Blurred lines: Chancellor House has won several lucrative tenders from the government.
Chancellor House, the ANC business front, has benefited from another multibillion-rand state contract – despite the heated controversy surrounding its share in contracts for boilers at two new Eskom power stations.
The Mail & Guardian has established that Chancellor House has a 10% stake in engineering company Bateman Africa, which received a R2-billion contract from Eskom for materials-handling at the new Kusile power station in November 2010. Bateman Africa is the local empowerment arm of the giant Bateman Engineering group.
The award of the contract followed Eskom's controversial decision in 2007 to award a R40-billion tender for boilers at the Medupi and Kusile power stations to Hitachi Power Africa, in which Chancellor House has a 25% shareholding.
In 2006 the M&G unmasked Chancellor House as an ANC investment arm that was looking to benefit from empowerment deals and state tenders in the minerals and energy sectors.
This week Eskom defended its decision to award Bateman the materials-handling contract, saying it was awarded after a competitive and open tender processes.
Governance procedures
"Bateman's bids were judged to be the most technically, commercially and financially acceptable," said the parastatal's media department. "Eskom's governance procedures were fully complied with. As part of our procurement process, we request information on the shareholdings of all potential suppliers, thus Eskom was aware of Bateman's total shareholding."
Chancellor House was formed in 2003 on the initiative of former ANC treasurer general Mendi Msimang and with the explicit intention of raising funds for the party.
Tom Fraser, Bateman Africa's spokesperson, said Chancellor House had been a shareholder in Bateman since 2003. Fraser declined to give details of the dividends Chancellor would receive.
"The final dividend to shareholders will be agreed by the board of directors on completion of the contracts and, while this is not for public disclosure, the amount will be pro rata shareholding participation," he said.
In 2006 the M&G asked former Bateman Africa chairperson Sivi Gounden – who joined the company after being a Chancellor House director – whether it was problematic for a company that partly relied on government tenders to have as a shareholder an entity set up to fund the ruling party. He denied the company would be tendering for government projects such as the Eskom tender it has now won, saying: "Bateman Africa supplies process engineering and construction-related services to the mining industry in South Africa. Our clientele is the mining companies and not government departments or state entities."
Conflict of interest
The ANC came under heavy fire when Hitachi, the company 25%-owned by Chancellor, was given the boiler contract in 2007. Opposition parties and non-governmental organisations objected that, among other things, Eskom's chairperson and ANC finance committee member Mohammed Valli Moosa had approved the deal.
Then-public protector Lawrence Mushwana found in 2010 that Moosa had failed to manage a conflict of interest arising from Chancellor's stake in Hitachi. He found that Moosa had failed to declare the conflict or recuse himself from the board's deliberations. These failings could have resulted "in the reasonable perception that Moosa was biased in respect of the … award", he said in his report.
However, he found that Moosa's conduct did not affect the validity of the deal. He advised then-minister of public enterprises Barbara Hogan to consider developing legislation for submission to Parliament to regulate business transactions between government entities and political parties. To date, no legislation has been enacted.
Opposition parties and non-governmental organisations regarded the contract as a conflict of interest – because the ANC, the party in government, was both player and referee – and heavily criticised the deal.
In response, Hitachi said that when it signed a black empowerment deal with Chancellor House it had no idea that the company was with the ruling party's investment arm. It added that the profits would not go to any political party, because the beneficiaries of the Chancellor House Trust were "natural black persons".
Power projects
Democratic Alliance leader Helen Zille, alleging that the ANC would make more than R1-billion profit from the deal, wrote a letter to the World Bank urging it to refuse Eskom's application for a $3.25-billion loan for power projects, including the Medupi power station.
In the end, the World Bank and Eskom agreed that the loan would not be used for the part of the work from which Chancellor House would benefit. Hogan denied that the loan was intended to fund only the boiler contract.
In 2009 the African Development Bank approved a $2-billion Eskom loan application for the Medupi project, sparking a letter of protest from the Independent Democrats, who asked the bank to investigate the conflict of interest.
The bank launched an investigation apparently premised on the possibility that foreign anti-corruption laws may have been breached because of the inclusion of a political funding vehicle in a government tender. The outcome of the probe is not known.
The controversy and negative media attention also appear to have caused a rift in the ANC and top leaders have made contradictory statements about Chancellor House.
In 2008, ANC treasurer general Mathews Phosa said Chancellor would sell its 25% stake in Hitachi and that the party was considering closing the investment arm.
Deputy President Kgalema Motlanthe echoed his views. Earlier this year he said that Chancellor should ideally not do business with the government and admitted that the conflict of interests posed a threat to South Africa's energy security.
However, ANC secretary general Gwede Mantashe has defended Chancellor House, saying there is nothing wrong with the party investing in public companies that later land state contracts. land state contracts.
ANC touts party funding reform
Mathews Phosa, ANC treasurer general, wants to speed up legislation to regulate the funding of political parties, following the adoption of far-reaching proposals on party funding at the ANC's recent national policy conference.
The proposals are set out in the ANC's consolidated report on organisational renewal, which the Mail & Guardian has seen but which has not been published.
They include an increase in the taxpayer's contribution to political parties, disclosure of private donors and the regulation of political parties' investment arms.
"Public funding should be expanded in order to promote and support democracy. Such funding will be accompanied by full financial accountability and transparency by political parties, including regulation of private financing of political parties," states the report.
The conference agreed that foreign funding should be allowed but "must be regulated to avoid abuse and manipulation by external forces in the political affairs of our country".
The resolutions were taken at last month's ANC policy conference in Midrand and are likely to be officially adopted at the ANC's national conference in Mangaung in December.
Phosa said in an interview last week that the ANC wanted to speed up the enactment of legislation. "We are not going to wait for December; we can endorse a running process," he said.
"The ANC cannot hold this process hostage and wait for its policy conference. This is a matter of national interest."
University of Cape Town political analyst Zwelethu Jolobe suggested that the ANC wanted regulation because private funding was fuelling factional infighting in the organisation, which would ultimately raise legitimacy questions about the leadership.
Jolobe made the point at a discussion hosted by the Open Society Foundation for South Africa in Cape Town earlier this month.
At the policy conference concerns were raised about the continued uncertainty surrounding the ANC's finances. Conference commissions agreed that decisive steps had to be taken to secure the movement's financial sustainability and independence.
Currently, parties are allocated limited public funds through the proportional representation electoral system and are required to account for their expenditure. However, no laws compel them to reveal private donors.
At its national conference in Polokwane in 2007, the ANC resolved to "put in place effective regulatory architecture for private funding of political parties to enhance accountability and transparency", but there has been little progress on the issue. – Tabelo Timse