THE GUIDE THROUGH SA STATE CAPTURE
Part Two: How much the Gupta enterprise earned
In my first explainer, I set out how the State spent over R57-billion on State Capture contracts associated with the Gupta enterprise. Today, I’ll show you how the Gupta enterprise (i.e. the Gupta family and the companies under their control) came to earn over R16-billion from State Capture.
Read Part One here
The total amount earned by the Gupta enterprise: R16,217,793,047.18
Sixteen billion, two hundred and seventeen million, seven hundred and ninety-three thousand, forty-seven rand and 18 cents.
This is the total amount earned by the Gupta Enterprise from State Capture, starting with its early scams in the Free State in 2011, and then spreading through various organs of State, but, most notably, Eskom and Transnet.
Like the cost of State Capture, this figure was calculated simply. I worked with the Commission to identify every contract or payment that was made to the Gupta enterprise where there was an obvious irregularity, wrong-doing or conflict of interest.
Taking this approach means that I excluded those amounts paid to the Gupta enterprise by the State where there was no obvious irregularity. For example, the Commission identified that Sahara — the Guptas’ flagship IT company — was paid R102-million by the State. But a lack of evidence meant that this could not be definitively deemed irregular, and was thus excluded.
The payments to the Gupta enterprise were made in four broad categories:
- Payments directly by the State to the Gupta enterprise;
- Payments made to the Gupta enterprise by contractors to the State whose contracts were tainted by Gupta State Capture;
- Payments made to what I call “first-level laundry vehicles” (I’ll explain this below); and
- The known kickbacks paid to the Gupta enterprise, all related to locomotive and crane contracts awarded by Transnet.
Payments made directly to the Gupta enterprise by the state
The second-biggest contribution to the Guptas’ illicit earnings were payments made directly to Gupta enterprise companies by the state.
In total, the Gupta Enterprise was paid R6.403-billion directly by the State in irregular contracts.
Two companies received 64% of these payments: Tegeta Exploration and Resources and Optimum Coal. Together, these two companies were paid R4.1-billion.
Other notable recipients included:
- Estina, which I’ve previously explained was directly under the control of the Gupta enterprise. Estina was paid over R280-million to deliver the Vrede Dairy Project;
- VR Laser, which earned over R242-million from Denel contracts after it was taken over by the Guptas; and
- TNA Media, which was paid R248-million by Eskom, Transnet, the Free State Treasury, and Offices of the Premiers of Mpumalanga, Free State and North-West Province, often without any contracts.
Payments made to the Gupta enterprise by state contractors
The Gupta enterprise earned R877-million through payments made to Gupta enterprise companies by contractors to the State.
By far the biggest winner here was Sechaba Computer Systems. As I explained in my first piece, Sechaba earned R323-million as T-Systems “supplier development partner”. The funds started flowing to Sechaba after it came under the effective control of the Guptas.
Other notable recipients included Zestilor, which earned R95-million from various different contractors including T-Systems, Transnet, and Trillian (which was disbursing illicit funds from Eskom), and CAD House, which earned R99-million from SAP.
Payments to first-level laundry vehicles
As I will explore in later articles, the Gupta enterprise made use of extensive and complex local and international laundries to move funds from State Capture.
The first step in the laundering process was the first-level laundry vehicles. These companies received payments flowing from State Capture (often simultaneously from multiple State Capture cases). From the first-level laundry vehicles, the money was sent into the local laundry.
In calculating the total earned by the Gupta enterprise, I used the total payments flowing from State Capture paid into these vehicles: over R1.2-billion.
The top-five first-level laundry vehicles were:
Known kickbacks paid to the Gupta enterprise
The largest contribution to the Gupta enterprise’s illicit income was kickbacks paid in relation to contracts placed by Transnet. In total, I estimate that the Gupta enterprise earned R7.3-billion through this route.
Of this, we can confirm that the Gupta Enterprise was paid R3.4-billion by CNR/CSR and CRRC in relation to the infamous R95,100,359,232 locomotive procurements based on hard documentary evidence. The Gupta enterprise was also due to earn a further R3.7-billion in kickbacks from these contracts when the paper trail goes cold, but which I believe they did.
Although much smaller than the loco procurements, the Gupta enterprise also scored from crane contracts issued by Transnet. Based on documentation from the #Guptaleaks I calculate that Gupta enterprise companies in Dubai were paid R33-million in relation to crane contracts given to ZPMCC (a Chinese firm). The Guptas’ Dubai companies were paid a further R26.5-million by Liebherr Cranes, the Swiss mega-multinational, which also related to crane contracts with Transnet.
Bonus round: some lesser-known but illustrative cases of capture
As the money flow investigations by the Commission proceeded, more and more previously unknown cases of State Capture were discovered (like the R7.8-billion Eskom contract with T-Systems I discussed previously). Here are three less-known examples that I think illustrate the extent to which the Guptas corrupted the state.
First: the R24.9-million paid to Nulane Investments 204. The contract was awarded to Nulane in October 2011. At the time, the lone director of Nulane was Iqbal Sharma, who had by then been appointed to Transnet’s board by Malusi Gigaba. Nulane’s bank accounts were controlled by a Gupta employee.
On review, it was discovered that the payments were for Nulane to write a feasibility study and ‘concept document’ for Project Mohoma Mobung and to identify a strategic partner. This exercise led directly to the Estina/Vrede Dairy Project.
The Gupta’s didn’t just steal the Estina/Vrede cash — they were responsible for writing the very documents that led to the project’s initiation.
Oh, one more kicker; of the R24.9-million paid to Nulane, R21.3-million went into the pockets of Gupta companies, eventually funding payments worth $2,295,000 to the Gupta’s Dubai front, Gateway Limited.
Second: the R71-million paid to Cutting Edge by Eskom. This contract sets a land-speed record. On 29 April 2016, Cutting Edge submitted an unsolicited proposal to Eskom for data management. On 9 May 2016, Eskom gave them the contract. On 16 May, Eskom paid the full amount to Cutting Edge. It took only 17 days to go from an unsolicited proposal to full payment.
Third: the payments made to TNA by the Department of Water and Sanitation, the Free State Treasury and the Offices of the Premiers of the Free State, North West and Mpumalanga. None of these government departments could provide any contracts to support the tens of millions paid to TNA.
The only department that could provide any sort of paper trail was the Free State Treasury; but it could only provide a single service agreement through which TNA would supply 6,000 newspapers over time for R576,000. This, however, was only 5% of the total paid to TNA by the Free State Treasury (R11.3-million).
If there is one department you hope can spend funds appropriately (and keep the receipts), it’s the treasury.
In the next part of this series, I’ll start to look at the laundries used by the Gupta enterprise to move, disguise and ultimately re-use funds from State Capture. DM
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