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South Africa
Nationality of Foreign Officials: South Africa
Summary of Allegations:
South African anti-corruption groups have identified companies who did work for businesses tied to the Gupta family and President Jacob Zuma’s son. The Guptas, originally from India and including brothers Atul, Rajesh and Ajay, moved to South Africa in the 1990s and are accused of engaging in "state capture" i.e. using their friendship with President Zuma to influence government contracts and cabinet appointments. The Guptas and Zuma deny any wrongdoing.
Some of the companies alleged to have been involved with the Guptas state capture corruption scheme are as follows:
SAP SE
McKinsey & Co.
McKinsey & Co. in July 2017 said it is reviewing work undertaken for South Africa’s state-owned power utility Eskom Holdings. An interim report by Eskom and G9 Forensic reportedly found McKinsey and Trillian Capital Partners Ltd., a company linked to the Guptas, made ZAR 1.6 billion (USD 121 million) in fees and expected to make another ZAR 7.8 billion. On 10 October 2017, McKinsey said that it supports the High Court's review of the validity of the contracts, and would deposit the consulting fees it received into an escrow account if the court finds that Eskom acted illegally when making the payments. In June 2018, McKinsey reached a settlement to repay almost R1 billion to Eskom and apologized for wrongdoing regarding how it did business with the utility.
KPMG LLP
KPMG allegedly failed to act when businesses controlled by the Gupta family diverted public money to pay for a wedding, according to the amaBhungane Centre for Investigative Journalism and Tiso Blackstar Group’s Sunday Times, citing emails known as the "Gupta Leaks".
China Communication Construction Company subsidiary Shanghai Zhenhua Heavy Industries (ZPMC)
Fin24 reported on 18 September 2017 that a kickback agreement existed between ZPMC and a Dubai company called JJ Trading (JJT). South African port and pipeline company Transnet reportedly purchased seven port cranes at a hugely inflated price, with commissions and fees of approximately USD 12 million to JJT in exchange for making sure ZPMC obtained the contract, according to an "agent agreement" between ZPMC and JJT. Media allege, based on financial records in the "Gupta Leaks", that the Guptas received most of the JJT money. The Wall Street Journal reported in November 2017 that bank spreadsheets show these transactions flowing through HSBC bank accounts in Dubai.
China South Rail (CSR) & China North Rail (CNR)
Several companies have been implicated in the Transnet SOC Ltd. -- South Africa's state-owned rail and ports operator -- procurement scam where it sought to acquire 1,064 new locomotives as part of its fleet renewal program and overpaid by approximately R16 billion.
The fleet renewal project was controversial from its inception. Transnet claimed that it needed to purchase the additional locomotives to support projected freight volume growth, and sought approval of R38.6 billion in spending for the project. Some officials felt that Transnet's projected volume growth was unrealistic and expressed concern in as early as 2013 that if they proceeded with the locomotive acquisition and didn't hit their projected freight volume growth, they could experience great losses. Officials wondered, was it wishful thinking on the part of Transnet, or was the project a procurement scam?
In March 2014, Transnet signed contracts with China South Rail (CSR) and Bombardier Transportation (BT) for electric locomotives, and China North Rail (CNR) and General Electric (GE) for diesel ones, at R54.5 billion -- R16 billion more than projected. In making its supplier and contract selections and in determining the project's implementation plan, Transnet made deceptive arguments to its board, didn't follow proper bidding and evaluation procedures for contracts, and its executives acted negligently and made unlawful decisions that led them to intentionally overpay for the project to the tune of R16 billion. For example:
Sister Chinese supplier companies CSR and CNR are alleged to have engaged in a kick-back scheme with Salim Essa, a Gupta associate, to secure benefits in the locomotive acquisition project that they would otherwise likely not have won, as their locomotives were far more expensive both in purchase price and maintenance costs. Law firm Werksmans' report suggests that CNR paid Essa to extract R647-million from the project, which should have cost only R9-million.
CNR engaged with a dormant shelf company -- Business Expansion Structured Products ("BEX") -- which had questionable qualifications to serve as its lead negotiator in the relocation aspect of the deal and promised BEX that it could keep any amounts Transnet agreed to pay in excess of R280 million as an agency commission. Ultimately, BEX received a commission of R65.9 million. BEX's sole director is also a director of three other companies which operate as "letterboxes" for the Guptas and Essa and pass back large commissions from the Transnet contracts.
CSR had hired a company "Tequesta" in securing its place in the Transnet deal, paying it a commission amounting to 21% of the contract amount. Tequesta was later found to be under Essa’s control.
The contract between CNR and BEX coincided with the one between CSR and Tequesta in format, cover pages, and layout, according to a forensic auditor.
CNR's minority shareholders are investigating the commission payment made to BEX. In June 2017, CNR's auditor KPMG reported the R65.9 million payment to the Independent Regulatory Board of Auditors as a "reportable irregularity", noting that it lacked sound commercial substance and purpose. They also noted that CNR had appeared to significantly misrepresent to Transnet the relocation costs associated with the project. CNR's minority shareholders have laid a charge with the police regarding the Prevention and Combatting of Corrupt Activities Act.
In July 2018, Transnet confirmed that both internal auditors and the law firm Werksmans were investigating the CNR relocation fees. It also confirmed that the fees were subject to a number of investigations by various law enforcement agencies.
Approximate Alleged Payments to Foreign Officials:
Business Advantage Allegedly Obtained: Unspecified
Agencies: Internal Investigation
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
KPMG in August 2017 said it suspended its lead audit-engagement partner in South Africa and fired two others pending the results of its internal investigation. Internal investigations are ongoing at McKinsey and SAP.
On 16 October 2017, McKinsey released interim findings in its internal investigation, announcing that the company had disciplined some staff for violating professional standards on a contract with Eskom, noting that due-diligence on Trillian was incomplete when they started work with them on the Eskom contract. A McKinsey partner, Vikas Sagas, was put on leave in July 2017 after a letter discovered in an internal investigation into Trillian indicated that he told Eskom to pay Trillian directly as a subcontractor.
20 May 2018 - CNR's minority shareholders are investigating the commission payment made to BEX. In June 2017, CNR's auditor KPMG reported the R65.9 million payment to the Independent Regulatory Board of Auditors as a "reportable irregularity", noting that it lacked sound commercial substance and purpose. They also noted that CNR had appeared to significantly misrepresent to Transnet the relocation costs associated with the project.
20 May 2018 - Transnet said it had tasked both internal auditors and Werksmans with investigating the relocation fees it paid to CNR.
Agencies: South Africa: Companies and Intellectual Property Commission (CIPC), South Africa: National Prosecuting Authority, South Africa: Office of the Public Protector, South Africa: Unspecified
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
Office of the Public Protector:
November 2016: The former South African public protector released a 350-page report that called for the creation of a public inquiry into government corruption related to President Zuma. President Zuma attempted to block the report and the creation of this inquiry.
December 2017: The South African High Court rejected Zuma's attempts to block the inquiry and ordered him to set up the public inquiry within thirty days, ensure the conclusion of its work within 180 days, and within two weeks to inform Parliament of the findings. On 8 December, the Court had ordered the removal of a chief prosecutor appointed by President Zuma, to be replaced by one appointed by someone who is not conflicted in the matter.
25 January 2018: A South African commission of inquiry has been established to investigate whether President Zuma played any role in the Gupta family’s alleged offer of cabinet posts to people including former Deputy Finance Minister Mcebisi Jonas and other claims that they influenced state decisions.The inquiry will be guided by the report of the nation’s former Public Protector Thuli Madonsela.
On May 30 2018, a high court in South Africa unfreezed properties seized from Gupta family worth $19.8 million over the accusation of influence paddling on the former president Jacob Zuma.
National Prosecuting Authority:
18 January 2018: South African National Prosecuting Authority (NPA) served an order by the High Court of Pretoria to McKinsey to freeze a 1 billion rand (approx. 81.4 MM USD) payment it received from Eskom, stating it may relate “to property and proceeds of unlawful activities.”
Companies and Intellectual Property Commission (CIPC)
November - December 2017: South Africa’s companies registry office filed criminal complaints against SAP, KPMG and McKinsey on suspicion that business they conducted with friends of President Jacob Zuma broke the Companies Act.
South Africa Police:
20 May 2018 - CNR's minority shareholders have laid a charge with the South African police regarding the Prevention and Combatting of Corrupt Activities Act in connection with the Transnet deal.
9 June 2018 - South Africa police searched Bank of Baroda’s offices in Johannesburg and Durban and seized documents related to several state-owned firms for the ongoing corruption probe on Jacob Zuma and the Gupta family.
Bank of Baroda allegedly began affiliating with the Gupta family in 2016 and is gradually closing local offices.
Johannesburg Specialised Commercial Crime Court
9 July 2018 - The South African government scrutinized and prosecuted Zuma’s son Duduzne Zuma for an attempt to bribe the deputy finance minister Mcebisi Jonas in 2015. He was released on bail on 10 July 2018 with a hearing scheduled for 24 January 2019. Duduzne has had a long-term business partnership with the Guptas which has been under close watch in light of the various corruption allegations circulating his family.
South Africa: National Prosecuting Authority
On 7 June 2022 it was reported that Rajesh and Atul Gupta, who are wanted in South Africa for their alleged involvement with President Jacob Zuma in connection with a massive corruption scheme, are awaiting extradition after being arrested in the UAE.
On 7 April 2023, it was reported that the UAE dismissed South Africa's request to extradit Rajesh and Atul Gupta. The UAE said the extradition request did not meet the strict standards outlined in the extradition treaty the countries ratified in April 2021. The court stated that the extradition request could be resubmitted.