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The Mail & Guardian reveals how the African National Congress, through its close association with an empowerment oil trader, joined a dangerous courtship dance with the Iraqi regime of Saddam Hussein.
The story raises important questions about party funding and the extent to which our ruling party may be prepared to use its access to state power to get more of it.
It also draws into question the actions of senior party officials — and in one instance a presidential official — who collaborated with the trader, Sandi Majali.
Saddam, his country under United Nations sanctions and constant threat from the United States, craved diplomatic support above all else. What his regime offered in exchange was lucrative allocations of Iraqi crude oil.
A number of South African companies entered the dance, asking for oil allocations and at least pretending to be friendly with the Iraq regime. But the trader with the most success, although a relative unknown, was Majali.
Now it seems much clearer why Majali had so much success: He travelled to Baghdad with top party officials — secretary general Kgalema Motlanthe and treasurer Mendi Msimang — and in South Africa he hosted Tariq Aziz, Saddam’s powerful deputy prime minister, again in the company of ANC luminaries.
If the Iraqis had doubts about which of the oil applicants could offer the best political access in South Africa, Majali’s display of friends may well have put them to rest.
But what was in it for the party? Some evidence points to it having been a beneficiary of Majali or his companies.
Party spokesperson Smuts Ngonyama this week refused to discuss ANC finances, but maintained: “The ANC has never received material assistance
from any government or organisation in exchange for ‘diplomatic support’ or ‘diplomatic favours’.”
In South Africa, Majali has been the beneficiary of two state oil contracts worth R1,75-billion. The larger was a controversial tender to source crude from Iraq — exactly where Majali was getting his allocations.
Has the ANC abused state power for financial gain? And was the diplomatic support South Africa gave Iraq because of Saddam Hussein’s oil?
Saddam’s crude diplomacy
In April 2002 then-Iraqi president Saddam Hussein was at it, tilting at windmills. He turned off his country’s exports of crude oil to protest repression in Palestine.
Had other Arab oil producers joined his embargo, world markets and the United States might have been sufficiently shaken to put polite pressure on Israel. Saddam may have, for once, achieved a measure of good. But other oil-producing states took up the slack and Iraq, isolated, was forced into a hasty retreat.
At a conference of Arab states in Cairo at the time, a relative of the Iraqi ruler spoke up in his defence. The relative, the like-named Saddam Hassan, was the Iraq Oil Ministry under-secretary and a recent former head of the powerful State Oil Marketing Organisation (Somo).
Hassan was quoted as saying: “Oil is [an instrument] of national policy that counters US hegemony.”
What Hassan said, and his link to South Africa, are both relevant to this story.
What he said is relevant because it so aptly describes the Iraqi regime’s response to the constant threat it felt from the US, and to the way its autonomy had been constrained under a comprehensive United Nations sanctions regime imposed in 1990 after Iraq had invaded Kuwait.
One partial exemption from the sanctions was the “oil for food” programme started in 1996 to alleviate civilian hardship. Under this programme the UN allowed Iraq to sell crude oil under strict conditions; it took the proceeds; and it gave them back to Iraq only to buy approved civilian necessities.
One of the few levers of power Iraq had was its right to select, through Somo, the buyers of its crude. And, as Hassan implied, the Iraqi regime had no qualms about using that power to buy or reward diplomatic friendship and punish enemies. Oil was as much a political as a commercial resource.
And so it came as no surprise that, even while the US was the single biggest consumer of Iraqi crude, the figures showed that companies from Russia — Iraq’s greatest supporter at the UN Security Council — were by 2002 awarded “lifting” rights to almost half the total volume available. US refiners had to buy from the Russians who, as middlemen, made substantial profits.
But what was Hassan’s link to South Africa?
On December 5 2001 the Strategic Fuel Fund Association (SFF), the state company tasked at the time with maintaining South Africa’s strategic stocks of crude, issued an unprecedented tender for the supply of four million barrels of crude.
Previously the SFF had bought on the spot market from international traders or on a government-to-government basis when prices were right. But this time a tender was called for for a number of reasons, including to give local black economic empowerment companies a bite.
Among a series of controversies that dogged the tender, worth about R1-billion, was that it called specifically for an Iraqi crude, Basrah Light. Critics charged that an order for this Iraqi oil, rather than crude of a specified grade regardless of provenance, limited the field of potential suppliers and smacked of an attempt to fulfil a pre-determined outcome.
The company that won the tender was Imvume Management (Pty) Ltd, an unknown at the time. But if what Imvume told the SFF during the selection process was correct, it certainly had good access to Iraq. Imvume, the Mail & Guardian has established, named Saddam Hassan, the relative of the ruler, as its contact at Somo.
If Imvume was well connected in Iraq, it was even better so in South Africa. But before we get to that, more background may be in order.
As regimes under sanctions tend to do, Saddam Hussein’s was looking for ways around them. In December 2000 it institutionalised a breach of the sanctions which the UN found very hard to plug: it required companies awarded Iraq lifting rights to pay a “surcharge”, or kickback, of anything from $0,10 to $0,50 for each barrel of oil bought.
While buyers paid the official selling price to the UN, they had to pay the surcharge, illegally, into bank accounts nominated by Somo. Through this, the Iraqi regime had a significant source of revenue it could use as it wished, including to buy arms.
The result was an immediate and dramatic drop in the amount of crude bought from Iraq, as major oil companies feared being caught breaking UN rules.
But no sooner had the majors withdrawn than a new class of entrepreneurs beat a trail to Baghdad. According to the authoritative Middle East Economic Survey, there was a temporary drop of $2,5-billion in sales, but then: “The Iraqi oil authorities stuck to their guns under strict instructions from the political leadership and pulled out all the stops to attract buyers, many of whom [were] either completely new to the oil business or very small players. The main qualification required was a discreet willingness to pay the … surcharge and create the necessary buffer between Somo and the international oil companies.”
The oil majors were soon buying Iraqi crude again, but through the middlemen, who took care of the dirty business by splitting the premium they charged between themselves and Somo. The extra costs did not matter that much, as Iraqi crudes were of grades that were in demand and tended to start off very reasonably priced.
This new incentive for a middleman system dovetailed neatly with the one already described: the regime’s desire to sell to companies from countries it wanted to court or reward diplomatically, rather than from where the crude was most in demand.
A number of South Africans saw the opportunity to enter the market as middlemen. Two, who asked not to be named, this week separately told the M&G that there had been a definite political dimension. Saddam’s Ba’ath Party, said one, had sent diplomatic teams to many countries to offer oil lifting rights in return for friendship. “That is where the ANC [African National Congress] and the Ba’athists hooked up.”
The other said his company had been approached by a foreign oil trader who explained that Iraq was dividing its allocations on a country-by-country basis. The foreigner encouraged the South Africans to apply for part of the South African allocation so that, if successful, they could trade it jointly. But they were also told of the Iraqis’ “tacit” precondition: “[If] you don’t hate us; we give you oil.”
As if to confirm that Somo was determined to sell its oil where it could get the most diplomatic bang for its barrels, the South Africans who beat the trail to Baghdad seemed politically well connected. They included Tokyo Sexwale, the ANC premier-turned-businessman; Dominic Sewela and Moses Moloele, whose oil interests were related to empowerment group Exel; and Metalcor, an oil venture which included former ANC secretary general Cyril Ramaphosa and the Mineworkers’ Investment Company.
Ultimately, however, Somo awarded the greatest known South African allocations to Sandi Majali, a South African who is publicly unknown, and at least two companies associated with him: Montega Trading and the same Imvume Management which later won the R1-billion SFF tender.
Not much is known about Majali, who, according to company registration records, sports a number of different birth dates and sometimes a different first name, Sthembile.
But Majali had access. In late 2000 he and two business partners, Rodney Hemphill (a Johannesburg auctioneer who was also in business with the late defence minister, Joe Modise) and Iraqi-American Shakir al-Khafaji, travelled to Baghdad. The M&G has established that they were accompanied by Kgalema Motlanthe, the ANC secretary general, and Mendi Msimang, the ANC treasurer general and chief fundraiser. The delegation met senior Ba’athists, including Saddam’s influential deputy prime minister, Tariq Aziz.
There is evidence suggesting that Motlanthe and Majali travelled to Iraq together three more times in 2001/02.
The ANC this week failed to confirm or deny the visit, or to answer whether oil allocations had been discussed.
But in so-called Phase 9 of the UN oil for food programme, which started in December 2000 (which is also when Somo institutionalised the kick-back system), Montega Trading — of Majali, Hemphill and Al-Khafaji — had an allocation of two million barrels of Basrah Light.
Rumours did the rounds in the industry that Montega was an “ANC company”; there to make money for the party. The M&G has been unable to verify a party shareholding, and the ANC this week failed to confirm or deny that Majali or his companies had funded it.
But Majali’s scoop — to be accompanied to Baghdad by Motlanthe and Msimang — and further evidence leaves little doubt that Majali’s business was as political as it was commercial. A businessman who moves in top circles told the M&G: “[Deputy Foreign Minister] Aziz Pahad and the previous Iraqi ambassador [to Pretoria] had a long-standing relationship. The link with the ANC was set up and then Sandi Majali runs with it. Sandi is a crony of Kgalema [Motlanthe]. He’s been going around telling people he represents the ANC.”
And a businessman with interests in oil said: “[Majali] was very close to the Iraqi ambassador and very close to the ANC, to the secretary general. When [deputy prime minister] Tariq Aziz was here [in July 2002 on a state and party visit] he was hosted by Imvume at a function in Randburg.
“There were ANC banners all over the place. Smuts Ngonyama [head of the ANC presidency] was there and Kgalema was the main speaker.”
The M&G has independently verified that Imvume had booked and paid for the function.
One ANC official told the M&G that Majali was “an ordinary member of the ANC”, but also confirmed that Majali would visit ANC headquarters to confer with the “top leadership”.
On February 2 2001 the crude carrier Ocean Jewel was at Iraq’s Mina al-Bakr terminal to load Montega’s two million barrels. Before the month was out, Montega and its marketing and technical partners, Swiss-registered companies Sopak and Glencore International, were in trouble with the UN: even though the US had been nominated as the Ocean Jewel’s destination, the cargo was discharged in Singapore.
As Iraqi crude was priced differently for different destinations, this diversion meant Montega, Sopak and/or Glencore stood to make an extra $7,7-million. The UN was diplomatic in the language it publicly used to describe the incident — it spoke about “non-compliance” — but tightened the rules to prevent a recurrence and ordered the windfall be repaid.
The mini-scandal and, insiders say, differences that developed between Majali on the one hand and his partners Hemphill and Al-Khafaji on the other, meant that Montega Trading subsequently died a natural death.
But the partnership between Majali, Sopak and Glencore grew. Glencore is a major international commodity trader. Sopak is a Glencore associate company active in Africa, and is led by Ivor Ichikowitz, a South African whose business activities have taken him close to the ANC and to individual ruling party luminaries including Mathews Phosa and Tony Yengeni.
By the time the SFF tender for four million barrels of Basrah Light came up in December that year, Majali put in his bid through Imvume, with partners Sopak and Glencore.
The SFF was widely criticised about aspects of the tender, including the insistence on Iraqi crude. Those who defended the deal maintained that Basrah Light was right for South African storage and refineries; and cheap.
Other factors that detractors charged indicated a desire to fulfil a pre-determined outcome was the very short tender period– 10 days — and a change mid-course in how pricing formulas were presented, which allowed Imvume’s bid to go from expensive to cheap.
When Renosi Mokate, chief executive of the SFF holding company, the Central Energy Fund, was hauled before a disciplinary committee on unrelated charges the next year, she hinted that her own displeasure with the tender had contributed to the “witch-hunt” against her. Mokate was later dismissed.
Be that as it may, Imvume has gone from strength to strength. On October 15 2002, the day the newly formed South African state oil company PetroSA was publicly launched by President Thabo Mbeki, Imvume was awarded a one-year R750-million contract by PetroSA to supply condensate feedstock to its Mossel Bay gas-to-liquids plant. Previously, condensate for the Mossel Bay plant was sourced on the spot market.
Just how close are Majali and Imvume to the ruling party? Imvume and its auditors have stalled since last week on providing Imvume Management’s share register– public documentation — to the M&G.
An earlier inspection of the share register, in October 2002, revealed the unusual situation of the company being owned by three charitable trusts. By the time of going to press, Imvume had not yet supplied the M&G with information relating to how much, if any, funding has already gone to the trusts.
But the trust deeds themselves show another high connection: Daniel Lengosane, director of internal security in the President’s Office, was the symbolic “donor” who had set up the trusts in all three cases.
Presidential spokesperson Bheki Khumalo was asked whether Lengosane’s association with a company that had secured R1,75-billion in government tenders was not problematic. He later responded: “We are not willing to go into details, but so far there is no indication that Mr Lengosane broke any of the official regulations … We are at ease at this stage.”
And there are other indications of a possible party funding role, including an assertion by an SFF director that during the SFF’s due diligence of Imvume prior to its tender award, it appeared that a beneficiary of Imvume was an entity called the Stalwarts Research Trust.
A contemporaneous inspection of the Stalwarts trust deed showed it to be a fundraising body of the ANC, with trustees Motlanthe, as secretary general; Msimang, as treasurer general; and Jeff Radebe, as head of the ANC policy committee. The deed described the president of the ANC as the trust’s ultimate arbiter.
ANC spokesperson Smuts Ngonyama this week refused to confirm or deny the ANC had benefited.
It is common cause that Saddam Hussein tried to buy diplomatic influence through oil allocations. Majali, Montega and Imvume got substantial allocations — nine million barrels according to a recent list published by Baghdad newspaper Al-Mada.
And it is clear that Majali was close enough to South Africa’s ruling party to give the Iraqis comfort that they were dealing with an entity which could influence South African authorities.
The ANC had joined a dangerous courtship dance with Saddam.
The ANC responds
African National Congress national spokesperson and presidency head Smuts Ngonyama this week commented on issues raised in the article as follows:
“The ANC has a long-standing practice not to discuss outside the mandated structures of the movement issues relating to its financial arrangements, and it is therefore not possible to respond directly to the questions you posed.
“The ANC has never received material assistance from any government or organisation in exchange for ‘diplomatic support’ or ‘diplomatic favours’.
“The ANC’s bilateral relations with foreign parties and organisations — and indeed our approach to the crisis in Iraq — is informed by the need to resolve international conflicts through peaceful means; to strengthen the multilateral system; and to provide assistance and solidarity to peoples in need.
“The ANC has never encouraged, nor been party to, any business interactions which contravene United Nations regulations or international law.”
Sandi Majali and Imvume had failed to reply to detailed questions by the time of going to press.