The Pretoria High Court heard claims of conflicting interests in its review of the Cell C licence award, but the real conflict of interest was not aired at all. Stefaans Brmmer reports
Within one week Lebanon’s prime minister visits Saudi Arabia, where his company Saudi Oger is based; South Africa awards its third cellular network licence to Saudi Oger subsidiary Cell C; and South Africa’s president also pitches up in Saudi Arabia.
These events may well have been a coincidence. But they demonstrate a complex international dimension to the tug-of-war over South Africa’s third cellphone operator’s licence.
Argument came to a close on Wednesday in the Pretoria High Court, where Judge Hekkie Daniels presided over a judicial review of the process that led to Minister of Posts, Telecommunications and Broadcasting Ivy Matsepe-Casaburri awarding the licence to Cell C.
The court review was brought by losing bidder Nextcom, which alleged a string of irregularities, including “interference” by Matsepe-Casaburri and the Office of the President, in what should have been an impartial evaluation of competing bids. Judge Daniels now has to decide whether to overturn the awarding of the licence.
The licensing process has been one of the more fraught episodes in South Africa’s attempts to attract international investment. Foreign companies partnering local empowerment groups invested huge resources pursuing their bids, only to have their expectations frustrated by continual delays and allegations that, from the start, there was only one winner as far as the government was concerned: Cell C.
That may be no great recommendation for others bidding to do business in South Africa. But the desire for investment, alongside job creation, black empowerment and increased telecommunications access, is what the decision to award a third cell licence was all about.
In February 1999 government invited bids for a third network, the process to be adjudicated by the independent regulator, the South African Telecommunications Regulatory Authority (Satra). In May that year, the month before the bids were to be lodged with Satra, the Saudi Arabian company Saudi Oger publicly announced its presence in South Africa.
Saudi Oger deputy chair Emad Baban was quoted as saying his company wanted to invest R3-billion, but he did not yet name the cellular project as part of its plans, nor that the company would team up with South African empowerment partners to form Cell C. Intriguingly since the company was about to enter a race where all entrants were supposed to be off to an equal start Baban also said: “The South African government encouraged us to invest here.”
About a year ago Satra decided to recommend that Matsepe-Casaburri award the licence to Cell C. But even before it could do so, the process was mired in allegations of irregularities. Nextcom launched two court challenges. This ultimately led to the judicial review before Judge Daniels, and meant that Matsepe-Casaburri reluctantly held off endorsing Satra’s choice and awarding the licence.
But when President Thabo Mbeki opened Parliament in February this year and gave the assurance that “the outstanding issue of the third cellular licence will be resolved in time”, it was as if the floodgates had been opened. After six days Matsepe-Casaburri announced the award of the licence to Cell C, even though the judicial review was pending.
Two days later Mbeki arrived in the Saudi Arabian capital of Riyadh for talks on trade and other issues with King Fahd bin Abdulaziz and Crown Prince Abdullah bin Abdulaziz. Mbeki’s office denied any link between his trip and the sudden awarding of the licence to Cell C, which is 60% owned by Saudi Oger.
Days earlier there had been another visitor to the royals in Riyadh: Lebanon Prime Minister Rafiq Hariri. The billionaire businessman/ politician and his family are the owners, in nominal terms at least, of Saudi Oger. Like Mbeki’s visit, Hariri’s may have had nothing to do with the sudden developments in South Africa.
But what Hariri’s visit does underscore is a set of very cosy relations centred on the Saudi rulers and arguably tying Hariri and Saudi Oger’s fortunes to South Africa. This is borne out by comments ascribed to Jakes Gerwel, former president Nelson Mandela’s director general and later a director of the Cell C holding company.
According to transcripts of closed Satra hearings held in September 1999 and leaked to a business publication, Gerwel motivated the Cell C bid by referring to the “consolidation of the friendly and strategic relationship” between South Africa and Saudi Arabia.
Gerwel also testified: “The bonds between the Saudi royal house and the South African presidency have been particularly warm and cooperative … The mutual visits by members of the royal house and the presidency to each other represents but one testimony to that.”
Relations between the Saudi rulers and the South African presidency have indeed been cosy. Mandela travelled to Saudi Arabia as early as 1992 to secure backing for the African National Congress. In 1994, then as president, Mandela was back for a two-week holiday and to cement diplomatic relations.
The relationship grew, with regular visits to Riyadh by Mandela, Mbeki and a host of ministers. Saudi royals, including Crown Prince Abdullah, paid reciprocal visits to South Africa. Much of this diplomatic activity related to an intended but still stalled arms deal South Africa wanted to sell about R10-billion in artillery pieces and unmanned aircraft to the Saudis.
Further interactions included successful shuttle diplomacy by Mandela, Gerwel, King Fahd, Prince Abdullah and the powerful Saudi ambassador to Washington, Prince Bandar bin Sultan, which convinced Libyan leader Moammar Gaddafi to hand over the Lockerbie bombing suspects for trial.
In October 1999, still during Satra’s cellphone licence hearings, Mandela was hosted by Prince Bandar in Washington. Hariri jetted in to join them for dinner. Hariri’s Beirut office later commented that the intention was “to meet with this South African icon and not to make business deals”.
Mbeki has maintained the close relationship. Last year he reportedly stayed overnight at Prince Bandar’s residence in England before flying to the United States in the prince’s aircraft. And in an echo of Saudi-South African collaboration in the Lockerbie case, Mbeki managed to extract promises of funding from the Saudis to help solve Zimbabwe’s land problem.
If indeed Satra took into account friendly relations between countries when it considered the suitability of foreign partners as Gerwel seems to have suggested it should there may have been little wrong with that.
But there is an extra dimension to the relationship between Saudi Arabia and South Africa. The first potential problem is that the ANC has been the recipient of Saudi largesse. At a 1999 election rally Mandela said that King Fahd had donated to the ANC a total of $60-million (near R480-million current value).
The second potential problem is that Saudi Oger is more than just another Saudi company that happens to be owned by a Lebanese national who just happens also to be his country’s prime minister. The reality is that Hariri has been commercially close to the Saudi royals for more than two decades.
Hariri, son of a poor Lebanese family, made his fortune in the Saudi construction industry after winning a royal contract to build a major summit venue. He founded Saudi Oger in 1978 and it soon became the unofficial royal public works company favoured for the construction of palaces and public projects.
In his book Rafiq Hariri: A Businessman Prime Minister, former Agence France Presse Beirut correspondent Ren Naba supplies a reason for this cosiness: when Hariri formed Saudi Oger, he offered co-ownership to King Fahd’s son Abdelaziz “to ensure himself lasting royal protection”. Saudi dissidents have made similar claims.
Hariri’s Beirut information office has denied any royal stake “financial or otherwise” in Saudi Oger, but acknowledged Hariri “remains very close friend[s] with member[s] of the Saudi royal family and he is honoured and proud of it”.
If commercial or funding ties between the ANC and the Saudi royals on the one hand, and between Saudi Oger, Hariri and the Saudi royals on the other played any role in Matsepe-Casaburri’s award of the licence to Cell C, that could look very much like corruption.
Put differently, South Africa’s rulers would have acted on the basis of a pre-existing conflict of interest the fact that their own party has benefited from the royal patrons of the company that they favoured for the cellphone licence.
But before such a question can be considered, Judge Daniels will have to determine whether indeed Matsepe-Casaburri and the Office of the President unduly influenced Satra to recommend Cell C for the licence. The allegations brought to the judicial review by Nextcom include:
l During the run-up to Satra’s secret deliberations in April last year where the competing bids were scored, Matsepe-Casaburri and Mbeki’s legal adviser, Mojanku Gumbi, put pressure on Satra council chair Nape Maepa to recuse himself. Maepa had been concerned about the apparent bias of two of his co-councillors.
l Gumbi and Matsepe-Casaburri have not denied they played a role in Maepa’s recusal, but claimed it was because of perceptions he had a conflict of interest. That “conflict”, it is now clear, was cosmetic rather than substantive. Nextcom has implied that Maepa’s removal from the process had the effect of favouring Cell C.
l Matsepe-Casaburri placed an “observer”, advocate Ismail Semenya, with Satra during the deliberations. Semenya made suggestions that may well have influenced the outcome. Matsepe-Casaburri counters that Satra agreed with Semenya’s role, which means his presence did not constitute undue influence.
l Satra went to great lengths to ignore expert advice it had commissioned and that found that Cell C’s business plan was seriously flawed.
A great deal of the deliberations in the Pretoria High Court revolved around conflicts of interest Maepa’s “cosmetic” conflict not least among them. But what did not figure was the larger conflict of interest the proximity of Saudi Oger to Saudi Arabia’s rulers and the generosity bestowed on South Africa’s ruling party by the same Saudis.
However, the review hearing was about determining whether there had been executive interference, not what the reason may have been.
Judgement has been reserved.