The ANC, its outgoing treasurer said in Polokwane this week, repaid the R11-million Oilgate ‘donation†immediately it appeared there was a dispute about it. So why is state oil company PetroSA — read the taxpayer — still owed millions?
Mendi Msimang’s acknowledgment during a closed session of the ANC national conference was the first clear confirmation by an ANC official, two and a half years after the Mail & Guardian broke the story, that the party had received the money.
The ackowledgement is contained in the prepared version of Msimang’s presentation to delegates on ANC finances. The report, a copy of which has been obtained by the M&G, also details an extraordinary turnaround in the ruling party’s financial fortunes, thanks in part to a portfolio of investments worth over R1,7-billion.
The M&G revealed in May 2005 that oil trader Imvume Management had diverted R11-million to the ANC in December 2003 shortly after receiving a R15-million advance from PetroSA for an oil condensate shipment.
Imvume, out of pocket as a result, could not pay its foreign supplier. PetroSA doubled up the advance, meaning that taxpayers’ money subsidised the ruling party.
Msimang’s report said: ‘Disturbing reports alleging that the ANC had benefited from an oil deal appeared in the media. That story is regurgitated from time to time in an effort to discredit the ANC—
‘Indeed we did receive a donation of R11-million in the normal course of our fundraising. And when it appeared there was a dispute around it, we immediately returned the entire donation to the donor in two instalments of R6-million on the 31st May 2005 and R5-million on the 20th June 2005.â€
While Msimang’s report confirms the ANC received the money, it does not resolve several questions:
- Msimang calls it a ‘donation — in the normal course of our fundraisingâ€. Why then did PetroSA pay the advance without conducting a due diligence on Imvume’s ability to repay it, and why did Imvume transfer the bulk to the ANC when it had no reserves of its own? The evidence suggests Imvume was used as a conduit to channel state funds to the ruling party.
- Why did the ANC delay until the M&G put the matter in the public domain in May 2005? Msimang says the ANC repaid the money immediately ‘when it appeared there was a dispute around itâ€. The dispute, however, dated from at least June 2004, when PetroSA formally demanded repayment from Imvume. It instituted legal action the following month.
- Why did PetroSA not pursue its legal demand aggressively until after the M&G exposé? PetroSA agreed to postponements of a hearing until August 2005, when a settlement agreement was made an order of court. This, it now appears, was only after the ANC had returned the money to Imvume. PetroSA has in the past explained its soft approach by claiming that ‘a liquidated Imvume would not generate the required proceeds for PetroSAâ€.
- Why did the ANC not return the ‘donation†with interest? On Petro-SA figures the interest owed on R11-million would have amounted to more than R2-million by mid-2005. In court papers Imvume boss Sandi Majali claimed that PetroSA had agreed during settlement negotiations in September 2004 to waive all interest. PetroSA denied this, but when Imvume defaulted on the August 2005 settlement agreement and PetroSA reinstituted action a year ago, PetroSA omitted a demand for the bulk of the interest. PetroSA amended its claim after the M&G pointed out the ‘errorâ€.
- Why did the ANC not repay PetroSA directly? While the party may have been keen to maintain the appearance that it was an ordinary donation by returning the money to the ‘donor†rather than the source, this has contributed to PetroSA — and by extension the taxpayer — still being partly out of pocket.
Imvume and PetroSA figures show Imvume did not make repayments to PetroSA commensurate with the repayments that Msimang says the ANC made to Imvume.
Imvume paid R1,33-million to PetroSA during 2004, before the M&G broke the story. About two weeks after the ANC repaid R6-million on May 31 2005, Imvume transferred R1,66-million to PetroSA.
Ten days after the ANC repaid another R6-million on June 20 2005, Imvume transferred another R3-million to PetroSA. And between the August 2005 settlement agreement and Imvume defaulting again in May 2006, Imvume transferred another R4-million in instalments to PetroSA, bringing the total repaid to date to only R10-million, still R1-million short of what Msimang says the ANC repaid and millions more if interest is taken into account.
Imvume’s attorney, Barry Aaron, said he could not comment as he was unable to get instructions from his client. But he added that in his ‘personal opinion … if any moneys were repaid [by the ANC], they would have been used for the purposes for which they were paidâ€.
Imvume still owes PetroSA R8-million in capital, plus a similar amount in interest. Although the ANC had received only R11-million, Imvume’s original debt to PetroSA was R18-million — the R15-million advanced to it plus R3-million more which it had withheld from PetroSA in a complex set of transactions.
PetroSA remains bogged down in protracted litigation to recoup the debt from Imvume sister company Imvume Resources, which signed surety.
Msimang’s report reveals that when Imvume paid the R11-million to the ANC in December 2003 the party was in great financial difficulty — it refers to the ‘hurtful journey we traversed for 14 months between January 2003 and April 2004 when we were unable to effect salary payments on timeâ€. There were 171 staff resignations as a result.
During the financial year October 2002 to September 2003, the ANC raised R107-million, but salaries and preparations for the April 2004 elections drove expenditure to R180-million, resulting in a R73-million deficit.
The following financial year, again because of the elections, expenditure grew to R235-million, but increased fundraising meant the deficit was reduced to R18-million.
During the adjusted April 2005 to March 2006 financial year, ANC coffers were suddenly brimful — R342-million was collected against R189-million spent, leaving a surplus of R153-million. During 2006/07 there was another surplus, of R67-million. Msimang’s report does not say what led to the reversal of fortunes.
The report describes a new type of fundraising now maturing — alternatively referred to as an ‘investment mechanismâ€, a ‘portfolio of investments†and ‘investment companiesâ€.
After the ANC’s 2002 national conference in Stellenbosch, says the report, ‘the office of the treasurer general has inspired the creation of investment mechanism [sic] that will ensure funding the movement on a sustainable basis — I am happy to announce that the market value of all our investments stands at no less than R1,75-billion. That is what the movement owns.â€
The ANC’s use of secretive front companies and its reliance on government contracts has elicited controversy. The M&G, in collaboration with the Institute of Security Studies’ corruption and governance programme, a year ago exposed what may be the main such vehicle, the Chancellor House Trust.
Chancellor House Holdings, owned by the trust, was set up in March 2003, four months after the Stellenbosch conference. The M&G revealed last month that Chancellor House Holdings has a R3-billion stake in one of South Africa’s largest state contracts yet, to provide boilers for a new Eskom power station.
An annexure to Msimang’s report states that ‘in its quest to be self-sufficient the ANC is entitled to establish its own investment companiesâ€, but admits that the ‘absence of investment policies and guidelines†is a ‘challengeâ€.