Zondo report, part 1 and 2: a short overview

Part one of the Zondo report has proven to be a must-read (all 874 or 855 pages of it, depending on how one counts) for South Africa’s abused public. It’s the first of an imminent three reports of the colloquially termed Zondo commission, as it was chaired by current Acting Chief Justice Raymond Zondo. 

The “abused public” I mention applies to all seekers of an environment in which both the public and private sectors in South Africa operate at optimum levels within the parameters of legislation consistent with the Constitution. 

The first Zondo commission report will be helpful to curious South Africans seeking to know and decipher some of the dubious decisions set into motion as part of a process of state capture on the instructions of former president Jacob Zuma. This entailed a self-serving agenda to loot the state, aided by people in public institutions and in the private sector. This report provided details, exposing corruption, but also listed Zondo’s ten recommendations.    

The following subheadings make up the initial report: 

• Volume I – Chapter 1: South African Airways and its associated companies; 
• Volume II – Chapter 2: The New Age and its dealings with government departments and state-owned entities; 
• Volume III – Chapter 3: South African Revenue Services (SARS) and public procurement in South Africa
• Chapter 4: Public procurement in South Africa. 

In a background section titled About The Commission, Zondo informs readers that the genesis of the establishment of this commission dates to the former public protector Thuli Madonsela’s State of Capture report of 2016-17. 

The gist of that report entailed investigating “complaints which included certain allegations of improper conduct on the part of President Zuma and certain members of the Gupta family. The remedial action included that the then-President Zuma had to appoint a judicial Commission of Inquiry, to be chaired by the judge selected by the Chief Justice” Mogoeng Mogoeng. 

After Zondo was approached and consented, the chief justice submitted his name to Zuma and he was appointed on 9 January 2018.

The initial report arduously details evidence gathered and captured under each of the three volumes and four chapters. The report follows a straightforward chronology of presenting its conclusions, findings and recommendations specific to each of the four chapters. The rationale to foreground the various sections with testimonies of participants seems to have been for reference purposes from all participants, who ranged from Zuma and the Guptas and their willing and reluctant “enablers” and “followers”, to the whistleblowers. 

Zondo’s approach provided tangible case studies to support the rationale of his recommendations. 

Recommendations

Recommendations for the attention of President Cyril Ramaphosa feature in Chapter 4, from page 844 to 855. They are summed up below.

1. The government in consultation with the business sector must prepare and publish a national charter against corruption in public procurement, which must include a code of conduct which sets out ethical standards which apply procurement of goods and services for the public.
2. An independent agency against corruption in public procurement must be established.
3. The government must introduce or amend legislation to protect whistleblowers.
4. The government must introduce legislation which will see the introduction of deferred prosecution agreements by which the prosecution of an accused corporation can be deferred on certain terms and conditions. 
5. Consideration must be made to enact legislation that will establish a professorial body to which all officials who work in the area of public procurement should belong.
6. The commission recommends that set standards of transparency consistent with the OECD principles for integrity in public for integrity in public procurement be formulated by the national treasury for compulsory inclusion in every procurement system adopted by a public procurement entity.
7. The commission recommends that the legislation dealing with the duties and responsibilities of accounting officers / authorities be amended to insert a provision which reads: “No person is criminally or civilly liable for anything done in good faith in the exercise or performance or purported exercise or performance of any power or duty in terms of this Act unless such a person acts negligently.”
8. In order to strengthen the duty of private sector entities to put in place measures against bribery, it is suggested that Act 12 of 2004 which features the Prevention and Combating of Corrupt Activities be amended by a section 34 A.
9. It is suggested that the Political Party Funding Act No 6 of 2018 be amended, in order to criminalise the making of donations to political parties in the expectation of or with a view to the grant of procurement tenders or contracts as a reward for or in the recognition of such grants having been made.
10. The commission recommends that consideration to be given to the enactment of legislation for the following a) the greater centralisation of public procurement in certain aspects; b) the better harmonisation of the legislation applying to public procurement; c) the better guidance of public procurement officials in applying the legislation governing public procurement; d) the better training of public procurement officials and e) the discrimination of any deviation based on the concept of a sole source service provider.

The second report

The second report examined shenanigans in the state-owned entities (SOEs) of Transnet, Eskom and Denel. 

Unlike in the first report, there were no overall recommendations regarding procurement processes. It strictly focused on reflecting evidence presented at the commission and recommendations for further investigations or immediate prosecution by the National Prosecuting Authority (NPA).  

At Transnet and Eskom the personalities that stood out were Brian Molefe, Anoj Singh, Siyabonga Gama, former minister of the department of public enterprises Malusi Gigaba, Iqbal Sharma and Salim Essa. In the case of these rogue agents of state capture, Zondo recommended that investigations must be launched by law enforcement agencies both locally and abroad against them and their respective companies. 

At Denel, the leading suspects were Riaz Saloojee, Johannes Motseki, Dr Ben Ngubane, Duduzane Zuma, Tony Gupta, Daniel Mantsha, Zwelakhe Ntshepe, former minister Lynne Brown and former president Jacob Zuma. Judge Zondo recommended similar action to be taken as that of Transnet and Eskom. Among the cohort to be investigated were the board of directors of Denel appointed in 2015, for arguably contravening Section 51 of the Public Finance and Management Act (PFMA) of 1999.  

As it stands, it will be difficult to deny that the Denel board was incompetent. On this particular matter, the commission recommended that Section 162 of the Companies Act be applied. Furthermore, the commission found that Denel, the department of public enterprises and the Companies and Intellectual Property Commission established by section 185 of the Companies Act would all have grounds to bring proceedings against this Denel board, which among others facilitated the capture of Denel at the behest of the Guptas. The report suggested that the findings against Daniel Mantsha must be reported to the Legal Practice Council, to determine his fitness to practise as an attorney. 

On the issue of the roles played by the two former ministers of the department of public enterprises, Lynne Brown failed to deny using the powers of her office to select her own unfit people to serve as board members of Denel. She appointed a new board in 2015 but apparently retained Johannes Motseki for reasons of “continuity”.  Evidence has shown that the real reason was that he was appointed was to serve the business interests of the Guptas. It was discovered that as a Gupta associate, he held a 1.3% stake in the consortium that bought Shiva Uranium in 2010. A similar trend was seen with Malusi Gigaba when appointing Brian Molefe and Anol Singh as directors and the reinstatement of Siyabonga Gama as the chief executive of Transnet.  

The ANC national executive committee members such as Gwede Mantashe during the tenure of Zuma’s cabinet openly supported Gama’s appointment. Evidence shows that Gama’s reinstatement was a consequence of an instruction from Zuma. Gigaba also appointed Salim Essa as director at state-owned Broadband Infranco (BBI) in an effort to secure information, communication and technology contracts at Transnet. Evidence at the commission reflected that Salim Essa worked closely with the Guptas.  All these appointees caused serious damage to SOEs that reported to them. It can be concluded that these ministers were part of the Gupta strategy to capture these SOEs.

With regard to the appointment of members of boards of directors of SOEs as well as senior executives, the commission found that this responsibility can no longer be left exclusively in the hands of politicians, as they have miserably failed in their constitutional mandate to lead these institutions successfully. It has been recommended that a body be established that would be entrusted to identify, recruit and select competent people for such appointments in SOEs.

Similarities in the suspension of executives at Denel and Eskom reflect a pattern. 

Suspensions of key personnel at both SOEs were implemented a few months after the appointment of the new boards. A number of the new board members at Denel were linked to the Guptas, namely Daniel Mantsha, Motseki and Refiloe Mokoena. Similarly, Gupta associates at Eskom were Dr Ben Ngubane, Mark Pamensky and Romeo Khumalo among others. The chairperson of the board of Denel, Daniel Mantsha, and chairperson of the board at Eskom, Zola Tsotsi, were both linked with the Guptas. As a result, they suspended executives in their entities, who could potentially resist their mandate and paid large amounts of money to get them to leave. 

Behind the scenes of both entities, Salim Essa was involved in the suspension and ultimate removal of all the suspended executives. At both SOEs, the suspended executives included the group chief executive and group chief financial officer, who were replaced by people serving the Guptas. 

Evidence brought before the commission demonstrated that the Constitution was consistently contravened. In the Denel case, two violations can be seen: the constitution of a board of directors for the purpose of achieving a result in direct conflict with the obligations imposed on directors by the Companies Act and the use of suspension power in an administrative context for improper purposes. The Commission suggested that the government must create a statutory offence rendering it a criminal offence for any person, vested with public power to intentionally abuse such power vested in them. Anyone found guilty of such an offence, will be liable to a fine of up to R200-million or imprisonment for up to 20 years or both.

The breach of Section 217 of the Constitution, is seen in the irregular awarding of the Hulls, Dynamic Light Scattering Single Source and the Direct Vision Standard Single Source contracts, which Denel awarded to VR Laser Services. Similarly, the same contravention of this section is also seen among others in the awarding of the “cranes contract” at Transnet. It is suggested that the law enforcement agencies should investigate whether there has been further contravention of the provisions of Sections 38, 50 or 51 of the PFMA. Additionally, more investigations are recommended to be launched, to determine if the 2015 board members behind controversial suspensions did not breach section 50(1)(A), (2) and section 51 of the PFMA. 

Salim Essa’s role in state capture is bothersome. Under his watch R41-billion of irregular contracts were awarded to entities linked to the Guptas and himself. This represents 72.2% of the total payments of contracts tainted by state capture. In financial terms this made Transnet the primary site of state capture. At Denel, Essa and the Guptas assumed control through VR Laser. 

We now await the final Zondo commission report.