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Zondo delves into Gupta-linked firm’s Alexkor diamond contract

Albert Torres of Gobodo Forensic Investigation Audit testifies before the Judicial Commission of Inquiry on January 08, 2021 in Johannesburg, South Africa. The hearings of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption, and Fraud in the Public Sector including Organs of State resumed in its first sitting of 2021. (Photo by Gallo Images/Papi Morake

The State Capture Commission heard of allegations relating to a joint venture between state-owned miner Alexkor and the Richtersveld Mining Company to benefit shelf company Scarlet Sky Investments.

First published in the Daily Maverick 168 weekly newspaper.

A joint venture led by state-owned entity Alexkor unlawfully awarded a company with ties to the Guptas a contract to market and sell diamonds mined in Alexander Bay, undermining economic development efforts in the Northern Cape region, the Zondo Commission of Inquiry into State Capture heard on Friday.

The commission resumed public hearings after a three-week break and started with allegations related to a joint venture owned 51% by Alexkor and 49% by the Alexander Bay community’s Richtersveld Mining Company (RMC), established after the community won land mining rights in court in 2007.

The Alexkor/RMC joint venture was initially seen as a victory for the region, as it pooled the community’s rights to mine the depleted land with Alexkor’s marine mining rights, where there were still significant diamond reserves.

In 2014, the joint venture, ostensibly controlled by Alexkor, issued a tender to market its diamonds. Albert Torres from Gobodo Forensic and Investigative Accounting, appointed by the Department of Public Enterprises to investigate Alexkor, told the commission the tender was manipulated to favour a shelf company, Scarlet Sky Investments 60 (SSI).

In expression of interest documents, Daniel Nathan and Kuben Moodley were listed as SSI directors, but they were actually only appointed weeks later.

Moodley, SSI’s purported 60% BEE shareholder, scored lucrative deals as an alleged fixer for the Gupta family.

SSI leaders have denied connections to the Gupta family and Moodley resigned in 2016 after he was appointed as an adviser to former Mineral Resources Minister Mosebenzi Zwane. Nathan has previously told the media Moodley did not benefit from the Alexkor deal.

“Now, Scarlet Sky Investments didn’t have a licence so they should have been disqualified right at the beginning,” said Torres.

Bidding companies were required to have a licence to market and sell diamonds and Gamiro Advisory Services, appointed to evaluate the bids, scored SSI zero in that regard. The Alexkor/RMC board’s bid adjudication committee, however, gave the firm with no mining experience a full score.

The committee also allowed SSI to make changes to the tender while it was presenting its bid, such as on how diamonds would be sold and the quantity that would be earmarked for local beneficiation.

“Allowing SSI to make a crucial change to the bid submission is an unfair and uncompetitive practice and it is a contravention of the Constitution section 217,” said Torres.

“In essence, the procurement process was irregular. It appeared to be manipulated to favour SSI given that all these discrepancies were found.”

Alexkor also appointed SSI in another deal to sell its diamonds. Torres called the tender process “fatally flawed”. The bid adjudication committee, which Torres called “a hoax”, did not evaluate the various bids and only checked whether companies had complied with the minimum requirements.

“In fact, the procurement process for the second appointment was a sham,” he said.

Deputy Chief Justice Raymond Zondo criticised Torres’s investigation for failing to include “the basic minimums”, such as asking Alexkor leaders why the board failed to evaluate the various bids.

“It dilutes the significance of your report if you don’t ask questions that should have been asked,” said Zondo.

Torres, who has since retired from Gobodo but still serves as a non-executive director, said he only had three months to conduct his investigation and was limited by the remote location of Alexander Bay, which sits on the Namibian border.

SSI scooped up most of the diamond sales for itself and failed to comply with requirements requiring it to sell 10% of Alexkor’s supply to the state and 5% to businesses in the community for local beneficiation, said Torres. Over four years, SSI undersold to the state diamond trader by R60-million and for local beneficiation by R38-million.

“It was a means of selling poor-quality

diamonds locally,” he said.

Gavin Craythorne, a local diamond diver who has worked for Alexkor and a member of the Equitable Access Campaign, aimed at raising awareness of the environmental impact of Alexkor’s work, testified that the community had seen “the steady and relentless decline in the standards of living, in the condition of the town, in the condition of the mine” in recent years.

Evidence leader Advocate Carol Sibiya said the commission would also hear evidence of attempts by Gupta-linked companies to capture Alexkor and reposition it from diamond mining to coal mining in Mpumalanga to supply Eskom. The Commission is due to complete its work and file its report to President Cyril Ramaphosa by the end of March 2021, but Zondo has indicated that he will go to court to apply for an extension to cover the three months lost during the hard Covid-19 lockdown. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for free to Pick n Pay Smart Shoppers at these Pick n Pay stores.

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