STATE CAPTURE COMMISSION
EDITORIAL: Nene and Gordhan’s testimony puts spotlight on Zuma
Evidence highlights former president’s pivotal role in disrupting the functioning of the state according to his whims
Two former finance ministers, Nhlanhla Nene and Pravin Gordhan, have now given evidence at the Zondo commission on state capture, and it’s worth registering what their evidence has been and what we have learnt — and not learnt — about the state capture process so far.
The most crucial evidentiary theme has been the nature of the role of former president Jacob Zuma. The evidence puts Zuma at the centre of the state capture process and highlights his personal pivotal role in disrupting the functioning of the state according to his personal whims. Over the years, this process of hollowing out the state has been alleged and surmised, but now evidence before the commission clarifies and magnifies that role.
Significantly, this was only at the instance of the notorious Gupta family; evidence before the commission suggests it began even before the Gupta family’s influence was being profoundly felt. What the commission has not yet heard is who, particularly, was behind these efforts.
It’s not impossible that Zuma simply felt that the deals were the right things to do. But given the circumstance and the counter-parties, it seems unlikely.
One good example was something that has not until now been in the public domain: the attempt by state-owned oil company PetroSA to buy Engen from the Malaysian state oil company, Petroliam Nasional Berhad (Petronas). The department of energy had begun negotiations with Petronas as far back as 2012, but according to Gordhan, he became aware of it in 2014.
The reason he became aware of the problem was that then energy minister Ben Martins had applied to the Treasury for approval for the acquisition and for a government guarantee for its proposed value of the deal, which was R18.68bn. This was an extremely generous offer, and Gordhan said the true value was closer to R12bn- R14bn.
Gordhan did say the price raised red flags because there was such a huge difference between the buying price and the real value. Gordhan said he wanted to know who would benefit from the difference.
The Treasury did, in fact, provide a conditional guarantee of R9.5bn subject to several “onerous” financing conditions being met and the completion of a satisfactory due diligence. A year later, Zuma raised the deal again personally with Nene, who was ordered into a meeting in mid-2015, only to discover a Malaysian official from Engen/Petronas in the room. Zuma told Nene he wanted him to approve a guarantee for PetroSA so it could raise funds to buy Petronas’s refinery stake. Like Gordhan, Nene also said he would consider it subject to the “normal evaluation process”.
Ultimately, the deal did not go through, after Petronas withdrew because PetroSA failed to fulfil financing conditions, but the deal suggests two things. Zuma had only scant concern about process and procedure. His attitude seems to have been that the Treasury was an implementation agency whose function was to carry out his personal wishes. Zuma also seemed to have little appreciation for the value of state funds, quite casually endorsing deals in which billions were at stake without any real concern about their true value.
Both former finance ministers related once again the tortuous history of the nuclear deal, where this second issue was clearly at play. Repeatedly, both finance ministers tried to impress on the president the impact that such a huge deal might have on public finances, but Zuma was not in the least bit swayed.
Insisting on the correct procedure in the nuclear deal ultimately cost both Nene and Gordhan their jobs. The third example concerns state-owned arms manufacturer Denel and by this time in 2015, the Guptas were prominently involved. Gordhan refused to give the company permission to go ahead with its Denel Asia project, a joint venture with VR Laser Asia‚ a company owned by Gupta family associate Salim Essa. Once again, Gordhan was fired.
The three examples suggest there may be much more to the state capture subject than merely the Gupta family, but unfortunately it is not clear from the testimony so far in whose interests Zuma was acting.
It’s not impossible that Zuma simply felt that the deals were the right things to do. But given the circumstance and the counter-parties, it seems unlikely. What is clear is that the corruption went wider and further than even the most sceptical observers knew at the time.