END OF THE LINE LOOMS FOR THE GUPTAS’ REIGN
▶ Gavin du Venage traces the downfall of the business family that once had the power to hire and fire ministers in South Africa
Events in 2017 seem to show that time is running out for the family whose influence over South Africa’s business and economic life has dominated local headlines for years.
“The Guptas are being squeezed out of the country in a number of ways,” Mpumelelo Mkhabela, a political analyst at the University of Pretoria’s Centre for the Study of Governance Innovation, said.
“They have become untouchable in the sense that no one wants to do business with them now.”
Among the Guptas’ travails, a South African financial regulator is investigating trades in Oakbay Resources and Energy, a company linked to the family, to determine whether share prices were manipulated over a five-month period.
The Financial Services Board will look into share moves from when Oakbay listed in November 2014 through April 2015, the Pretoria-based institution said last week.
The stock rose almost 11 per cent over that period, on higher average volumes than in the months leading up to its delisting in July this year.
Originally from India, the Gupta brothers – Ajay, Atul and Rajesh – built up a stealth empire and state-within-a-state to control the levers of power, including the South African government itself.
At the height of their power, they owned mines, a newspaper, a TV network and a computer business, among others.
But it was their close relationship with the country’s president Jacob Zuma that drew attention.
This was spelled out in glaring fashion in a series of leaked documents and email dumps to local media, investigations by anti-corruption officials and by confessions and statements from disillusioned senior politicians.
The Guptas were revealed to have the power to hire and fire ministers with a phone call and direct millions of dollars in state revenue to personal projects.
As the depth of their control of the president spilled out and caused a rising tide of anger, the family decamped to Dubai sometime in 2016.
But the tightly knit alliance may now come to a close, as investigators from around the world circle the family and their business dealings. Their activities allegedly also include money laundering and influence peddling.
The family has been accused by activists and opposition politicians of stacking the leadership of powerful state companies, rigging bids in favour of suppliers it controls, and even helping orchestrate a planned US$70 billion nuclear power deal with Russia, for which it could supply vast quantities of uranium – all this while using an alliance with Mr Zuma to neuter law enforcement agencies that would otherwise shut down its efforts, according to Bloomberg.
Blue chip companies, including McKinsey, KPMG and SAP, have been embroiled in what is fast becoming a global scandal.
In October, the British parliamentarian Lord Peter Hain called for an investigation, triggering the involvement of the UK’s Serious Fraud Office.
“Such is the extent of this criminal network that the South African state is indisputably regarded as having been ‘captured’, with corruption and cronyism plundering taxpayer resources on an industrial scale,” Mr Hain said at the time.
“In consequence, economic growth has plummeted, international investor confidence is rock bottom and state institutions have been hollowed out in this great country, totally betraying Nelson Mandela’s legacy and the values for which so many of us fought in the anti-apartheid struggle,” he said.
In the United States, the FBI and department of justice are conducting a joint investigation into the Guptas and their relatives living in the US.
Whistleblowers are lining up to give statements, and corporations from London to Hong Kong are falling over themselves to help out authorities.
On June 1, the first of a torrent of stories was published by the ama-Bhungane Centre for Investigative Journalism and the Daily
Maverick news website, which had obtained emails and documents leaked from a Gupta company server.
The communications painted a picture of an intimate partnership between the Guptas, the president’s son Duduzane Zuma, the mineral resources minister Mosenbenzi Zwane, and the executive Brian Molefe of the “parastatal” company – one having some political authority and serving the state indirectly – Eskom, according to Bloomberg.
Around the time Glencore agreed to sell its Optimum mine to the Guptas, an email shows Mr Zwane’s name on the passenger list for a flight on their private jet departing from Zurich to Delhi.
The leaks also precipitated a disaster for the companies entangled with the Guptas. Eight top KPMG executives, including Ahmed Jaffer, the country chairman, resigned.
At McKinsey, the global managing partner Dominic Barton apologised, and senior partner Vikas Sagar left the firm.
And the German IT company SAP said it is being investigated by the US department of justice over payments of about 94 million South African rand (Dh25.41m) to Gupta-controlled entities in exchange for help winning business from the logistics firm Transnet and Eskom.
The Guptas’ apparent grip on politics is resilient, but their freedom of movement has been significantly reduced – and doing business with them now carries severe risks.
Bell Pottinger, a London public relations company with a long record of representing clients with doubtful ethical credentials, collapsed in September after a campaign blaming criticism of the Guptas on “white monopoly capital” backfired.
No major South African bank is currently willing to take the family’s money, leaving only the Bank of Baroda, a midsize Indian lender, to handle their accounts – and it is seeking a court order for permission to close them.
The Guptas may also be about to lose their ace: later this month the ruling African National Congress must elect a replacement for Mr Zuma, whose two-term limit is reaching completion.
His successor will take over the party and lead it into national elections in 2019.
The apparent looming demise of the family comes as little surprise to some analysts.
“The Guptas, it’s their amateurish, grotesque, in your face, corrosive approach.
“They became way too excited about their proximity to the president and they found a president who himself has always gone from one period of insolvency to another in the middle of a big family,” said the political analyst Somadoda Fikeni, speaking at a University of Johannesburg public seminar titled “Political Crisis in South Africa” in April.
The chief candidates for the top job – Mr Zuma’s preferred replacement, his ex-wife Nkosazana Dlamini-Zuma, and billionaire businessman Cyril Ramaphosa – are avoiding the “G-word” at all costs.
“The campaign by the contenders is not about the Guptas. So far none of the candidates have mentioned the Guptas overtly,” says Thabi Leoka, an independent economist.
Since making a play for the country’s top job Mr Ramaphosa has tried hard to portray himself as the clean candidate, disposing of assets or ring-fencing them.
Last year, for instance, he sold his holding in South Africa’s McDonald’s fast food franchise to a Dubai firm.
We have yet to see what the South Africa of tomorrow will be like.
But as South Africans are becoming ever-more aware, a nation’s ultimate success depends on the principles of the people who run it.
The Guptas, it’s their amateurish, grotesque, in your face, corrosive approach. They became ... too excited about their proximity to the president SOMADODA FIKENI Political analyst