/ 17 December 2015

Gupta’s grip – state ‘captive to networks of patronage’

Greenpeace activists protest against Shell's oil drilling project in the Arctic.
Greenpeace activists protest against Shell's oil drilling project in the Arctic.

As South Africans endure their deepest economic crisis since 2009, it’s not just President Jacob Zuma they blame. There’s a family whose name is increasingly the target of protest: the Guptas.

As tens of thousands marched in October in one of the country’s biggest wave of nationwide anti-government protests since the ANC came to power, one poster, broadcast on the television channels nationwide, captured the public anger: “SA: Gupta Farm.”

Since Atul Gupta arrived in South Africa from Uttar Pradesh, India, in 1993, a year before the election of Nelson Mandela marked the end of apartheid, he and his brothers Rajesh and Ajay have built on a computer business to amass stakes in uranium, gold and coal mines, a luxury game lodge, an engineering company, a newspaper and their 24-hour television news channel, ANN7.

Having employed or been in business with at least three of Zuma’s immediate family, including his son Duduzane, the family drew increased scrutiny in September as opposition parties and local newspapers raised the question that they may have influenced the appointment of a minister to manage the embattled and important mining industry.

‘Zuma is controlled by the Guptas’
“They are the chieftains of patronage. They get extraordinary privileges from the president,” said the Democratic Alliance leader Mmusi Maimane, in a phone interview on Tuesday. 

“Zuma is controlled by the Guptas. Once you have a weak institution like the ANC and a government that is institutionally captured, you only have to win control over a few individuals like Jacob Zuma and you control everything.”

Analysts concur.

It’s a deeply troubling relationship between the Gupta family and the president’s family,” said Nic Borain, an adviser to BNP Paribas Securities South Africa. “There are a multitude of documented relationships and there is a very widespread acceptance and assumption that this goes beyond undue influence. This goes close to capture of political authority by a group of foreign businessmen.”

Guptas: We don’t receive preferential treatment
A spokesperson for the Gupta family, Gary Naidoo, declined to comment for the story. So did Zuma’s spokesperson Bongani Majola and ANC spokesperson Zizi Kodwa. In an interview with Business Day in 2011, Ajay and Atul said they received no preferential treatment because of their relationship with the president and that their computer business specifically avoided government work to protect their relationships.

Their newspaper, the New Age, regularly hosts ministers at televised events that have been sponsored by state-owned companies while Duduzane and Gupta family members are directors of at least 11 of the same companies, publicly available documents show. When the New Age launched in 2010 its then editor, Henry Jeffreys, wrote in a first edition editorial that “We will generally support the government of the day at all levels” while saying the paper had no links with the ANC.

Public anger mounting against the ANC
With one of the world’s highest levels of economic inequality and a 25.5 percent unemployment rate, public anger is mounting against the ANC, which has won more than 60 percent of the vote in every general election since 1994. 

That anger was exacerbated when Zuma fired former finance minister Nhlanhla Nene,  replacing him with the relatively unknown Des Van Rooyen, only to change his decision four days later when he reappointed former finance minister, Pravin Gordhan. The Rand weakened as much as ten percent against the dollar, and bonds and banks stocks plunged before paring their declines when Gordhan was appointed.

The police have documented 2 289 violent demonstrations by communities demanding better housing, education and other services in the year through March – up from 1 907 the year before.

Recurring themes at recent protests are white domination of the economy, ineffectual government and increasingly, corruption. The statitics speak volumes; 83 percent of people believe that corruption is on the rise, compared with 58 percent across the continent, according to a Transparency International survey this month.

Some of those who have done business with the Guptas say they’ve kept companies open and safeguarded jobs.

Close ties
Abel Malinga, the head of mining and metals at the state-owned Industrial Development Corporation, said that in 2010 it had lent R250-million to the Guptas’ Oakbay Resources and Energy to buy a uranium and gold mine they now control along with Duduzane Zuma because it was about to be closed under previous management at the cost of 2 400 jobs. The IDC converted the loan into a stake in Oakbay.

“The jobs are still there, they are still producing gold,” Malinga said. “There is no preferential treatment from our side. No political pressure.”

The Guptas have been friends with President Zuma from about the turn of the century, Atul Gupta, the 47-year-old chairperson of Oakbay who pioneered the move to South Africa, said in an interview with the Johannesburg-based Daily Maverick in 2011.

Zuma’s wife Bongi Ngema-Zuma worked for Gupta-controlled JIC Mining Services as a communications officer. His daughter Duduzile was a director at Sahara Computers, the Guptas’ main computer business, for more than a year ending in 2009. And Duduzane has worked with the Guptas for 11 years, initially starting as a 22-year-old trainee at Sahara.

The Guptas live in a complex of several houses a few blocks away from Duduzane in Johannesburg’s upscale Saxonwold suburb, behind a row of purple-blossomed Jacaranda trees and a four meter high wall adjacent to the city zoo. 

A giant roof-top chess board and cricket nets are spread across the grounds and one three-storey house has an elevator, seven balconies and a dome, publicly available blueprints of the property and Google Earth maps show.

“The Guptas continued their work relationship with me despite not knowing what the future held for my family,” Duduzane said in a letter published in the Gupta’s New Age in September. Communications staff from his office at Sahara Computers didn’t respond to requests for comment.

Controlling interests
In 2010, Duduzane and the Guptas were part of a group of business people embroiled in a dispute with Anglo American Plc unit Kumba Iron Ore and ArcelorMittal South Africa, after winning rights to part of Kumba’s concession at Africa’s biggest iron-ore mine. Although the courts ruled that Duduzane and the Guptas’ group weren’t the rightful owners, ArcelorMittal would have paid them R800-million for the partial concession if they had won the case and also planned to sell a 26 percent stake in its business to groups that included Duduzane Zuma.

At the time of the announcement, in August 2010, the National Union of Metal Workers of South Africa (Numsa) demanded that government intervene and cancel the deal. A month later Duduzane Zuma said in a statement that he would give 70 percent of the proceeds of the deal that would have given him a stake in ArcelorMittal South Africa to groups including orphans and women in rural communities.

In April 2013, the Guptas flew 217 people in a chartered jetliner to the Waterkloof air-force base in Pretoria for their niece’s wedding. They welcomed them with music and dancing, and shuttled them to the Sun City casino and resort in helicopters and black BMWs, according to a government report investigating how a commercial plan landed at an air force base. The police illegally used their blue lights as they escorted the party, it said.

When the airport manager wouldn’t accommodate them, the Guptas approached the defence minister to use Waterkloof, even though it’s classified as a top-security site and commercial use is prohibited, according to the report.

When that too failed they asked the Indian embassy to make it look like the visit was by an official delegation, according to the report, describing that as an abuse of diplomatic channels. The report concluded that the landing had been authorised because Zuma’s name was falsely invoked. It also said some of the cars had false license plates and the security company used was unregistered.

Minister of Public Enterprises Malusi Gigaba and Trade and Industry Minister Rob Davies attended parts of the week of celebrations. Attending the wedding didn’t reflect an improper relationship, Gigaba’s spokesperson Mayihlome Tshwete said. Davies responded to a private invitation, his spokesperson Sidwell Medupe said.

In an interview at tht time, Atul Gupta said that the wedding was held in the country to boost tourism and that the plane had permission to land. The family later apologised for the incident.

The Indian High Commissioner at the time, Virendra Gupta, who isn’t related to the family, then said in a statement his country applied for permission to land the plane at the base because ministers and senior political figures were on board.

Mining minister linked to Guptas
In September Zuma appointed Mosebenzi Zwane minister of mineral resources – a newcomer to national politics – even as mining companies and labor unions were in the middle of sensitive wage talks threatening to break into a strike in an already ailing industry.

At the time, the Mail & Guardian reported that the newly-appointed minister, who would now oversee decisions involving the Gupta’s mining interests, was linked to two scandals involving the politically connected family. 

The Economic Freedom Fighters Party sent out a press release entitled “Welcome to the Gupta Republic of South Africa: The New Minister of Mineral Resources is an Extension of the Gupta Family” after the appointment. 

In the statement, it said Zwane wrote a letter inviting members of the extended Gupta family to South Africa at the time of the wedding, saying that they were coming for business purposes. Zwane hasn’t commented on this allegation.

Zwane’s spokesperson Martin Madlala said the minister’s appointment was “at the discretion” of the president and referred questions to his office.

A shadow government
“We are feeling the real effects of the state becoming captive to networks of patronage,” said Judith February, an analyst at the Institute for Security Studies, in an interview on Wednesday. “The Guptas seem to wield an enormous amount of influence over ministers. There’s a pattern here.”

At an anti-government protest in Johannesburg in October, former Cosatu general secretary Zwelinzima Vavi told thousands of workers and unemployed people that South Africa now only serves big business and the ruling elite. The Guptas were one of his targets.

“The Guptas are continuously buying helicopter after helicopter” Vavi said. They once landed a helicopter in a park near their house, where children ride bikes around a lake and families barbecue on weekends, the Star newspaper said in 2010. “They want special permission to land on their homes. We’re up to here with our corruption,” he said.

Vavi later said that the Guptas were the “shadow government. They’re a sign of what’s wrong with our country”. – Bloomberg