The ruling party has employed ANC-speak, its own version of Newspeak, the
fictional language used in George Orwell's novel 1984, to cover its traces in
relation to its fundraising company Chancellor House.
Faced with a spate of media speculation over the significance of a report that
Mathews Phosa, the new ANC treasurer-general, had commissioned a forensic audit
into Chancellor House, the ANC denied that Chancellor House was under
investigation.
The conjecture focused on the question of whether Phosa's initiative was aimed
at discrediting President Thabo Mbeki and of ousting Mbeki loyalists from
positions of power in the ANC, including Mendi Msimang, the immediate past ANC
treasurer-general, who is still a major figure in Chancellor House.
But on closer examination the ANC denial turned out not to
be a denial but a confirmation.
The pseudo-denial issued by the ANC's national working committee, or inner
administrative core, consisted of two contradictory assertions:
Firstly, that the "ANC is neither conducting an investigation nor a forensic
audit" into Chancellor House or its transactions.
Secondly, that the "ANC treasurer-general correctly initiated an assessment of
the value of the assets of [Chancellor House] to establish if there was any
perceived or real conflict of interest for the ANC."
Bearing in mind that, according to the Oxford Thesaurus, the words assessment,
investigation and audit are interchangeable synonyms and that a conflict of
interest is usually a symptom of corruption, it is logical to assume that a
comprehensive audit has been ordered, ANC-speak notwithstanding.
The Sunday Independent has it on impeccable authority that the accounting firm
Ernst & Young and an "independent bank" have been commissioned to conduct audits
on behalf of the ANC.
It is, of course, prudent of Phosa to order an independent audit to ensure that
he is not held accountable for possible mistakes or malpractices that may have
occurred during the tenure of his predecessors.
Phosa's precautionary action is a 21st-century South African equivalent of the
Herculean clearing of the Augean stables in Greek mythology.
It is relevant to recall Msimang's boast that he had turned the ANC's financial
situation around from one of near bankruptcy in late 2003
to a situation shortly before the ANC's 52nd national conference in Polokwane in
December last year when its assets were worth more than
R1,75 billion.
Further details in Msimang's confidential report to the conference included his
disclosures that:
The ANC had an operating surplus at the end of the
financial year 2006/2007 approaching R70 million.
The ANC had repaid the R11-million transferred to it in December 2003 by Sandi
Majali, the CEO of Imvume Management, a mere four months ahead of the April 2004
election, after his company received an advance of R15-million from the public
purse courtesy of the state-owned Petro-SA.
A major factor - if not the major factor - in the ANC financial fortunes was the
establishment of Chancellor House after the ANC's 51st national conference in
Stellenbosch in December 2002.
In his report at the Polokwane conference, Msimang described Chancellor House as
an investment company, though Kgalema Motlanthe, the former ANC
secretary-general who is today the ANC's deputy president, had previously
admitted it was a "fundraising vehicle".
Chancellor House's operational strategy included touting
for government contracts *1.
Its modus operandi thus meant an ANC-controlled front company was soliciting for
business from the ANC government, a practice that certainly falls
outside the parameters of good corporate governance *2
and which was disapproved of by Motlanthe.
Phosa clearly shared Motlanthe's disquiet, judging by his intervention to
persuade Chancellor House to withdraw from a consortium that had been awarded a
contract worth R38,5 billion from Eskom to build boilers for two new power
stations.
Eskom is a 100-percent state-owned and ANC-controlled utility. Its chairman is
Valli Moosa, a former cabinet minister and the chairman of the ANC's finance
committee. His business partner, Popo Molefe, is a former premier of North West
province and the chairman of the Chancellor House board of trustees.
An exposition on ANC fundraising strategies by Makhenkesi Stofile, who served as
ANC treasurer-general before Msimang took over at the 50th national conference
at Mafikeng, is illuminatingly instructive.
After reflecting on how the ANC election coffers had been filled by foreign
donations and how these funds had dried up following the installation of the ANC
as the governing party in 1994, Stofile outlined the fundraising options open to
the ANC.
One was the "National Party option" of establishing companies and granting them
contracts. It created a steady flow of income for the National Party but the ANC
did not think it was a good idea, Stofile said.
Another option was joint ventures. That, too, was rejected, in part, Stofile
explained, because the ANC feared it would be a "source of conflict," presumably
between the ANC and its business partners.
"We opted for the role of facilitators for black business in the country,"
Stofile said, adding: "There have been black businesses that we have been able
to turn to when we're in trouble." Thus, as elucidated by Stofile, black
economic empowerment became both an instrument of transformation and a source of
funding for the ANC.
But, extrapolating and reading between the lines, Msimang found that it did not
provide the ANC with sufficient money for its needs and, after the 51st national
conference at Slellenbosch in 2002, he adopted a variant of the discarded
National Party option to boost funding.
He founded one large fundraising front company, Chancellor House, and used its
"ANC connectivity" to win contracts and raise funds for ANC administrative and
electioneering costs. The deployment of ANC cadres at all the levers of power -
as illustrated by Moosa's position as chairman of Eskom - facilitated the
winning of government contracts.
Phosa, however, is boldly poised to inaugurate a new era of "good corporate
governance and good business practice" which, on the face of it, portends a
major change in fundraising strategy in the ANC.
A catch-22 situation may lie ahead. Unless managed carefully, Phosa's
intervention may win the moral high ground for the new party administration but
lead the ANC back into near bankruptcy.
The consequences of that may force Phosa to adopt questionable fundraising
stratagems to ensure financial solvency or to resign rather than await
retribution in the form of dismissal for killing the goose that laid the golden
eggs.
Independent political analyst Patrick Laurence is a contributing editor to
The Star
* This article was originally published on page 9 of Sunday Independent on
March 02, 2008
With acknowledgements to Patrick Laurence and
Independent Online.
*1Touting for government contracts is fine; the problem is
being awarded government contracts.
*2This is mealy mouthing - it's plain corruption - simple.