'Zuma's Cabinet is fighting back on state capture'

Under Patel’s watch the IDC has moved to increase levels of transparency by publishing a list businesses it lends to and highlighting links to any politically exposed persons. (David Harrison, M&G)

Under Patel’s watch the IDC has moved to increase levels of transparency by publishing a list businesses it lends to and highlighting links to any politically exposed persons. (David Harrison, M&G)

Economic Development Minister Ebrahim Patel’s move to sue Gupta-linked firm Oakbay Resources and Energy is a sign that some of Jacob Zuma’s Cabinet members are willing to take the president on over state capture, says political analyst Ralph Mathekga.

“There is a major realignment within government, where Jacob Zuma is sitting with a few Cabinet members who are recalcitrant and fighting back on state capture,” Mathekga told the Mail & Guardian.

Patel’s move comes in the context of other “decentralised” efforts to address state capture, such as the parliamentary inquiry into Eskom, while Zuma and law enforcement entities have dragged their feet in response to allegations of deep-set corruption.

“Patel’s move is very strategic and is a way of getting this information before the courts,” said Mathekga.

On Thursday, Patel revealed in a parliamentary reply that the Industrial Development Corporation would initiate legal proceedings against the Oakbay Group to recover an amount of R293-million.

Oakbay meanwhile has rejected the IDC’s action as “spurious and malicious”, saying it has always upheld its obligations to shareholders. 

In 2010, the IDC loaned Oakbay R250-million to purchase the Shiva Uranium mine.

In 2014, the loan was restructured ahead of the listing of the Oakbay Group’s Oakbay Resources and Energy on the JSE. The IDC’s interest on the loan was converted into shares in the company at a R10 less a 10% discount.

The IDC’s relationship with the Gupta company has been the subject of persistent questions.

These centred on the valuation of Oakbay Resource’s shares, which priced the company at far more than the value of the underlying mining assets and suggested that the IDC risked losing money.

Media reports following the release of a dossier of leaked emails from within the Gupta empire, supported long-standing suspicions that Oakbay share price had been manipulated using a Singaporean company linked to the family.

After the reports, Patel asked the IDC to investigate the claims and the IDC board appointed advocate Geoff Budlender to carry out the work.

As a result of the inquiry, the IDC cancelled the restructuring agreement with Oakbay Resources and other entities in the Oakbay Group on the basis “that various misrepresentations and breaches of warranties were committed by the Oakbay Group”, Patel said.

The IDC wants the return of its shares in Oakbay and has demanded repayment of the outstanding capital on the loan, plus interest, amount to about R293-million.

It was given until Thursday night to pay back the money filing which the IDC would go to court to retrieve it.

It was a pity that the IDC had not taken these steps sooner, when it was renegotiating the loan in 2014, said Melanie De Nysschen corporate finance expert independent investment bank Bravura

“But the political and social environment has changed so much from what it was three years ago, that perhaps people are more comfortable differentiating between what is ok, and what is not ok,” she said.

It remained to be seen whether the IDC would, however, its money back. Oakbay has since delisted from the JSE after numerous banks, advisory firms and corporate sponsors terminated their relationships with the group.

Nevertheless, it was very positive to finally see a public entity taking Oakbay on, said De Nysschen.

“I think it’s very important that we see [the IDC] follow the matter through, to the end, because it is the first time we will have access to an open and transparent view of what has been going on here,” she said.

But Oakbay said it has always “strictly abided by all relevant financial rules and regulations”.

The IDC’s “allegations and smears” formed part of a wider attempt to discredit Oakbay, the company said. The company’s attorneys had formally responded to the IDC, Oakbay said.

But Patel appears to be taking a hard line on the matter.

“We have to take allegations of fraud very seriously and pursue the recovery of public monies vigorously and using all legally available means to do so,” he said in a statement.

“Commercial dishonesty is not a victimless crime. It imposes an enormous cost on the economy, redirects resources from creating jobs for unemployed citizens and undermines confidence in governance and in the economy.”

Under Patel’s watch the IDC has moved to increase levels of transparency by publishing a list businesses it lends to and highlighting links to any politically exposed persons. 

Oakbay did not immediately respond to a request for comment.

*This story has been updated to incorporate a response from Oakbay 

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