Reluctance to follow due process in nuclear, PetroSA deals says Gordhan
A tax incentive alerted national treasury to the nuclear deal with Russia and a R6-billion difference in the PetroSA-Engen deal signalled possible malfeasance, Public Enterprises Minister Pravin Gordhan told the commission of inquiry into state capture.
The department of energy was responsible for the costing and evaluation of the nuclear deal and the deal was budgeted at R1-trillion. This Gordhan explained to the commission — chaired by Deputy Chief Justice Raymond Zondo — was greater than the total fiscal budget for 2011, which was just under a trillion rand.
The Integrated Resources Plan which was made in 2011 would have had nuclear power added to the national grid between 2023 and 2030.
Gordhan told the commission that treasury objected to the energy department’s nuclear plan and its hope to incentivise the deal with a tax break.
Treasury undertook a commentary of the energy department’s feasibility studies of the nuclear deal but was concerned with the draft nuclear agreement and “its clear objective of creating firm fiscal commitments to Russia by South Africa.”
According to Gordhan, there were several countries that would have been interested in bidding for the deal, such as France, South Korea and China. He added that there were several environmental groupings who wanted to voice their concerns over the deal too.
Gordhan explained how in a meeting with then president Jacob Zuma in the latter half of 2013, he expressed his concerns over the complexity of the nuclear deal and the parties that would want to be involved in the process. Gordhan said he reiterated the importance of proper procurement protocols to Zuma at the meeting. The energy minister — Nelisiwe Makubane — was absent from this meeting, Gordhan told the commission.
“This project became quite central for whatever reason. If you like, come what may,” Gordhan told the commission. However, he never did find out if correct procurement procedures were followed in the end as he had been moved to the department of cooperative governance and traditional affairs.
The energy security cabinet subcommittee, chaired by Zuma, replaced the National Nuclear Energy Executive Coordinating Committee in 2014.
At the time, this subcommittee comprised of Nene, Energy Minister Tina Joemat-Pettersson, Public Enterprises Minister Lynne Brown, International Relations Minister Maite Nkoana-Mashabane, State Security Minister David Mahlobo, Trade and Industry Minister Rob Davies and Minister of Economic Development Ebrahim Patel.
Mineral Resources Minister Ngoako Ramatlhodi and Minister of Defense and Military Veterans Nosiviwe Mapisa-Nqakula were also part of the committee.
Another example of his insistence on due diligence, according to Gordhan, was the transaction between PetroSA and Malaysian oil company Petronas. This deal fell through as PetroSA was unable to provide the necessary financing in 2015.
Then Energy Minister Ben Martins had been engaged with the Petronas since 2012. PetroSA wanted to acquire Petronas’ stake in Engen which, according to the energy department, amounted to R18.68-billion.
According to Gordhan, “It became clearer that as the transaction evolved that its true value was closer to between R12-and R14-billion.”
The difference of R6-billion had Gordhan questioning who would benefit from the transaction.
Sonangol — a parastatal that oversees petroleum and natural gas production in Angola — was “selected as a strategic equity partner in the transaction”. The result, Gordhan explained, would see Sonangol end up with 49% of Engen.
According to Gordhan, a conditional guarantee of R9.5-billion was made for the PetroSA transaction on April 25 2014. This guarantee, Gordhan said, “was subject to several onerous but necessary financing conditions being met, and the satisfactory completion of the necessary due diligence.“
The Denel Asia deal, Gordhan told the commission, saw “serious collaboration with the Gupta family” with its company VR Laser Asia and state-owned arms manufacturer Denel.
This collaboration, Gordhan explained was witnessed with the reporting on the #GuptaLeaks emails. Amabhungane, the Mail & Guardian and the Daily Maverick’s Scorpio covered the Denel Asia deal extensively.
Denel Asia was registered by Gupta lieutenant Salim Essa in Hong Kong in 2016.
Gordhan told the commission that he had never met Essa, or “had drinks with him”. Gordhan has encourage the commission to seek Essa’s family members out to find out where he is.
The Public Finance Management Act (PFMA) application for the approval of Denel Asia was submitted on December 11 2015, addressed to newly installed Finance Minister Des van Rooyen who would be fired after the rand plummeted two days later. Van Rooyen, as Gordhan pointed out, did not have time to approve the deal.
According to Gordhan, Denel Asia would not be able to form without the “explicit approval” of the ministers of finance and public enterprises. This, Gordhan explained, led to “belligerent attacks on his person and the treasury by Denel chair Daniel Mantsha. Gordhan added that Denel then launched litigation proceedings against the finance minister and the treasury.
Mantsha has spoken on behalf of Zuma and acted as his counsel.
Gordhan will continue his testimony at the commission on Tuesday where he is expected to detail his meetings with the Gupta family.