/ 10 November 2006

The ANC’s new funding front

This week, we expose a new business front set up by the African National Congress (ANC) to seek profit on its behalf.

The Johannesburg-based Chancellor House group of companies has acquired ”empowerment” stakes in a wide range of businesses (see ”Other Chancellor House investments”).

More often than not, these opportunities have depended on the government’s discretion — the award of state tenders, mineral rights and the like. This means the ANC, as ruling party, has been both player and referee.

As in the Oilgate scandal, where ANC-linked Imvume Management diverted state funds to party coffers before the 2004 elections, the activities of Chancellor House raise the spectre of government actions being shaped by party interests rather than the public interest.

Civil society groups have argued that there is an urgent need for the regulation of private party funding — South Africa is one of the few democracies with no such law. The story of Chancellor House reinforces that argument.

Chancellor House has focused strongly on the minerals and energy sector, where empowerment opportunities have mushroomed since 2004, when new mining legislation came into effect.

Our main case study (see ”The oligarch, the ANC and the manganese deal”) reveals how the government awarded rights to strategically important manganese reserves to a consortium that included both Chancellor House and a Russian oligarch, Viktor Vekselberg.

The South African government’s embrace of Vekselberg flies in the face of well-publicised allegations of racketeering and asset theft against him (see ”Who is Viktor Vekselberg?”). Diplomatic expediency and the party’s funding needs may, it appears, have trumped the public interest.

The set-up
The evidence that Chancellor House was set up as a business front for the ruling party, answerable to its treasurer general, Mendi Msimang, is compelling.

Chancellor House is named after a now-decrepit building in downtown Johannesburg — in the 1950s it housed ”Mandela and Tambo”, the law firm of the two ANC presidents-to-be.

According to one well-placed official, who wants to remain anonymous, Msimang approached representatives of the department of minerals and energy as early as 2002 seeking opportunities for Chancellor House, which was formally constituted in March 2003.

By 2004, said the official, Chancellor House ”kept trying to get deals [from the department]. It said the money was for the ANC.”

The official added: ”You can speak to any senior ANC leader. There is no question, Chancellor is regarded as an ANC company … It is officially supposed to be an entity for ANC funding.”

During this research we obtained the versions of three business people who have close knowledge of the Chancellor House group. It is clear that they regard Chancellor House as a source of funding for the ANC. Details of the accounts are not provided here as doing so may compromise the informants who provided them.

Others have also spoken about their knowledge, direct or indirect, of Chancellor’s ANC connection. One business person who entered a deal with Chancellor said: ”We did know that Chancellor House was linked to the ANC … We don’t see it as a concern because we are satisfied as to their credibility.”

Another, who was involved in a deal indirectly related to one of the transactions described on these pages, said: ”I think it is common cause that Chancellor is the ANC’s — that it owns it. I have heard that Mendi [Msimang] chairs it.” Msimang does not chair Chancellor House, but this comment is consistent with separate accounts that the group answers to him.

On paper, the beneficial ownership of Chancellor House is deliberately vague. A ”charitable trust”, the Chancellor House Trust, is the sole shareholder of Chancellor House Holdings, according to the latter’s share register.

The Chancellor House Trust deed, lodged with the master of the high court, specifies no beneficiaries. But the deed does give a whiff of political purpose, saying that the ”principal object” of the trust ”shall be to promote, encourage and facilitate the participation and involvement in all economic and political sectors of South African persons and entities which have been historically disadvantaged”.

In theory, the trustees have the discretion to donate the proceeds of Chancellor House’s activities to whomever they choose within the broad confines of this principal object. In practice, however, the proceeds are intended for the ANC treasury.

The trustees are Popo Molefe, ANC national executive committee member and former premier of the North West, and Salukazi Dakile-Hlongwane, the CE of Nozala Investments, a leading black economic empowerment company.

Perhaps appropriate to the historical reference of the name ”Chancellor House”, the founder of the trust is Professor Bernard Magubane, the ANC historian-activist. Magubane has headed the Road to Democracy in South Africa project — an official history of the struggle — as well as government’s classification and declassification review committee, appointed to decide the status of sensitive historical documents.

Chancellor House Holdings directors are of similar pedigree. The founding directors in 2003 included Henry Makgothi, the treason trialist and former National Council of Provinces ANC chief whip; Sivi Gounden, formerly director general in the department of public enterprises and Irene Charnley, the unionist turned MTN director. Both Charnley and Gounden have since resigned from Chancellor.

The MD is Mamatho Netsianda, the former deputy secretary of defence. Netsianda’s relationship with Msimang, the ANC treasurer general, goes back at least to the late 1980s, when he served in London under Msimang, who was then the ANC’s chief representative to the United Kingdom and Ireland. Other directors are Edith Kuzwayo, formerly a legal adviser in the defence secretariat, and Tebogo Makgatho, who chairs the NGO information network Sangonet.

The Chancellor House Holdings board is chaired by Professor Taole Mokoena, an Oxford-educated surgeon. Mokoena was appointed by Health Minister Manto Tshabalala-Msimang in 2001 to serve a term as chair of the Medical Research Council. He is said to be close to the health minister, who is married to the ANC treasurer general.

Mokoena’s proximity to Msimang himself is apparent from an intriguing report by the Bahrain News Agency on March 20 last year. On that day, it said, Sheikh Hamdan bin Rashid Al Maktoum, the Dubai deputy ruler, had ”reviewed with Mendi Msimang and Taole Mokoena, advisers to President Thabo Mbeki of South Africa, means of enhancing bilateral commercial, tourism and cultural ties”.

Detailed questions about Chancellor House group and its role in ANC funding were sent in August to trustees Molefe and Dakile-Hlongwane; to Chancellor House chair Mokoena and MD Netsianda; and to ANC treasurer general Msimang. They were not answered.

Approached for comment, Chancellor House Trust founder Magubane said: ”Your assumption that it’s a front for the ANC is a bit far-fetched.” He then put the phone down.

Two persons who should have intimate knowledge of Chancellor House claimed to be unaware of its ANC funding role. Gounden, one of the founding directors, stated: ”During my tenure as director at [Chancellor House] … the objectives of the trust were to promote the development of black women and youth, in particular. I was unaware and remain so, of any link to the funding of the ruling party.”

It is not clear why Gounden maintains that ”black women and youth, in particular”, are the intended beneficiaries, as the trust deed makes no mention of this.

Robinson Ramaite, the former public service director general, is involved in the Kalahari manganese deal alongside Chancellor House. ”I don’t know about any links to the ANC,” he said. ”I have not met with Uncle Mendi in any of my relations with [the manganese consortium]. I know him only as the [treasurer general] of the ANC.”

However, others in whose interests it may have been to deny all, gave a glimpse.

Dilmar Abdoulaev, locally a director of Russian-headquartered Renova, which partners Chancellor House in the Kalahari manganese deal, confirmed that his company had met at least once each with Msimang and Kgalema Motlanthe, the ANC secretary general. ”We met to discuss how to align Renova’s social programmes with the ANC’s,” he said.

There seems to be no obvious reason why Renova should have met with the ruling party in a process that was supposed to have been government led.

When a call was made to Msimang’s office at ANC headquarters asking for the Chancellor House offices, the receptionist said: ”Chancellor House has had some dealing with us; that is why people get confused as to whether they have their offices [here].”

These articles are based on research undertaken by M&G journalists in collaboration with the Institute for Security Studies (ISS) corruption and governance programme and as part of a joint project with Idasa (PIMS) on party funding

On the net
The full ISS occasional paper, SA Democracy Incorporated: Corporate Fronts and Political Party Funding, can be downloaded


This article formed part of a larger report on the ANC’s funding front, Chancellor House. Click here to read more.