HOW NOT TO FIGHT STATE CAPTURE
Transnet and the Special Investigating Unit must do a U-turn on their outrageous settlement with Swiss multinational Liebherr
In January, the Special Investigating Unit (SIU) and parastatal Transnet issued a joint statement. It confirmed that they had entered into a preliminary settlement agreement with Swiss multinational Liebherr on the final day of 2022. The settlement, however, is an outrage — and it lets a key corporate participant in state capture off the hook. It must be rejected.
Liebherr was one of the companies that benefited from the extraordinary corruption at Transnet at the height of the Gupta-led state-capture period. Liebherr’s South African subsidiary was awarded a contract to supply 18 rubber gantry cranes to Transnet at a cost of R841m in 2014. The value of an earlier contract, awarded in 2013, has not been made public.
The Gupta Leaks revealed that Liebherr won its business with Transnet with the assistance of the Gupta “sales agents” Accurate Investments. The leaks show that Liebherr paid the Dubai shell company a total of $3,232,430.88 between July 2013 and May 2014.
Evidence presented by civil society organisation Shadow World Investigations (SWI) at the Zondo commission of inquiry into state capture suggested that a good deal of this money was ultimately laundered back into the accounts of Gupta companies in South Africa.
The commission made damning findings on Liebherr and Accurate Investments. It found that “the Gupta Leaks and Dubai ledgers in particular show that Accurate Investments was beneficially owned and controlled by the Gupta enterprise, and its function was to act primarily as a vehicle through which kickbacks could be laundered”.
The commission additionally found that “it is difficult to conceive of any legitimate payments that could have been made by Liebherr to a
‘sales agent’ in respect of a cranes contract that ought to have been awarded by a fair, competitive and transparent process”.
The commission concluded that, despite being made aware of the allegations, Liebherr failed to answer them before the inquiry: “If there was any legitimate reason for these payments to Accurate Investments as a ‘sales agent’, Liebherr could have been expected to place evidence before the commission but it declined to do so.”
According to the joint Transnet-SIU media statement, Liebherr will pay a fine of R54m in settlement of any claim against it by both parties. This is equal to the amount Liebherr paid Accurate Investments.
The statement claims that, despite all parties agreeing that the award of the contract was irregular, “the SIU did not find that the payments [to Accurate] were corrupt or fraudulent”.
The settlement still has to gain the consent of either the high court or the Special Tribunal — a statutory body mandated to recover public funds lost to corruption, fraud and illicit money flows.
The settlement is an outrage, for a number of reasons.
First, the amount to be paid by Liebherr is a joke. Liebherr is an enormous multinational owned by a super-rich family in Switzerland. Its annual turnover last year was more than €11.5bn (R222bn). The settlement it is paying in South
Africa is roughly equivalent to €2.8m — a handful of coins thrown at the South African public like an insult. Liebherr no doubt spends more money on fancy loo paper at its lush Swiss headquarters each year.
Second, the amount paid by Liebherr is so small that it not only won’t be a deterrent, but the company will probably still end up making a profit on its questionable contracts.
Indeed, the Transnet-SIU statement confirms that the Liebherr cranes will continue to be operated by Transnet. The result is that, over the lifetime of the cranes, Transnet will pay Liebherr substantial sums to maintain and service them. So Liebherr can still expect to make a profit on a deal it got, essen
tially, by paying the Guptas. Third, it is deeply disturbing that the SIU and Transnet say that, despite the contracts being irregular, it found no corruption. Clearly the Zondo commission findings suggest neither the SIU nor Transnet would have had to try particularly hard to find it.
Why would the SIU and Transnet choose to ignore the Gupta Leaks evidence that emerged at the Zondo commission? This evidence suggested that confidential Transnet procurement documents related to the contracts won by Liebherr were being shared and distributed by the Gupta enterprise. One confidential internal memo was even shared with an employee of the Indian group that the Guptas allegedly used to launder billions of rand in kickbacks on the infamous 95, 100 and 1,064 locomotive contracts at Transnet.
It is an insult to South Africans to tell us that Liebherr has now admitted “irregularities”, paid Transnet the exact amount it paid the Guptas, and yet continues to maintain its innocence and will continue to benefit from the contract. It is a farce. Fourth, Liebherr has not shown an ounce of contrition for its behaviour. In response to the allegations from the Gupta Leaks, the company issued a statement in 2017 claiming it had conducted its own internal investigation, and found the payments to Accurate to be “legally sound”. If so, why is it paying back the money now?
In 2020, in response to a query from SWI, Liebherr loftily explained that it had already investigated itself, cleared itself of wrongdoing, and that, as a result, “we consider the case to be concluded for us. We’d ask for your understanding in this regard.” Even the normally sober judge Raymond Zondo chuckled when this statement was read out to him. Fifth, the Transnet-SIU statement could have a material impact on any criminal investigations into Liebherr in South Africa and abroad. If the National Prosecuting Authority now wants to investigate and bring charges, it will have to explain to a court why it has reached such a different conclusion to the SIU.
Most importantly, though, Liebherr could now present this half-baked and ill-considered statement to law enforcement agencies in Switzerland and other jurisdictions to halt any investigations there.
This last point is extremely important. The only thing Liebherr will truly fear is a criminal investigation and conviction for corruption in South Africa or Switzerland.
The company has repeatedly stated that it employs “sales agents” such as Accurate Investments around the world. If its offices were to be raided in Switzerland, would other questionable payments be found that mirror its engagement with the Gupta enterprise?
And, if it were convicted, Liebherr would face debarment from contracts in the EU and other countries. This could cost it tens of billions of euros. Arguably, considering the company’s conduct, this is exactly the sort of punishment it deserves — and that it fears the most.
Finally, this sort of settlement is not just a slap in the face of South Africans; it sends a powerful message to the many multinationals operating in South Africa that questionable dealings pay off. Moreover, it confirms that, even if these come to light, multinationals can simply negotiate a sweetheart deal that avoids accountability, kills investigations abroad and guarantees long-term excessive profits.
Transnet and the SIU still have to get this deal officially approved. They mustn’t do so, and instead should scrap this capitulation. However, if they decide to continue down this path, any settlement must achieve two things, at a minimum.
First, it must ensure Liebherr cannot make anything approaching a profit on its contracts in the long term, or even be allowed to break even. Indeed, it is more appropriate for the company to pay a substantive fine that properly quantifies the horrific damage caused to South Africa’s social, political and economic fabric through its indulgence of the Guptas. Money cannot undo social damage — but it is a start.
Second, the settlement must withdraw any claims around not finding corruption or fraud — this is simply a get-out-of-jail-free card that may be at odds with the findings of any further investigations, and the SIU and Transnet must surely know this.
The Gupta Leaks showed that large corporations are not the public’s allies in stopping state capture — they are often the architects of corruption, and will arguably continue to make corrupt deals unless we stop them.
South Africans must send a clear message to multinationals: you can no longer bribe your way to contracts, enable corrupt political elites, kill off domestic competitors and destroy our institutions. You will be rewarded for such crimes with meaningful accountability and prosecution.
We’ll make sure you don’t get away with it.