, 24 to 30 March 2006. August 2006. 40 S Fakie, op cit. 7 E Palmer, chief legal adviser in the National Assembly, 41 S Fakie, interview, Pretoria, 24 March 2006. telephonic interview, 25 April 2006. 42 B Nzimande, SACP remembers Martin Thembisile 8 A Quintal, ANC bid to tap into tax revenue, Cape Times, “Chris” Hani, South African Communist Party, 9 April 20 October 2006. 2006. 9 Ibid. 43 B Nzimande, Bua Komanisi, special edition, May 2006. 10 M Msimang, interview, Luthuli House, 24 January 2006. 44 Ibid. 11 Ibid. 45 T Mbeki, Fourth Annual Nelson Mandela annual lec- 12 S Brümmer and S Sole, The ANC’s Oilgate, Mail & ture, delivered at the University of Witwatersrand, 29 Guardian, 20 May 2005. 46 Ibid, pp 13–14. 13 B Maclennan, Marais wipes away tears after verdict, 47 C Lewis, The buying of the President, in R Calland, Independent Group, 5 October 2006. Party funding: Avoiding the slippery slope, Idasa, 14 W Wa ka Ngobeni, D Mahlangu and D Lubisi, A finger 29 June 2004. in all the right pies, Business Times, 5 October 2005. 48 Ibid. 15 C Carter, Kebble probe tracks R25m to the ANC, Sun- 49 Southall, op cit., p 472. day Independent, 6 August 2006. 50 Ibid, p 455. 16 S Sole, Beware of the Mafiosi, Mail & Guardian, 23 51 Ibid, p 455. December 2005. 52 Ibid, p 455. 17 R Southall, Black empowerment and corporate capi- 53 Ibid, p 465. tal, in J Daniel, R Southall and J Lutchman (eds), State 54 Ibid, p 466. of the Nation 2004-2005, Human Sciences Research 55 Unilever Institute of Strategic Marketing, Black Dia- Council, Pretoria, 2005, p 457. mond, March 18 Ibid. 2006. 19 S Brümmer, Politics and money: a deeper malaise, un- 56 Institute for Justice and Reconciliation, Money and published article, 2004. morality, 17 October 2006. 20 Ibid. 57 South African Broadcasting Corporation, SA’s rich use 21 Msimang, op cit. political connections for deals, 13 October 2005. 22 Transparency International, Report on the transparency 58 M Mbeki, Concepts of transformation and the social global corruption barometer 2005, Berlin, 25 October structure of South Africa, 26 April 2006, p 5. 2006. 59 Ibid. 23 J February and R Calland, The funding of political par- 60 T Lodge, Bus stop for everyone: Politics in South Africa ties, democracy and the right to know, Idasa, – from Mandela to Mbeki, Indiana University Press, 30 April 2004. 2002, p 66. 24 Brümmer, op cit. 61 Ibid. 25 D Pottie, Elections in Southern Africa: Democratic con- 62 Three confidential sources from the ANC’s National solidation or low-intensity politics?, sociology seminar Executive Committee. presented at the University of Johannesburg, Septem- 63 T Manuel, interview, 8 August 2006. ber 2001. 64 Ibid. 26 Quintal, op cit. 65 Msimang, op cit.

SA Democracy Incorporated • page 33 Paper 129 • November 2006 66 Economist, Chasing the rainbow, 8 to 4 April 2006. build knowledge and capacity around the subject of 67 S Sole, The politics of patronage, Mail & Guardian, 8 party funding, and public awareness. Other civil soci- October 2004. ety organisations also support the call for transpar- 68 African National Congress, Strategy and tactics in Na- ency, such as the Civil Society Network Against Cor- tional General Council resource pack, Pretoria, 29 June ruption (CSNAC), which consists of a number civil so- to 3 July 2005. ciety organisations working broadly on anti-corrup- 69 Brümmer and Sole, op cit. tion issues. CSNAC has been crucial in garnering 70 Ibid. broad-based civil society support for the campaign to 71 Ibid. regulate private funding to political parties. 72 Ibid. 107 Coetzee, op cit. 73 In the High Court of South Africa (Durban & Coast 108 Democratic Alliance, op cit. Local Division), The State versus Jacob Gedleyihlekisa 109 Coetzee, op cit. Zuma, Thint Holding (Southern Africa) (Pty) Ltd and 110 Off the record interview with DA member of parlia- Thint (Pty) Ltd, 31 July 2006. ment, op cit. 74 Ibid. 111 K Matlosa and K Mbaya, The Politics of state resources: 75 Sole, op cit. Party funding in South Africa, occasional paper, 76 Sole and Brummer, op cit. Konrad-Adenauer-Stiftung, Johannesburg, March 2004, 77 Ibid. p 13. 78 Ibid. 112 D Maynier, email response, 10 August 2006. 79 Telkom Annual Report 2004, p 161. 114 Chancellor House, Register of members’ interests, 80 Telkom circular to shareholders, 22 September 2004, Bowman Gilfillan Attorneys Inc, Johannesburg, p 1. 10 January 2006. 81 Sole and Brummer, op cit. 115 Ibid. 82 Thlalefang Sekano, company search, 116 Ibid. 5 March 2006. 117 Chancellor House, op cit. 83 Telkom Annual Report, op cit. 118 E Davids, telephonic interview, Bowman Gilfillan Inc, 84 S Brummer and S Sole, Oil scandal rocks SA, Mail & 10 January 2006. Guardian, 30 May to 5 June 2003. 119 Chancellor House Trust deed, Master of the High 85 Ibid. Court, Pretoria, 23 January 2006. 86 Ibid. 120 Ibid. 87 Ibid 121 Ibid. 88 Ibid. 122 S Gounden, Letter of resignation to company secre- 89 S Msomi, ANC Incorporated takes over, City Press, 27 tary, Chancellor House, September 29 2004. November 2005. 123 ANC memoranda, Mendi Msimang, chief representa- 90 T Leon, interview, Johannesburg, 12 July 2006. tive, UK and Ireland, to Secretary for International Af- 91 Off the record interview, DA member of parliament, fairs, ANC, Lusaka, 11 September 989, University of 12 May 2006. Witwatersrand History archives. 92 Independent Electoral Commission, 5 March ment deal, Issue 41, May 2004; Bateman Globe, 26 2006. March 2006. 93 Democratic Alliance, responding affidavit to Idasa’s 125 Chancellor House, op cit.; Bateman Globe. op cit.; notice of motion, in the High Court of South Africa MRC News, New MRC board takes its place, Septem- (Cape of Good Hope Provincial Division), 2003. ber 2001, 32(4); MRC News, 6 February 2006. 94 R Austin and M Tjernstrom, Funding of political par- 126 Confidential source interview(s). ties and election campaigns, Handbook Series, Inter- 127 Bahrain News Agency, Hamdan meets Angolan deputy national Institute for Democracy & Electoral Assist- PM, 20 March 2005. ance, 2003. 128 P Molefe, questionnaire, 25 August 2006; S Dakile- 95 Leon, op cit. Hlongwane, questionnaire, 29 August 2006; M 96 Off the record interview with DA member of parlia- Msimang, questionnaire, 25 August 2006; T Mokoena ment, op cit. and Mamatho Netsianda, questionnaire, 28 August 97 Ibid. 2006. 98 Government Gazette, volume 481, no. 27770, Preto- 129 B Magubane, telephonic interview, 25 August 2006. ria, 8 July 2005. 130 Confidential source interview(s). 99 Ibid. 131 Confidential source interview(s). 100 R Coetzee, interview, Johannesburg, 17 January 2006. 132 Confidential source interview(s). 101 Ibid. 133 S Gounden, emailed response to questionnaire, 25 102 Ibid. August 2006. 103 Daily Dispatch, Scorpions clear on corruption allega- 134 R Ramaite, telephonic interview, 24 August 2006. tions, 13 February 2003. 135 D Abdoulaev, conversation at Renova Investment of- 104 Coetzee, op cit. fice, Johannesburg, 13 February 2006. 105 D Pressly, Landmark ruling on party funding, Mail & 136 M Msimang’s Luthuli House office, telephone call, 17 Guardian, 20 April 2005. February 2006. 106 Idasa’s campaign, which is jointly led by the Right to 137 Engineering News Online, South Africa’s power pros- Know Programme and the Political Information and pects attract global giant, 10 May 2006. Monitoring Service-South Africa (PIMS-SA), aims to 138 Ibid.

SA Democracy Incorporated • page 34 Paper 129 • November 2006 139 Ibid; Eskom Holdings, 2006 results presentation, 13 update and cautionary announcement, 5 February July 2006. 2004; Clark, op cit. 140 F Zulu, telephonic interview, 20 October 2006. 175 M Molina and D Butin, Renova Masters Africa, 141 R Duff, telephonic interview, 6 June 2006. Kommersant, 19 November 2004. 142 R Duff, telephonic interview, 24 July 2006. 176 The world’s richest people, 4 July 143 Wits Gold, Prospectus, 18 2006. April 2006. 177 Department of Minerals and Energy, South Africa’s 144 D Urquhart , telephonic interview, 15 September 2006. mineral industry 2004–2005, Directorate: Mineral Re- 145 Wits Gold, op cit.; Mining Weekly Online, Imminent sources, p 110; International Manganese Institute/ listing for new exploration minor, 24 February 2006; Motjoli Resources, New developments in the manga- Wits Gold, Annual Report 2006, 18 July 2006. nese sector, 12 June 2006; Northern Cape government, 146 Ibid. Northern Cape Province mineral sector strategy, 5 Oc- 147 Wits Gold, New exploration company: Wits Gold tober 2004. raises ZAR 31.85 million (US$5 million) to fund ac- 178 D Gleason, A steely pot-pourri, Torque, 12 June 2006; quisition of new order prospecting rights, 8 Decem- confidential source interview(s); Northern Cape gov- ber 2004; Wits Gold, Annual Report 2006, 18 July ernment, op cit.; H Heinz, Pariser, Manganese, No- 2006. vember 2003, p 8. 148 Confidential source interview(s). 179 HFJ Theart, ET Basson, JHE Basson, and PC Pistorius, 149 Afgem Limited, Serious about diamonds, brochure, The impact of unlocking access to the Kalahari Manga- August 2005; Afgem, preliminary consolidated annual nese Field, or maintaining the present industry struc- results for the year ended 31 March 2006, 3 July 2006. ture: A strategic and macroeconomic analysis, Mintek, 150 R Summers, telephonic interview, 8 September 2006. 28 November 2003. 151 Bateman Globe, op cit. 180 Ibid. 152 Ibid. 181 S Nogxina, written answers to questions, 5 Septem- 153 S Gounden, letter of resignation to company secre- ber 2006; White Paper: A minerals and mining policy tary, op cit. for South Africa, Department of Minerals and Energy, 154 Bateman Globe, op cit. October 1998, 13 October 2005. 155 Minerals Engineering International, MOU with Renova 182 International Manganese Institute/Motjoli Resources, Facilitates Russian/SA cooperation, 28 November op cit; confidential source interview(s); M Dipico, Key- 2005. note speech at mining investment opportunities semi- 156 S Gounden, emailed response to questionnaire, op cit. nar, London, 16 October 2002. 157 Bateman Globe, New MD for Bateman Africa, Issue 183 M Dipico, State of the province address, Northern 51, October 2005; Bateman Globe, 6 January 2006. Cape legislature, 28 February 2003. 158 Bateman website, Power and Energy, 7 September 184 Mineral and Petroleum Resources Development Act 2006. (MPRDA) no. 28 of 2002, South Africa. 159 Bateman Globe, Bateman Howden wins Camden 185 J Helmer, No half measures – Vekselberg sells out of bagfilter order, 46, 2005; Bateman Globe, 6 January Russia, Mineweb, 23 February 2006. 2006. 186 Dreamworld Investments 347 (Pty) Ltd, Prospecting 160 Charles Morgan, Tsohle Business Solutions, emailed work programme, prepared by Renova Investments, response on behalf of Tsohle Technology Holdings, 10 May 2005. 7 November 2006. 187 Helmer, 2006, op cit. 161 Tatis Societe Anonyme, press release, Geneva, 188 J Helmer, Anglo American in sale talks with Renova?, 22 December 2005. Mineweb, 29 November 2004; Helmer, 2006, op cit. 162 Tatis Africa, company registration details, 189 Russian oil tycoon who challenged Putin is jailed for 26 July 2006. 9 years, Institute for Global Ethics, 8(22), 6 June 2005. 163 Confidential source interview(s). 190 Fleming Family & Partners, biographies, 14 June 2006. 165 ICT World, SA company becomes centre of excellence 191 Confidential source interview(s). for global customs management solution, Issue 89, 9 192 SUAL website, Brian Gilbertson appointed president June 2006; SAP partners with TATIS SA on customs of SUAL Holding, 3 August 2004. and border management, 6 193 Samancor, ; Confiden- June 2006. tial source interview(s). 166 Tsohle Business Solutions, company registration de- 194 Confidential source interview(s). tails, op cit. 195 S Nogxina, written answers to questions, 5 Septem- 167 Public Sector Solutions, 27 July ber 2006; P Mlambo-Ngcuka, written answers on be- 2006. half of her from S Nogxina, 5 September 2006. 168 Tsohle Business Solutions, South African technology 196 MPRDA, op cit.; Broad-based socio-economic empow- vanguard, undated. erment charter for the South African mining industry, 169 Charles Morgan, op cit, 2006. 11 October 2002; MPRDA (28/2002): Mineral and Pe- 170 Grindrod limited, Grindrod expands its empowerment troleum Resources Development Regulations, Govern- base, 24 July 2004. ment Gazette, 23 April 2004; Fasken Martineau, South 171 I Clark, interview, 1 September 2006. Africa’s mineral and petroleum resources development 172 Ibid. Bill – A brief overview, May 2002. 173 Grindrod J&J Logistics, 197 Confidential source interview(s). 22 August 2006. 198 Nogxina, op cit. 174 Grindrod Limited, Specific repurchase results, with- 199 Ibid. drawal of cautionary on black empowerment, trading 200 Renova, ; M Buzuk of

SA Democracy Incorporated • page 35 Paper 129 • November 2006 Renova, letter to Dirleton Minerals and Energy, 10 June 231 Helmer, 2004, op cit. 2004. 232 The Presidency, emailed questions, 31 August 2006. 201 Nogxina, op cit.; Clarification on the application of 233 Helmer, 2004, op cit; Helmer, 2005a, op cit. the BBBEE Charter and the MPRDA, Department of 234 Nogxina, op cit. Minerals and Energy, 14 July 2004. 235 Department of Foreign Affairs, minister Nkosazana 202 Ibid. Dlamini-Zuma to host 4th session of joint intergovern- 203 J Rocha, interview, Pretoria, 23 August 2006. mental committee on trade and co-operation between 204 Ibid. South Africa and Russia, Pretoria 18–19 November 2004. 205 Ibid. 236 J Helmer, Renova mining bid under investigation, 206 MPRDA, op cit. Mineweb, 24 February 2005b; Helmer, 2004, op cit.; 207 Nogxina, op cit. (The DME acknowledges the purpose Helmer, 2005a, op cit.; Molina & Butin, 2004, op cit. of the 100% requirement was so that BEE companies, 237 Engineering News, Russians sniff Kalahari manganese once awarded rights, could obtain funding by selling prospects, 12 September 2005. up to 49%); Rocha, op cit. 238 Renova Investment Ltd, 21 June 208 Nogxina, op cit.; Rocha, op cit. 2006. 209 J Helmer, Are the gods crazy? Renova moves on to the 239 Nogxina, op cit. Kalahari manganese field, The Russia Journal Daily, 13 240 Renova letter to Dirleton, 24 November 2004, op cit. August 2005a. 241 Department of Minerals and Energy, Mineral Resource 210 The Russian group of companies Renova announces Management System, 2005, 6 March 2006; Pitsa ya the opening up of its affiliate company Renova Invest- Setshaba Holdings, 7 Janu- ments (Pty) Ltd in the Republic of South Africa, ary 2006. 23 July 2006. 242 Ibid. 211 Ibid. 243 Department of Minerals and Energy, Mineral Resource 212 Confidential source interview(s); . ments, 7 January 2006. 213 Nogxina, op cit. 244 Pitsa ya Setshaba Holdings, op cit. 214 M Buzuk, op cit. 245 Confidential source interview(s). 215 Confidential source interview(s). 246 Renova Investments letter to Dirleton, 7 December 216 Partnership agreement between Renova Investments 2004. and companies 1, 2, 3 in a project of prospecting, pro- 247 Ibid. duction and processing of manganese ore in the Kala- 248 Memorandum of understanding, Chancellor House hari basin, Draft agreement, Renova, 8 October 2004; Mineral Resources Investments and Dirleton Minerals Letter from Renova Investments to Dirleton, 24 Novem- and Energy, 10 December 2004. ber 2004. 249 Confidential source interview(s). 217 J Helmer, Renova to Mbeki – watch what I say, not 250 Helmer, 2005b, op cit.; Russian Ministry of Natural what I do, Mineweb, 26 March 2006; J Helmer, The Resources, press release, 1 February 2005. Renova & Evraz manganese scheme – The bell tolls for 251 Memorandum of understanding, Chancellor House thee, Mineweb, 21 September 2005. Mineral Resources Investments and Pitsa ya Setshaba 218 Ibid. Holdings, 16 February 2006. 219 Russian company considers ferro-alloy plant at Coega, 252 P Mlambo-Ngcuka, power of attorney, 30 March 2005. Coega Development Corporation, press release, 253 Notarial prospecting right entered into between DME 5 September 2006. and Dream World Investments 347, 17 May 2005. 220 Ibid. 254 Nogxina, op cit. 221 Coega smelter tops bill on Putin visit, Business Day, 7 255 Notarial prospecting right, op cit. September 2006. 256 Ibid. (Note: United Manganese of Kalahari was at that 222 Confidential source interview(s). stage still called by its “shelf” name, Dream World 223 Confidential source interview(s). Investments 347. See certificate of name change from 224 D Mashile-Nkosi, telephonic request, February 2006. Dream World Investments 347 to United Manganese 225 Kalahari Resources, information sheet, undated, ob- of Kalahari, 10 June 2005.) tained from confidential source. 257 United Manganese of Kalahari, register of members’ 226 K Motlanthe, emailed questions, 31 August 2006 (SMS interests, 17 February 2006; Bahamas offshore corpo- message from ANC spokesperson Steyn Speed, 12 Sep- ration, 8 tember 2006, “SG won’t be responding to questions”). September 2006. 227 Kalahari Resources, op cit. shows Majali as Siyanda 258 Confidential source interview(s). Mining Corporation’s executive chairman; company 259 Confidential source interview(s). registration detail searches, , 260 Confidential source interview(s). of Siyanda Mining Corporation and Imvume Manage- 261 MPRDA, op cit. ment, show Imvume Management’s two active direc- 262 DME Mineral Resource Management System, op cit.; tors, Majali and Sulaiman Said, as directors of Siyanda Department of Minerals and Energy, fax, farms, appli- too. cants and dates, 26 April 2006; Notarial prospecting 228 M Benson (ed), The Sun will rise – Statements from the right, op cit. dock by Southern African political prisoners, Interna- 263 Ibid. tional Defence and Aid Fund, London, Revised Edi- 264 Nogxina, op cit. tion, 1981. 265 DME Mineral Resource Management System, op cit; 229 Brümmer and Sole, The ANC’s Oilgate, op cit. DME fax, 26 April 2006; Notarial prospecting right, 230 Dirleton Minerals and Energy, letter to Renova Invest- op cit. ments, 7 December 2004. 266 Confidential source interview(s).

SA Democracy Incorporated • page 36 Paper 129 • November 2006 267 Nogxina, op cit. ment, Norex Petroleum Limited v Access Industries Inc 268 Department of Foreign Affairs, Conclusion of fifth ses- and Others, United States Court of Appeals for the Sec- sion of ITEC, press release, 5 October 2005. ond Circuit, 21 July 2005. 269 P Richardson, Top Russian oligarch joins Mbeki’s team, 287 Ibid. Sunday Times, 27 November 2005. 288 Ibid. 270 State enters dispute over BEE credentials of Simmer & 289 Ibid. Jack, Business Day, 15 March 2006. 290 Ibid. 271 J Helmer, Russians prepare for African energy, mining 291 Emailed questions to Renova, 28 August 2006. push, Mineweb, 7 August 2006. 292 N Skovlygina, Managers of British petroleum were in- 272 I Filatova, Buoyant Russia bounces back, Business Day, cluded in “international conspiracy”, Kommersant, 23 29 August 2006; Department of Foreign Affairs, Rus- December 2005. sian president Vladimir Putin to pay historic state visit 293 Ibid. to South Africa, press release, 29 August 2006. 294 United States Court of Appeals, docket number 04- 273 J Michaels, South Africa ready for security council seat, 1357-cv, Norex Petroleum Limited v Access Industries, Weekend Argus, 25 September 2004. Renova Inc, Leonard Blavatnik, Alfa Group Consortium 274 Mail & Guardian online, SA readies itself for security Tyimen Oil Company, 2004. council seat, 16 October 2006. 295 Ibid. 275 Russia/SA business relations to strengthen, Sapa, 296 Emailed questions to Renova, op cit. 5 September 2006; Vekselberg comes from Russia with 297 J Helmer, Russian Aluminum – The world’s largest billions, Business Report, 7 September 2006; Coega removalist, Mineweb, 13 October 2006. smelter tops bill on Putin visit, Business Day, 7 Sep- 298 Ibid. tember 2006. 299 J Helmer, Brian Gilbertson’s unexpected headache, 276 , op cit. Mineweb, 31 March 2004. 277 J Helmer, Consolidation within the country is practi- 300 K Ewing, Corruption in party financing: the case for cally complete, Kommersant, 14 September 2006. global standards, Global Corruption Report, 2001, 278 Ibid. p 191. 279 Nogxina, op cit.; Mlambo-Ngcuka, op cit. 301 Idasa position paper on party funding, , op cit. org.za> 2003. 281 Sotheby’s Auction House, Forbes collection private sale, 302 Southall, op cit., p 472. press release, 4 February 2004. 303 B Turok, Black capitalism: Prospects of the national 282 J Helmer, How the eggs may save Vekselberg’s goose, democratic revolution, New Agenda, Fourth Quarter Mineweb, 15 July 2004. 2005, p 21. 283 , op cit. 304 Ibid. 284 Ibid. 305 Southall, op cit., p 472. 285 Ibid. 306 K Motlanthe, African National Congress, Organisational 286 Complaint in United States District Court, District of report presented by at the National General Council, Massachusetts, Athina Investments Limited and Others June 29 to July 3 2005. v Victor Pinchuk and Others, 30 March 2006.; Judg- 307 Ibid.

SA Democracy Incorporated • page 37 Paper 129 • November 2006 Subscription to ISS Papers

If you would like to subscribe to ISS Paper series, please complete the form below and return it to the ISS with a cheque, or a postal/money order for the correct amount, made payable to the Institute for Security Studies (marked not transferable).

Please note that credit card payments are also welcome. You can also deposit your payment into the following bank account, quoting the invoice number and the following reference: PUBSPAY.

ISS bank details: ABSA, Brooklyn Court, Branch Code: 634156, Account number: 405 749 8921

Please mail or fax: ISS Publication Subscriptions, PO Box 1787, Brooklyn Square, 0075, Pretoria, South Africa. ISS contact details: (Tel) +27 12 346 9500, (Fax) +27 12 460 0998, Email: [email protected] Website: www.issafrica.org

Title Surname Initials

Organisation

Position

Postal address Postal Code

Country

Tel Fax E-mail

ISS PAPERS SUBSCRIPTION 2006 – MIN 8 PER YEAR

South Africa African countries* International

R 150.00 US$ 30.00 US$ 40.00

* Angola, Botswana, Burundi, Comores, Congo-Brazzaville, Democratic Republic of the Congo, Gabon, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Reunion, Rwanda, Seychelles, Swaziland, Tanzania, Uganda, Zambia, Zimbabwe (formerly African Postal Union countries)

Details of subscription rates for the African Security Review, ISS Monographs, SA Crime Quarterly or other ISS publications are available from:

ISS Publication Subscriptions, P O Box 1787, Brooklyn Square, 0075, Pretoria, South Africa Tel: +27-12-346-9500/2 • Fax: +27-12-460-0998 • Email: [email protected] • www.issafrica.org/pubs.html

ISS Paper 128.indd 11 2006/10/19 11:47:59 AM The ISS mission

The vision of the Institute for Security Studies is one of a stable and peaceful Africa characterised by human rights, the rule of law, democracy and collaborative security. As an applied policy research institute with a mission to conceptualise, inform and enhance the security debate in Africa, the Institute supports this vision statement by undertaking independent applied research and analysis, facilitating and supporting policy formulation; raising the awareness of decision makers and the public; monitoring trends and policy imple- mentation; collecting, interpreting and disseminating information; networking on national, regional and international levels; and capacity-building.

About this paper

The purpose of this research paper was to identify possible sources of private funding to South Africa’s political parties, beyond the annual state allocation, which are potentially corrupting and/or subverting the will of the electorate. The lack of legislation to regulate the flow of private funds to political parties is one of the greatest threats to South Africa’s sanctified democracy. The paper analyses how Broad-Based Black Economic Empower- ment has been misapplied by some individuals and companies seeking party funding opportunities. The paper does not seek to attack the principle of BEE, which it fully supports; rather it critiques the exploitation of the policy for ulterior financial gains, revealing a new corporate front used by the ruling African National Congress to seek profit on its own behalf. The paper also provides a quantitative assessment of sources of funding to the opposition Democratic Alliance.

It was commissioned by the Cape Town based ISS Corruption & Governance Programme as part of a joint project with the Idasa Political Information Monitoring Service (PIMS) to promote debate on options to regulate private funding of political parties as well as the monitoring of party funding by researchers, civil society and the media. For more about the project and other views on the regulation of private funding to political parties in South Africa visit www.whofundswho.org.za. About the authors

Vicki Robinson is a political journalist at the Mail & Guardian newspaper. She studied political science and journalism at Rhodes University before joining the newspaper four years ago.

Stefaans Brümmer is a senior journalist at the Mail & Guardian newspaper, where he has specialised in investiga- tions involving the nexus between politics and money. He has honours degrees in political studies (University of Cape Town) and journalism (University of Stellenbosch). Funder This research was made possible by generous funding from the Open Society Foundation for South Africa.

© 2006, Institute for Security Studies • ISSN: 1026-0404 The opinions expressed in this paper do not necessarily reflect those of the Institute, its Trustees, members of the Advisory Board or donors. Authors contribute to ISS publications in their personal capacity.

Published by the Institute for Security Studies • P O Box 1787 • Brooklyn Square • 0075 • Pretoria • SOUTH AFRICA Tel: +27-12-346-9500/2 • Fax: +27-12-460-0998 Email: [email protected] • http://www.issafrica.org 67 Roeland Square • Drury Lane • Gardens • Cape Town • 8001 • SOUTH AFRICA Tel: +27-21-461-7211 • Fax: +27-21-461-7213 Email: [email protected]

SA Democracy Incorporated • page 40 Paper 129 • November 2006