/ 23 June 2022

R57-billion: How the Guptas played Monopoly with state money

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More than R57-billion in public funds were tainted by state capture — and its alleged architects, the Gupta family, raked in at least R15.5-billion, according to the Zondo commission

In its final report, which Chief Justice Raymond Zondo handed to President Cyril Ramaphosa on Wednesday night, the commission estimates that the state haemorrhaged R57 344 912 379.34 during the Gupta era. 

The amount, the report points out, is only the most clear-cut evidence of state capture’s assault on the public purse, which experienced collateral losses in the aftermath. 

The largest sources of state capture money were Transnet and Eskom, two of South Africa’s most fragile state-owned entities (SOEs), which are also at the heart of the country’s current economic woes.

More than 97% of the R57-billion was syphoned from the two entities, which (as detailed in previous volumes of the Zondo report) were allegedly captured by the Guptas with the aid of the family’s two inside men, Brian Molefe and Anoj Singh.

Zondo has recommended that Molefe and Singh face criminal charges for their alleged roles in the plundering of Transnet and Eskom.

Transnet tracks for graft

According to Zondo’s final report, the Gupta enterprise started its capture of South Africa’s state-owned entities in 2011. “This led to the awarding of a vast array of contracts and the payment of billions of rand to entities paying kickbacks to, or controlled by, the Gupta enterprise,” it says.

Around that time, Molefe, with the help of then public enterprises minister Malusi Gigaba, ascended to the helm of Transnet. Jacob Zuma, the president at the time, had in 2010 appointed Gigaba — whom Zondo has called “an admitted associate of the Gupta enterprise” — to replace Barbara Hogan.

In the latter sections of Zondo’s fourth report, which covers graft at Eskom, the chief justice stated that “Zuma readily opened the doors for the Guptas to go into the SOEs and help themselves to the money and assets of the people of South Africa”. Zondo added that Zuma did this by appointing Molefe as Transnet’s chief executive. 

After Molefe’s appointment, Singh was appointed as Transnet’s chief financial officer, a position he had been acting in since 2009.

Through the capture of Transnet, the Gupta enterprise received kickbacks and was paid offshore in respect of at least six major contracts. The second instalment of the commission’s six-part report found that the Gupta enterprise landed R41.2-billion in illegal contracts under Molefe’s watch. 

Zondo found that Molefe and Singh “facilitated the conclusion of irregular contracts at inflated prices, variously through deviations, improper confinement and the changing of tender evaluation criteria in order to facilitate the entry of companies involved in the extensive money laundering scheme directed by [Gupta lieutenant Salim] Essa on behalf of the Gupta enterprise”.

In 2015, Molefe, along with Singh, was seconded to Eskom on the instruction of the Guptas, who wanted him redeployed to the power utility, according to the second Zondo report.

‘Gupta agents’ took Eskom

Zondo has previously stated that the Guptas were eager to have a friend (Molefe) as the Eskom chief executive “and used their influence to bend policy to their advantage”.

Molefe was instrumental in paving the way for the Gupta family’s purchase of the Optimum Coal Mine. In 2015, Gupta-owned Tegeta Exploration and Resources benefitted from a R659-million payment and the R1.68-billion guarantee from Eskom. The money was used to fund the acquisition of Optimum.

Regarding the Optimum deal, the report stated that Molefe and Singh — as well as former Eskom chief executive Matshela Koko — were “Gupta agents who were prepared to do the Guptas’ bidding when required to do so”. They knew that Eskom money was being used to fund the Gupta family’s Optimum takeover, the report noted.

The final report revisits the Optimum transaction. In it, Zondo noted that at least R1.7-billion of the R2-billion used to purchase the mine was derived by criminally sourced funds. The former president’s son, Duduzane Zuma, was the second-biggest beneficiary of the mine’s acquisition, raking in R342-million.

Zondo’s report on Eskom also concluded that Molefe, Singh and Koko were central to the Trillian scandal, a scheme designed to exploit Eskom and benefit Salim Essa

Trillian, an offshoot of Regiments Capital, has fielded allegations of profiting from SEOs, including Transnet. Trillian’s involvement at Eskom, alongside consultancy firm McKinsey, began in early 2015. Eskom made allegedly unlawful payments totalling R1.6‑billion to Trillian and McKinsey.

In explaining that the R57-billion is probably the tip of the iceberg of the actual amount pillaged through state capture, Zondo said in his final report that the Gupta enterprise created a culture of indifference to cost in many state-owned entities.

“There is reason to believe that third party contractors, who were protected by their relationship with the Gupta enterprise, exploited this culture to charge the state excess amounts even beyond those necessary to recover the cost of the kickbacks they were paying to the Gupta enterprise,” the chief justice said.

It is likely that the amount that the Guptas benefitted from state capture far exceeds the R15.5-billion that has been estimated, Zondo concluded.