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Ok. Got itIndependent analyst, JP Landman, gives his annual update on some of the high-profile corruption cases in South Africa. According to his update, seven out of nine cases have led to arrests.
This political research note was prepared by JP Landman in his personal capacity. Landman is an independent political and economic analyst, and the opinions expressed in this article are his own and do not reflect the views of Nedbank Group. |
By JP Landman
20 October 2022
Once a year, usually in August, I do an update on the fight against corruption. This year I delayed it because the head of the National Prosecuting Authority (NPA), Shamila Batohi, committed in May to Parliament that nine ‘high-profile’ state capture cases would be brought to court by the end of September 2022.
Below is a summary of the status at the end of September:
At Transnet there were some significant criminal and civil prosecution victories:
As an aside, Regiments Capital was put into liquidation and is fighting to come out, but the South African Revenue Service (SARS) has slapped it with a R700 million claim for unpaid taxes. Nice to see coordinated action by the authorities.
Just like Transnet, Eskom is one of the biggest sites of state capture.
Unlike Transnet, there have been no recent high-profile arrests, but there was one arrest, which may lead to more. In July two former employees of the South African arm of Asea Brown Boveri (ABB), a Swiss multinational engineering firm, and their wives were arrested and charged with fraud, corruption and money laundering. A contract initially worth R25 million increased to some R526 million following a string of variation orders, awarded to a contractor by ABB (at the behest of the accused, who was at the time working at ABB). Reports indicate the case may involve some former senior Eskom employees, but charges have not been laid yet. ABB is cooperating with the South African authorities. Interestingly, ABB has already paid back R1,56 billion to Eskom and as recently as September made a provision of another R6 billion in its accounts to cover possible costs related to corruption probes at Kusile power station.
Eskom also received R1,1 billion from McKinsey and R150 million from Deloitte and obtained a R600 million court order against Trillian. The utility has gone after several unlawful contracts and has recovered billions. The work is ongoing. An interesting snippet is that a former employee-turned-supplier repaid R1,2 million a mere few hours after having been fingered by Eskom! If only everybody was so cooperative.
Puzzlingly, the arrest of four people (France Hlakudi, Abram Masango, Mike Lomas and Tony Trindade) in 2021 on charges relating to a R1,2 billion contract at Kusile has not proceeded further. Lomas was arrested in London at the request of the South African authorities, granted bail of £100 000 by the UK court and is fighting extradition to South Africa. After several postponements and delays, the criminal case here in South Africa is set down for 2 November. We will see whether it then advances to trial.
Given that the theft of infrastructure equipment is so prevalent, it is useful to note that in August 2022 several individuals were charged, convicted and sentenced to 12 years in jail for stealing Eskom cables in 2018. In July an Eskom staffer and contractor were arrested for the theft of cables. In February two scrap metal dealers and three Eskom security guards were arrested by a multi-agency team from Telkom, Eskom, Transnet and MTN for the possession of copper cables. These may seem like drops in the ocean, but it is a start.
The National Prosecuting Authority
Apart from the above high-profile cases it is worth taking note of the NPA’s ‘ordinary‘ anti-corruption work during the past financial year. The Specialised Commercial Crimes Unit in the NPA finalised 388 cases with 344 convictions – a 90,5% conviction rate. The number of government officials convicted of corruption increased by 38% from 86 to 119. Convictions of people in the private sector for corruption increased by nearly 40% from 147 to 205. Freezing orders to the value of R5,5 billion were obtained, a strong 800% increase on the R611 million in the previous year. It is worth noting that in June 2021 more than 800 posts/vacancies were filled in the NPA.
The Special Investigating Unit
The SIU is responsible for reclaiming state resources through civil action. It does not do criminal prosecution, which is the NPA’s job. It has the option of bringing civil cases in a High Court, or before the Special Tribunal, also created in 2019 by President Ramaphosa. It cannot put people in orange overalls, but it can deprive them of their ill-gotten loot. The unit has filed at least 50 civil cases to the value of R6,9 billion with the Special Tribunal. When it comes to consequences for bad behaviour, the SIU has been undeniably successful.
It was an order by the Special Tribunal that R150 million can be recouped from various people and entities in the Digital Vibes scandal that led to former minister Zweli Mkhize’s downfall. He has not been charged criminally and that is why he judges that he can run in the upcoming ANC elections.
Steinhoff
Since it was probably the biggest corporate heist in our history, the Steinhoff case is worth keeping an eye on. In June 2020 the Hawks asked PwC to compile a forensic report on the Steinhoff case. At the time Steinhoff said that it would be covering a ‘substantial portion of the costs’ of the probe. Apparently, the report comprises 31 lever arch files.
In July 2021 the head of the Hawks, General Godfrey Lebeya, reported to parliament that the Hawks were in the process of seeking 14 witness statements from foreign countries, comprising individuals living in Germany, France, Australia and the UK. The Hawks are also in the process of using mutual legal assistance to source 33 foreign bank account statements identified by the audit process. This evidence will be used in a final forensic report that will form the basis of the state’s case, should it proceed.
In July 2022 the minister of justice reported to parliament that the ‘first leg of the Steinhoff matter has been finalised’ and ‘mutual legal assistance requests are being finalised’. It is not clear what assistance is being requested from whom, but presumably it will involve the Germans.
It is worth remembering that Steinhoff’s offices in Germany were raided by German authorities in December 2015. The Steinhoff bomb exploded two years later in December 2017. More than three years later in March 2021 charges of balance sheet fraud were brought against four accused.
The Germans have a system where a court conducts a pre-trial process to independently assess the likelihood of a conviction. In October 2021 such a court announced the prosecution will proceed against two accused living in Germany and that the other two accused will face the court later. To date no trial has started. It is not just in South Africa where these things take time.
As this note went off the press, so to speak, news broke that the South African Reserve Bank (SARB), has obtained a court order from the Cape High Court to attach assets worth R1,4 billion belonging to Markus Jooste, his wife and his family trust. The assets include his home in Hermanus, the Lanzerac wine estate in Stellenbosch (which Jooste had previously denied that he owned), five vehicles and about R100 million worth of jewellery, art and other assets. It looks like a very comprehensive seizure. The action by SARS is related to suspected exchange control contraventions. Whatever the legal basis, it is no doubt a massive relief for the public that action has been taken. Rest assured that Jooste will fight this order all the way, but like the Guptas, his style will be a bit cramped. Now one must watch the criminal process for fraud to play itself out, in Germany and South Africa.
So what?