Investigating South Africa's mire of Gupta-linked corruption

The endgame to South Africa's largest post-apartheid corruption scandal appears to be playing itself out, but how did major multinational companies get drawn into this web of corruption?

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    The endgame to South Africa's largest post-apartheid corruption scandal appears to now be playing itself out. 

    South African President Jacob Zuma was forced from office by his own party, the African National Congress, in February 2018, when almost a decade's worth of corruption, bribery and racketeering allegations finally became too great to ignore.

    Central to the scandal are the Guptas, an immensely wealthy Indian-born business family. Since arriving in South Africa in the early 1990s, three poor brothers, Atul, Ajay and Rajesh, have made themselves astoundingly rich.

    In 2016, Atul Gupta was listed as being South Africa's seventh-richest person, with a net worth of over R10bn ($760m). Their empire encompasses ownership of mines, media and many other companies.

    But, their good fortune seems to have been intimately connected to the undue political influence they've been accused of wielding due to their close relationship to former President Zuma. This, it's alleged, has allowed them to commit corruption within South Africa on a grand scale.

    Many have been drawn into this web of corruption, including, it has been alleged, a number of major multinational companies.

    We wanted to take a closer look at these claims, but where to start?

    The strands of this hugely complex story stretch in every direction across South Africa and finding reliable sources of information and people willing to talk against a background of intimidation and fear was never going to be easy.

    The strands of this hugely complex story stretch in every direction across South Africa and finding reliable sources of information and people willing to talk against a background of intimidation and fear was never going to be easy.

    Naashon Zalk, filmmaker

    The Gupta leaks

    Luckily for the country, and for us, a massive data leak of documents and emails last year has revealed much of how the Guptas operated.

    The leaks provided compelling evidence about the brothers' connections to Zuma, his family, and his associates and how these links allowed the billionaires to plunder vast sums of money from massive state institutions like Transnet, the state rail company, and Eskom, the country's electricity supplier.

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    At the same time, they also appear to have used their political leverage to undermine state institutions which might hold them to account. These include key bodies like the National Prosecuting Authority and the South African Revenue Service.

    At the peak of their influence, it's alleged, the Guptas wielded enough power to bypass democratic institutions and even influence the appointment of cabinet ministers and key state officials.

    The Guptas, former President Zuma, and his family deny these allegations. But that decade-long era of wholescale looting has now come to an end and Zuma, who was forced out as South Africa's president, now looks to be facing dozens if not hundreds of charges of corruption in the near future. The Gupta's meanwhile have fled South Africa and are now fugitives from the law. It is thought they have gone to ground in Dubai where they have property.

    The intimate workings of this vast corrupt network have been brought to light by the exceptional investigative journalism done collaboratively by local media entities Daily Maverick, Amabunghane and News 24.

    Their work, I believe, has done much to save South Africa from becoming terminally corrupt. Several of these journalists generously shared information and insights, which were immensely helpful to us in the making of our film.

    The other side of the corruption equation

    Africa, and its politicians, have an international reputation for being corrupt. Transparency International reports that Africa appears at the bottom of their 2018 Corruption Perceptions Index.

    There is, of course, some justification to these perceptions. Within the last year, four African heads of state have resigned in the wake of corruption allegations. They are Gambia's Yahya Jammeh, Angola's Jose Eduardo dos Santos, Zimbabwe's Robert Mugabe, and South Africa's Jacob Zuma.

    Yet I believe that not nearly enough attention is given to the other side of the corruption equation: those individuals or entities who pay bribes to win lucrative government contracts, or turn a blind eye to these corrupt practices.

    What interested me particularly as a journalist and filmmaker was to examine how, and why, international companies became embroiled in South Africa's mire of Gupta-linked corruption.

    It soon became clear that several major international companies appear to have been caught up in some or other scandal, from software companies to banks and even public relations firms, such as the now-defunct UK business, Bell Pottinger.

    But I was particularly interested in what transpired at two companies: audit firm KPMG and management consultancy McKinsey.

    KPMG was the Gupta family's personal and business auditor for 16 years [Al Jazeera]

    KPMG scandals and the big fat Gupta wedding

    The primary role of audit firms is to maintain independent oversight of their client's businesses, providing assurances that their financial affairs are honestly and accurately reflected and are legally compliant. As one of the "big four" international audit firms, KPMG holds itself to very high standards.

    It says its guiding values dictate that "we seek the facts and provide insight, challenging assumptions, … and strengthening our reputation as trusted and objective business advisers" and "above all, we act with integrity, constantly striving to uphold the highest professional standards, provide sound advice, and rigorously maintain our independence."

    Yet this is not what appears to have happened in South Africa.

    KPMG was the Gupta's personal and business auditor for 16 years. Despite this, it did not flag a number of suspicious activities which occurred over those years across the Gupta empire. This has raised questions about its independence and the quality of the work it did in South Africa.

    Our film examines two KPMG episodes. The first involved an explosive report the firm produced for the South African Revenue Service (SARS), which accused senior SARS officials of running a "rogue unit" that engaged in a range of unlawful activities. The post-publication fallout of this controversial document resulted in these officials leaving SARS under a cloud and was used as a key motivation for President Zuma firing then Finance Minister Pravin Gordhan last March (he has just recently been reinstated in the cabinet as Minister of Public Enterprises). Gordhan, had been a troublesome thorn in the administration's side for some time because of his attempts to clamp down on the misuse of public monies and increase tax revenues.

    However, last year, after the Gupta leaks revelations, KPMG disavowed the conclusions of this [i.e. its own report] and fired its South African CEO and many of his senior management team. Thus to some observers, it seems the whole affair may have been a political conspiracy to rid SARS of its senior management.

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    They point to the fact that SARS commissioner Tom Moyane, a key Zuma ally, had commissioned the report just weeks after being appointed by the then president in 2014. It looked, they say, like a fairly typical example of the kind of ploy adopted by the Zuma circle to undermine key state institutions in order to avoid scrutiny of illicit activities.

    It's a further sign of this complex, and oftentimes bizarre affair that its twists and turns keep on coming. As we were completing the film, the Hawks, an elite police unit in South Africa, summoned several former SARS officials to appear in court to answer to allegations of corruption - based, extraordinarily, on the now discredited KPMG report. And then, last week, Moyane was suspended from his job as SARS commissioner by South Africa's new President Cyril Ramaphosa… and so it goes on.

    The second KPMG scandal we deal with in the film was rather more straightforward, but no less concerning. It concerns the firms conduct in relation to an opulent R30m wedding the Gupta's held for their niece at a casino resort in 2013. The wedding, it later turned out, was paid for with laundered money channelled through a Gupta-owned company which KPMG audited, which begs the obvious questions about the diligence with which such auditing is carried out.

    "Increasingly the Gupta and this network of extraction needed advice as to how to structure different operations. For example, they stole close to 250 million from a dairy project; 30 million of it had to go to Dubai and roundtrip back here to pay for a wedding. KPMG had to advise them how to do it in South Africa, how to do it in Dubai. So they used an international network, KPMG's international adviser services in Dubai to help set it up in full compliance with the Dubai legislation," Iraj Abedian, pan-African Capital Holdings, told us.

    We sought an interview with KPMG to discuss some of these matters but it declined to talk to us.

    Increasingly the Gupta and this network of extraction needed advice as to how to structure different operations. For example, they stole close to 250 million from a dairy project; 30 million of it had to go to Dubai and roundtrip back here to pay for a wedding. KPMG had to advise them how to do it...

    Iraj Abedian, pan-African Capital Holdings

    Eskom, McKinsey and a consultancy deal under scrutiny

    Management consultancy firm McKinsey is another international company which became embroiled in a Gupta-linked corruption scandal. As you will see from this programme, a massive consultancy deal it struck with Eskom, South Africa's state electricity company, has come under scrutiny. To service the Eskom project, McKinsey worked jointly with Trillian, a firm which was majority-owned by a well-known Gupta associate.

    Questions are now being asked as to whether McKinsey secured the deal with Eskom through these connections; what exactly it did to earn the eye-watering R1bn in consultancy fees it was paid for just six months work, and whether it's partner, Trillian, did any meaningful work at all to justify its own R580m share of the profits.

    McKinsey declined to be interviewed for the film but it has publicly denied any allegations of wrongdoing. Nevertheless, it has agreed to pay back the fees it has earned.

    It's clear that both companies, KPMG and McKinsey, have been hit hard by these scandals. Both are under some form of judicial investigation and it is possible that some former employees who were involved in these events may yet face prosecution.

    Perhaps more importantly though, South Africa will take years to recover from the wider web of corruption that spun out of the Zuma era, to which too many turned a blind eye. We could touch on only a few of the disturbing examples that have recently come to light, but in the months and years to come, many more damaging stories are sure to emerge.

    Can South Africa stop cycles of corruption?

    UpFront

    Can South Africa stop cycles of corruption?

    SOURCE: Al Jazeera News


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