ANC to Exit Eskom Deals [Mail and Guardian, 2008-02-15]

Publication: Mail and Guardian Issued: Date: 2008-02-15 Reporter: Stefaans Brummer

ANC to Exit Eskom Deals

Publication	Mail and Guardian
Date	2008-02-15
Reporter	Stefaans Brümmer
Web Link	www.mg.co.za

In an about-turn signalling a fresh approach to party funding by the African National Congress's (ANC) new leadership, party investment company Chancellor House will exit two multibillion-rand contracts with Eskom, the state electricity company.

The ANC company's stake in the contracts to build boilers for two new Eskom power stations is worth an estimated R5,8-billion. It has been controversial because the party stood to gain from contracts awarded by an organ of the state it controls.

This week Chancellor House managing director Mamatho Netsianda *1 confirmed the company intended to release a statement, but would not say when. "We are running a company. We'll do it when the time is right; when it is appropriate."

But the ANC's new treasurer general, Mathews Phosa, confirmed the intended exit this week, saying it would be "immediate". He did not say how it would be achieved.

Chancellor House holds its stake in the contracts through a 25% shareholding in engineering company Hitachi Power Africa, part of a consortium that won the Eskom contracts late last year.

Disinvesting from Hitachi Power Africa might be the simplest exit, although this could be interpreted as Chancellor House simply cashing in early *2.

Phosa said the decision was based on ethical considerations. "Corporate governance and good business practices are binding on all citizens of this country. No one is above this ... This is the message we want to bring across."

Phosa confirmed that he had discussed the matter with both Netsianda and Popo Molefe, the chairperson of the Chancellor House Trust. The trust is the vehicle through which the Chancellor House group of companies funds the ANC.

Phosa said he advised Chancellor House to get out of the Eskom deals, as well as others that might present a conflict of interest. "I had to consult broadly. I didn't bully anyone and I think everyone agreed."

Phosa said he could not make a "broad statement" about Chancellor exiting all public sector contracting, but "we recommend that they stay [away from] crossing the line of good corporate governance".

The Chancellor group has investments as diverse as minerals and energy, defence and logistics.

A number of these depend on state procurement or the granting of rights by government. A manganese prospecting right held by United Manganese of Kalahari, co-owned by Chancellor, was recently converted to a full mining right.

The Mail & Guardian and the Institute for Security Studies corruption and governance programme exposed Chancellor as an "ANC business front" in 2006. The M&G recently revealed Chancellor's part in the Eskom contracts.

Phosa's intervention suggests a break with the approach of the ANC treasury under his predecessor, Mendi Msimang, whose term was marked by scandals such as Oilgate and allegations that the party benefited from the arms deal *3.

Phosa's approach was forshadowed by ANC deputy president Kgalema Motlanthe, who reportedly said after the M&G's initial exposé: "The ANC can have an investment vehicle -- but it must do business out of government procurement, even outside of South Africa. So there's no conflict of interest."

The ANC's Polokwane national conference in December passed a resolution motivating "an effective regulatory architecture for private funding of political parties and civil society groups to enhance accountability and transparency to the citizenry". It mandated the party's leadership to "urgently develop guidelines and policy on public and private funding, including how to regulate investment vehicles".

Unlike most democracies, South Africa has no laws on the private funding of parties.

This week Hennie van Vuuren of the Institute for Security Studies hailed the "bold move by Mathews Phosa", adding: "With luck *5 the new treasurer general will now work in earnest to reverse the culture of secrecy and dismantle the front companies established under the tenure of his predecessor ...

"The ruling party has burned its fingers in the Chancellor House debacle. The ANC should use this opportunity to win back the moral high ground and push for legislation that binds all political parties to full transparency of their funding sources."

Idasa's Judith February said Phosa's intervention was "obviously helpful and will set boundaries about how the ANC raises money". But this remained an ad hoc solution and the proof of the new approach would lie in how the ANC's new leadership implemented the Polokwane resolution.

The ANC, opposition parties, civil society and business needed to engage and "rules of the game that are clear to all" needed to be legislated, she said.

With acknowledgements to Stefaans Brümmer and Mail and Guardian.

*1       Appointed as Acting Secretary for Defence during 1998 and 1999 after Mbeki and Modise effectively forced out Lt Gen Pierre Steyn.

Netsianda vacated the post on 1999-11-30 to be succeed by January Boy Masilela on 1999-12-01 so that the latter could sign the Arms Deal contracts on 1999-12-03.

This is as clear a case of breaking the responsibility chain as one will ever see.

But there are many others in the Arms Deal.

Within a year or less of the contracts being signed there was almost no-one still in any position of authority.

This is so that if there was to be an independent enquiry, new persons get sent to testify on behalf of the government and who can claim ignorance.

Transparency indeed.

But at the same time it is significant that Netsianda was appointed to oversee the Arms Deal procurement process during the critical period from appointment of prime contractors as preferred bidders until contract signature.

If Netsianda was always a party bagman, then the conclusion is obvious.

One also just needs to ascertain whether he was one of Mbeki and/or Mendi Msimang's buddies.

It could very

*2      The deal is done.

How, why will it be simply undone unless it is unlawful.

Even if Chancellor House disinvests, the value is there for the plucking, even at a discount.

It is also as clear as dammit that the entire power station price offer to and eventually accepted by Eskom was substantially inflated in order to include the ANC's share.

Just like the Arms Deal, where the prices were such as to include Thabo's and Chippy's and Joe's and Fana's and all and all's shares.

In the case of the corvette combat suite, the documented record shows very clearly that the price was inflated by at least R300 million (1999 Rands). In reality this was probably more (more like R500 to R700 million) because the SA Navy ended getting "substantially less quality and quantity" [its own words] than they had budgetted.

*3      The whole reason for the Arms Deal was to benefit the ANC, both as a party and as individuals.

I've said it before and I'll say it again. I heard (and saw him saying it with my own eyes), Chippy Shaik said :

"the government does not care about the equipment; it only cares about the offset (or countertrade) *4"

*4 Read bribes, largesse, bumiputera, BEE (although this term was not even in formal use by then), wonga.

*5 Good luck.