Alan Gray has spilled the beans on Mpumalanga’s elaborate network of shady empowerment companies. Justin Arenstein reports
Political infighting in Mpumalanga has revealed a shadowy network of black empowerment companies set up in 1996 to channel funds into the African National Congress’s election coffers.
The “empowerment” network includes casino ventures, security, aviation, medical rescue, travel, tourism and industrial companies, and relies heavily on government contracts. At least one of the companies, Phakamani Security Services, holds the bulk of security contracts with Mpumalanga’s provincial administration.
The full extent of the web of cross- holdings was first revealed by the network’s alleged architect and Mpumalanga’s prince of the dodgy deal, Alan Gray, the suspended Mpumalanga Parks Board chief. Gray warned the provincial executive council in a highly confidential report dated September 23 that he would have to reveal the network’s existence unless the province stepped in and mitigated the charges of maladministration and possible fraud against him.
Dismissing charges related to his role in issuing six illegal promissory notes worth R1,3-billion as “misinformation”, Gray said all his actions had been designed to benefit Mpumalanga and the ANC’s financial well-being.
Gray has refused to speak to the Mail & Guardian, threatening to sue it for spearheading a “smear campaign” against him. But the M&G has independently confirmed the majority of the links and companies referred to vaguely in his 43- page report.
He confessed in his report that he was asked to amalgamate his own and other sympathetic businesspeople’s interests into a network of black joint-venture companies, which would channel funds into the ANC’s 1999 election coffers. The companies would initially survive on government contracts but were supposed to broaden their revenue bases as rapidly as possible to avoid creating scandals or suspicion.
Gray was chosen to head the project, he said, because of his existing business holdings, his previous candidness with Premier Mathews Phosa about possible conflicts of interest and because of his past support of the ANC.
The report also confirms that Mpumalanga Finance Corporation head Sam Cronje was requested to set up the network’s company structures and control the participation of private financiers or investors. Cronje has admitted his involvement in a number of the projects but has refused to disclose his own business interests.
The first trial venture set up for the network in 1996 was the ill-fated Air Excellence Helicopter Partnership. It linked Gray, Cronje, MEC for Environmental Affairs and Tourism David Mkhwanazi, his finance counterpart Jacques Modipane and South Africa’s ambassador to Mozambique, Mangisi Zitha. The top-secret partnership’s articles of association stress that the names and roles of its political members should be kept secret at all costs.
The venture was supposed to purchase luxury Bell Ranger helicopters for lease to another of Gray’s companies, Lowveld Helicopters, which would in turn lease them to the government. A formal proposal presented to Phosa’s special adviser, Brian Schrosbree, in February 1996 suggested that the government guarantee charters of at least 20 hours a month for four years so that the partnership could make enough profit to fund other ventures.
It is unclear whether the proposal was ever approved, but Auditor General Henri Kluever has since repeatedly chastised Mpumalanga for chartering helicopters from Gray’s company when cheaper alternatives existed.
Gray accused the M&G in his report, however, of scuttling the partnership before it could make any real money by exposing another of his secret deals – the R12,5-billion Dolphin deal. The deal secretly granted exclusive commercial development rights to the shady Dubai-based Dolphin Group for 50 years in return for a pledge to underwrite the parks board’s budget.
Dolphin’s president, Ketan Somaia, was wooed into the deal through a combination of lavish parties (the launch party costing in excess of R1,9-million) and flips across the province’s key reserves such as the Blyde River Canyon in Gray’s helicopters.
Public outrage at the secrecy and potential monopoly in the Dolphin contract has prevented the deal from ever being implemented. Gray said in his report that the “media hype” made him look like a “sleazeball” and prompted the politicians to bail out of the partnership late in 1996.
Gray himself eventually sold out to Sean McMurray, another network member and a good friend. McMurray was briefly a parks board member, leased the parastatal’s Middelburg offices to it, accompanied Gray on foreign trips to meet Dolphin and eventually sold 50% of his hotels in Nelspruit and Pilgrim’s Rest to the group. He is also a key player in another of the network’s major enterprises, the Somalanga tourism development consortium, tipped to commercialise Mpumalanga’s flagship game reserve at Songimvelo.
Gray contended in his report that the Dolphin debacle put the network itself into limbo and that the organisation eventually faded away. The M&G’s investigations this week proved otherwise. At least two of three umbrella holding companies set up by the network still operate and still have significant shares in a series of the project’s subsidiary companies.
Cronje admitted to the M&G two months ago that he set up the Corridor Development Corporation (CDC) late in 1996 on behalf of Zitha. He designed the holding company as an investment vehicle to identify and fund projects linked to the Mpumalanga corridor, he said.
Although Zitha’s name no longer features in CDC’s list of directors, McMurray’s does. Phosa’s former law partner, M Mojapelo, and the names of a number of South Africa’s new business elite, such as Eskom chair Raul Khoza, are also there.
Cronje refused to expand on his earlier statement this week, insisting that he had a constitutional right to privacy even on government-related questions. He referred all queries to his attorney, Stanley Fanaroff. Fanaroff was unavailable for comment during the past two weeks. McMurray also declined to comment, saying his answers would be twisted. He did, however, pledge to consider answering written questions later this month.
CDC, according to Gray, also held interests in his own former medical rescue company, Life Crisis, in Nelspruit. Staff in the parks board and a number of other departments were contractually forced to take out policies with Life Crisis until the M&G revealed the practice in 1997. The company has since fallen on hard times.
McMurray’s Somalanga is also meant to answer to CDC and was set up by Gray to transform Songimvelo reserve into an imitation Kenyan White Mischief theme resort complete with “askari” game guides. Songimvelo survived both a tentative relationship with Dolphin and criticism from Kluever and is regularly trotted out by Gray as the ideal for commercialisation of state reserves in the region.
Other as yet unconfirmed ventures listed as “A” priorities for CDC in Gray’s report include secret plans to convince the Department of Environmental Affairs and Tourism to relocate to private land near the parks board’s swish new offices outside Nelspruit. CDC also allegedly has shares in a Mozambican game farm, in something called Ethno Safaris and has a stake in a paprika factory in the Mpumalanga Onderberg. A Mozambican version of CDC has been established by joint director K Rawjee.
CDC’s sister holding company, Pfunanani Holdings, is the economic success story of the network. Pfunanani only boasts four listed directors but has significant direct interests in the province’s most successful new security company, Phakamani Security. Phakamani’s managing director and a major shareholder is Cronje’s wife, Marika, and the company still holds a majority of the province’s security contracts. Other familiar faces in Phakamani’s boardroom include Mojapelo and Muntu Silinda of CDC, and Dr Nkate Mamoepa of Pfunanani.
Pfunanani was also initially responsible for the abortive Air Excellence partnerships and later teamed up with Admiral Leisure World to bid for a casino license in Ermelo. The consortium lost the bid to Tsogo Sun, headed by another Mpumalanga star and former CDC chair, Jabu Mabuza.
But this abortive casino bid wasn’t the network’s only gamble on gaming licences. Admiral Leisure’s Michael Werner is still smarting after a fallout with Gray and McMurray over a disastrous bid for the province’s fourth and still unawarded licence in the Pilgrim’s Rest area.
Other ventures attributed to Pfunanani by Gray include a “paradise” camp, school furniture and wheelchair factories, and something called CD Brown.
The only holding company that appears to have “faded away” was the Women’s Group and its ventures into separate vehicle hire and travel companies, corporate catering and something called Imvelo Clothing.
Gray and his wife are directors in the Nelspruit-based Travel Today and have admitted to handling substantial government travel accounts. Kluever slams Gray for his involvement in the company, for repeatedly referring parks board travel accounts to it and for allegedly failing to disclose his directorship.
A large number of the network’s companies are audited and assisted secretarily by Fisher Hoffman and Sithole. Pfunanani director and representative Judas Msibi works as a director at Fisher Hoffman and Sithole, and is a former member of Mpumalanga’s Tender Board.
Gray stresses in his report that both he and Sam Cronje suffered substantial financial losses, up to R700 000 on the helicopter ventures alone, while setting up the network for the ANC.
He insists that Phosa was aware of the network after he stumbled on to some of its operations in August 1997, but says that the premier reversed an order to fire Gray, Cronje, Modipane and Mkhwanazi after the situation was explained to him. Phosa concedes that he wrote letters demanding that all four be dismissed for their involvement in the helicopter venture in 1997, but says he was not briefed on the full scope of the network. He also insists that the letters were deemed sufficient warning at the time.
Phosa forced Modipane to resign from the provincial executive council and suspended both Modipane and Mkhwanazi from the ANC for misconduct and possible self- enrichment.
Mpumalanga ANC representative Jackson Mthembu confirmed that the report had been referred to the ANC’s national working committee for review but said that it had still not been tabled officially in Mpumalanga. “The report has no status yet and cannot be discussed or given credibility until we have debated it.”
Refusing to either confirm or deny whether the individuals involved had made large donations to the party, Mthembu said the ANC would only be willing to co-operate with a formal police or other legal investigation into the matter.
– African Eye News Service