/ 29 September 2015

Hitachi and Chancellor House: How the events unfolded

Medupi power station during the initial phases of construction.
Medupi power station during the initial phases of construction.

On Monday, the US-based Securities and Exchange Commission charged Tokyo-based conglomerate Hitachi with violating the Foreign Corrupt Practices Act (FCPA) when it inaccurately recorded improper payments to the ANC in connection with contracts to build two multibillion-dollar power plants.
Hitachi has agreed to pay $19-million to settle the SEC charges.

The SEC alleges that Hitachi sold a 25% stake in a South African subsidiary to a company serving as a front for the ANC.

The Mail & Guardian first reported about this in 2006 and in 2007, and carried a full investigation into the deal which was denied by the ANC and Hitachi.

Here is a timeline of how things went down.

  • 10 November 2006: The Mail & Guardian reported that Chancellor House had a stake in Hitachi Power Africa, local subsidiary of Babcock-Hitachi Europe. At the time, the M&G reported that  the company had tendered for a R26-billion contract to construct a coal-fired power station near Lephalale. 

Other Chancellor House investments

  • 14 November 2007: Eskom’s Brian Dames at the time announced that Hitachi and Alstom have been awarded the R20-billion boiler and the R13-billion turbine contracts respectively for Eskom’s Medupi power station at Lephalale in the Limpopo Province. 
  • 23 November 2007: The M&G revealed that the contract to supply steam generators for Medupi power station was awarded to Hitachi Power Africa which was 25% owned by the ANC company, Chancellor House Holdings.

ANC front wins huge state tender

  • 8 February 2008: The M&G reported that the then Eskom board chair Valli Moosa presided over the parastatal giving contracts worth billions to ANC funding company Chancellor House – while also serving on the ANC’s fundraising committee.

Moosa in R38-billion tender conflict

  • 21 February 2008: ANC treasurer general at the time, Mathews Phosa, stated that the Hitachi deal would be exited from, because “governance is an issue and there is public focus on this”.
  • 3 April 2010: DA Party leader at the time Helen Zille said the ANC stands to earn R1-billion if the World Bank grants Eskom a loan to finance work on the Medupi power station.

Zille says ANC stands to make R1bn from Medupi

  • 15 April 2010: Then finance minister Pravin Gordhan called on Chancellor House’s shareholders to “do the right thing” and deal with any conflict of interest arising from business dealings of the ANC’s investment arm.
  • 16 April 2010:  The ANC was defiant about its involvement with Hitachi Power Africa, which secured a multibillion-rand contract with Eskom. At the time secretary general Gwede Mantashe said Chancellor House would not sell its Hitachi stake.

‘Chancellor House not selling Hitachi stake’

  • 20 April 2010: Hitachi Power Africa pleaded ignorance about questionable business links with the ruling ANC. HPA chief executive Johannes Musel told reporters the company had no idea that the ANC owned Chancellor House when it signed a black empowerment deal with the ruling party’s investment arm.

Hitachi claims ignorance in ANC-Eskom deal

  • 28 February 2014: Hitachi agreed to buy the stake in Hitachi Power Africa held by Chancellor House after criticism that the shareholding constituted a conflict of interest, as the unit had won business from state companies. No details of the deal were made public.
  • 28 September 2015: The Securities and Exchange Commission today charged Tokyo-based conglomerate Hitachi, Ltd. with violating the Foreign Corrupt Practices Act (FCPA) when it inaccurately recorded improper payments to South Africa’s ruling political party in connection with contracts to build two multi-billion dollar power plants. Hitachi has agreed to pay $19 million to settle the SEC charges.

Hitachi pays $19m to settle ANC bribe charges – US SEC