A leading KwaZulu-Natal politician and a long-standing member of Parliament’s public enterprises committee has been giving apparently confidential government information on privatisation to a top Malaysian tycoon with whom he has business links.
Mandla Msomi, an IFP MP in the National Assembly and director of the Durban-based Empowerment Trust, has a close business relationship with Dato AH Samsudin. Samsudin, who controls SMG Holdings and has various interests in South Africa, is a resident here and was behind the now defunct New Republic Bank (NRB). He owned more than 40% of NRB, has allegedly been paying Msomi hundreds of thousands of rands and settled some of Msomi’s debt.
Msomi gave Samsudin a restricted status report on the restructuring of state assets in 1998; advised him on which companies were ready for privatisation; and suggested that Samsudin’s NRB insinuate an adviser on privatisation into the office of KwaZulu-Natal’s premier. The status report, marked “strictly confidential”, was restricted to the inter- ministerial Cabinet committee on restructuring of state assets and to “government officials directly involved in the restructuring”.
In an interview with the Mail & Guardian this week, Msomi confirmed that he had sent the confidential report to the government, prepared by HSBC investment banking and entitled Restructuring of State Enterprises: Status Report: Number 14 to Samsudin on April 9 1998. But, he claimed, the report was then in the public domain even though it was dated March 16 1998.
The status report Msomi gave Samsudin gives details of state privatisation plans at state-controlled companies, including Transnet, South African Airways, Alexkor and and Airports Company. In a covering memo Msomi sent Samsudin with the confidential report, he wrote: “I have always been grateful for your support financially and in the form of advice and referrals to strategic persons …”
Later, in the same memo, Msomi says: “The privatisation process is developing to a very interesting stage now. This is the time to be in readiness for the bidding and to position the Empowerment Trust consortium in good time (see enclosed [status] report). “I am ready to talk about companies that are now ready for privatisation if you have time. I have no doubt the return on your investment into KwaZulu-Natal will be realised by the end of the year at the very latest,” he stated, adding that their empowerment venture was set to win a string of government contracts. Msomi denied receiving payment for this information.
The M&G has copies of two personal cheques from Samsudin’s Nedbank account made out to Msomi. They are both worth more than R100000, and were issued in 1997. Another document from April 1998 shows payments of more than R70000 to Msomi. Msomi told the M&G that these cheques were for expenses incurred while working for the Empowerment Trust.
Although members of Parliament are required to declare their interests including gifts, sponsorships, hospitality and benefits from private companies, Msomi had “nothing to disclose” in the register on members’ interests between 1998 and 1999. In 1997 he disclosed a leather folder and sponsored trip to Malaysia from Denel, the arms manufacturer, and a clock from Transnet. But he did declare his remunerated employment with the Empowerment Trust and DSE Technologies, an information technology company owned jointly by the trust and SMG Holdings.
Msomi said this week his “declaration of interest was up to date”. Samsudin was abroad and unreachable, according to Derby Butler, his personal assistant. Msomi is alleged to have misappropriated R1,3-million from the Empowerment Trust, which has been placed under provisional liquidation by the Durban High Court.
He was chair of the Parliament’s public enterprises committee, which is responsible for overseeing the government’s privatisation programme, from 1994 to 1999 and remains a member. He also served on the housing and public works committees. MPs said Msomi’s advice to Samsudin about privatisation especially while he was chair of the public enterprise committee was a clear “conflict of interest as his information gave Samsudin an unfair business advantage”.
Msomi denied this to the M&G, maintaining that the information he gave Samsudin was not “privileged information”. In 1998 he wrote to Samsudin: “I believe that NRB Merchant Bank Services can play a major role on advising the premier of [KwaZulu-Natal] on the privatisation process (possibly with a strategic adviser placed in the office of the premier for one calendar year)”. He says now that this suggestion was intended merely to help the KwaZulu-Natal government get investment and that “there was a general understanding that a special advisor was needed in the premier’s office”.
Msomi’s legal representative, Pieter Burger, also told the M&G that the money Msomi received was not connected to information provided to Samsudin. “At the inception of the Trust, he [Msomi] incurred expenses. In the early days Mr Dato [Samsudin] agreed to assist in the setting up of the Trust. Dato needed to get SMG board approval to effect the payment. But he did not follow those formalities and the money became an SMG advance and Dato was reimbursed by SMG,” Burger said.
Msomi’s relationship with Samsudin dates back to 1996 when they signed a memorandum of understanding to form the Empowerment Trust, which is managed by Newco. Newco, which Msomi claims never operated, is co-owned by Msomi and Samsudin. The two had initially agreed that Newco would receive 10% pre-taxed profits from the Empowerment Trust.
Newco, according to the memorandum of understanding, has a right to participate or acquire at its own discretion up to 20% of equity in companies established or acquired by the Empowerment Trust, which has placed its emphasis on information technology.