South Africa's unholy mining marriage

Published by MAC on 2016-01-02
Source: Nostromo Research, BBC, IOL, Mail & Guardian

The Zumas and the Guptas

Who are the Guptas?”

Nostromo Research

2 January 2016

That's what the BBC Africa service asked its listeners in May 2013.

Ask the same question of many Indian citizens, and they might wax lyrical about the ancient empire whose power and influence covered a huge of swathe of the country a few hundred years before CE.

This was India's "Golden Age", when the Guptas were credited with spawning an astonishing upsurge in the sciences, technology, arts and much else.

However, in South Africa, the activites of the Guptas have far less heroic connotations – one much closer to the current Indian prime minister Narendra Modi's trope of an “Incredible India”.

Indeed, it seems scarcely believable that they've – literally - been able to get away with so much in such a short space of  time.

The degree of natural resources' pilfering attributed to the Guptas would make even the Adani's invasion of Australia seem benevolent by comparison. See: Australian government approves Abbot Point coal terminal expansion 

Incredible the Guptas certainly are in their adopted African home – or rather homes. They own least four closely-garded mansions in Johannesburg, and the late Iron Lady's son Mark Thatcher's former home in Capetown.

The BBC answered its own question thus:

“Brothers Ajay, Atul and Rajesh (also known as Tony) Gupta, all in their 40s, relocated to South Africa from India's northern state of Uttar Pradesh in Saharanpur in 1993, just as white minority rule was ending and the country was opening up to the rest of the world.

“Family spokesman Haranath Ghosh told the BBC by email that their father, Shiv Kumar Gupta sent Atul to South Africa, believing that Africa was about to become the "America of the world" - the world's land of opportunity.

“It is said that when Atul arrived in Africa's largest economy and he set up the family business Sahara Computers, which distributes hardware, he was amazed at the lack of red tape compared to India.

“They were small businessmen back home but their parent company Sahara Group - which has no links to the Indian giant of the same name - now has an annual turnover of about 200m rand ($22m; £14.3m) and employs some 10,000 people”.

Shortly after touching down just over twenty years ago in South Africa, the Guptas set about forging links with indigenous entrepreneurs and other influential leaders, but their ambitions really took flight after the election of President Zuma in 2007.

Not long afterwards, “Bongi Ngema-Zuma, one of the president's wives, was working for the Guptas; Duduzile Zuma, his daughter, was a director at Sahara Computers; and Duduzane Zuma, a son, is a director in some Gupta-owned companies...

“Asked how much they were worth by South Africa's Mail and Guardian newspaper, another family spokesperson, Gary Naidoo, said: "We respectfully decline to respond. As a private company, our strategies are closely guarded, as we operate in industries where our margins are wafer-thin."

Added the BBC:

“It is not clear how much money, if any, the Guptas have donated to the ruling party because political parties are not obliged to disclose donations, especially from private sources.” republic" [BBC Africa service, 14 May 2013].

Ministering to mines

The Zuma's courting of the Gupta's hasn't cooled in the last two years. Not a bit!

On 24 September 2015, South Africa's Mail & Guardian described an extraordinary event which had occurred just five days before:

“Early on Sunday evening this week, a presidential-level motorcade, complete with a large contingent of traffic police on motor­cycles, paid a visit to the Gupta family compound in Saxonwold in Johannesburg.

“On Tuesday night, President Jacob Zuma unexpectedly – and to the surprise of even top members of his own party – announced that he would fill a six-month-old vacancy in his Cabinet by appointing the relatively unknown Mosebenzi Zwane to the critically important mineral resources
portfolio....

“On previous occasions, leaders in the ANC have expressed concern about the Guptas’ influence in appointments, and rumours about consultations with the family before Cabinet appointments are made have swirled around for years”.

Zwane’s appointment as mines' minister “plucked him from obscurity after a very brief stint in Parliament and, before that, in the Free State provincial government".

Stated the Mail & Guardian: "He has experience in neither mining nor the handling of an important national portfolio”.

Why on earth, then, did he get the the single most important cabinet post in a country recently beset by huge conflicts with mine workers - resulting most notoriusly in the Marikana Masacre of August 2012? (See: South Africa's Marikana mining massacre: who is to blame?)

And how can he possibly deal with some of the greatest economic and development challenges, faced by the mining industry, of any country in the world?

Says the Mail & Guardian:

“In recent years, the Gupta family has moved into mining, primarily uranium – a feedstock that will be in demand if South Africa moves ahead with plans to build a massive new fleet of nuclear power stations – and coal, part of which is sold to Eskom.

“Gupta and Gupta-linked companies involved in mining have several times run into trouble with regulatory requirements, including those on environmental compliance. Zwane will now be in charge of enforcing those regulations”.

Shiva - the "auspicious one"?

A foretaste of what this might mean in practice was offered by the Mail & Guardian earlier that month, when it said the Shiva Uranium gold and uranium complex: "has been operating under the management of the politically connected Gupta family for nearly four years without up-to-date permits for many of its environmental impacts.

“This fact is contained in documents prepared for Shiva and submitted before the listing of the mine’s holding company on the JSE in November last year.

“Listed mining companies have to disclose any possible liabilities, including environmental transgressions that could carry a fine. In Shiva’s case, this is contained in a 'competent person’s report'. The 300-page report details every aspect of the Shiva Uranium mine, including several ways in which it was not complying with legislation at that time.

“Shiva is the successor to several mining companies at the North West site that have tried to turn a profit from the vast gold and uranium deposits that lie just beneath the rocky and hilly grazing land...

“It [was] listed as the world’s fourth-largest mine for the key ingredient for nuclear weapons and power plants.

"But the Canadian-listed company put the mine on hold in 2008. Four thousand people lost their jobs. The local town of Dominionville – its grid-pattern dirt roads and small red brick houses creating a community for mine management – lost its main source of income. The large town hall, where dances and weddings were held in the mine’s heyday, is now overgrown with weeds. Its missing roof echoes a pattern repeated throughout now-derelict Dominionville. Only a few houses stubbornly cling on, with neat lawns and greenhouses packed with the fruit of small projects to earn money.”

Now, enter the Guptas in alliance with the Zumas:

“Two years after mining was put on hold, the local operation was bought by a partnership between Oakbay Investments, owned by the Gupta family, and the Indian-based Action Group. The two created Oakbay Resources and Energy, a holding company for Shiva Uranium.

“A quarter of Shiva is owned by a black economic empowerment group, which includes President Jacob Zuma’s son Duduzane’s Mabengela Investments and the Umkhonto weSizwe War Veterans’ investment arm.

“In August 2010, it started producing gold again, and six months later it produced its first uranium. Since then it says it has mined about 2.6-million tonnes of ore".

In November 2014, as Oakbay listed on the JSE, it was discovered that among the documents the Guptas had submitted was a specialist report confirmng that mining operations had started-up without some of the required environmental permission.

The JSE found “inconsistencies between the existing and the planned future mining operations, and those described within the approved environment impact assessment and environmental management plan. Accordig to the Mail & Guardian:

“This meant the mine was carrying out work that was outside what was allowed in the environmental plans.

“The specialist report said the only environmental authorisations given to the plant were for the 'installation and utilisation of treated sewage effluent'. These had been granted in the early 2000s. At that stage, gold mining was taking place only in underground shafts, a fact explicitly noted in the Oakbay listing announcement.

“But in its latest annual report, the company now talks about its 'open-pit gold operation' doubling output to 200 000 tonnes of ore a month this year. The listing points to the company not having all of the required permits: 'The most significant of which [inconsistencies] being the open-cast gold mining activities'.

“To get around the fact that mining had started without legal authorisation, the competent person’s report recommended that Shiva apply for a loophole in environmental legislation – a section 24G rectification.

"This allows companies that have started operating without a permit to pay a fine for doing so, and to fix the damage while continuing operations. Environment legislation allows for companies that do not do this to be fined up to R5-million and for their directors to be sentenced for up to 10 years in prison”.

The loophole has also been used by the Guptas and their bosom buddy, Duduzane Zuma, to progress other dubious mining gambits:

“Idwala Coal in Mpumalanga...applied for a section 24G. According to its own submission, Idwala Coal had diverted a river and a road, mined without a water licence and destroyed a wetland.

“Oakbay’s listing gives several cases where authorisation would be required: for the transformation of more than 20 hectares of land; for the construction of haul and access roads; and for the emissions coming out of the processing factory.

“And, although a general water use licence exists for the overall mining site, the listing says one 'may be required for activities at the Afrikaner Leases gold section'. This is the site of the old underground mine, which has since become an open-cast gold mine.” [Mail & Guardian, 5 September 2015].

"Zuma - controlled by the Guptas"

Let's stick with reports by the Mail & Guardian. After all, it's South Africa's oldest newspaper, and is renowned as having been one of the sternest critics of apartheid.

In an update on the 17 December 2015, it said:

“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...

“'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...'

“'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...'

“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...

“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 statistics 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...

“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...”

Keeping up with the Mittals?

The Gupta's involvement in the affairs and mining ambitions of other South African companies – such as Anglo Ameican and ArcelorMittal - is also noteworthy.

Lakshmi Mittal is not only the founder of the largest steel group in the world, but also an NRI (Non-Resident Indian) with a taste for the high life that even the Guptas cannot hope to emulate. Nonetheless they appear to be doing their best to follow in his footsteps.

In 2001, Mittal threw away millions of dollars at a French wedding for his daughter, Vanisha. He also splashed a reputed £70 million on a mansion in London's fashionable Kensington district, and gave £125,000 to bolster Britain's Labour Party funds [Telegraph (UK) 21 January 2007].

The 17 December Mail & Guardian goes on:

“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 plane 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 the 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...

“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” [Mail & Guardian, 17 December 2015].

And so we could go on - adding more allegations to the long list of the Guptas' improprieties, corrupt practices and illegal acts.

The spirits of the original dynasty must, metaphorically, be rolling in their ancient graves...

[Comment by Nostromo Research]

---

Guptas take control of Optimum mine

Dineo Faku

http://sbeta.iol.co.za/business/companies/guptas-take-control-of-optimum-mine-1959729

14 December 2015

Johannesburg - The controversial Gupta family, which is closely linked to President Jacob Zuma, on Friday became the new owners of Glencore’s Optimum Coal Holdings, saving 500 permanent jobs but raising eyebrows on whether the asset would be viable after difficulty under Optimum’s management.

Tegeta Exploration and Resources snapped up Optimum Coal for R2.15 billion, business rescue practitioners, Piers Marsden and Peter van den Steen, said in a statement on Friday, signalling certainty of supply for Eskom’s Hendrina power plant in Mpumalanga, which contributed 2 000MW of power to the national grid.

Marsden and Van den Steen said that Tegeta, which was formed in 2006 to identify and develop the mining assets of the Oakbay Investments Group, especially coal, had undertaken to honour the existing coal supply agreement with Eskom.

Oakbay Resources and Energy were a gold and uranium producer, which debuted on the JSE last year.

Optimum Coal supplied the state power utility’s Hendrina with coal at below cost for several years and went into business rescue in August after Eskom imposed a R2.2bn fine for low quality coal.

Former Minister Ngoako Ramatlhodi threatened to suspend Optimum’s licence in August after it announced plans to cut jobs but made a u-turn after consultations with the company.

Eskom spokesman Khulu Phasiwe said the deal meant Hendrina’s power supply was secured, reiterating that the terms of the supply agreement would remain unchanged.

“It was not clear what was going to happen to Optimum. We made it clear to the new owners we are going to continue with our supply agreement, which is R150 a ton with the new owners until 2018. We are not going to waiver the R2bn fine to Optmimum for supplying poor quality coal. That is our position so far,” said Phasiwe.

Peter Bailey, the National Union of Mineworkers’ chief negotiator in the coal sector, said the new owners had to follow legislation. “The assurance of 500 jobs must not be an assurance to acquire the assets and six months later give notice to cut jobs,” said Bailey.

The proceeds of the sale was expected to settle Optimum’s existing bank debt of R2.55bn and Glencore had committed to advance about R400 million to Optimum to settle the balance of the bank debt so that the transaction could be finalised.

Business rescue practioners said Tegeta’s offer presented the most compelling option for all stakeholders of Optimum Holdings.

“We believe this transaction provides the most optimal outcome for stakeholders and importantly preserves the livelihoods of thousands of the mines employees and dependants as well as the uninterrupted coal supply to two of Eskom’s 13 power stations,” business rescue practitioners said.

Nazeem Howa, a director of Tegeta, said the deal was significant for the Oakbay Investments group, but of much greater strategic value for South Africa.

“A key issue for all the stakeholders in this deal is the security of coal supply to Eskom and the concomitant impact this will have on our country having a secure electricity system. Optimum supplies Hendrina power station with 2 000 megawatts. If Optimum stops the supply of coal it will place major constraints on the grid,” Howa said.

Business rescue practitioners said the deal would halt business rescue proceedings with Optimum and meant the mine would continue to operate in the ordinary course of business.

“Over the past several months, the business rescue practitioners have worked with the management of Optimum Holdings and Optimum Mine to consider all available options to rescue the companies that may be acceptable to Eskom and other key stakeholders, which include shareholders, creditors, organised labour, employees and regulators,” the business rescue practioner said.

Tegeta would assume responsibility for financing the operations of Optimum mine with effect from January 1.

Tegeta held two mining rights for coal – Brakfontein and Brakfontein extension – in Mpumalanga and prospecting rights in Mpumalanga, Free State, KwaZulu-Natal and Limpopo directly or through associates.