Prosecutors Strike at Heart of Zuma-Era Graft in South Africa

Antony Sguazzin
·3 min read
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(Bloomberg) -- South African law-enforcement officials arrested a former chief executive officer of the state ports and freight rail company and senior finance officials in the most significant step yet to bring those implicated in the looting of government coffers during former President Jacob Zuma’s rule to book.

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Siyabonga Gama, who was fired as Transnet SOC Ltd. CEO in 2018, appeared on charges of fraud, corruption and money laundering at a magistrates’ court hearing in Johannesburg on Friday, along with Garry Pita, the company’s former acting chief financial officer, and three other men. The arrests were made earlier in the day by the National Prosecuting Authority’s Investigating Directorate and a police unit known as the Hawks.

The action takes attempts to trace the root of the corruption closer to the ruling African National Congress. Gama was appointed at the insistence of Zuma, and Mineral Resources & Energy Minister Gwede Mantashe, who was ANC secretary-general at the time, defended his appointment over the objections of the board, according to evidence presented at a judicial inquiry into state graft.

“It’s very significant. These are the architects. They are going to start telling you who gave the instructions, this is just the beginning,” said Ralph Mathekga, an independent political analyst and author of books about the ANC. “You start with Gama, you can only go up. You are going to Luthuli House,” he said, referring to the headquarters of the ANC.

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The government estimates more than 500 billion rand ($32 billion) of taxpayer money was stolen during Zuma’s nine-year tenure. The graft at state companies has contributed to electricity shortfalls and undermined Transnet’s ability to rail some of the country’s most important exports to harbors. The daily drip of allegations leveled against the ANC during the three-year judicial probe and in the media has undermined support for the party, with its share of the vote falling below 50% in last year’s municipal elections for the first time since it took power in 1994.

In a report released in February, the commission identified 41.2 billion rand of irregular contracts at Transnet and recommended that prosecutors investigate Gama and other officials. The probe found members of the Gupta family, who were friends with Zuma, and their businesses and associates were the main beneficiaries of Transnet deals secured by paying bribes and kickbacks. The ex-president and the Guptas have denied any wrongdoing.

Consulting companies McKinsey & Co., Regiments Capital Ltd. and Trillian Capital Partners Ltd. were also found to have received irregular fees for work they did at the company. Eric Wood, a founding partner of Regiments, was arrested along with Gama. Regiments and Trillian are among the co-accused in the case. The five men were released on bail and the case was postponed until July 13.

McKinsey last year said it would repay 870 million rand that it earned in contracts at Transnet, where it was working with Regiments. While the company has said there were “errors of judgment,” it said none of its employees were implicated in wrongdoing.

The arrests may ease the pressure on the National Prosecuting Authority’s director, Shamila Batohi, and President Cyril Ramaphosa, both of whom have faced withering public criticism for the perceived lack of action against state-linked business people and politicians who’ve been implicated in graft.

“The public can start believing in the justice system,” said Rudie Heyneke, portfolio manager on state corruption at the Organization Undoing Tax Abuse, a non-profit. “There was a lot of negative sentiment from the public because there seemed to be no movement taking place despite the amount of information available showing that extensive corruption had taken place.”

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