Payback: Gordhan plays his Zuma card
The state capture inquiry is back with a bang, with Pravin Gordhan’s leaked submission highlighting the ‘profound interest’ Jacob Zuma took in oiling the wheels of high-value deals
In the three months since judge Raymond Zondo began his inquiry into state capture, Jacob Zuma has been conspicuous largely by his absence. In an inquiry that seems set to unravel the former president’s potentially pivotal role in hollowing out the state, his hand has been surprisingly hidden in most of the testimony presented so far.
But the affadavit prepared by public enterprises minister Pravin Gordhan, like that of former finance minister Nhlanhla Nene before him, put Zuma at the centre of state capture allegations.
According to Gordhan — who served under Zuma as finance minister, then co-operative governance & traditional affairs minister, before returning to head the National Treasury — Zuma had taken a "profound interest" in matters that should have been the ordinary, transactional affairs of state; subjects such as due diligence, affordability and feasibility studies.
Gordhan has detailed these events in his submission to the inquiry, which was leaked to the media ahead of his appearance next week. His submission suggests Zuma was directly involved in trying to sway particular projects. Together with the explosive testimony delivered by Nene last month, it offers a glimpse into how the then president operated. It’s also instructive in showing how those who stood in the way were sidelined politically.
Gordhan’s submission focuses on three key projects — the nuclear build programme, the PetroSA/Engen deal and Denel Asia — providing insight into Zuma’s interest in each. "Suffice to state that at least two of these projects share similarities with respect to their size in monetary value and the level of personal interest showed by former president Zuma in them," Gordhan says. "They may be suggestive of a pattern that may be relevant to understanding the methodologies and aims of the state capture project."
Gordhan says Zuma had his eye on a nuclear programme as far back as 2011, when his cabinet established the national nuclear energy executive co-ordination committee. He hoped to procure 9.6GW of nuclear power-generating capacity from Russia — at a cost to the fiscus of more than R1-trillion, "if not more".
He then fast-forwards to 2013, and a meeting he and former Treasury director-general Lungisa Fuzile attended at the presidential residence in Pretoria. There, Zuma indicated that SA needed nuclear power and a process should be initiated to procure it.
Gordhan says he explained that nuclear procurement was a "complex issue" with a number of stakeholders, including competing suppliers and environmentalists. As finance minister, he told Zuma that the National Treasury could design a procurement process and ensure that it complied with the applicable legal framework for public and energy procurement.
"I made this undertaking after I indicated to the former president that it would be appropriate to follow lawful procurement procedures for such an expensive project to avoid becoming mired in scandal like the so-called arms deal," Gordhan says.
At least two … projects share similarities with respect to their size in monetary value and the level of personal interest showed by former president Zuma in themPravin Gordhan
"I wanted to impress upon the former president that undertaking the nuclear procurement required careful consideration of its costs, the choice of supplier, due process and the likely challenges to any decision to proceed."
After this, Gordhan and Zuma had no direct engagement on the nuclear deal.
But things were on the move. Officially, the National Treasury became aware of the nuclear deal at some point in 2013, when it received a draft co-operation agreement from the energy department, to be signed with Russia, because it included a tax incentive structure that would require Treasury approval.
Treasury officials raised concerns about the draft, and its "clear objective of creating firm fiscal commitments to Russia by SA".
Gordhan says the officials strongly objected to the department of energy’s approach, and undertook to prepare commentary on the feasibility and financing studies that they eventually received from the energy department in 2014 and 2015.
"In sum, National Treasury, during my first terms as minister of finance, insisted on sufficient and satisfactory evaluations of the true cost and attendant fiscal risks for the country of the proposed nuclear deal," says Gordhan.
That intransigence may, in part, have cost Gordhan his job. In 2014, Zuma shifted him to the co-operative governance portfolio, where he was no longer privy to nuclear procurement processes.
With Nene in place as finance minister, a similar series of events unfolded. According to Nene’s testimony, Zuma placed pressure on him to ensure the Russian deal went ahead; he was presented with ready-made documents to sign, circumventing due process; and he was shuffled out of his position after he refused to green-light the deal.
The cabinet eventually approved the deal at a meeting in 2015 — the day on which Nene was fired as finance minister.
Gordhan makes clear in his submission that he was not at that cabinet meeting. But it’s still not clear who gave the deal the go-ahead. The DA is trying to compel President Cyril Ramaphosa to disclose whether he attended the meeting and what view he took of the programme. He has refused to do so, claiming cabinet meetings are confidential and that ministers are bound by cabinet decisions regardless of their personal views.
In the pipeline
Gordhan also interacted with Zuma on the matter of state-owned PetroSA’s attempt to purchase the shareholding of Petroliam Nasional Berhad (Petronas) in Engen.
In his telling, Gordhan became aware in the first quarter of 2014 that negotiations for the Petronas stake, facilitated by the department of energy, were at an advanced stage. (The energy department had begun talks with Petronas as far back as 2012.)
In mid-March 2014, the then energy minister Ben Martins applied to the Treasury for approval for the acquisition and for a government guarantee for its proposed value — R18.68bn, in Gordhan’s original understanding.
"It became clearer as the transaction evolved that its true value was closer to between R12bn and R14bn. This raised red flags for me as to why there was a possible difference of up to R6bn in possible valuations of the Engen stake, and who may stand to benefit from that difference," he says.
By late March, Gordhan says Zuma was already following up on the status of the application Martins had lodged. He indicated, in response, that various technical issues were being discussed by the Treasury and representatives of the department of energy and PetroSA.
At an April 1 2014 meeting between Gordhan and Martins, Gordhan explained that the Treasury required additional information and a detailed due diligence before any guarantee could be approved. The Treasury did provide a conditional guarantee of R9.5bn within the month — but this was subject to several "onerous" financing conditions being met and the completion of a satisfactory due diligence.
A year later, with Nene in the finance minister’s seat, Zuma raised the deal again, in a bizarre break with protocol. According to Nene’s testimony, he was ordered into a meeting with Zuma some time in mid-2015 — only to discover a Malaysian official from Engen/Petronas in the room. At that meeting, Zuma told Nene he wanted him to approve a guarantee for PetroSA so it could raise funds to buy Petronas’s refinery stake. Nene said he’d consider it — "subject to the normal evaluation process".
Ultimately the transaction did not proceed: Petronas withdrew from the deal after PetroSA failed to fulfil financing conditions and perform a due diligence, Gordhan says. And Nene withdrew the guarantee in March 2015 — nine months before Zuma fired him.
During his second stint as finance minister‚ Gordhan locked horns with state-owned arms manufacturer Denel after the Treasury 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.
Denel submitted a formal application for approval of the joint venture, under the prescripts of the Public Finance Management Act, after Nene’s removal from the finance ministry in December 2015. Nene was replaced by Zuma favourite and ANC backbencher David "Des" van Rooyen — and it was Van Rooyen who was supposed to sign off on the project. But the public backlash accompanying his appointment meant he was removed from office before he was able to do so, and the task fell to Gordhan, who had returned to the ministry.
What it means
Two former finance ministers have now put Jacob Zuma quite squarely in the state-capture frame
When Denel didn’t get a response within 30 days‚ it went ahead and registered the joint venture in Hong Kong, in January 2016. The result was a standoff between Denel’s board and Gordhan.
The arms manufacturer eventually lodged an application with the high court in Pretoria to get a thumbs up for the venture (an application that was ultimately withdrawn).
Gordhan says he and the Treasury were at the time attacked by the then Denel chair Daniel Mantsha. Mantsha had demanded that Gordhan retract comments he made about the lawfulness and desirability of the joint venture.
In 2017, the leaked Gupta e-mails revealed what appeared to be highly damaging correspondence between Mantsha and the Gupta family about the establishment of Denel Asia. Other damning e-mails showed Mantsha sending the Guptas his personal bills, though it is unclear whether the family paid them.
It would seem Gordhan’s decisions did not sit well with Zuma: the then ANC secretary-general Gwede Mantashe tried to persuade him to resign, telling him it was what Zuma wanted. But Gordhan refused. Then in March 2016, a week after Denel’s application was lodged, Zuma removed Gordhan from the post of finance minister for a second time — this time without the courtesy of a call. "I became aware of my removal when the president made his announcement of the reshuffle, which was broadcast on television while I watched," he says.