The ANC's Oilgate
- Stefaans Brmmer, Sam Sole and Wisani wa ka Ngobeni,
20-May-05
A Mail & Guardian investigation into covert party funding has revealed how R11-million of public money was diverted to African National Congress coffers ahead of the 2004 elections.
In what may be the biggest political funding scandal since 1994, the M&G has established that South Africas state oil company, PetroSA, irregularly paid R15-million to Imvume Management a company closely tied to the ANC at a time when the party was desperate for funds to fight elections.
The M&G possesses bank statements and has seen other forensic evidence proving that Imvume transferred the lions share of this to the ANC within days. PetroSA this week said it was unaware of this. The ANC denied impropriety and said it was not obliged to discuss its funders.
The scheme unfolded in two stages. First, PetroSA management bent over backwards to pay Imvume the money as an advance for the procurement of oil condensate. Then, when Imvume diverted the funds to the ANC instead of paying its own foreign suppliers, PetroSA had to cover the shortfall by paying the same amount again.
A multimillion-rand hole remains in the parastatals books. PetroSA has gone through the motions to recover the debt by suing Imvume but most of it remains outstanding.
The effect of the entire transaction was that PetroSA, and ultimately the taxpayer, subsidised the ruling partys election campaign: a blatant abuse of public resources.
Imvumes role as an ANC front company first emerged in February last year when the M&G exposed its oil dealings with Saddam Husseins Iraq. Imvume principal Sandi Majali obtained lucrative crude oil allocations from that regime when he travelled to Iraq with top ANC officials between 2000 and 2002. More recently, Imvume described its boss as ANC secretary-general Kgalema Motlanthes economic adviser.
But it was the diversion of the Petro-SA money four months ahead of the 2004 elections that is now lifting the lid on the funding scandal.
The deal puts the spotlight on PetroSAs management, which approved the payment; Imvume boss Majali, who asked for the advance and then issued the cheques to the ANC; and Motlanthe, who was Majalis ANC patron.
Imvume, now unable to pay its debts, was once the empowerment pin-up of the oil industry.
The contract that caused all the trouble was awarded by PetroSA to Imvume on October 15 2002 the day President Thabo Mbeki publicly launched PetroSA as the national oil company.
Under the contract, Imvume with the backing of Swiss-based resource trader Glencore International was to supply PetroSA with regular cargoes of condensate, a feedstock for PetroSAs Mossel Bay gas-to-liquid fuels plant.
A number of condensate cargoes were delivered to Mossel Bay during 2003. The standard contractual procedure was for PetroSA to pay Imvume the full cargo price no later than 30 days after the bill of lading date (the date the cargo was loaded for shipment to Mossel Bay).
Once it received payment from PetroSA, Imvume would immediately pay it on to Glencore, which sourced the cargo on international markets. Glencore paid Imvume a commission.
But in December 2003 the pattern was broken, and PetroSA has confirmed that standard procedure was departed from. The bill of lading date for that cargo was December 6 2003, meaning PetroSAs payment for the cargo worth $10-million (about R65-million) was due on January 5 2004. But Imvumes Majali asked PetroSA for an advance of R15-million (just more than $2-million of the $10-million) which was paid even before the cargo was discharged on December 22. PetroSA paid the advance into a different account to that usually used by Imvume for the contract.
Evidence in the M&Gs possession confirms that Imvume Managements corporate account was credited with R15-million a day later, on December 19. And the M&G has seen forensic proof that within the next four days, Imvumes Majali issued a series of four cheques to the ANC for R4-million, R3-million and R2-million (twice). These cheques, totalling R11-million, were all transacted on December 23. (Download Imvume bank statement -- cheques to ANC)
This week Majali and Imvume did not dispute that the money was paid to the ANC, but claimed their support for the party was a private affair.
The transfers to the ANC came four months before the elections, held on April 14 2004. A number of sources have described the partys financial straits around that time, claiming it had a bank overdraft typically running at more than R100-million.
When payment for the cargo became due to Glencore on January 5, Imvume failed to pay the company the R15-million advance and, effectively, also withheld another R3-million from the balance owed.
Glencore turned to PetroSA for what it was owed, eventually threatening in February not to offload the next cargo. PetroSA agreed to cover the shortfall of R18-million, for fear that the Mossel Bay plant would run out of feedstock, leading to greater losses. Effectively, PetroSA paid R18-million twice once to Imvume, and once to Imvumes supplier.
PetroSA maintains that the special circumstances of the empowerment environment largely excuse the actions of its management. It also denies that there was pressure from either the Minerals and Energy Ministry or the ANC to approve the advance to Imvume.
Circumstances, however, suggest that empowerment is not a sufficient explanation and that Imvumes ANC links played a role. These links were no secret in oil trading circles. A businessman active in the sector told the M&G last year: It was talked about when they got tenders that it was an ANC company I certainly understand that ANC fundraising has a keen interest.
The advance payment to Imvume was irregular in that it was a departure from standard procedures. PetroSA maintains procurement policy allows for advance payments, but admits it should have checked whether the money was going into the usual account.
When the transaction with Imvume blew up in its face, PetroSA continued treating the company with kid gloves.
On February 23 last year, four days after PetroSA had been forced to settle Imvumes debt with Glencore, Majali signed an acknowlegement of debt to PetroSA, agreeing to repay the R18-million plus interest within 90 days. He also ceded his companys revenue stream as security. But Imvume paid nothing in terms of that agreement.
Court records show more than a month passed after the expiry of the 90-day term before PetroSA issued a letter of demand. (See "PetroSA vs Imvume Management" download box on top right of this article for full documents).
PetroSAs choice of lawyer employed to pursue the demand raises further questions about PetroSAs seriousness of purpose.
The lawyer, Leslie Mkhabela, was previously Imvumes own attorney and still has a business relationship with Majali via their common interest in Forever Resorts Aventura, the privatised state leisure company. This raises conflict-of-interest questions.
Mkhabela maintained this week that this was not a problem as he had disclosed his business relationship with Majali to PetroSA.
The agreement signed between Mkhize and Majali was still not enforced. Instead new terms, much more favourable to Imvume, were agreed between PetroSA chief executive Sipho Mkhize and Majali in September last year.
Now PetroSA waived any claim to interest and agreed that Imvume could repay the capital amount in monthly instalments over four and a half years.
But again, in February this year and after paying only R1,33-million, Imvume defaulted, court papers show.
PetroSA took off the kid gloves for a little while, filing an application for summary judgement in the Johannesburg High Court. But the matter was postoned twice, and on a third court date May 3 this year PetroSA removed the matter from the roll. PetroSA this week claimed that this was to allow Imvume to remain operational, which would give PetroSA a better chance eventually to recoup the debt.
The ANC this week threatened legal action against the M&G without confirming or denying the flow of money to it.
Circumstantial evidence strongly suggests the ANC knew exactly where the funding was coming from. Between 2000 and 2002, when Majali was trading in oil allocations from Saddam Husseins Iraq, the ANCs Motlanthe repeatedly accompanied him to that country.
ANC treasurer-general Mendi Msimang also went along on at least one occasion.
It is rumoured that the relationship between Majali and Motlanthe has cooled recently, but an Imvume brochure last year still described Majali as economic adviser to the secretary-general of the ANC. Describing the companys winning formula, the brochure said Imvume had access and influence on economic policy.
Published in: Mail & Guardian Online
www.worldsecuritynetwork.com/showArticle3.cfm?article_id=11450&topicID=67
- Stefaans Brmmer, Sam Sole and Wisani wa ka Ngobeni,
20-May-05
A Mail & Guardian investigation into covert party funding has revealed how R11-million of public money was diverted to African National Congress coffers ahead of the 2004 elections.
In what may be the biggest political funding scandal since 1994, the M&G has established that South Africas state oil company, PetroSA, irregularly paid R15-million to Imvume Management a company closely tied to the ANC at a time when the party was desperate for funds to fight elections.
The M&G possesses bank statements and has seen other forensic evidence proving that Imvume transferred the lions share of this to the ANC within days. PetroSA this week said it was unaware of this. The ANC denied impropriety and said it was not obliged to discuss its funders.
The scheme unfolded in two stages. First, PetroSA management bent over backwards to pay Imvume the money as an advance for the procurement of oil condensate. Then, when Imvume diverted the funds to the ANC instead of paying its own foreign suppliers, PetroSA had to cover the shortfall by paying the same amount again.
A multimillion-rand hole remains in the parastatals books. PetroSA has gone through the motions to recover the debt by suing Imvume but most of it remains outstanding.
The effect of the entire transaction was that PetroSA, and ultimately the taxpayer, subsidised the ruling partys election campaign: a blatant abuse of public resources.
Imvumes role as an ANC front company first emerged in February last year when the M&G exposed its oil dealings with Saddam Husseins Iraq. Imvume principal Sandi Majali obtained lucrative crude oil allocations from that regime when he travelled to Iraq with top ANC officials between 2000 and 2002. More recently, Imvume described its boss as ANC secretary-general Kgalema Motlanthes economic adviser.
But it was the diversion of the Petro-SA money four months ahead of the 2004 elections that is now lifting the lid on the funding scandal.
The deal puts the spotlight on PetroSAs management, which approved the payment; Imvume boss Majali, who asked for the advance and then issued the cheques to the ANC; and Motlanthe, who was Majalis ANC patron.
Imvume, now unable to pay its debts, was once the empowerment pin-up of the oil industry.
The contract that caused all the trouble was awarded by PetroSA to Imvume on October 15 2002 the day President Thabo Mbeki publicly launched PetroSA as the national oil company.
Under the contract, Imvume with the backing of Swiss-based resource trader Glencore International was to supply PetroSA with regular cargoes of condensate, a feedstock for PetroSAs Mossel Bay gas-to-liquid fuels plant.
A number of condensate cargoes were delivered to Mossel Bay during 2003. The standard contractual procedure was for PetroSA to pay Imvume the full cargo price no later than 30 days after the bill of lading date (the date the cargo was loaded for shipment to Mossel Bay).
Once it received payment from PetroSA, Imvume would immediately pay it on to Glencore, which sourced the cargo on international markets. Glencore paid Imvume a commission.
But in December 2003 the pattern was broken, and PetroSA has confirmed that standard procedure was departed from. The bill of lading date for that cargo was December 6 2003, meaning PetroSAs payment for the cargo worth $10-million (about R65-million) was due on January 5 2004. But Imvumes Majali asked PetroSA for an advance of R15-million (just more than $2-million of the $10-million) which was paid even before the cargo was discharged on December 22. PetroSA paid the advance into a different account to that usually used by Imvume for the contract.
Evidence in the M&Gs possession confirms that Imvume Managements corporate account was credited with R15-million a day later, on December 19. And the M&G has seen forensic proof that within the next four days, Imvumes Majali issued a series of four cheques to the ANC for R4-million, R3-million and R2-million (twice). These cheques, totalling R11-million, were all transacted on December 23. (Download Imvume bank statement -- cheques to ANC)
This week Majali and Imvume did not dispute that the money was paid to the ANC, but claimed their support for the party was a private affair.
The transfers to the ANC came four months before the elections, held on April 14 2004. A number of sources have described the partys financial straits around that time, claiming it had a bank overdraft typically running at more than R100-million.
When payment for the cargo became due to Glencore on January 5, Imvume failed to pay the company the R15-million advance and, effectively, also withheld another R3-million from the balance owed.
Glencore turned to PetroSA for what it was owed, eventually threatening in February not to offload the next cargo. PetroSA agreed to cover the shortfall of R18-million, for fear that the Mossel Bay plant would run out of feedstock, leading to greater losses. Effectively, PetroSA paid R18-million twice once to Imvume, and once to Imvumes supplier.
PetroSA maintains that the special circumstances of the empowerment environment largely excuse the actions of its management. It also denies that there was pressure from either the Minerals and Energy Ministry or the ANC to approve the advance to Imvume.
Circumstances, however, suggest that empowerment is not a sufficient explanation and that Imvumes ANC links played a role. These links were no secret in oil trading circles. A businessman active in the sector told the M&G last year: It was talked about when they got tenders that it was an ANC company I certainly understand that ANC fundraising has a keen interest.
The advance payment to Imvume was irregular in that it was a departure from standard procedures. PetroSA maintains procurement policy allows for advance payments, but admits it should have checked whether the money was going into the usual account.
When the transaction with Imvume blew up in its face, PetroSA continued treating the company with kid gloves.
On February 23 last year, four days after PetroSA had been forced to settle Imvumes debt with Glencore, Majali signed an acknowlegement of debt to PetroSA, agreeing to repay the R18-million plus interest within 90 days. He also ceded his companys revenue stream as security. But Imvume paid nothing in terms of that agreement.
Court records show more than a month passed after the expiry of the 90-day term before PetroSA issued a letter of demand. (See "PetroSA vs Imvume Management" download box on top right of this article for full documents).
PetroSAs choice of lawyer employed to pursue the demand raises further questions about PetroSAs seriousness of purpose.
The lawyer, Leslie Mkhabela, was previously Imvumes own attorney and still has a business relationship with Majali via their common interest in Forever Resorts Aventura, the privatised state leisure company. This raises conflict-of-interest questions.
Mkhabela maintained this week that this was not a problem as he had disclosed his business relationship with Majali to PetroSA.
The agreement signed between Mkhize and Majali was still not enforced. Instead new terms, much more favourable to Imvume, were agreed between PetroSA chief executive Sipho Mkhize and Majali in September last year.
Now PetroSA waived any claim to interest and agreed that Imvume could repay the capital amount in monthly instalments over four and a half years.
But again, in February this year and after paying only R1,33-million, Imvume defaulted, court papers show.
PetroSA took off the kid gloves for a little while, filing an application for summary judgement in the Johannesburg High Court. But the matter was postoned twice, and on a third court date May 3 this year PetroSA removed the matter from the roll. PetroSA this week claimed that this was to allow Imvume to remain operational, which would give PetroSA a better chance eventually to recoup the debt.
The ANC this week threatened legal action against the M&G without confirming or denying the flow of money to it.
Circumstantial evidence strongly suggests the ANC knew exactly where the funding was coming from. Between 2000 and 2002, when Majali was trading in oil allocations from Saddam Husseins Iraq, the ANCs Motlanthe repeatedly accompanied him to that country.
ANC treasurer-general Mendi Msimang also went along on at least one occasion.
It is rumoured that the relationship between Majali and Motlanthe has cooled recently, but an Imvume brochure last year still described Majali as economic adviser to the secretary-general of the ANC. Describing the companys winning formula, the brochure said Imvume had access and influence on economic policy.
Published in: Mail & Guardian Online
www.worldsecuritynetwork.com/showArticle3.cfm?article_id=11450&topicID=67
