SACC “Unburdening”; PARI “Betrayal of the promise”; OUTA “No Room to Hide” Report findings; Eskom inquiry prep
SACC “Unburdening”; PARI “Betrayal of the promise”; OUTA “No Room to Hide” Report findings; Eskom inquiry prep 1
SACC “Unburdening”; PARI “Betrayal of the promise”; OUTA “No Room to Hide” Report findings; Eskom inquiry prep 2
Betrayal of the Promise: How South Africa Is Being Stolen presentation
Betrayal of the promise: How the nation has been stolen
Remarks to the Portfolio Committee on Public Enterprises Bishop Malusi Mpumlwana SACC General Secretary
SACC Report to the Church Public on the Unburdening Panel Process Regina Mundi Church, Soweto. May 18, 2017
No Room To Hide A President caught in the act: Organisation Undoing Tax Abuse presentation
No Room To Hide A President caught in the act Document: Organisation Undoing Tax Abuse
“No Room To Hide”: Organisation Undoing Tax Abuse presentation
Chairperson: Ms D Rantho (ANC) (Acting)
In preparation for an inquiry into Eskom, the Portfolio Committee on Public Enterprises invited the South African Council of Churches (SACC), the Organization Undoing Tax Abuse (OUTA) and the Public Affairs Research Institute (PARI) to present the findings of their research into corruption involving state entities.
The SACC said it had established an “Unburdening Panel”, a pastoral listening or confessional process that it had conducted across the country to allow South Africans to speak freely about issues such as their involvement in corrupt practices, in order to relieve themselves of the burden caused by an individual, a representative of a business interest, a political party or a person of influence. Its General Secretary spoke of sleepless nights having listened to the hopelessness of the people across the country who had presented to the Panel. There were individuals who lived in fear of their lives, people who had left their homes to seek safety, and people who were dying as a result of the corruption and rottenness of the country. A careful analysis had made the case for observable trends of inappropriate control of state systems through a power elite that was pivoted around the President of the Republic, which was systematically siphoning the assets of the State, and blunting any possible effective means for law enforcement.
The Organisation Undoing Tax Abuse (OUTA) presented its findings in the “No Room to Hide” Report. It focused on persons of significance in relation to the matters at Eskom who, because of strong relationships with the Gupta family, had sent classified and confidential documents to the Guptas and facilitated contracts from which the Guptas benefited. OUTA informed the Committee that the auditors of Eskom had found irregular payments by Eskom of R3 billion in the 2016/17 financial year. The auditors could not find documentation relating to the payments. The money had therefore been processed without documentation so that someone had been able to override the SAP system, or payments were being made outside of the system. OUTA was also adamant that the load shedding of 2008 and 2014 had been self-inflicted by Eskom and was part of the corrupt practices.
PARI referred to the State Capacity Research Project (SCRP), and briefed the Committee on the “Betrayal of the Promise” Report, which was a collaborative report by a group of academics who worked in the field of public administration. SCRP had found that underpinning the corruption, illegality, criminality and immoral behaviour was a political project intended to reshape the fundamentals of a new economy. Public procurement was the route for massive economic transformation, but there had been a turn in 2012 when the use of procurement budgets had turned against Constitutional procurement processes. There had also been a turning against the National Treasury and all investigative institutions. The story of Eskom was a story of illegality and criminality linked to a political conviction that the Constitution was an obstacle to progress in economic transformation.
The Chairperson explained that the meeting had come about because of the resolution taken by the Committee on 21 June to hold a meeting before it began its inquiry into Eskom. She welcomed the three groups that would be making presentations to the Committee.
As background, she said that the Committee had taken a decision on 23 May 2017 to apply for an inquiry into Eskom’s re-appointment of Brian Molefe, and the governance of Eskom in general. The decision had been taken after an earlier meeting that day with the Eskom board and the Ministry. After the deliberations, the Committee had decided to investigate the underlying issues that had not been presented by the Ministry and Eskom. On 21 June 2017, the Committee had considered the terms of reference and a list of potential witnesses and documents that the Committee had thought were necessary for the inquiry. It had also agreed to hold a meeting during the recess, and to hold many and long meetings. The Chairperson said she had been interacting with the support staff on a regular basis, and they had prepared and circulated some documents to Members. Eskom had also submitted some documents which had been shared with all Members.
The documents showed that it was not a straightforward process, especially as it was the first time that the Committee on Public Enterprises had been involved in such an investigation. It was very technical and looking at the extent and the sensitivity of the issues, it had been decided that more time and more information was needed. The Chairperson had determined that it would be valuable to receive input from those who had already done research into the “State Capture” phenomenon. Further information was being received that had caused the Committee to raise its eyebrows. She appreciated the support and understanding of all the political parties in the Committee to ensure that the government was accountable to it. She assured everyone that the Committee was working in terms of its mandate.
The Chairperson had asked Parliament to provide additional researchers and additional legal staff to help to prepare for the inquiry. She had also requested the Chairperson of Chairs to provide the services of Advocate Ntuthuzelo Vanara, Senior Legal Adviser at Parliament, to be an evidence leader at the inquiry and to help the Committee by checking the relevance of the potential witnesses. Eskom had been informed of the inquiry, but witnesses had not yet been invited. The inquiry would not start on 1 August 2017, as the Committee was currently assessing the information that it had and how it would approach the inquiry.
Mr N Singh (IFP) asked that the Committee discuss those issues after the presentations. The Eskom Project Map would also be discussed.
Presentation: South African Council of Churches
Bishop Malusi Mpumlwana, General Secretary: South African Council of Churches (SACC), presented the findings of the “Unburdening Report” by the SACC. The Church had felt compelled to speak on political matters, despite the refrain that the Church should restrict itself to spiritual matters. The nature of the Christian faith was such that the Church had a preamble which ended with the words, “may God protect our people”. That was the motivation for consideration of the political situation. He quoted from the “The Divine Intention,” in which Archbishop Desmond Tutu had stated that the interest of churches was in the here and now, because that determined the hereafter. The whole of life was important – social, economic and political – and none of those excluded the Church. The SACC never did, could not now, and would not in the future, refuse to address political issues that were against the public good. The SACC National Conference had resolved to collaborate with South African society through a national convention process that would agree on the basic standards and values against which public institutions and public officers would be measured in the critical spheres of life, and agree on what was ethically un-South African.
In May 2016, the SACC had instituted the Unburdening Panel to provide a platform for South Africans to unburden themselves and to speak freely on issues such as involvement in corrupt practices, and to relieve themselves of the burden caused by an experience of someone – whether it was an individual, a representative of a business interest, of a political party or of a person of influence. Depending on the wishes of the unburdening person, the information would be used to create awareness, made public or given to a body such as the Human Rights Commission or the Public Protector. Many did not want to take the matter further, but those who did were advised to contact the Public Protector, and those stories had become part of the State Capture Report.
The Panel had encountered cases of people at the municipal and provincial level who had been pressured to divert funds inappropriately to certain activities that had nothing to do with the work and purpose of the budget. There were people who had been prevailed upon to rig tender processes in favour of certain companies and individuals, or bend and tailor regulations for a specific desired outcome. Some of these people lived in fear of their lives. It had become clear to the SACC that there was serious undermining of government processes that went beyond petty corruption.
A careful analysis had made the case for observable trends of inappropriate control of state systems through a power-elite that was pivoted around the President of the Republic, which was systematically siphoning the assets of the state and blunting any possible effective means of law enforcement.
Eskom was a perfect illustrative case of securing control over state wealth through the capture of state-owned companies, and weeding out of conscientious, skilled professionals. It was South Africa’s largest consumer of coal, and an extremely attractive cash cow for corrupt interests. The two Transnet tender chiefs, Brian Molefe and Anoj Singh, had both been redeployed, as Eskom was big with both coal and the tantalizing opportunities through its nuclear power project. The Eskom case was not isolated, nor was that of Transnet, Prasa, Denel, South African Airways (SAA) or the SA Broadcasting Corporation (SABC), as this had reached out to other organs of State, including elements of the security services.
The Chairperson indicated that questions would be reserved until after all the presentations.
There was a discussion regarding the copies of the presentation that were not available at that time.
Dr Z Luyenge (ANC) said that the presentation was important, as it was the word of God.
Mr S Swart (ACDP) said that the presentation by the Church had been very extensive, and he asked that the Chairperson ensure that the Committee had sufficient time to interrogate it, as the SACC was presenting the word of God. It was a prophetic word from God.
The Chairperson said that the Committee had the entire day for discussion, so there would be sufficient time.
Presentation: Organisation Undoing Tax Abuse (OUTA)
Mr Rudie Heynecke, Head of Investigations: OUTA said the organisation had extensive information on issues relating to state capture and corruption, but would focus on matters relating to Eskom in the findings in the report entitled “No Room to Hide”.
A year previously, OUTA had begun examining the situation at Eskom. The so-called “leaked emails” had since provided evidence of the findings that OUTA had made. It had made presentations of the report to the President, the government, the SA Police Service (SAPS), among others. The entire report was available on the OUTA website. OUTA was still busy with findings, and they were compiling a second report.
OUTA’s presentation focused on persons of significance in relation to the matters at Eskom. The first person of significance was Mr Anoj Singh, who had been Chief Financial Officer (CFO) at Transnet before being transferred to Eskom as CFO. He had had a relationship with the Gupta family from at least 2012. Mr Richard Seleke was the current Director-General at the Department of Public Enterprises (DPE), and had acted as a “postman” to get classified and confidential information from the DPE to the Gupta family. Mr Matshela Koko, a former acting Chief Executive Officer (CEO) at Eskom, had provided improper assistance to the Gupta family in relation to Eskom matters. Mr Heynecke referred to additional people who were part of the current investigation, including the personal assistant of Minister Lynne Brown. In conclusion, he said that OUTA was trying to “connect the dots.”
Mr Ted Blom, Portfolio Director for Energy: OUTA, said he had worked for Eskom, and in 2006 had been employed as a consultant to Eskom. He spoke about the confusion as to how Mr Molefe had arrived at Eskom and how he had left. He referred to the involvement of Trillion Capital, which had received a payment of R495 million which members of the Eskom board knew nothing about. Furthermore, although Trillion was said to have received a third of the payment, the R495 million paid was not a third of R100 billion. The auditors of Eskom had found irregular payments by Eskom of R3 billion in the 2016/17 financial year. The auditors could not find documentation relating to the payments. The money had been processed without documentation so someone had been able to override the SAP system, or payments were being made outside of the system. He asked the Committee to focus on that issue during its investigation.
The Eskom Board had been unaware that Mr Singh had signed off on a guarantee for ABSA of R1.6 billion in relation to Tegeta, but it had met all the legal requirements. It was evidence that there was wide scale corruption as the legal department had also signed the guarantee. It had to be said that the R1.6 billion Eskom guarantee plus the pre-sale amount of R600 million paid to Tegeta was the full cost of the Optimum Mine.
When Mr Blom was consulting for Eskom from 2006 to 2008, the invoice for the Medupi Power Station had been R32 billion, the normal price for a six-pack power station in Indian and other countries. At that time, Mr Brian Dames, the CEO, had disbanded the coal procurement department and banned Mr Blom from the building. The Eskom board had later approved a payment of R91 billion for Medupi -- an unexplained addition of R60 billion. Various technical components at the Medupi power station had been changed, which had led to a technical mess at Medupi. Hitachi, one of the service providers, had been obliged to have a black empowerment partner, Chancellor House. Mr Dames had also photocopied contracts and appointed service providers without tender procedures. Coal fraud was rife and coal was shipped from one power station to another. There was an organised crime syndicate of 50 people. Mr Blom asked the Committee to investigate.
In 2005, the cost of electricity was 16 cents an hour. This had been increased to pay for power stations to be built. The latest application to the National Energy Regulator of South Africa (NERSA) was for over R1 an hour. The consumer price index (CPI) increases indicated that electricity should, by 2017, have amounted to 30 cents per hour. In addition to the tariff increases, Eskom had borrowed over R350 billion. This meant that Eskom had accumulated over a R1 trillion for a R90 billion asset. Mr Blom advised that, in relation to the CPI, the price of electricity should revert to under 30 cents an hour.
Ms Dominique Msibi, Portfolio Director for Special Projects: OUTA, commended and thanked the Committee for giving citizens an opportunity to speak at the meeting.
Presentation: State Capacity Research Project (SCRP)
Prof Ivor Chipkin, Director: Public Affairs Research Institute at the Universities of Witwatersrand and Cape Town, presented a report on behalf the State Capacity Research Project (SCRP). The “Betrayal of the Promise” Report, compiled by a partnership of South African academics, had tried to bring a whole lot of new concepts to the situation. SCRP had found that underpinning the corruption, illegality, criminality and immoral behaviour, was a political project. They had joined the dots by following the media, used government and court documents etc, and had collated and analysed information. He emphasised the importance of the current moment, as there were signs of a growing political and societal will to address the situation of state capture. There was an opportunity to move forward economically and politically in South Africa.
A political conviction had arisen after 2007, and was a repudiation of the Thabo Mbeki years, and the economic and social features of the time. The argument had been that growth in the Mbeki years was associated with the growth of a small elite, an unstable middle class, and the exclusion of a massive poor lower class. The idea of a political project was to reshape the fundamentals of a new economy. Public procurement was one route for massive economic transformation. The Department of Trade and Industry saw public procurement as the route to radical economic transformation. R213 billion was available for procurement in state-owned entities, which could cease procuring from white-owned business and which could promote black businesses. However, there had been a turn in 2012, where the use of procurement budgets were found to fall outside the Constitution framework which governed procurement processes, determining that they should offer good value and produce economic justice. This was followed by a turn against constitutional bodies, such as the National Treasury. The Constitution was seen as an obstacle to black entrepreneurship, in that it was seen as impossible for a supplier to offer good value and promote economic justice. There was pressure on Treasury to approve the spending of 30% of all government procurement on black businesses, regardless of value and price. The story of Eskom was a story of criminality linked to a political conviction that the Constitution was an obstacle to progress in economic transformation. At this point, there had developed a growing illegality in procurement.
The dominant concept of President Jacob Zuma and his allies as a criminal network that had captured the state, had obscured the existence of a political project at work to repurpose state institutions to suit a constellation of rent-seeking networks that had constructed a shadow state. This was akin to a silent coup. The Zuma-centred power elite emphasised the role of the state-owned enterprises (SOEs), particularly their procurement spend. Eskom and Transnet, in turn, were the primary vehicles for managing state capture and the large-scale looting of state resources, which in turn created a continuous source of self-enrichment and funding for the power elite and their patronage network.
Eskom was simply an example of the looting. The value of the coal contracts was significant. Optimum Mine provided low quality coal to Eskom. Brian Molefe, then CEO of Eskom, had imposed a fine of over R2 billion on Optimum Mine, which had pushed the mine into bankruptcy and had led to its purchase by Tegeta. However, the value of the coal contract with Tegeta had increased from R325 million to over R7 billion for the same low-quality coal from Optimum. The Tegeta contract had driven up the cost of electricity. At the same time as a shift to illegality and criminality, there had been moves against other state institutions, especially those that had investigative departments, such as the South African Revenue Services (SARS), the Hawks and all institutions with an investigative capacity. This was the start of a “shadow government,” or “kitchen cabinets” outside of the law. A lot of decision-making then happened at places such as the Gupta residence in Saxonwold.
The SCRP was of the opinion that the belief that the Constitution was a reactionary document had to be addressed. The context of illegality and criminality needed to be addressed. If successful, a reaffirmation of the Constitution could turn the ship around and a project of state building could be launched.
The SCRP submitted a graphic report that showed how the shadow state was built and how, in less than a decade, the Zuma and Gupta families had managed to position themselves as a tight partnership that coordinated a power elite to manage the rent-seeking that bound the constitutional and shadow states.
The Chairperson thanked all presenters, and welcomed elaboration on the presentations. She cautioned Members that the Committee had not yet begun the inquiry and that none of the presenters were witnesses.
Mr M Gungubele (ANC) expressed his gratitude to the three bodies for widening the understanding of the Committee. He agreed with the SACC that the role of the church in politics was critical and could not be questioned or criticised. He appreciated the clarity in respect of the economic consequences, the quantification of jobs lost and opportunities lost to the economy. More work was critical. He asked Mr Blom of OUTA to write down, in sequence, all the power stations that had been purchased and the corresponding price increases, especially the escalation of costs for Medupi and the increase in the electricity price. He wanted to know from the academia about the radical changes that went together with illegality, criminality and anarchy. Had it been a coincidence, or had the policy proposals deliberately allowed it? Had the political conviction emerged out of illegality, or was it the other way around?
Mr Swart commended and encouraged the SACC. Corruption affected all, especially the poor. He saw the looting and plundering. The Committee had started the process of accountability, justice and righteousness, which was the cornerstone of God. The presence of the SACC in Parliament was an answer to prayer. He referred to the degree of corruption at the provincial and local government level, and asked the SACC to encourage the whistle blowers to report their stories. He asked the Church where they would be going from that point onwards.
He commended OUTA on their work and the affidavit that they had filed in court. The affidavits had weight that would be valuable in the inquiry, where witnesses would have to testify under oath. He hoped that the Committee would be allowed to engage the expertise of Mr Blom and OUTA. He wanted to know how the “golden” key, or the hidden cheque book, could work to override financial systems. How was it possible for funds to be moved? He wanted to know more about the Eskom guarantee to ABSA for the purchase of the Optimum Mine. He had never heard of a state-owned enterprise giving a guarantee for one company to purchase another. The Committee was connecting the dots, as former Finance Minister Pravin Gordhan had suggested. He asked OUTA to connect the dots in respect of the movement of money at Eskom. His greatest concern was that there was nothing to prevent criminal prosecution taking place, but charges were not being investigated or prosecuted. Funds were leaving the country at an alarming rate. What was OUTA’s next step going to be?
He said the SCRP had shown that even the ANC had been side-lined. He was extremely alarmed that the Constitution was under threat by a shadow state. It went far deeper than a no-confidence vote in the President. It was time for every South African who wanted justice and righteousness to take a stand, and he commended civil society for the work they had done. What did the SCRP intend to do with the evidence that they had uncovered in the research? They had engaged with Parliament, but what were they going to do themselves? Were they going to litigate? There was still the Rule of Law and the courts. How were they going to take it forward?
Dr Luyenge said the SACC should not be apologetic for doing God’s work. The issues were real. The Church had the obligation to lead people to do the right thing and to take morals into account. He commended the collaboration by the three presenters, which had led to a logical chronology and the presentations had followed sequentially. Much of the information was in the public domain, and well-known people had spoken about the matter, so the Committee would not be shooting in the dark. The three organisations were in accordance with other civil organisations. The Committee could not forget the past, but the legacy of the past could not be blamed. He agreed that there might be political arrangements, but no political party should ever permit the looting of state resources. No political party would promote anarchy. The acts of individuals had to be separated from the political party. The acts of criminality were not being carried out by the ANC, but by individuals. It did not matter who was doing wrong, he had to hold them responsible for their wrong-doing. It did not matter who the person was. Had OUTA checked the processes in the Constitution, including recruitment policies and strategies of government? Was the government still the one that was created by the heroes of the struggle -- Chris Hani, Nelson Mandela and others? He commended the work of the three organisations, and suggested that the Committee should call any of them to give evidence at the inquiry.
Mr D Maynier (DA) asked Professor Chipkin about the narrative about the political project that was the centre of the rot, and the power elite at the centre of the rot. He had referred to that elite in his document as “the Zuma-centred power elite” which had emerged after the Polokwane moment in 2007. He asked how the SCRP explained Chancellor House -- which had been formed by the ANC in 2003 -- being part of a corrupt contract with Hitachi in 2007, which pre-dated Polokwane. It seemed to him that Chancellor House was one of the inconvenient dots that had not been included in the narrative.
Mr P Gordhan (ANC) thanked the Chairperson for her leadership and the presenters who had presented evidence of a vibrant democracy and people who could still speak the truth and write the truth. That bode well for the future and was gratifying. The fact that the Parliament was taking an initiative regarding democracy and corruption was important, and would earn Parliament the respect of South African citizens who would know that Parliament would stand up to the corruption which was prevailing in the country.
He complimented the SACC on its initiative in setting up the Unburdening Panel. He asked whether the pursuance of money and greed was prevalent throughout South Africa, or whether there were sufficient South Africans who were good, honest people. He thought South Africans were, and asked how South Africans were going to be guided from the spiritual point of view so that ethics did not decline even further. Had the country reached a point of impunity, where those who were involved had a “don’t care” attitude which allowed them to act with impunity while they carried on with corrupt activities and sent money out of the country? He was concerned about a general attitude of “don’t care” that might be pervading the country.
He suggested that Prof Chipkin might look at deviant globalisation, which described how bad globalisation piggy-backed on good globalisation. Was that what had happened with state procurement, which had started out with good intentions but had been abused because constraints were not in place? It took a long time to build an organisation, so what was the prognosis for rebuilding and restoring the state? How long would it take to recover capability in the government and SOEs? He asked Prof Chipkin to explain the role of the people in the process of corruption, such as the brokers, middlemen and middlewomen and others, and how they connected to each other. What were the observations of the SCRP in respect of complicity by the professionals, such as accountants, lawyers and others, either actively or passively?
What did OUTA think would be the consequences? It was good to develop reports, but would there be action? Would something come out of the reports? Would law enforcement take action? Did the presenters have a message for the public? He was concerned about the damage to political ethics, the country and particularly the economy. What was the financial, economic and job role of the corruption? What was the effect on the economy which had been monopolised by a small circle of elite players and had excluded all other role players who could have developed the economy and created jobs?
Mr Singh thought that it had been a very useful exercise. He asked for the views of the presenters, as it was possible that what was happening in Eskom was a picnic compared to what was happening in other state-owned entities and government departments. Presidents had been put behind bars in other countries for corrupt activities, but in South Africa there were very few examples of government officials and officials from parastatals who had been put behind bars. He asked the three organisations for their opinion on that matter.
What was happening to the State Capture report? What was the view of the three presenters on the report and the dragging of heels that had ensued? Had they picked out certain officials or people who were evidently the common denominator in the corruption? Some of these people were still employed by Eskom, for example. His view was that those people ought to be suspended while the investigations continued. One could not have people who were involved in the corrupt activities in a position where they could manipulate things. Lastly, there had been an allegation by OUTA of flagrant disregard of the law, which had said that the law appeared to have been used in favour of the Guptas. He requested further information in that regard, as he believed that anybody who was breaking the law should be put behind bars.
Mr R Tseli (ANC) appreciated the presentations, especially the fact that it gave them a way forward. He asked Mr Blom how long he had been at Eskom. The Committee would also require information about the cases that OUTA had referred to law enforcement agencies. What had the SACC done where there had been evidence of the diversion of funds and flouting of tender processes? He wanted to know from OUTA what NERSA had to say about the increase in electricity tariffs, if the analysis was correct. The Committee also required documentary proof in terms of some of the statements made by the presenters.
Mr F Shivambu (EFF) appreciated the submissions, and suggested that the chief whip of the ANC should have all the documents provided by OUTA, which ANC Committee Members did not currently have, and which would provide the documentary evidence requested by Mr Tseli and others. The Committee believed what the SACC had to say, as they would not present misleading evidence. The Committee also believed the evidence-based submission of OUTA and the socio-scientific research of Public Affairs Research Institute (PARI) as presented by Prof Chipkins.
The key issues that had arisen out of all the reports was that South Africa was currently experiencing more massive, callous and capricious looting of the state-owned companies than had ever been seen anywhere else, perhaps including Idi Amin of Uganda and other such corrupt leaders. It was a crisis of rapacious looting of state resources of huge magnitudes. There seemed to be collaboration by multi-national consulting companies such as SAP and McKinsey, which were bowing to Trillion Capital -- a criminal entity used to siphon off money from state owned companies such as Transnet and Eskom. Trillion was being paid money for doing absolutely nothing. Money that had been earmarked for electrification was being siphoned off into Trillion Capital. This was one of the things that had to be looked into.
The Committee had to remember that there were political protagonists in all these matters, and nothing could be resolved unless they called those political protagonists by name. The President of the ANC, Mr Jacob Zuma, was at the centre of the crisis of looting of state-owned companies by the Gupta-linked criminal mafia. He utilised the Mulusi Gigabas (Minister of Finance) and others to run around with the project of looting the state-owned companies. He agreed that when the looting was intensifying, a parallel process had begun to weaken the institutions, or even to capture those institutions, that could hold the looters accountable in the criminal justice system. He mentioned a number of criminal cases that had been opened by organisations such as OUTA and the EFF itself, where cases had not been prosecuted, even though the police had told them that there was a case to be pursued. The National Prosecuting Authority (NPA) was not coming to the party. The NPA offices seemed to be closed. No one knew what had happened to NPA Director, Shaun Abrahams. He seemed to be part of the looting, as he had closed his eyes to the massive looting of resources. The money of the people was being transferred into the hands of the corrupt. Shaun Abrahams had already been captured.
It seemed that, from a technical point of view, Parliament was incapacitated. Parliament had legal advisors who should be given to the Committee. It should also source the services of a senior counsel to advise on the processes. Adv Venara was involved in other issues, and was busy trying to implement the Chapter Nine resolutions. Two advocates, employed by Parliament, were totally inadequate to service the needs of Parliament and all of the institutions that reported to Parliament. Parliament had to be requested to resource the inquiry. Senior counsel outside of Parliament should be sourced to serve as a resident advocate. Some of the cases would have to be referred for criminal prosecution. Politicians behind the looting should also be summonsed to appear before the Committee. Mr Jacob Zuma and Mr Gigaba had to come and account before the Committee.
Mr Shivambu said his greatest concern was that many of the people who were involved in the corruption, the Gupta ground forces, were still in the employ of the entities or the government. Mr Singh was still at Eskom, Mr Seleke was still in the Department of Public Enterprises. The Ministry had to be approached to deal with it, so that it could at least be stopped. Those people had to be removed and the intention of the process had to be that all monies should be paid back.
The Chairperson had one question, and that was on the seven points that the Bishop had presented. There was an undermining effort to weaken the government of South Africa. She asked whether people employed by government were incapacitated, especially the SOEs that were intended to be developing the economy of the country? Did the Bishop have a suggestion? When Mr Molefe had been moved to Eskom, it was said that he had the expertise to prevent the load shedding. Mr Molefe had been seen as the person who was able to prevent the country from being plunged into a total blackout. He had stopped the load shedding, but the Committee did not know what was behind it. Had there been something behind employing Brian Molefe and removing the previous CEO? The presenters had suggested that the worm was going deeper. Could they tell whether things were different from the way that things had been presented to the Committee? She wanted to know about the increasing costs of Medupi. She also wanted to understand fully about the “golden key,” or hidden cheque book, that Mr Blom had referred to.
Mr Gordhan asked about the role of Bell Pottinger in the entire matter.
Ms G Nobanda (ANC) appreciated the Church’s presentation, as when the Church spoke, it was God speaking. She asked Mr Blom about the by-passing of the SAPS financial system, and what that meant for Eskom or any other company going forward. Was there a possibility that the looting had been going on from before 2015?
Response by OUTA
Mr Heyneke agreed to submit comprehensive answers in writing. In response to questions about laying charges and follow-ups, he reassured the Committee and the public that OUTA was following up and was putting pressure on the investigating officers. The BMP (Beekman Management Portfolio) matter relating to SAA was with the prosecutor. OUTA had also been tasked to assist with the SABC investigation and everything was in place. However, permission was required to continue with the investigation, but had not been forthcoming. He requested the Committee to put pressure on the follow-up.
He referred to the question asking about recruitment strategies. The introduction to Mr Gigaba’s presentation as Minister of Public Enterprises on 1 November 2011, as reported by the Parliamentary Monitoring Group (PMG), looked like a shopping list. If one referred to that speech, everyone would be able to see the “shopping list” that was being filled. OUTA’s message to the public was to keep on fighting and to be brave. He encouraged whistle blowers and people who worked for the public service to come forward to prevent the things happening in the country and to prevent them from ever happening again.
Mr Blom said that he had been involved with Eskom since 1988. The rot had started when Eskom was commercialised in 2001 (the Eskom Commercialisation Act, 2001), as the management had been oblivious to the change. He recommended that any investigation into Eskom should begin in 2001, and he specifically recommended the reading of the minutes of 2001 of the Eskom board. The professional bodies, consultants, lawyers, and other hangers-on at Eskom and other SOEs were not doing their jobs. Auditing and legal firms held on to their contracts and became complicit with the entities in order to retain those contracts. They were being used and played off one against each other. A change of auditors was paramount, as each auditing firm had transgressed. A multi-national firm, named during the presentation, was earning R16 million a quarter at Eskom. They were charging R400 per hour for clerks, and had been connected with Eskom for at least ten years. He was prepared to name and shame the company in a written document, if the Committee so requested.
The stealing at Eskom had damaged the economy in terms of growth and jobs by 3% to 5% per annum for the past ten years, because of its excessive charges for electricity and the borrowing of funds. He was adamant that the load shedding of 2008 and 2014 had been self-inflicted by Eskom and was part of the corrupt practices. In 2008, Eskom had been held hostage by coal producers. In 2014, R10 billion for maintenance had disappeared, which had resulted in load shedding.
Response by SCRP
Prof Chipkin emphasised the broad thesis that a political project had turned against the Constitution and the law, and had created a climate for illegality and criminality. Non-compliance with government regulations had become permissible and tolerable. This had created an environment of illegality and criminality, where all sorts of shenanigans became possible. Some of the motives were in good faith, so not all could be put down to criminality. It was in this context that the coal contracts at Eskom had to be understood. The general environment had produced the space for criminality. If one understood the political agenda, one could understand the brazenness of the operations. There was a sense of righteousness in some of the actions. Some people believed that they were in pursuit of a higher cause. Brian Molefe, in his speech of January 8, 2017, had made the point clearly that he was a deployee and had been asked to do things that he did not understand but were required in the service of the organisation. Because there was a belief in a political project, one could understand what was driving the actions.
Some events had occurred prior to Polokwane, and it had to be remembered that not all events could be reduced to the same phenomenon. The Chancellor House involvement was in relation to party political funding, which was an issue that the Committee needed to probe in relation to some of the Eskom deals. There were paybacks going to political parties, and also to factions of political parties to wage political battles. The re-purposing of institutions, as the academics understood it, was to take over an entire institution, turning it away from its original purpose and official mandate in the service of an altogether different political project. That was what was different from what had happened in the past.
How did one correct it? The legal route was limited because investigations and prosecutions did not proceed. Actions against individuals needed to be accompanied by a reaffirmation of the rule of law and a commitment to the South African Constitution and democracy. Never mind the looting, one of the great tragedies of the moment was the profound weakening of institutions that was taking place across the state. There was a generalised decline of state institutions to perform their mandate. There had been a deliberate attempt to politicise the administration and an undermining of the professionalism of the public service. Political considerations were overriding all sorts of professional considerations in the appointment of personnel and in the kinds of operations being undertaken. An important professional and political commitment needed to be made. There had to be a recommitment to the autonomy and professionalism of the public service. Recruitment practices had to reduce political discretion, especially that of the President. Professional routes had to be established into the public service -- potentially a universal examination to allow entry into the senior management of public service.
At the same time, it was critically important to recognise the autonomy of public institutions and administration. The system of brokers had come into being as a means of controlling the environment where one could no longer rely on the constraints of the institutions. Informal practices had been instituted to manage rent seeking, because those driving the process did not want uncontrolled rent seeking or corruption, as it had to benefit particular individuals. The risk was that it could spiral completely out of control. The system of brokers was part of their own system of checks and balances.
Prof Chipkin addressed the role of private corporations and professionals in relation to the current situation. There was complicity among all sorts of professional services such as consultants, auditors, accountants and lawyers, who were doing the everyday work of putting in place systems and processes which allowed money to leave the country illegally. That was an important area for the Committee to explore. There should be a process where the private sector disciplined itself and those companies and associations that were complicit in illegality and criminality. The Research Group offered whatever assistance was required by the Committee.
Response by SACC
Bishop Mpumlwana reminded the Committee that the triannual conference of the SACC had expressed a total loss of hope for the health of Parliament, and had prevailed on the leadership of the SACC to approach the leadership of Parliament to persuade them to vote themselves into dissolution. If the Committee’s action was a response to that call, the SACC would be filled with hope.
In response to the question about reversing the rot in the current environment, he confessed that he himself had had sleepless nights over the question. That was partly because he was the person who had listened most to the hopelessness of the people across the country who had presented to the Panel. What seemed to be happening was that people at the lower level were responding to the culture at the leadership level, and although one could see it percolating, was very difficult to stop it. He worried that even if the leadership changed, it was not possible to go back and change those who had been influenced at the lower level. The rot was so pervasive that people did not even see the need to get an education, because they could always make money. Councillors and candidates for councils were being killed because there was money on the ground that had come in inappropriate ways and had become commonplace.
Bishop Mpumlwana believed that there was a much broader decline in moral values, but he would restrict his remarks to the political and governmental environment. He expressed concern generally for the lack of morality in the country. The SACC therefore had a campaign under the banner of “The South Africa that We Pray For,” and it had five pillars. One was healing and reconciliation, which dealt with the South African identity and issues of tribalism and racism. There was little talk in South Africa of a non-racial society. A lot of the goals of a common society in South Africa had been reversed. People talked about what was un-ANC, but they did not talk about what was un-South African.
South Africa was a wounded society and this had an impact on social values. The family structure had virtually collapsed. The SACC dealt with issues under the banner of see, judge, act. The “see” referred to research, and the SACC was in partnership with the Human Sciences Research Council (HSRC). They had found that 62% of families were single parent, or child, headed. Only 38% of South African families had two parents. Children were not receiving parental guidance, nor were values being transferred. Issues of poverty and inequality led to violence in society. The issue of public values was part of the package, which was why economic transformation had to happen. The governmental environment had developed the kind of rot that would be very difficult to reverse.
The SACC had been concerned that Parliamentarians were becoming collaborators and covering up for corruption in government, and that they were failing in their duty. Politicians in the House did not represent themselves -- they represented the public. That was the logic of the SACC, to say that maybe there needed to be a fresh start. The SACC hoped that all of the work and information going on and trying to deal with the rot should lead to a common conversation. It had therefore called for a national convention that included public servants who had left because of the corruption. Public parties would be invited to the first sessions.
There had to be a willingness to change if the country was not going to go to rot. Those who knew had told SACC that in the “arms deal,” at least one million jobs had been lost. The current loss of jobs in the mining sector was alarming. Public ethics would be the start of dealing with these matters. What was the SACC doing? It had started out with a pastoral listening or confessional process which was a traumatic experience, even for the pastors. This was similar to what the SACC had done in the 1980s. The pastor’s job was to care for the individuals. Individuals were so afraid for their lives. People were dying. People had left their homes to seek safety.
Rev Pieter Grove, Chairperson of the SACC in the Western Cape, added that the one thing that could make a difference was that there had to be people who were willing to take the necessary risks. Some people needed to say that they would not go along with the flow of the stream. The collapse of South Africa would have been far greater if it were not for those individuals who had stood up. The Portfolio Committee was part of South Africa’s governance, and he asked whether it had the authority to push the matter to the point where things would start to shift. Recounting of issues would be inadequate.
He was concerned that matters had gone so far that it was not possible to stop them anymore. The criminality had opened the door for even worse expressions of deviance. He did not know whether everyone, especially the Committee Members, understood the critical point which the matter had reached, and that if there was no action, South Africa would collapse. The facts available showed that there was no excuse for what was happening and that it was real. The facts needed to be made public in order to educate society. It was the task of the Church to show the troubles that the country was facing. It was not a race issue any more, but a class matter, as 50% of the people were without jobs.
What was SACC’s message to society? It was time that the real contribution of every true citizen was recognised and affirmed, regardless of their colour. When South Africa moved towards a more inclusive approach for everyone, new opportunities would arise. If the people who were the worst off, who were on the margins, were not elevated, all would be lost. People in the townships had been completely forgotten, unless they burned something.
The Chairperson said she had originally thought that the information was “out there,” but she had found that the engagement had given her a deeper understanding of the situation. Those who had not understood why there should be an inquiry should now understand, after the presentations, exactly why the Committee needed to hold the inquiry. She agreed with the Bishop that corruption ran beyond petty corruption, and those things were causing the country to collapse. The country would never be able to recover if nothing was done. South Africans should clean their own house. No one from outside of the country could resolve this matter for South Africans. It was something South Africans had to do for themselves. The Chairperson added that she was very glad that the Church had provided guidance.
Update on preparations for inquiry
Committee members were provided with a Project Map for Eskom. The Committee Secretary indicated that the document was a product of the support team that had been tasked to put together the terms of reference that had been agreed to on 21 June. The support team had tried to highlight the key issues for the Committee to address in the inquiry. In terms of the objectives of the inquiry, the team suggested four pillars:
- to investigate the governance failure at Eskom, specifically with regards to the early retirement and reappointment of Mr Brian Molefe;
- the failure to comply with procurement prescripts, including all issues relating to procurement;
- the process of appointment of board members and the executive management;
- the financial stability of Eskom.
The team had identified the contracts of Eskom that were under question and had listed them in the terms of reference. It suggested that the Committee might require an evidence leader because of the complexity of the issue. On each page, they had described the event that had taken place, the witnesses that would be required and what kind of evidence the Committee would require. They had tabulated all of the issues, including the role of Eskom in assisting Tegeta to buy Optimum Mine. Events, role players, witnesses and evidence required for the issue of the awarding of the R7 billion coal supply contracts had been tabulated. The secretary said that they had the two legal advisers, Ms Sueanne Isaac and Ms Fatima Ebrahim, that Parliament had provided to offer support during the inquiry. The legal advisers would also be able to assist the evidence leader.
The Chairperson reminded the Committee that she had sought Adv Vanara as the evidence leader. She had been told that he was no longer in the legal services unit, but that he would assist the legal advisors appointed to the Committee. The Committee needed all the resources available to meet the objectives of the inquiry.
Mr Singh said that it was critical to determine the evidence leader. It was also important to ask the public to send in responses, and the Committee should reserve the right to call anyone who could provide input. He said that Chris Yellen, an energy writer, and Sikonathi Mantshantsha, Deputy Editor of the Financial Mail, would be key people to talk to on the financial situation of Eskom. Mr Singh, supported by Mr Shivambu, asked whether they should not extend the investigation to include the other entities.
The Chairperson believed that many of the issues would come out from other entities while investigating Eskom. They could thereafter investigate the other entities.
Mr Swart said that Adv Vanara was an experienced attorney and had extensive court experience. Witnesses had tried to bully him, but his experience had stood him in good stead. The leading of evidence was critical. He also believed that the terms of reference had to include the words “and any other related issues,” as there may be other issues. Also, people such as the Guptas, Duduzane Zuma and Minister Zwane might be required. The Committee had to consider the need to call law enforcement institutions and the banks, including the Reserve Bank, in the light of the rumours of funds being transferred.
The Chairperson indicated that additional people could be included as witnesses.
Dr Luyenge agreed that the Committee would need to call additional people. He also emphasised the need for an experienced leader of evidence.
Mr Shivambu recommended that the Committee should agree to find an experienced evidence leader. He also recommended the extension of the terms of reference to include all those related to Denel and Transnet, and that the inquiry had to include the entire spectrum of institutions and people involved with the Guptas. The NPA and SAPS had to be called to account. It was about solidifying. If not, the country was headed for ruin.
Mr Maynier said that the object of the inquiry was not aligned to the terms of reference. He proposed that the terms of reference be amended. It was also necessary to include an inquiry into the diesel contract and the Denton Reports. A “catch-all” amendment was necessary. He had understood that the Guptas and Mr Duduzane Zuma would definitely be called as witnesses. He wanted the document to include that factor. They had to be summonsed.
Mr Tseli did not want to change the document, as the phrase “any other witnesses” covered all possibilities.
Mr Gungubele believed that the witnesses had to be called. The problem lay in which witnesses would be called and which would not be called. He understood that the Committee was also permitted to deal with issues arising from the State Capture report. The terms of reference were not sufficiently clear about the need for additional witnesses. He assured the legal team that they might well be capable, but might lack the necessary court experience. The Committee could require that Parliament employ an attorney as for every witness, the background had to be explained.
Mr Singh read from the Minutes of the Committee, which stated that additional people could be called.
The Chairperson indicated that the terms of reference and the list of witnesses were open and the Committee could make amendments as needed. The legal team had to be approached so that no errors would be made. The idea had been to do things in phases, but the Chairperson would adhere to the request that additional people and institutions be included.
Mr Tseli said the minutes of the previous meeting indicated Members had agreed to the additions.
Mr Maynier confirmed that the Chairperson would review the document, and asked her to bear in mind his proposals.
Mr Gungubele asked that the process continue, even as the amendment was being finalised. He asked that the Committee act as a single unit, and not take up party issues.
Mr Shivambu suggested that the Chairperson should amend the document and circulate it for approval.
The Chairperson pointed out that the day’s proceedings had shown how enormous the task was. She assured everyone that the Committee was not undermining the capacity of the legal team, but needed additional capacity because of the workload.
The meeting was adjourned.