Stefaans Brmmer and Mungo Soggot
One of the men implicated in a bribe scandal that rocked the state oil industry was this week made chairperson of Armscor.
Seth Phalatse has admitted he took a $20 000 (about R165 000) cash bribe in May last year. He subsequently returned the money and, months later, helped blow the whistle, assisting prosecutors prepare what is likely to be the first high-profile corruption prosecution since 1994.
Phalatse was the chairperson of the Strategic Fuel Fund (SFF), the state oil storage and trading company, until he and his board were axed by the Ministry of Minerals and Energy last December.
Phalatse, as state witness, is likely to be indemnified from prosecution. But serious questions remain over his judgement: he did initially accept the bribe, and on his own version he waited three months before alerting authorities.
Phalatse’s appointment at Armscor, the state arms procurement body, was announced by Minister of Defence Mosiuoa Lekota on Wednesday. Phalatse is among four new board members expected to steer the troubled arms parastatal into calmer waters. Another surprise appointment is Constand Viljoen, the former South African Defence Force chief and Freedom Front leader.
The bribes that Phalatse says he and his colleagues took were allegedly part of a deal the SFF struck with Trafigura, a major international oil trading company, and its South African joint venture operation High Beam Trading International. The investigation that followed resulted in raids on former Central Energy Fund (CEF) chairperson Keith Kunene and High Beam’s head, Moses Moloele. Both men are icons in the black business community. After the raid, Kunene resigned his numerous public positions and has since faded from public life.
In an affidavit dated February 5 this year, Phalatse first sets the scene for the oil deal. He tells how Minister of Minerals and Energy Phumzile Mlambo-Ngcuka directed the SFF to sell off stored oil and replace it with higher-grade oil, but that she ordered it be an in-house transaction.
Phalatse then details how Kunene, as chairperson of the CEF, then went against Mlambo-Ngcuka’s instructions to negotiate a deal with Trafigura in London. On May 13 last year, Phalatse, as head of the SFF, a subsidiary of CEF, signed the deal. “I did not read the agreement, and I did not understand what it contained. I depended entirely on the advice of the people who were assigned to negotiate and conclude this contract,” he says.
Not long after, according to Phalatse’s affidavit, Kunene asked him to a private meeting at the home of SFF procurement committee head Dukes Zondi. “Present at the meeting was Kunene, Zondi and myself. Kunene informed me that after the signing of the agency agreement [with High Beam/Trafigura], SFF’s new partners had given him cash for himself, Zondi and myself in the amount of US$20 000 each, as an initial token of appreciation of the awarding of the contract …
“Kunene placed a white envelope of cash on my lap. Kunene further mentioned that there was an additional R12-million to be shared between the three of us that would be deposited in a foreign bank account for us once the dust had settled … Kunene and Zondi convinced me to take the envelope of money, which I did. Inside the envelope was US$20 000 in brand new US$100 bills.”
Phalatse further describes how his doubts got the better of him, and how, in June last year, he eventually returned the envelope to Kunene. In August he informed the minister, who by then had already got wind of the bribes and had ordered an investigation. Following the raids on Kunene and Moloele, the national prosecuting authority has continued its investigations. It is unclear when the matter will reach court.
Phalatse is also the director of government affairs and Africa sales at BMW South Africa. His “abbreviated curriculum vitae”, released by Armscor this week, fails to make any reference to his stint in the state oil sector.
Ministry of Defence representative Sam Mkhwanazi this week commented: “We are aware of the allegations the Mail & Guardian is referring to. But we are convinced that when the said trial shall have run its course it will become clear that this was a correct appointment.”
Phalatse is abroad and could not be reached for comment.
Additional reporting by Evidence wa ka Ngobeni