Inside the ANC Youth League’s business empire

Once the cradle of young black leadership, the African National Congress Youth League seems in part to have become a vehicle for elites and a reference point for businesses seeking to engage “political capital”.

This account probes the extent to which the ruling party’s youth wing may have been prepared to use its access to state power to feather its own financial nest — and the extent to which business people entering business relationships with league companies have seen this as giving them special access to the government. Many of the youth league’s office bearers are actively pursuing business interests. Where did all this start?

In May 1997 ANC Youth League leaders met in downtown Johannesburg to put their signatures to the founding documents of a company, the National Youth Trade and Investments Corporation.

Backed by the technology group Gijima of well-connected businessman Robert Gumede, the company was the league’s first significant attempt, after the dawn of democracy in 1994, to branch into the world of business.

The company was led by Kirro Kinana, then the youth league deputy secretary general; Pemmy Majodina, then treasurer, and Andries Nel, then a prominent member and now the ANC deputy chief whip in Parliament.

The company made a number of attempts to secure government contracts. In December 1997 it emerged that the youth league-linked company was part of a consortium that had tendered to construct two juvenile prisons in Mpumalanga.

The bid ran into trouble after Nel, who at the time was also a member of Parliament’s correctional services portfolio committee, disclosed his interest.

There was an outcry from opposition parties.

Later the same company was preferred bidder in another prison contract near Pretoria, but that also fell through.

Through other, newer business vehicles, the youth league has had more success — although league officials this week sought to distance the league from these newer companies.

The Progressive Youth Investment Company (PYIC) was set up in 1999 and Lembede Investment Holdings in 2000 — the latter named after Anton Lembede, elected the league’s first president in 1944.

Lembede is majority-owned by a charitable trust, the South African Youth Development Trust, which features youth league secretary general Fikile Mbalula as a trustee. A second trustee is Malose Kekana, CEO of Umsobomvu Youth Fund, a youth development fund set up by government. PYIC appears to be owned by the same trust.

Kekana helped set up both PYIC and the trust before joining the Umso-bomvu fund in 2001. He remains a trustee of the trust. Songezo Mjongile, a member of the youth league’s national executive committee, runs both PYIC and Lembede.

Mjongile this week said PYIC is no longer active and exists only to hold shares in Khaya Car Hire, an empowerment company associated with transport giant Imperial, and People’s Bank.

Lembede, on the other hand, controls or has had major shareholdings in a range of ventures, not all of them successful, spanning mining, financial services, forestry, property and telecommunications.

In a number of cases these ventures have depended on state opportunities — tenders, privatisations, operating licences — which have, in some instances, created conflicts of interest for state officials.

One of the best examples of this dilemma may have been the debacle when the Komatiland state forests were privatised in 2002 to the Zama forestry consortium, only to be cancelled when it emerged that the Department of Public Enterprises official who had presided over the tender process, Andile Nkuhlu, had accepted substantial gifts from the consortium.

An added conflict that was not highlighted at the time was that the league was one of the major shareholders in Zama through Lembede — while Nkuhlu was also a leading league member. Key players in Lembede were responsible for the gifts to Nkuhlu.

A subsequent attempt by Lembede to benefit from the re-privatisation of the same state forest failed last year.

But a case where the league has had success in a state privatisation tender is its involvement in a consortium that bought high-tech construction material company Fibretek, spun off from state arms group Denel, in 2002.

Lembede also has a small stake in Two Consortium, one of the successful bidders for the second national telephone operator licence.

Many of the league’s business ventures, however, have concentrated more strictly on the private sector. The best example of this has been the mining empowerment deals struck with controversial father-and-son team Roger and Brett Kebble.

But even here the marriage of what may be termed “political capital” with commercial capital could lead to questions about political impartiality. Take the battle last year between Deputy President Jacob Zuma and national prosecuting head Bulelani Ngcuka, when the Kebbles, who are both being prosecuted by Ngcuka on unrelated fraud charges, both weighed in on Zuma’s side. The youth league, very publicly, also criticised Ngcuka.

While league leaders may have been following the ANC’s political line, the fact of their relationship with the Kebbles does give rise to questions about their independence.

Lembede, according to its chief executive, Mjongile, has an annual turnover of between R3-million and R5-million. As the company and its deals are relatively young, greater profit may flow in years to come from deals, such as that with the Kebbles, effected late last year.

In spite of attempts this week by Mjongile and league officials to downplay the relationship between Lembede and the league, the flow of funds leaves little doubt about the link.

The league receives financial benefits from the trust, which, in turn, as majority shareholder, benefits from dividends paid by Lembede. In recent years the trust has dished out hundreds of thousands of rands to the league. Mjongile confirmed this, but said most of the money was used to support development projects organised by the league.

Though the trust has so far benefited only the league, Mjongile denied that the league “owned” the trust. He said it was “unfair” to describe Lembede as a youth league company. “There are other shareholders in the company, including myself, [attorney] Themba Langa and Mcebisi Mlonzi [the former Zama chief executive].”

Mjongile said Mbalula, the league’s general secretary, was involved in the trust in his “own personal capacity”. This was echoed by Mbalula, who said: “The youth league is a political party. Youth league office bearers are involved in business in their own personal capacity.”

Mbalula this week also denied that the league was associated with Lembede. “There is no company that is being run by the youth league. We do not control any company. [Lembede’s] Songezo [Mjongile] is a member of the youth league. If Lembede decides to donate money to the youth league it is the company’s own discretion.”

Mbalula also sought to downplay his own role in the trust. “That trust does not even exist anymore. I do not even remember the last time we met. Yes I am a trustee but the trust is not active and we are even thinking of cancelling it,” he said.

This was contradicted by Mjongile, who confirmed that the trust was active and had in recent years received dividends from Lembede.

Mjongile also confirmed that Mbalula, in his capacity as trustee, had co-presided over the decision to “donate” money to the league. Asked about Mbalula’s dual roles — as donor and representative of the beneficiary — Mjongile said: “Well, I think the youth league approached the trust through the treasurer and not the general secretary.”

The trust’s deed, held by the master of the high court, describes Mbalula as a “fundraiser for youth campaigns” and Umsobomvu Youth Fund head Kekana, who remains as a trustee, as a “banker”.

The beneficiaries of the trust are described “as every person resident in the RSA under 35 years of age and every entity, whether a company, cc, trust, or partnership, which in the opinion of the trustees is able through its activities to promote the economic, social or educational well-being of any such person”.

The object of the trust, according to the documents, is to promote development, and “to assist beneficiaries to acquire assets”.

Mjongile confirmed that the trust supported a number of programmes for the league. It donated money to the league’s 21st congress in 2001 and funded certain aspects of the league’s Youth Day celebrations last year.

Mjongile said the youth league regularly approached the trust for financial assistance. “The youth league is involved in development work. The trust supports the youth league on that,” he said.