About this site

This resource is hosted by the Nelson Mandela Centre of Memory, but was compiled and authored by Padraig O’Malley. It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.

Oilgate

MAIL & GUARDIAN

15 July 2005

Oilgate company was ANC front

The African National Congress has misled the nation on the Oilgate scandal.

Documents in the possession of the Mail & Guardian make it clear that Imvume Management -- the company that channelled R11-million in state oil money to the ANC before the 2004 election -- was effectively a front for the ruling party.

The relationship between the ANC and Imvume is central to Oilgate.

When the M&G broke the Oilgate story two months ago, ANC spokesperson Smuts Ngonyama claimed Imvume was an independent firm from which the ANC was perfectly entitled to accept donations.

"We do not ask donors where their money comes from," he said. The point was echoed by ANC secretary general Kgalema Motlanthe, who said: "A distinction should be made between the ANC and private companies."

Both officials suggested the transaction was an arm's-length donation from an ordinary private concern - which meant the ANC could not have known that the R11-million came from the parastatal PetroSA, which had prepaid Imvume for part of a supply contract.

But the documents, some marked "Top Secret" and which the M&G gathered over three years, make a mockery of that defence. Instead, they show how close the ANC and Imvume really were.

They show that as early as 2001 Motlanthe and, to an extent, party treasurer Mendi Msimang were intimately entangled with Imvume boss Sandi Majali.

The evidence suggests that together they hatched an ambitious project to raise millions of rands for the ANC by obtaining lucrative oil allocations from Saddam Hussein's regime under the United Nations Oil for Food (OFF) programme.

OFF was an exception to UN sanctions that allowed Iraq to export oil to pay for humanitarian needs.

In turn Motlanthe and Majali, on behalf of the ANC, would extend politi-cal solidarity to the Iraqi dictator and campaign for the lifting of sanctions.

The documents include a letter from Motlanthe to the Iraqis, confirming Majali as the ANC's designated representative for this project.

Lawyers acting for the ANC and its officials have declined to comment and warned of further legal steps against this newspaper. The ANC sued the M&G for defamation after an initial exposé in February last year, but has not pursued the matter actively.

Lawyers acting for Imvume and Majali warned the M&G that it was drawing on secret and private information and described the inferences drawn as "a distortion of the facts".

The information obtained by the M&G carries implications for the government as well. It shows that senior representatives from the Ministry and the Department of Minerals and Energy, as well as the state-owned Strategic Fuel Fund (SFF), participated in this project - to an extent that suggests their boss, former minister Phumzile Mlambo-Ngcuka, must have been aware of the plan.

Mlambo-Ngcuka and her officials have denied any such collusion, but have declined to comment on the allegation that Majali was effectively an agent for the ANC.

The full evidence is carried below -- see "Trading principle for profit" -- but even in summary it is damning.

When Majali travelled to Iraq for talks with Hussein's government in 2001, he was accompanied by a top-level delegation, including the Director General of Minerals and Energy, Sandile Nogxina, and Mlambo--Ngcuka's chief of staff, Ayanda Nkuhlu. The minister personally authorised their trip.

Also with them was Riaz Jawoodeen, a director of the SFF, the state body responsible for maintaining South Africa's strategic fuel stocks. The SFF was also answerable to Mlambo-Ngcuka.

The deal proposed to the Iraqis was startling in its simplicity. The ANC - and, by implication, its officials in government - would support Hussein's beleaguered regime in exchange for the allocation of oil. The oil trade between Iraq and the South African authorities would be handled by Majali, who was introduced as the ANC's agent. Some of Majali's profits would go to an ANC funding front, controlled by him.

Imvume's first deal was a R1-billion contract to restock the state oil reserves held by the SFF with Iraqi crude. Imvume won a controversial tender in which Jawoodeen, the SFF director, played a central role.

But the oil allocations were not on the scale originally envisaged and proved to be far less profitable.

Soon war loomed and any future extension of the scheme was scuppered by the United States-led invasion of Iraq in 2003.

By that time, however, Imvume had already scooped its next state deal in South Africa. In October 2002 it won a R750-million tender to supply para-statal PetroSA with oil condensate.

As reported by the M&G two months ago, it was this contract from which Imvume diverted R11-million to the ANC.

(15 July 2005,Stefaans Brümmer and Sam Sole | Johannesburg, South Africa)

Trading principle for profit: Full background story

Stefaans Brümmer and Sam Sole investigate the events that led to the ruling party funding scandal

This is the story of how South Africa's ruling party offered solidarity to Saddam Hussein in exchange for crude oil -- and how state resources were used to help the party in this ambitious fundraising project.

Two years of effort resulted in little, if any, financial gain for the African National Congress. But the story is important for it reveals not only how the party subordinated principle to profit, but also how it engaged in business through what was effectively a front company.

On September 11 2001 terror visited New York, giving United States President George Bush an excuse to invade Iraq.

That same day, a small group of South Africans set off on Emirates flight EK464, Johannesburg to Dubai, travel records show. Dubai, and then Amman, was the standard route to Baghdad.

The group included Sandi Majali, chief executive of the newly formed company Imvume Management; Sandile Nogxina, Director General of the Department of Minerals and Energy; and Riaz Jawoodeen, a director of the Strategic Fuel Fund Association (SFF), the state agency that managed South Africa's strategic crude reserves.

Four days before they left Johannesburg the then minerals and energy minister, Phumzile Mlambo-Ngcuka, approved her director general's travels. The motivation she signed, and a subsequent expense claim, show that her chief of staff, Ayanda Nkuhlu, went on part of the trip.

Although Nogxina denied last week that he, Jawoodeen and Nkuhlu had travelled for the same reason as Majali, all indications are that the men had a single purpose -- to ask Iraq to allocate crude oil for sale to Majali's company, so that he could sell it on to the SFF to replenish South Africa's strategic reserves.

Less than three months later, the SFF would issue a tender for the supply of four million barrels of Basrah Light, an Iraqi crude oil.

The SFF answered to Mlambo-Ngcuka and her department. Jawoodeen, as SFF director, would play a central role in the tender adjudication. And Majali's Imvume Management would win the tender.

According to Nogxina, it was pure chance that Majali joined him, Nkuhlu and Jawoodeen on the September 11 trip to Iraq.

The government delegation, he said, had gone inter alia "to explore the possibility of a government-to-government deal for the supply of oil for our strategic stocks".

Majali joined them after he had been "advised by the Iraqi ambassador of our intention to travel to Iraq" and "wanted to take advantage of our presence in Iraq to finalise his [own] oil deal".

But Majali had been negotiating with the SFF for some time to sell it Iraqi crude. It is highly unlikely that Nogxina's plan to negotiate Iraqi crude for the South African state, and Majali's plan to be the middleman in such a deal, were unconnected.

First contact

Majali's efforts went back some time. In December 2000 he and two business partners, auctioneer Rodney Hemphill and Iraqi-American Shakir Alkhafaji, travelled to Baghdad to finalise a contract for their company, Montega Trading, to buy two million barrels of Basrah Light.

They were accompanied by the ANC's secretary general, Kgalema Motlanthe, and treasurer general, Mendi Msimang. It is unclear why the ANC officials accompanied them. The Mail & Guardian has been unable to confirm allegations that Majali's Iraqi oil business at that time already was aimed at funding the party.

Montega Trading lifted its two--million-barrel cargo at Iraq's Minah al Bakr oil terminal on February 2 2001. It was sold to Sopak, an associate company of Glencore International, a Swiss trading major.

At about the same time, Nogxina arrived in Baghdad. He said last week that this was to develop trade relations under the United Nations Oil for Food (OFF) programme.

OFF was the exception to United Nations sanctions imposed on Iraq after it invaded Kuwait in 1990. Under the programme, Iraq could sell crude oil, but the UN held the proceeds in trust and released them only for approved humanitarian imports.

On April 5, the SFF wrote to Montega and Majali, telling them it would "like to pursue discussions with yourselves" for the supply of 9,5-million barrels of Iraqi Basrah Light for South Africa's strategic stocks. At that stage already, Majali and the state were talking about him supplying strategic stocks.

In May 2001 Majali registered Imvume Management, leaving behind Hemphill and Alkhafaji. But the plan remained the same. At the end of July, he signed a fax offering six million barrels of Basrah Light to the SFF; alternatively to "facilitate" a direct purchase between the SFF and Iraq. Either way, he would be an intermediary between Iraq and the South African state.

Intimates

By the time of the September 11 trip, there is no doubt that Majali and Imvume were intimately entangled with the ANC. A day before the dele-gation departed, the ANC's Motlanthe signed a letter to Khalid Tabra, a businessman-member of Hussein's Arab Ba'ath Socialist Party. Tabra led the Iraq Friendship Association, seemingly a Ba'ath front. Motlanthe's letter conveyed "the ANC's approval of Sandi Majali as a designated person to lead the implementation process arising out of our economic development programmes".

Majali was to report to Motlanthe's office "at regular intervals".

Motlanthe also referred to a letter from party treasurer Msimang to Iraq's then influential deputy prime minister, Tariq Aziz. A draft version of a letter prepared for Msimang promised solidarity to the Iraqis: "Both the ANC and the South African government are unequivocally committed to advancing the cause of the people of Iraq."

And it endorsed Majali as middle-man between the Iraqis and the South African state: "The relationship being forged between our government Department of Minerals and Energy and your Ministry of Oil, facilitated and managed by Imvume Management (Pty) Ltd led by Sandi Majali, has our blessing and support."

In any event, Majali portrayed himself as the ANC's agent. In a letter he signed before leaving for Baghdad he called himself the "head of implementation of ANC economic transformation programmes".

The letter, addressed like Motlanthe's to Tabra's friendship association, reinforces the idea that the government officials and Majali went with the same purpose. In fact, Majali claimed to be "leader of the delegation".

Majali's letter set out a programme which included him presenting "a message from the leadership of the ANC" to Aziz and him meeting Tabra's friendship association to "discuss possible friendship with the ANC". There would be discussions towards the finalisation of an Iraqi-South African Friendship Association; a body to join Tabra's Iraqi association and a similar one in South Africa.

Nogxina has confirmed that the government delegation took part in a meeting with Tabra's association - seemingly the same where party-to-party relations were on the agenda.

Majali's proposed programme also included a meeting between Nogxina and his Iraqi Oil Ministry counterpart "regarding government-to-government relations in relation to oil trade".

But, just like the South African government officials were included in the friendship talks, Majali participated in the oil discussions.

After his return to Johannesburg he wrote to Iraqi deputy oil minister Saddam Hassan, whom the South Africans had met in Baghdad. Referring to a presentation he had made to Hassan, he said he was asking for an initial 12-million barrels of Basrah Light, to be lifted by Imvume starting in December. "Please note that this order is required by the South African government for its strategic reserves."

On the same day, September 20, Majali also wrote to the Iraq State Oil Marketing Organisation (Somo), the powerful body that administered the oil allocations. He repeated the request for 12-million barrels, but also referred to longer-term ambitions: "Our total requirement is 25-million barrels per annum."

In a third letter on that day, to a senior Ba'ath official, Majali alluded to his political backers and suggested President Thabo Mbeki would also be in the loop. He wrote: "I have already briefed the leadership of the ANC, through the secretary general and the treasurer general, regarding our visit to Baghdad … They, in turn, have undertaken to provide a full briefing to the president of the ANC."

Majali reaffirmed "our commitment to support the people of Iraq in their struggle against the economic sanctions", adding that the ANC welcomed an invitation to attend an anti-sanctions conference in Baghdad on November 12 that year.

The UN sanctions had dealt a massive blow to Iraq's economy and autonomy. They were a large part of the reason Hussein's regime craved friendship of the kind Majali offered; it needed international support against sanctions.

Travel records show that Majali and Motlanthe boarded the same flight, EK464 Johannesburg to Dubai, on November 9 2001, in time for the conference in Baghdad.

Hat trick

During the September 2001 meetings in Baghdad, Majali wore two hats - of the ANC extending solidarity to Hussein, and of Imvume, the company that would trade Hussein's oil. Or did it amount to the same hat? Was Imvume fronting for the ANC?

Two versions of an oil trade proposal Majali prepared for the Iraqis are instructive. They show he intended making hundreds of millions of rands buying and selling Iraqi crude over a 10-year period, and that a key beneficiary was to have been the ANC.

An earlier, undated draft of the proposal clearly identified Majali's company, as yet unformed, as controlled by and at least partly to bene-fit the ANC.

It said: "This proposal is made by Mr Sandi Majali acting under a power of attorney from Mr Kgalema Motlanthe on behalf of a company to be established, to the Deputy Prime Minister of Iraq, Mr Tariq Aziz … The shares in the company will be held by a nominee on behalf of the beneficial shareholders who will be the following entities …"

The largest shareholder, with 35%, was Stalwarts Research Trust. The ANC formed Stalwarts in 2000 to raise funds for the party, in particular its policymaking functions. Its trustees were Motlanthe, Msimang and ANC policy head Jeff Radebe.

Another 25% was earmarked for an Iraqi-South African business consortium to be nominated by Motlanthe and Iraq's Aziz, with a brief to "facilitate and manage the development of political and socio-economic relations".

The draft envisaged a staggering 100-million-barrel allocation of crude annually over 10 years, with a projected gross profit of R4,9-billion. Of this, R1,7-billion would go to the ANC's Stalwarts trust.

The second version of the proposal, dated simply September 2001, appears to be what Majali took to Baghdad. It asked for a more realistic 25-million barrels of Basrah Light annually for 10 years and - apart from a "top secret" cover letter, as will be seen - any direct reference to an ANC stake was removed.

Majali was introduced not as Motlanthe's representative, but as an Imvume director. And the proposal correctly described Imvume's formal shareholders as three supposedly charitable trusts. Not much is known about these trusts, but they were founded in August 2001 by Daniel Lengosane, a former member of the ANC underground who was head of security in the presidency at the time.

On the money

However, there is direct evidence that the oil trades envisaged in this new version of the proposal were still intended to fund the party. Apart from the trusts, it said, profits would be channelled to the Iraqi-South African Friendship Association and an entity called the South African Business Council for Economic Transformation (Sabcet).

Majali headed both Sabcet and the South African chapter of the friendship association.

As will be seen, the friendship association appears to have been intended as a cover behind which the ANC and the Ba'ath party could conduct relations.

And Sabcet was to fund the ANC. Majali's "top secret" cover letter on the oil proposal was blunt: "[Sabcet] has the blessing of the South African leadership, with its brief being to facilitate and advance economic programmes that are geared towards supporting the ANC's political programmes sourcing finance to fund such programmes."

The cover letter emphasised the message of solidarity with the Iraqi regime and gave a "commitment to advancing the cause of the people of Iraq". It said the request to allocate Imvume 25-million barrels of crude a year for 10 years was "an initial measure to foster such political relations".

Oil was requested and friendship offered - oil for Majali to fund the ANC through Sabcet; friendship for the Iraqis through the friendship association. Oil for friendship.

Compliments returned

To consummate the relationship, a Ba'ath delegation paid a return visit to Johannesburg a month later, in mid-October 2001.

A draft programme listed talks hosted by Motlanthe and the adoption of a protocol to formalise the Iraqi-South African Friendship Association.

A speech prepared for Motlanthe set out the purpose of the friendship association and the wider scheme. It is not known whether Motlanthe delivered the speech, but its message is consistent with the other documentation.

It addressed the political - saying the ANC had an "unwavering commitment" to oppose sanctions - but also commerce and party finance: "Crude oil trade and other value-adding spin-offs from such trade are intended to build and strengthen financial and political capabilities of both parties to meet their social obligations."

The speech said the friendship association would operate publicly; the ANC and Ba'ath hands behind it would remain hidden. "Note should be taken that the association will function at arm's-length level from the respective parties. Because of the hostile environment, this becomes necessary to protect the leadership and to shield them from attacks by the media and hostile opponents."

The association would be "empowered to conduct business in the open market through appropriate vehicles and/or companies it sets up …"

Sabcet was such a vehicle. Reporting to Motlanthe, it would "facilitate and advance economic programmes that are geared towards supporting the ANC's political programmes sourcing finance to fund such programmes" -the same wording as in Majali's secret cover letter a month earlier.

The speech concluded that the ANC, "through the council [Sabcet]", was behind the 25-million barrel-a-year oil request.

Friends

On October 20 2001, the Iraqi-South African Friendship Association was formalised in a protocol signed by Majali for the South Africans and Tabra for the Iraqis.

The protocol spoke of stronger relations and the injustice of sanctions. While the association's main task was to boost ties, "that shall not prevent it from facilitating and implementing commercial dealings in pursuance of the aims of this protocol".

As a reminder that the true parties behind the association were South Africa's and Iraq's ruling parties, the text referred to a further protocol between the ANC and the Ba'ath party and that formed "the basis for this protocol".

Did the formalisation of relations help secure the oil allocations Majali and his backers wanted? Judging by a draft letter dated shortly before the main protocol was signed, it appeared so.

In this, Majali, wearing his Imvume hat, thanked deputy oil minister Hassan for his "positive response" to the allocation request. The response, he said, had been conveyed by the Iraqi delegation then in South Africa.

Majali, it seemed, had his promise of oil. But why did it have to be achieved through to-and-fro visits involving government and party officials and promises of funding and friendship? Why could Majali, as an ordinary businessman, not have asked the Iraqis for oil, paid for it and traded it for his own profit?

There are clues in the motivation Mlambo-Ngcuka approved before her officials left for Iraq that September. It said: "There is room for expansion for more trade by South Africa under the 'Oil for Food' programme … It is recommended that the right political atmosphere between Iraq and South Africa be created in order to win more business."

Her department was aware that Iraq bestowed business according to its political likes and dislikes. This is consistent with what is now accepted fact: that the regime used oil allocations to influence international opinion against sanctions. The department was prepared to help boost relations with Hussein's regime to win business - and in this case specifically for Majali.

But the travel motivation went further: "A surcharge imposed by the Iraqis on their oil allocation makes it difficult for South African companies, especially black empowerment groups, to break into the market. This is one of the issues that needs to be addressed by both parties."

Iraq demanded "surcharges" - in reality kickbacks illegal under UN rules - from oil buyers as a way to make money outside the strictures of OFF. But why did Mlambo-Ngcuka's officials have to help Majali overcome the kickback problem?

Indebted

Somo records say Majali's earlier company, Montega Trading, was billed a "surcharge" of $464 632 (then about R3,6-million) for its February 2001 cargo.

Even though Iraq tended to refuse further allocations to buyers who failed to comply, Montega did not pay.

This seems to have been because of a dispute between Montega and Sopak, the Glencore associate company that bought the cargo. Sopak did not pay the full price agreed and Montega grossed only about $406 000 for the entire transaction - not enough to cover the kickback.

Apparent confirmation that Majali was in trouble over the Montega debt, and that he thought political goodwill could help overcome it, is found in another letter he wrote after the September 11 trip.

Thanking Tabra for his hospitality, he confirmed that Somo had been formally approached for an initial allocation of 12-million barrels of Basrah Light.

Majali added: "We would highly appreciate if you could facilitate this transaction, with particular attention to the competitive advantage pricing of this transaction for the benefit of both parties in order to build financial resources to support political programmes."

Under OFF, Iraqi crude prices were set monthly and were not subject to negotiation. As Majali could not have been asking for a discount, it is more likely he wanted exemption from the "surcharges".

Progress -– and setbacks

In December 2001 the South African side of the plan started to come together. The SFF issued a tender on December 5 for the supply of four million barrels of Basrah Light, worth about R1-billion, to replenish South Africa's strategic stocks.

A central figure on the tender evaluation committee was SFF director Jawoodeen, Majali's fellow-traveller in Baghdad. And, although Imvume's initial quotation was the highest of nine bidders who complied with basic tender conditions, it eventually won the right to supply the entire consignment.

On March 6 2002 Imvume signed a contract with the SFF to supply the first two million barrels. But on the Iraqi side things started to unravel. On the same day, Somo promised Majali a two-million barrel allocation, but it was finalised too late.

To meet his contract deadline Majali turned to Glencore, which in turn bought the required oil from a Russian company, Slavneft.

The extended supply chain slashed the expected profit. Hemmed in by its contract with the SFF, Imvume seems to have realised a margin of only two US cents a barrel, grossing it a paltry $37 681 (then about R424 000). Not an auspicious start to the millions Majali hoped to raise for the ANC from Iraqi crude.

Further problems arose over the additional two million barrels required by the SFF. Imvume still had its unused two-million-barrel allocation from Iraq, but it was never lifted.

There are two explanations for this. In April, Hussein temporarily stopped all crude exports to protest repression in Palestine. This may have interfered with Imvume's lifting schedule.

But Somo may also still have held Majali liable for the $464 632 kickback Montega had failed to pay. Between May 5 and 10 2002, Majali was again in Baghdad - accompanied by Motlanthe. The M&G knows of an allegation that they met Aziz and discussed the outstanding "surcharge".

And so, to supply the SFF, Imvume again turned to Glencore, who bought from another Russian company, Machinoimport. The cargo was loaded at Minah al Bakr on May 24.

This cargo was definitely tainted by a kickback: Machinoimport, Somo records say, paid a "surcharge" of about $500 000. And, because the margin was again shared between three companies, Imvume is unlikely to have profited much.

Friendship renewed

But this was not the end of the story. On July 2 2002 the Department of Foreign Affairs announced that Aziz would arrive in South Africa the following day as guest of then deputy president Jacob Zuma.

Sanctions were high on the agenda. The department said the South African government and Aziz would discuss "the expected effect of the new sanctions regime for the people of Iraq, who have been subject to severe suffering by more than 10 years of stringent international sanctions".

Zuma hosted a banquet for Aziz at King's House in Durban, where he condemned sanctions and expressed "our enthusiasm" for stronger relations. "South Africa believes that solid economic relations can be the foundation of lasting friendship. I hope that this visit … will yield new economic possibilities that will be to the benefit of both South Africa and Iraq."

A subsequent farewell dinner for Aziz would be hosted, according to the official programme of the foreign affairs department, by the "ANC with members of the Iraq-South Africa Friendship Association and business community".

The M&G has been told that Motlanthe was the main speaker at the event.

Imvume paid the bill of about R40 000 for Cabanga, the Johannesburg venue.

Aziz left South Africa on July 9, to be followed by Majali on July 20 and Motlanthe and Msimang six days later. The next day, July 27, Somo and Imvume concluded a contract giving the latter the right to buy another four million barrels of Basrah Light. Majali, Motlanthe and Msimang returned to South Africa together on August 2.

This time Imvume took the four million barrels, again in conjunction with Glencore, in two cargoes on October 17 and December 13. They appear to have been traded on the international market.

Since these were from Imvume's own allocation - rather than bought from Russian companies - it may have made some profit at last.

But this may not have been substantial. By that time the UN had squeezed Iraqi prices upwards to decrease margins from which kickbacks could be paid. Ten US cents a barrel is a high estimate of what Imvume grossed - a total of no more than $400 000 (about R3,8-million) for both trades.

It unlikely that much, if any, of this reached the ANC as Imvume would have had its own expenses to cover.

There is evidence that Somo earmarked another three million barrels for Majali to buy from December 2002. But nothing came of it, perhaps because of the looming war.

The US-led invasion in March 2003 blew away two years' groundwork by Majali and his backers in the ANC and the South African government.

The rest is history. Shattered was Majali's dream of 25-million barrels of crude annually from Hussein's regime, and untold millions for the ANC. But Imvume was still to use state oil procurement to fund the ANC. In December 2003, as revealed by the M&G two months ago, Imvume diverted R11-million from a PetroSA supply contract to the ruling party.

'Oilgate slick won't wash away'

'There's a nice vagueness about the office of public protector. You'd be forgiven for assuming that the person owning this title was there to protect the public from politicians and not the other way around… Public Protector Lawrence Mushwana gives new meaning to the word protection. It's about a faithful hound sitting in his master's lap and yapping at any who approach.

Mushwana, pressed by opposition parties to investigate the obvious abuse of state funds (PetroSA is a state-owned company), found in a report published on Friday that he couldn't make a finding on what Imvume did with the money it had been given by the government because it is in the private sector… Imvume was an agent in the deal, not a principal, and it was still state money when Imvume paid it over to the ANC. Mushwana goes on to clear PetroSA of any wrongdoing. … what the country needs to know is why Imvume has not been prosecuted. What's the word that best describes taking money from the public in order to further the public good and then using it, instead, to buy political favour - investment or fraud?

What Mushwana has done is to wreck the credibility of his office. His ruling means he can never investigate possible corruption if it ever involves abusive relationships between the state and the private sector. Isn't that where corruption most often occurs?'

(The Thick Edge of the Wedge, Peter Bruce: Business Day Special Report 03 August 2005)

'THE dust has almost settled after the report by the public protector into the "Oilgate" saga… It will be difficult to lay the matter to rest because, regrettably, the public protector's report leaves too many unanswered questions. ..

While there are several areas of the report that open themselves up for discussion and debate about interpretation, possibly the point that raises the most concern is the fact that the public protector interpreted his mandate in such a narrow, legalistic manner. This will raise doubts and further questions in the public mind.

The report states that the mandate of the public protector is "restricted to the investigation of matters relating to government bodies, public entities, state affairs and dishonesty in respect of public money". Consequently, the allegations pertaining to the relationship between Imvume and the ANC could not be investigated as these are private entities.

Relying on the case of the South African Association of Personal Injury Lawyers vs Heath and Others, in 2001, the public protector asserted that money in the hands of Imvume or the ANC was not "public money", and therefore could not be investigated.

This technical, legal approach will have implications for future matters brought for investigation. In terms of the constitution, the public protector's mandate is to investigate "any conduct in state affairs that is alleged or suspected to be improper … or to result in any impropriety or prejudice".

…An expansive interpretation of his mandate would certainly have allowed the public protector to "follow the money trail" and get to the crux of the allegations. This would have been in accordance with the spirit and the letter of both the act and the constitution.'

(Shameela Seedat & Judith February, posted 17 August 2005 /Business Day Oilgate Special Report)

'PetroSA attaches Imvume's assets'

STATE-owned liquid-fuels company PetroSA has begun attaching assets of Sandi Majali's Imvume group in a bid to recover an outstanding debt of R12,5m…Yesterday, PetroSA CEO Sipho Mkhize told Parliament's minerals and energy committee that the first attempt at attaching Imvume Management's assets realised only R22000 as the company proved to be an empty shell.

Mkhize said that a second attempt would be made in the next two weeks to attach the assets of Imvume Resources, which had acted as surety for the R18m advance that was given to Imvume initially. Imvume agreed to repay PetroSA that R18m at R500000 a month. But Imvume stopped paying in May, apparently because of delayed payments by a provincial government over a contract it had with Imvume. The repayment agreement is an order of court, which allows PetroSA to immediately attach assets without going to court in the event that Imvume defaults.

However, the manner in which PetroSA is attempting to collect the outstanding loan led to a heated exchange during the committee meeting, with ANC MPs arguing that Imvume should be treated softly in the spirit of ubuntu, and the Democratic Alliance (DA) and Freedom Front Plus (FF+) calling for tougher action. FF+ MP Willie Spies suggested that PetroSA had been treating Imvume with "kid gloves".

(Barry Aaron, Imvume's lawyer) said if Petro SA liquidated Imvume, then all the company's creditors would get was R22000 worth of office furniture.'

'Beware the mafiosi'

'…this year, my colleague Stefaans Brümmer and I were able to bring a long-term theme of investigation to fruition through the Oilgate exposés: that theme being the messy, dangerous cocktail produced by liaisons of business, party and state.

…as I get older I perceive increasingly that the world is run by mafias. Not necessarily criminal mafias, but tight networks of people who work together to protect their own interests to the detriment of their public obligations… In that spirit I offer you Sam's first law of political entropy: all political parties tend to become mafias, even if they don't start out that way -- and the distinction between criminal and political mafias is largely one of degree.

Essentially, the paradigm is about using economic power to capture political space and then using political power to obtain economic benefit -- a vicious circle. Obviously this process distorts political choices and contestation as well as economic decisions and the distribution of economic benefits. Because they are mutually reinforcing, these processes -- and the mafias that drive them -- can very quickly become entrenched. They undermine laws and institutions designed to promote rational economic decision-making, public interest and political freedom and pluralism.

In South Africa, it is also necessary to trace continuities with the apartheid era to give some sense of where we've come from.

Firstly, the Afrikaner Broederbond formalised covert elite networks of Afrikaner political and economic power -- it was a mafia, a secret brotherhood that set out to capture the strategic heights of the state and the economy by deploying members into the public service, corporations and the judiciary. These then carried an undefined and undisclosed debt of loyalty to the movement, wherever they went.

Doesn't this sound like the "deployment committee" of the ANC?

Secondly, as its crisis grew, the apartheid state took on a particularly frightening character -- it privatised the political war against the ANC by setting up private networks intended to be outside the net of state accountability and self- sustaining. These ranged from bogus political movements to the notorious Civil Cooperation Bureau, the private wing of the apartheid military.

These networks also made common cause with criminal mafias -- especially as a means of funding themselves -- including ivory smugglers, drug smugglers and arms traffickers.

For the same reasons the liberation movements in exile engaged with criminal networks smuggling drugs and stolen cars, for example. It would be naive to think that these networks -- and the dubious relationships they fostered -- did not survive in some form into the democratic era.

It did not take a political rocket scientist to work out that the ANC's political culture would be uncomfortable with the strict separations of power enshrined in the Constitution -- and with the independence of significant institutions set up under the new basic law.

But the stark reality of those conflicts was only brought home to me by an investigation in 1999 into the award of the third cellular licence.

The campaign that emerged to unseat Nape Maepa, then chairperson of the regulatory authority awarding the licence, seemed to have little to do with any fault of his, except a reluctance to be railroaded into rubber-stamping a selection, Cell C, already made in the corridors of power.

It seemed that Saudi support of ANC to the tune of some $70-million might have something to do with the pressures that emerged to give the nod to Cell C, which is controlled by Saudi-Oger.

The next major site of conflict between constitutional accountability and political expediency was the arms deal, where major damage to our democratic institutions was and continues to be done.

Parliamentary oversight, the reputations of the Public Protector and the Auditor General and faith in unbiased investigation by the National Prosecuting Authority have all been damaged.

Here, too, the exercise of executive power might be put down to the national interest, but again there was the suspicion that party or personal interests were hidden beneath them and may have played a decisive role.

We began to look actively at the involvement of the ANC in business. This led us to an interest in the oil business -- another opaque industry with large opportunities for skimming benefits.

Our first success was the exposure of a lucrative Nigerian oil lifting allocation to something called the South African Oil Company (SAOC). The Nigerians appeared to think that this was a public benefit entity like their own national petroleum corporation.

And, indeed, the SAOC had been personally endorsed in a letter of recommendation by President Thabo Mbeki to his Nigerian counterpart. However, it emerged that all benefits flowed to a company in the Cayman Islands.

Once again the suspicion of party interest lingered, with the money trail frustratingly hidden behind opaque offshore banking structures.

So we were looking for an opportunity to prove party benefit from a relationship that involved an improper closeness between party, business and state.

This came with the invasion of Iraq and the disclosure of records kept by the Iraqi State oil marketing company. Imvume and Majali emerged as having benefited from oil allocations from the regime of Saddam Hussein and our investigations showed he had been actively helped in this project by the ANC leadership.

Documents suggested the party expected to benefit from Imvume's oil trading with Iraq. The questionable award of a state tender to Imvume to supply Iraqi oil closed the circle of suspicion.

Finally, with Imvume's "donation" to the ANC of R11-million of a R15-million advance on a contract with state-owned PetroSA, we were able to trace a direct and substantial party benefit.

The cost of this exposure has been enormous, with legal bills running into hundreds of thousands of rands and with lawsuits against the Mail & Guardian still pending.

But the dubious relationship between money and politics is the defining struggle of the democratic era: it is embedded in virtually every crisis faced by government since 1994, including the abandonment of the reconstruction and development programme, the arms deal, the Jacob Zuma-Schabir Shaik saga and the life and death of Brett Kebble.

Disputes within the ruling party have grown to resemble mafia turf battles, with competing individuals and groups attempting to establish political and economic dynasties. Serious policy battles appear to be overshadowed by a fight about access to economic benefits.

In this context, the struggle for proper public control of, and information about, party funding is part of a broader fight to protect the integrity of our politics -- to reduce the ability of these mafias to hijack the system.'

(Sam Sole, M&G Online, 23 December 2005)

This resource is hosted by the Nelson Mandela Centre of Memory, but was compiled and authored by Padraig O’Malley. Return to the Nelson Mandela Centre of Memory site.