INTRODUCTION OUTA'S SUBMISSION TO THE JUDICIAL COMMISSION OF INQUIRY INTO STATE
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I
NTRODUCTI
ON
OUTA’SSUBMI SSI
ONTO THE
JUDICI
ALCOMMI SSIONOF
INQUIRYINTO STATE
CAPTURE
OUTA: State Capture Inquiry submission CONTENTS INTRODUCTION ........................................................................................................ 1 SYNOPSIS ................................................................................................................. 2 THE DEFINITION OF STATE CAPTURE .................................................................. 4 The Guptas Arrive In South Africa (1993 ->) .............................................................. 5 Patronage Networks (1995 ->) ................................................................................... 7 RELATIONSHIP WITH JACOB ZUMA ....................................................................... 9 CONCLUSION ......................................................................................................... 11
OUTA: State Capture Inquiry submission
1
INTRODUCTION
OUTA is a non-profit civil action organisation, funded by tens of thousands of
individuals and businesses, whose main aim is to hold government accountable for
the abuse of power, corruption and maladministration. In doing our work, we ensure
that more tax revenues are made available to the benefit all in South Africa, especially
the poor and vulnerable.
In June 2017, OUTA prepared its report titled No Room to Hide – A president caught
in the act with a focus on former President Jacob Zuma (“Zuma”). The report was
compiled with the intent to highlight the former president’s misconduct while in office
with the hope that it would drive his exit from the political scene.
Not even a full year thereafter and during the early stages of 2018, Zuma was replaced
by his colleague and current President of South Africa, Cyril Ramaphosa, who’s
appointment as president was met with great elation in the country and on the back of
almost a decade of poor leadership costing South Africa’s economy dearly.
It has recently been reported that Zuma’s tenure cost South Africa’s economy R1
trillion1.
Throughout the various chapters that will follow, we set out the numerous instances of
various appointments under the leadership of Zuma who will be shown to have acted
in the interests of either themselves, a chosen few and/or the Gupta Family.
1
Steyn, L., 2018. Budget 2018 is Zuma’s costly legacy. [online] The M&G Online. Available at:
https://mg.co.za/article/2018-02-23-budget-2018-is-zumas-costly-legacy [Accessed 13 Sep. 2018]. – Annexure
AOUTA: State Capture Inquiry submission
2
To kick off, we look at the early days of the Gupta family in South Africa and detail
their “progress” towards the capturing of the state including instances where actual
capture did not take place, but attempts were made to.
Whilst evidence in respect of state capture is likely to emanate from a number of
parties and organisations in the Commission of Inquiry, as OUTA we hope to add value
to the inquiry in our submissions and render any assistance that the commission may
require in the proper ventilation of the evidence we submit.
SYNOPSIS
In the early 1990’s, Ajay, Atul and Rajesh (also known as Tony) Gupta, collectively
referred to as the Guptas2, along with various other family members, relocated to
South Africa from India's northern state of Uttar Pradesh in Saharanpur.3
The Guptas have built a business empire spanning from computer equipment to media
and mining.
In 2017, they became the focus of widespread scrutiny based on revelations made
upon the release of the #Guptaleaks, a collection of e-mails, which exposed links the
family had to a variety of questionable business deals with the government entities
and state-owned enterprises. It involves billions of Rands. The leaks also exposed a
2
Annexure B
3
Raju, S. (2016). From Saharanpur to South Africa: The rise of Ajay Gupta. [online]
https://www.hindustantimes.com/. Available at: https://www.hindustantimes.com/world/from-saharanpur-
to-south-africa-the-rise-of-ajay-gupta/story-nCz46IFMMqHxUvgvASjTjN.html [Accessed 13 Sep. 2018]. –
Annexure COUTA: State Capture Inquiry submission
3
group of government officials and civil servants that assisted the Gupta Family and
their associates in securing tenders in return for kick-backs and favours. In our various
chapters we deal with state capture particular to the terms of reference and providing
evidence in OUTA’s possession.
The family's strong ties to former South African president Jacob Zuma, both personally
and through their numerous companies, has not only caused criticism of the nature of
the deals, but has also resulted in much political controversy. These ties, along with
the #Guptaleaks have contributed to claims of corruption, undue influence and most
concerning, claims of State Capture. The term State Capture is used to describe the
actions of individuals or groups both in the public and private sectors, manipulating the
formation of laws, regulations, decrees and other government policies to their own
personal advantage.4
It is evident, as will be shown more fully throughout the chapters to follow, that the
Gupta family was involved in State Capture. The critical investigation that needs to be
conducted is the extent to which they exert(ed) control, for their direct or indirect
benefit, over both the state and the economy, as well as the extent to which laws and
government institutions became the product of corrupt transactions themselves.5
These business deals and the manipulation of government are now under further
scrutiny with the State Capture Commission of Inquiry lead by Deputy Chief Justice
Raymond Zondo.
4
Sutch (2015: 2) cited in Martin, M.E. and Solomon, H., 2016. Understanding the Phenomenon of “State
Capture” in South Africa. Southern African, 21. – Page 22 of article paragraph 4 – Annexure D
5
Martin, M.E. and Solomon, H., 2016. Understanding the Phenomenon of “State Capture” in South Africa.
Southern African, 21 – Page 22 paragraph 4 - Annexure DOUTA: State Capture Inquiry submission
4
OUTA’s submission will outline some of the issues and deals that need to be
addressed in the commission. Where OUTA is in possession of documentary evidence
confirming allegations, same is provided but we also seek to point out certain
“coincidences” that are telling and present a basis on which certain inferences may
reasonably be drawn.
To fully illustrate all of those involved and the extent to which the family exerted control,
a timeline has been drawn up of events to illustrate how the state was captured, with
particular reference to issues and events undermining the efficiency of the State. The
timeline aims to highlight direct relationships between state capture and corruption.
Through the discussion of events, the timeline illustrates the role of Presidential
powers in assisting the Guptas and the influence and dependence the Guptas had on
executive power to protect their interests.
THE DEFINITION OF STATE CAPTURE
OUTA construes the definition of state capture as follows:
“…a situation where powerful individuals, institutions, companies or groups
within or outside a country use corruption to shape a nation’s policies, legal
environment and economy to benefit their own private interest”.6
(Own emphasis added).
6 Chene M, “State Capture: An Overview”, 11 March 2014. – Annexure EOUTA: State Capture Inquiry submission
5
THE GUPTAS ARRIVE IN SOUTH AFRICA (1993 ->)
The Gupta family migrated from the Indian state of Uttar Pradesh to South Africa. Atul
Gupta, the first family member to arrive in South Africa in 1993, started numerous
business ventures between 1994 and 1996, including Correct Marketing, an import
and distribution business selling computers and components. In 1997, Correct
Marketing’s name was changed to Sahara Computers after the company had achieved
a collective turnover of R98-million. By 1998, the company had a turnover of R 127-
million.7
A few years later, Atul was followed by his brothers Ajay and Rajesh (Tony) in 1995
and 1997 respectively. By 1998, the Gupta family had begun to show an improvement
in wealth status with reports of Atul Gupta’s replacing his Toyota Camry with a BMW
M5.8 Whilst this may not be a relevant fact standing on its own, it is important to note
that during the same period of growth in wealth, Myburgh 9 reports that Atul Gupta
already started mentioning the name Jacob Zuma. He boasted about having an ANC
guy under his influence and noted that when Zuma eventually becomes President, the
Guptas’ ship was going to “come in big time”. Atul was also allegedly paying school
fees for some of Zuma’s children during this period who were in Pretoria Girls High.
With Zuma being elected Deputy President of the ANC in December 1997, with Thabo
7
It-online.co.za., 2018. Face-to-face: The secrets behind Sahara | IT-Online. [online] Available at: http://it-
online.co.za/2007/08/13/face-to-face-the-secrets-behind-saharas-success/ [Accessed 13 Sep. 2018]. –
Annexure F
8
Myburgh, P., 2017. The Republic of Gupta. Penguin Books.
9
Ibid 8OUTA: State Capture Inquiry submission
6
Mbeki as the party’s president, the Guptas sudden rise in wealth and influence was
questionable.10
From Mr Guptas’ arrival up until 1999, the Guptas registered various other business
ventures in South Africa and India. Some of these companies became the foundation
of networks and influence in the political space and were used to obtain government
contracts. These companies include:
15 January 1996 SKG Marketing Private India
Limited
16 January 1997 Raja Chemicals India
4 February 1997 Izak and Iris Investments South Africa
1997 Sahara Holdings South Africa
10 June 1998 Goyal Cal Carbonates India
Limited
1 April 1999 VRLS Properties South Africa
Incorporated [Issar Capital
Listed as shareholder]
6 September 1999 Veriana Property Holdings. South Africa
10
Ibid 8OUTA: State Capture Inquiry submission
7
PATRONAGE NETWORKS (1995 ->)
Patronage networks and illegal dealings have infiltrated government so much so that
it has become highly improbable not to believe that President Zuma and other key
political figures intentionally appointed people with knowledge and expertise to
perform illicit dealings within government entities and run patronage networks, and in
turn, with manipulation of governance structures, not face the consequences of their
actions.11
There is no clear consensus regarding when and how the Gupta’s began their political
barrage. It is alleged that the Gupta family first inserted themselves into South Africa’s
political class through Essop Pahad, the former Minister in the Presidency under
President Thabo Mbeki.12 Mr Pahad is also a former business partner of the Guptas
and still regards himself as a good acquaintance of the family. 13
Mr Pahad was formally introduced to Atul Gupta during a visit to India with Deputy
President Thabo Mbeki in 1996. The Guptas have been linked to President Mbeki
through a failed oil deal in Angola, where they used President Mbeki to influence
business dealings. Jagdish Parekh, a former Gupta associate, “told one of the Guptas’
would-be partners in the deal that Mbeki regularly had breakfast with the family at their
home in Cape Town. The claims appear to be an attempt to convince the Angolans of
the Guptas’ political connections back in South Africa”.14
11
Ibid 5
12
Ibid 8
13
Ibid 8
14
Ibid 8OUTA: State Capture Inquiry submission
8
The purpose of President Mbeki and Mr Pahad’s visit was partly to discuss investment
and trade opportunities with India’s business elite 15
In the same year, President Mbeki had set up a private think tank called the
Consultative Council, to provide him with political insight and advice. This council
would meet monthly at President Mbeki’s official residence in Pretoria, with Essop
Pahad acting as convener.16 The advisors were made up of lawyers, business
individuals and selected cabinet ministers. One of the businessmen included in the
council was Ajay Gupta. Ajay however, only joined the council at a later stage in
2005.17 Pahad stated that the Council was set up to source ideas and suggestions
from individuals who were “influential in their own area of work”. 18
In 2006, Ajay’s “good understanding of India, also China and other parts of Asia”
prompted Mr Pahad to nominate him for a position on the board of the International
Marketing Council of South Africa (IMC). IMC was later rebranded to ‘Brand South
Africa’ which had been established in 2000 by the Mbeki administration to be the
custodian of the South African National Brand and “create a positive, unified image of
South Africa; one that builds pride, promotes investment and tourism, and helps new
enterprises and job creation”.19 The IMC’s first chairperson was then Foreign Affairs
Minister Nkosazana Dlamini-Zuma. The organisation’s founding board members also
included some of South Africa’s foremost leaders from the private and public sectors.20
15
Ibid 8
16
The M&G Online. (1999). Who's who in Mbeki's private think-tank. [online] Available at:
https://mg.co.za/article/1996-07-19-whos-who-in-mbekis-private-think-tank [Accessed 22 Jun. 2018]. –
Annexure G
17
Ibid 8
18
Ibid 8
19
Ibid 8
20
Ibid 8OUTA: State Capture Inquiry submission
9
Mr Pahad maintains that Ajay Gupta was never close with President Mbeki and
maintains President Mbeki never attended the meetings but would simply stop by to
introduce himself.21
Ajay Gupta’s inclusion in President Mbeki’s secretive advisory council implies that the
family had made their way into the political establishment long before President
Zuma’s rise to power.22 In 2007, a press release issued by Sahara reads “President
Mbeki salutes Gupta family, Sahara as Gandhi My Father premieres”. President Mbeki
is quoted praising the release of the Gupta produced film23:
“This [movie] is a gift to South Africa and for that we thank
the Gupta family, as well as those who made this film and
decided to launch it in South Africa”.
RELATIONSHIP WITH JACOB ZUMA
The Gupta family has stated in the past that they have been friends with President
Jacob Zuma since 2000, even before he became President.24 The Guptas stated their
friendship with President Mbeki, as with President Zuma, was a strong relationship. In
addition, they stated that as a Member of Advisory Committee - IMC, they attended
21
Ibid 8
22
Ibid 8
23
Sahara, 2007. President Mbeki salutes Gupta family, Sahara as Gandhi My Father premieres. [online] ITWeb.
Available at: https://www.itweb.co.za/content/nWJadMbaAKP7bjO1 [Accessed 26 Jun. 2018] – Annexure H
24
News24. (2018). Guptas: We were friends with Zuma before he was president. [online] Available at:
https://www.news24.com/SouthAfrica/News/guptas-we-were-friends-with-zuma-before-he-was-president-
20160318 [Accessed 21 Jun. 2018] – Annexure IOUTA: State Capture Inquiry submission
10
more State of the Nation Addresses (SONAs) under the Mbeki Administration than
under the Zuma Administration.
Gary Naidoo, the Gupta family’s long-standing spokesperson and Managing Editor of
The New Age (to be discussed in more detail later), confirmed in the media that
President Zuma met the Guptas in 2001.25 This is reaffirmed by Duduzane Zuma, the
son of President Zuma, who stated in a 2011 interview with City Press, that he was
introduced to the Gupta family in late 2001 by his father, Jacob Zuma [(City Press,
2011) cited in (Myburgh, 2017)]. 26
Both President Zuma and the Guptas are adamant that the family’s first meeting with
South Africa’s then second-in-command took place “around 2002, 2003”, when Zuma
attended an annual function hosted by Sahara Computers.27 Sahara Holdings and its
subsidiaries, including Sahara Computers and Sahara Systems appears to be the
foundation of the friendship between Zuma and the Guptas.28 Duduzane Zuma was
also employed at Sahara in around 2003, whilst his twin sister Duduzile Zuma would
only join the company in July 2008 as a director.29 It is important to note that soon
after her appointment, Duduzile was appointed to the board of both Sahara
Consumables and Sahara Computers.30 She resigned from all companies a few
months later. In the same month, Duduzane Zuma became a director of Mabengela
Investments alongside Rajesh Gupta. Two months later in September 2008,
25
Ibid 8
26
News24. (2011). ‘I would have been further if my surname wasn’t Zuma’. [online] Available at:
https://www.news24.com/Archives/City-Press/I-would-have-been-further-if-my-surname-wasnt-Zuma-
20150429 [Accessed 22 Jun. 2018] – Annexure J
27
Ibid 8
28
Ibid 8
29
Ibid 8
30
Ibid 8OUTA: State Capture Inquiry submission
11
Duduzane was made a director for Westdawn Investments (Pty) Ltd alongside several
Gupta associates.31 The relationship between the Gupta and Zuma families was
therefore evident.
When questioned about the involvement of the President’s son, Duduzane, in their
business dealings, Atul Gupta stated to the Weekend Argus that “He’s disciplined,
systematic and organised and has become a fully-fledged, matured businessman. So
why punish him? Is it a crime to be the president’s son?”32
CONCLUSION
In our following chapters we focus on the key role players and state institutions that
were literally looted to the detriment of the South African citizen.
OUTA is honoured to be making submissions to the commission which commission
we truly hope will result in the end of any further attempts by any party to pillage our
state and leave our country in the state it currently finds itself in.
31
Ibid 8
32
Grange, H., 2010. PressReader.com - Connecting People Through News. [online] Pressreader.com. Available
at: https://www.pressreader.com/south-africa/weekend-argus-sunday-edition/20100822/281694021087375
[Accessed 22 Jun. 2018] – Annexure KYou can also read
