Did govt know of Iraq kickbacks?

The extent of the government’s knowledge that Saddam Hussein’s Iraq levied sanctions-busting payments on transactions under the Oil for Food programme may become a focus of the Donen Commission of Inquiry, which starts public hearings on May 8.

The commission, led by advocate Michael Donen, was appointed by President Thabo Mbeki in February to pursue allegations made against South African companies and individuals in a report of the United Nations Independent Inquiry Committee (IIC).

Oil for Food was a UN-administered attempt to relieve the civilian hardships caused by comprehensive sanctions on Iraq. Under the programme, Iraq could sell oil internationally, but use the proceeds only to buy humanitarian necessities.

The IIC reported last October that Iraq had abused the programme by bestowing lucrative allocations on politicians and other influential people in order to buy international support against sanctions; and that it had raised “surcharges” on oil trades and “kickbacks” on food and other humanitarian transactions. These payments to Iraq were in breach of the sanctions.

The Mail & Guardian has documented how Oilgate company Imvume Management acted effectively as a front for the African National Congress in its Iraq oil dealings.
The ANC was to have shared in the profits, while Iraq was assured of the ANC and South Africa’s support against sanctions.

Donen is unlikely to stray much into the influence-buying allegations, which he calls a “moral issue”. His terms of reference limit him to examining whether South Africans physically breached sanctions by paying the surcharges and kickbacks to Iraq; whether that constitutes an offence in South Africa; and how to prevent recurrences.

The IIC report contained claims that four South African oil companies paid or promised surcharges to Iraq. They are Imvume, Montega Trading (an earlier company in which Imvume boss Sandi Majali was involved), Omni Oil (started by Majali’s former partners in Montega) and Mocoh Services South Africa, a company co-owned by Tokyo Sexwale. Majali and Sexwale have denied making illicit payments.

The report also contained allegations against four companies that operated from South Africa and traded under the “food” side of the programme. They are APE Pumps, Falcon Trading, Glaxo Wellcome South Africa (now GlaxoSmith Kline) and Reyrolle Limited. APE has acknowledged payments, but claimed it thought they were above board, while Glaxo has maintained it operated within the rules of Oil for Food.

Donen may well find that if illicit payments were made to Iraq, this, in itself, is not prosecutable in South Africa. The Application of Resolutions of the Security Council of the United Nations Act, intended to give local enforceability to UN sanctions, was passed in 1993, but never proclaimed into law by Mbeki or his predecessors.

Donen this week said there might be other possible charges. The Cole Commission in Australia, which has a mandate similar to his, has explored the possibility that where the state is the end user and a supplier does not tell the state that it is breaching sanctions, this constitutes “material non-disclosure” and fraud. This is because the state is put in a position by the supplier to breach its international obligations.

Donen added: “We don’t know what the answer is, and that is why we’re subpoenaing these people.”

Among the companies named in the IIC report, Imvume is the only known supplier to the South African state.

Majali and Imvume have denied knowledge of a $60 000 surcharge payment that the IIC report says was reflected in Iraqi records as having been paid on Imvume’s account. If surcharges were indeed paid—but the state was aware of it—there would have been no non-disclosure and no offence of fraud.

There is evidence of some knowledge at high levels. In September 2001 a Department of Minerals and Energy delegation travelled with Majali to Iraq, where it asked for oil allocations which Imvume would supply to the Strategic Fuel Fund (SFF), a South African state institution. The trip was led by the department’s Director General, Sandile Nogxina, and included ministerial chief of staff Ayanda Nkuhlu and SFF director Riaz Jawoodeen.

A departmental motivation for the trip, signed by Deputy President Phumzile Mlambo-Ngcuka, then the minerals and energy minister, noted that “a surcharge imposed by the Iraq’s [sic] on their oil allocation makes it difficult for South African companies, especially Black Economic Empowerment Groups, to break into the market. This is one of the issues that needs to be addressed by both parties.”

The M&G reported last year that a justification used internally by the SFF to source Iraqi crude through a tender awarded to a private company—Imvume—rather than doing a direct government-to-government deal was that this would save the SFF, as a state institution, having to dirty its hands by paying surcharges. Jawoodeen and Nogxina, who have both been subpoenaed by Donen, may face questions about this.

Should Donen’s hearings substantiate these and similar allegations, this may lift the blame from individuals and companies who may have made illicit payments to Iraq—but draw into question the South African government’s own commitment to international law.

Players and bit-players in the Oilgate scandal dominate the list of individuals subpoenaed by Donen to produce documents and testify. Apart from Nogxina and Jawoodeen, the list includes Majali, his former lawyer, George Poole, former business partners, Rodney Hemphill and Ivor Ichikowitz and ANC secretary general Kgalema Motlanthe—who also travelled to Baghdad with Majali.

Sexwale has also been subpoenaed.

Stefaans Brümmer

Stefaans Brümmer

Stefaans is an old hand at investigations. A politics and journalism graduate, he cut his reporting teeth at the Cape Argus in the tumultuous early 1990s; then joined the Mail & Guardian as democracy dawned in April 1994. For the next 16 years (a late-1990s diversion into television and freelancing apart), the M&G was his journalistic home and launch pad for award-winning investigations focusing on the nexus between politics and money. Stefaans has co-authored exposés including Oilgate, the Selebi affair, Chancellor House and significant breaks in the arms deal scandal. Stefaans and Sam Sole co-founded amaBhungane in 2010. He divides his time between the demands of media bureaucracy (which he detests), coaching members of the amaBhungane team, and his first love, digging for dung. Read more from Stefaans Brümmer

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