Broad-based crony capitalism, ka-ching!

THIS damn election business must be costing the ANC a pretty penny if Chancellor House’s sale of its 25% of Hitachi’s African arm is anything to go by.

Chancellor House is the ruling party’s front company set up stealthily years ago under an opaque trust deed. Before being exposed as a front company, it scored a number of “empowerment deals”, as in the Hitachi case.

Now, fingers crossed, the ANC may yet be able to shake R30million or so out of this sale — not a bad return considering this stems from a massive contract given to the African arm of Japanese power giant Hitachi by (state-owned) Eskom back in 2007.

Had Mamphela Ramphele’s Agang got this sort of help from government coffers, it might not have had to run grovelling to Helen Zille’s DA for a merger.

It’s a sordid business, but at least this sale will draw a line under one of the dirtiest deals in recent financial history, rippling with undertones of corruption and influence peddling.

These are the highlights: back in 2005, Chancellor House “bought” 25% of Hitachi Power Africa, after the two companies were introduced by a mysterious “retired businessman”. In the same year, Eskom gives the goahead for Medupi to be built.

Shortly afterwards, as luck would have it, Eskom’s board picked Hitachi as the winner of the R38.5-billion deal to build boilers at Medupi. And who chaired Eskom at the time? Valli Moosa, a member of the ANC’s executive and part of its fundraising committee.

Ka-ching for Chancellor House, and ka-ching for the ANC!

Not everyone was pleased with this rampant conflict of interest. Public protector Lawrence Mushwana ruled that “there was a conflict between the personal interest of Moosa in the ANC and his duty towards Eskom”.

Moosa, he said, had “acted improperly”, and new laws were needed to govern how political parties do business with the state.

This week it’s emerged that Chancellor House has apparently sold its 25% of Hitachi Power Africa back to the Japanese company for, wait for it, “an undisclosed sum”.

A back-of-the-matchbox calculation would suggest this sum could be tens of millions. Four years ago, Hitachi Power Africa CEO Johannes Musel said that Chancellor House stood to be paid about R50-million in “dividends” from the Medupi project over the following eight years.

That would obviously need to be discounted back to the current price. Costs excluded, it’ll still be a tidy sum to score from a state contract. Even more handy, three months before an election.

Thanks to the hue and cry from the public, the ANC will have to do some fancy footwork to get its hands on these millions though.

In 2010, Hitachi said it had “taken steps” to ensure the ANC wouldn’t benefit from the Medupi money. The way it did this was to ensure that Chancellor House’s trust deed (which determines how it spends its cash) had been changed to “exclude” payments to entities such as the ANC. Money can still be paid to “natural persons” so perhaps there’s a gap there.

Tokyo-based Hitachi won’t come out of this murky story with much credit though — even if they’ve tried their best to portray themselves as hapless victims of machinations beyond their control.

Back in 2008, Hitachi’s European executive, Klaus-Dieter Rennert, seemed surprised when told of the ANC’s link to Chancellor House, claiming this “would contradict our own governance rules”.

But it looks even worse now if you consider the hard facts:

Shortly before a massive state contract is awarded, Hitachi sells a chunk of its shares to an ANC front, presumably so it can boast “empowerment credentials”.

The actual execution of the contract itself ends up as a mess, with Hitachi and others missing deadlines and 9 000 faulty welds detected in Medupi’s first boiler.

Then, with the end of the contract in sight, Hitachi dumps its “empowerment partner”, Chancellor House, presumably having got what it wanted.

Even Gold Fields would blush at the cynicism of that empowerment deal. If the Hitachi deal was meant to be about using state resources to transfer wealth to a “broad base” of disadvantaged South Africans, it ended up looking to be nothing more than glorious Russian-style crony capitalism.