Jacob Zuma, Khulubuse and the missing millions
President Jacob Zuma allegedly helped to clinch a $2-million (R13-million then) investment for his nephew"s controversial mining company, Aurora Empowerment Systems.
The claim by a director of international investment firm Global Emerging Markets (Gem) suggests that Zuma involved himself personally – despite having a clear conflict of interest given that his nephew, Khulubuse Zuma, was a director of Aurora.
The Gem director"s claim is buttressed by circumstantial evidence.
To make matters worse, Gem was led to pay the money into what appears to be a dummy account from which, according to a high court claim it filed, the cash was diverted.
There is no evidence the president or Khulubuse were involved in the claimed misappropriation.
Zuma"s alleged intervention – a July 2010 meeting that gave Gem the confidence to invest – came while Aurora was desperate to raise funds to make good on its bid to buy the Pamodzi gold mines out of liquidation.
Presidential spokesperson Mac Maharaj confirmed receiving detailed questions on Monday afternoon. By Thursday at 10am, he indicated there was no response from the presidency.
1"s nod-and-wink meetings”)
Aurora woos Gem & Labat
By the time of Zuma"s meeting with Gem director Chris Brown on July 11 2010, Aurora had been courting Gem for some time.
In April 2010, Zuma"s private attorney, Michael Hulley – acting on behalf of Aurora – announced that Gem had agreed in principle to advance up to R725-million to Aurora through the purchase of shares, provided the latter listed successfully on the JSE.
Aurora tried to get on to the JSE by buying Labat Africa – a small listed technology company led by former rugby administrator Brian van Rooyen. But Aurora struggled to meet the conditions set by Labat and the JSE, and the listing, through a takeover of Labat, had not occurred by July 2010.
Aurora under fire
By then, Aurora was in severe financial difficulty and was facing fierce public criticism about its interim management of the Pamodzi mines and failure to pay workers.
On July 12 2010, the online publication Moneyweb reported that Gem director Chris Brown had arrived in South Africa.
Moneyweb quoted Pamodzi liquidator Enver Motala as saying: “I have met with Chris Brown, one of the directors at Gem and he confirmed that R50-million in interim funding is to be made available.”
The news came as the remaining 100 employees keeping Aurora"s Grootvlei mine under care and maintenance were reportedly threatening to walk out because of nonpayment.
Enter President Zuma
Now it has been alleged that the day before, July 11, Brown had been treated to a face-to-face meeting with President Zuma.
In an emailed response to questions from amaBhungane, Brown confirmed meeting Zuma on the morning of the Fifa World Cup final on July 11 2010.
The New York-based businessman said Zuma “thanked” him “many times” during their meeting, which took place at the “presidential home … in Zuma"s living room”.
Brown told amaBhungane that the meeting was arranged by Khulubuse Zuma and Fazel Bhana, Aurora"s self-styled “chief strategist of mergers and acquisitions”.
No one from Aurora was present during their discussions, but according to Brown, Zuma heaped thanks on Gem for bailing out the flailing company.
With hindsight, however, it appears Brown believes Aurora manipulated him.
Asked why he thought the meeting was arranged, Brown wrote: “To bullshit Gem and pump Gem up to invest in the mine; yet all along, they had arranged to steal the funds by setting up an account at a different branch.”
Khulubuse Zuma said: “While it is true that Mr Brown and I did discuss his wishes to meet with the president and other senior government leaders to discuss his firm"s investment plans ... it is patently untrue that I ever undertook to help him in this regard. To this day, I am not aware of any meetings that Mr Brown did manage to secure with any senior government leader or what was discussed at such meetings, if ever they did take place.
“The question of the Gem transfer into Labat/Aurora is the subject of the Aurora liquidation enquiry that is currently underway and I am not at liberty to discuss this matter at this stage.”
Responding to questions on Bhana"s behalf, attorney David Swartz said: “As the matter is still pending and the various issues and questions raised by you are material to the numerous issues in dispute, it would be improper for my client to provide any response thereto. In short, the matter is sub judicata.”
Gem gets fooled?
Brown"s allegation is still the subject of a police investigation and a high court damages claim by Gem against First National Bank.
According to evidence that forms part of Gem"s claim, Fazel Bhana emailed Gem exactly a month later, on August 11 2010, providing the name and contact details of “Naseem Boda”, an FNB manager.
A subsequent email from Nasiem Boda Mahomed confirmed to Gem: “The information that you have on the FNB Lenasia account is correct and is held in the name of Labat Africa. All proceeds to be directed to the account as mentioned.”
Two million dollars, then worth R13 167 150, was transferred into the account on August 17 2010.
Not Labat, but Thulane
According to Gem"s claim, the account did not belong to the listed company Labat Africa – which was expected to provide 20-million shares as security for the payment.
Instead, it was held in the name of “Thulane SZ trading as Labat Africa Limited” and was a money market account of a sole proprietor – Sheshile Thulani Zwelihle Ngubane.
Ngubane was a director of Aurora. Both he and Bhana have re-emerged in the Blyvooruitzicht gold mine debacle, in which Goldrich Holdings, a company co-owned by Ngubane and advised by Bhana, embarked on a re-run of the Aurora saga.
The high court in Johannesburg this week ordered the eviction of Goldrich from the Blyvooruitzicht mine after the company had repeatedly missed payment deadlines.
The court heard evidence that – as in the case of Aurora – the mine, in provisional liquidation, had been stripped of material and equipment while under Goldrich"s control.
Here today, gone tomorrow
Gem alleges that “Ngubane has appropriated the money by transferring or allowing the transfer of the money out of the account”.
According to a bank statement seen by amaBhungane, the account was opened on August 5 2010. The cash was transferred out in two tranches of R5-million and one of R3.15-million, on August 19 and 20, and the account was closed on September 7 2010.
Ngubane angrily declined to respond to questions: “You are not the courts,” he said on the phone: “Write anything you want; don"t ever contact me again, please.”
Mohamed reportedly left FNB on April 30 last year after resigning from the bank.
He did not respond to messages.
FNB spokesperson Humbulani Salani told amaBhungane: “In view of the ongoing legal proceedings, it is not possible for FNB to comment in detail. However, the bank can confirm that it has dealt with the matter internally and has instructed its attorneys to defend the claim against the bank.”
Where did the money go?
On August 23 2010 Aurora issued a statement confirming Gem had “advanced interim funding against security of 20-million Labat shares from Aurora”.
Ngubane told Moneyweb that some of the $2-million would be used to pay salaries. “The priority is to our staff, paying off the outstanding salaries,” he was quoted as saying.
But that does not seem to have happened.
In October 2010, Sapa reported that workers, who had not been paid salaries since March, had not received a cent from Aurora.
National Union of Mineworkers branch chairperson Frasy Namanyana was quoted as saying: “The situation remains unchanged. People have not been paid and the water and electricity is still cut off. We have received nothing at all.” (See “Derelict Grootvlei: A monument to malfeasance”.)
Eventually the Aurora takeover of Labat fell through when Aurora failed to come up with the necessary cash.
With Aurora gone, Gem queried the whereabouts of its payment and its 20-million Labat shares.
In August 2011, Labat issued a notice to shareholders warning that “a $2-million investment which an investor had been led to believe was to be invested in Labat was in fact diverted to an Aurora account”.
Labat chief executive Brian van Rooyen told amaBhungane that President Zuma"s alleged involvement came out when he confronted Gem: “I asked Chris Brown: “How the hell do you give $2-million without verifying?” And he said: “What do you expect? I was sitting in President Zuma"s house, when President Zuma himself thanked me for availing this money to pay for all these poor workers …” He said: “I haven"t been taken to some back yard … this is the president"s house”.”
No.1’s nod-and-wink meetings
Jacob Zuma appears to have a history of questionable glad-handing on behalf of his nearest and dearest.
Renong and the Point Waterfront
After trying – and failing – to browbeat the preferred local partner of Malaysian frontrunner Renong to redevelop the Durban waterfront, Schabir Shaik tried to use Zuma"s influence to muscle in on Renong"s empowerment allocation.
In an affidavit for Shaik"s corruption trial, Renong executive David Wilson recalled a meeting that Shaik arranged between him and Zuma at Shaik"s Durban apartment in January 1997. According to Wilson, a “clearly uncomfortable” Zuma proposed Shaik should be involved in the project and “stressed repeatedly that he would be a good partner for the job”.
“It became increasingly clear that Zuma was acting as if Shaik had some sort of hold over him.”
This evidence contributed to the judge"s conclusion that Shaik and Zuma had a “mutually beneficial symbiosis”.
Shaik had been French arms company Thomson CSF"s main business partner in South Africa, but the company was having serious concerns about whether he was politically palatable to the ANC government, and had excluded him from its South African arms deal project.
Zuma met with executives of Thomson CSF (now Thint) in London in July 1998. After the meetings, the firm reinstated Shaik.
Another meeting took place in Durban in March 2000 between Thomson CSF chief executive Alain Thetard, Shaik and Zuma.
Thetard"s account of this meeting – the notorious “encrypted fax” – would later take centre stage during Shaik"s corruption trial.
According to the fax, Shaik had indicated to Thetard that Zuma was requesting R500 000 a year in return for Zuma"s protection in the looming investigation of the arms deal – and his support for future Thomson projects.
Zuma denied the meeting to Parliament, whereas Shaik told his trial the meeting did happen, but was about a Thomson donation to the Jacob Zuma Education Trust.
The evidence was enough to convict Shaik.
Daewoo (South Korea)
A day before inking a major transport logistics deal with Khulubuse Zuma, Zuma"s nephew, the chief executive of Korean multinational Daewoo Shipbuilding and Marine Engineering met with Zuma – now president – in Pretoria.
AmaBhungane obtained a picture of the July 2010 meeting in which Jacob Zuma, dressed casually in a tracksuit top, is seen clasping the hand of Daewoo"s Nam Sang-Tae.
Asked whether his uncle played a role in facilitating the deal, Khulubuse said: “Use common sense: Do you think the president has the skill to facilitate such a deal in three minutes?”
Zuma"s then-spokesperson did not respond to questions about the meeting.
Zuma is alleged to have lent his support to a proposed hydroelectric deal in Mozambique, for which his son Saady was a lobbyist.
According to a source close to the events, Saady brought Celso Correia, the group chairperson of Insitec, the project"s Mozambican private partner, to meet Zuma at his official residence in Pretoria in October 2010.
Correia, the source claimed, came away with the “unequivocal impression” that the president approved of Saady"s involvement in the project.
Correspondence between other parties to the deal, seen by AmaBhungane, suggested that Zuma had subsequently “made the necessary pressure for things to move”.
The project did not go ahead, however. Correia denied that he knew “any Zuma”, and neither Zuma responded to questions about their involvement. – Reporting by Lionel Faull, Sam Sole & Stefaans Brümmer
Derelict Grootvlei: A monument to malfeasance
A lone figure clutching a shotgun patrols the derelict buildings around the mine head at Grootvlei, near Springs on the East Rand.
Windows gape emptily, paint peels off the walls, roofs sag, and head-high thickets of blackjacks and wild marigold stretch in all directions, concealing building rubble and crusty human turds.
This is one of the mines that Aurora Empowerment Systems, represented by luminaries such as Jacob Zuma"s nephew Khulubuse and Nelson Mandela"s grandson Zondwa, briefly took out of liquidation in 2009. Under their stewardship, the mine was stripped of critical machinery, including cabling and underground pumps. They left behind flooded shafts and still owe mineworkers thousands of rand in unpaid wages.
Gold One bought some of the assets from the liquidators in 2012, including the offices and what remained of the gold processing plant, but not the mine itself.
“Our strategy is to apply for totally new prospecting rights over Pamodzi"s old area, and start from scratch,” said Gold One company secretary Pierre Kruger.
A former Gold One executive involved in the purchase explained that Grootvlei mine “was so badly stripped and vandalised that there was no point trying to resuscitate it”. Former Grootvlei employees still eke out an existence in the crumbling workers” quarters a few hundred metres away.
A pair of glum Mozambicans huddle over a homemade board game, while another gives himself a chiskop with a razor over a bucket of cold soapy water.
Gabriel Sekgobela, a process controller at the mine, says that Gold One absorbed some of the 1 900-strong Grootvlei workforce into its other mine in the area.
Sekgobela is still owed R35 000 by Aurora in unpaid wages and other fringe benefits, but is fortunate to have work with Gold One.
Johannes, who won"t give his full name, has worked at Grootvlei since 2006, and is now unemployed. “We have learned how to steal,” he says cryptically, before explaining how illegal miners (zama zamas) prowl the mine"s underground shafts.
As the sun sets, three gunshots ring out. The miners offer to escort me back to the tarmac, in case we meet a band of zama zamas in the dark.
As we drive away from this once productive mine, I think: “That is what corruption really looks like.” – Reporting by Lionel Faull
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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.