How Malusi Gigaba sold South Africa for a song

In his first budget speech in February 2018 as the new finance minister, Malusi Gigaba drew inspiration from American rapper and poet Kendrick Lamar to allay growing public concerns that the Jacob Zuma administration had pushed the South Africa in a discouraging fiscal and economic crisis.

“As urban poet Kendrick Lamar says, ‘We’re gonna be right, we’re fine,’ exclaimed Gigaba, looking smug and throwing up a few humorous hand gestures. Except it wasn’t about laugh because South Africa – in hindsight – hasn’t been ‘well’ since then.

His budget speech slapped the nation with a one percentage point increase in value added tax to 15% (a first since 1994), making life more expensive for the poor, unemployed and forgotten. Gigaba preached containment of public spending to save money, but provided taxpayer-funded financial aid to struggling state-owned companies, mainly Eskom and SAA.

At the time of his budget speech, Gigaba had never been asked to report on the appointment of people linked to Gupta to senior positions in state-owned companies, including Transnet, Eskom, Denel and SAA, while he was Minister of Public Enterprises from November 1, 2010 to May 25, 2014.

During a Morning Live interview the day after his budget speech, Gigaba attempted a mea culpa for naming ethically compromised people such as Brian Molefe and Anoj Singh (the couple were first at Transnet, then moved on). moved to Eskom), Dudu Myeni (SAA), Siyabonga Gama (Transnet), Gupta family ally Iqbal Sharma (Transnet) – to name a few. But the mea culpa was hollow and fell flat. “If I had known some of the things I know now then, I would have done some things differently,” Gigaba admitted during the interview. “It was a good decision to bring more black professionals into state enterprises.”

Enter Judge Zondo

With the recently released second report on the state capture by Acting Chief Justice Raymond Zondo, Gigaba can no longer dodge responsibility. The Zondo Commission report tore into Gigaba, revealing that he was a central figure in the web of state-owned enterprises caught up in state capture during Zuma’s nine-year administration.

In the vast universe of state-owned companies (there are around 700 in South Africa), the Zondo Commission’s first two reports have so far focused on Gigaba’s shenanigans over just two entities: Transnet and Denel. The upcoming third and final installment of the report is expected to be the mother of all, examining the capture of Eskom and Prasa – entities whose affairs were under Gigaba’s watch.

In the Zondo Commission’s second report, Gigaba’s role in the State Capture project was to weaken the governance structures of Transnet and Denel by appointing executives and board members closely aligned with Zuma, members of the Gupta family and their associates. The goal was also to enrich politically connected individuals through lucrative contracts.

The Zondo Commission report does not offer new information and evidence on the capture of Transnet and Denel, as high-level corruption has already been exposed by investigative journalists. But the report provides insight into the anatomy of state capture, how it started, and how it took a flexible network of individuals in the public and private sectors to escalate.

First attempts to capture Transnet

The first features of state capture began after Zuma was first elected president of South Africa in 2009.

In his first cabinet, Zuma chose Barbara Hogan as minister of public enterprises. On Hogan’s to-do list was finding a Transnet Group CEO after Maria Ramos quit shortly after Zuma walked into the Union buildings. Hogan testified before the Zondo Commission in 2018 that Zuma had been invested in appointing Ramos’ successor and often interfered in the process. This was unusual, as Zuma had other pressing matters to attend to, such as outlining his vision for the country as newly elected president. After a long search, Pravin Gordhan emerged as a favorite for the position of CEO of Transnet, but withdrew his candidacy because Zuma intended to appoint him to his cabinet as finance minister.

With Gordhan out of the way, Zuma pressured Hogan to appoint Siyabonga Gama as CEO of Transnet Group because he was an SOE insider, leading its freight rail division since 2005.

But Hogan objected to Gama’s promotion as he was under investigation for corruption related to Transnet’s purchase of security services from General Nyanda Security Risk Advisory Services, a company linked to the former Communications Minister Siphiwe Nyanda. The investigation revealed that there was a case of misconduct against Gama.

Despite this, Zuma still insisted that Hogan hire Gama, but she refused. For not granting Zuma’s request, Hogan was fired as Minister of Public Enterprises – a post she held for more than a year.

The Gigaba Network of Compromised SOE Nominations

In November 2010, Hogan was replaced by Gigaba, who the Zondo Commission discovered had a close relationship with Zuma and members of the Gupta family that began in the early 2000s when he was president of the League. ANC youth.

Gama was eventually named CEO of Transnet Group after Gigaba became Minister of Public Enterprises. His time at Transnet was chaotic for the company as he was fired and then rehired after facing new corruption allegations.

There are more instances in which Gigaba bowed to the will of Zuma and the Guptas by appointing compromised individuals to Transnet. Molefe’s nomination process as CEO of Transnet in February 2011 was flawed from the start: he was hand-picked by Gigaba, who overlooked a more suitable and qualified Dr. Mandla Gantsho for the top job.

The first part of the Zondo Commission report revealed that during the interview process, Gantsho scored higher than Molefe, making the former a favorite for the position of CEO of Transnet. But Gigaba snubbed Gantsho because “he knew that Mr. Molefe was the candidate the Guptas wanted to be appointed to this position”, the Zondo Commission concluded.

Beyond the executive level of Transnet, Gigaba has also been involved in board appointments. In November 2010, he selected candidates for Transnet’s new board, including Iqbal Sharma, who in 2012/14 was the business partner of Gupta associate Salim Essa. Sharma was then promoted to control the tendering committee of Transnet, the nerve center of public company procurement processes.

With compromised individuals firmly placed at the executive management and board level of Transnet, corruption schemes ensued. When Gigaba was Transnet’s sole shareholder as Minister for Public Enterprises from 1 November 2010 until 25 May 2014, he oversaw the company’s multi-billion rand program to acquire electric and diesel locomotives.

Transnet’s extensive freight, rail and logistics operations are important to South Africa’s economy, as its locomotives haul everything from coal to steel across the country and to neighboring countries. From 2011, Transnet wanted to modernize its fleet of locomotives and ended up buying 1,064 from Chinese manufacturers – the expected cost of which rose from R38 billion to R54 billion. But the locomotive program became a kickback program, with Molefe, Singh, Gama, Essa and others benefiting illegally.

Gigaba responds

DM168 could not reach Gigaba for comment after the publication of the second part of the report. But Gigaba spoke out about the report, disparaging Judge Zondo, the entire Zondo Commission, and its adverse findings against him.

“[Three] years and 1 billion rand later [the duration and cost of the Zondo Commission], DCJ Raymond Zondo found NO evidence to support a recommendation that I be charged with bribery. Instead of clearing me, he’s asking that I be investigated further in the hopes that it will kill me politically. If only he and his masters knew! Gigaba tweeted.

This is undoubtedly an incorrect interpretation of the Zondo Commission report.

Zondo has repeatedly noted that referring allegations of wrongdoing for prosecution or further investigation can be made on the basis that there is a reasonable chance the evidence can be substantiated. In other words, any evidence that can be corroborated can potentially be used to prosecute Gigaba.

The Zondo Commission discovered that Gigaba was a regular visitor to the Gupta family compound in Saxonwold, where he discussed state-owned company business such as board appointments and the channeling of Transnet and Denel contracts to entities. family related.

For his hard work, Gigaba’s driver, known to the Zondo Commission as “witness three”, testified that Gigaba always carried a “duffel bag full of wads of R200 notes”. “Witness 3” suspected that the money came from the Gupta family. Gigaba’s estranged wife, Norma Mngoma, also corroborated ‘witness three’s’ version of events, adding that the Gupta family often funded Gigaba’s penchant for expensive costumes, fine dining and leisure travel.

Law enforcement authorities have been asked to criminally investigate Gigaba for cash payments from the Gupta family under the Preventing and Combating Corruption Act 2004.

No reimbursement for public companies

Senior Economist Dr Iraj Abedian says that if Gigaba and other State Capture enablers had not taken their leadership positions out of greed, they could have used state-owned enterprises to make a significant contribution to the economy and reduce stubborn levels of unemployment and inequality. “After all, state enterprises have huge capital and investment budgets. If used correctly, they can make a big difference to society,” he said. DM168.

Since 2003, the government has adopted a model development declaration to use state-owned enterprises to further develop and industrialize the economy and create jobs. This has yielded tangible results as the economy grew by 5% in 2007 and the official unemployment rate hovered around 26%. Today, state enterprises are collapsing, they have made the unemployment rate more than 35% worse, and they depend on taxpayer-funded bailouts for their survival. DM168 calculations show that state-owned companies, mainly Eskom, SAA and SA Express, received bailouts amounting to R92.2 billion during the Zuma years.

Political analyst Dr Ralph Mathekga says the problem is that corruption is entrenched and embedded in all spheres of the SOE and state organs and the ANC, adding that it is too advanced to be used wisely. DM168

This story first appeared in our weekly newspaper Daily Maverick 168 which is available for R25 from Pick n Pay, Woolworths, Exclusive Books and airport bookshops. To find your nearest retailer, please click on here.

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