By Allistar Sparks
(source: BusinessDay Online, 18/08/2010)
The speed at which we are trashing the positive image of this country created by the soccer World Cup is astonishing.
A mere six weeks ago the world was applauding us for the success of that event. Thousands of visitors were expressing their pleasure at being here in what was a visible display of our "rainbow nation," expressing surprise, too, at our wonderful infrastructure, our fine hotels, the efficiency of our services and the harmony of our multi-cultural society. It was way beyond what they had expected, given the bad publicity we have had about our crime rate and poor governance.
Investors were beginning to reassess us as the realisation spread that South Africa was different from the rest of what many still perceived to be "the hopeless continent," riddled with corruption, coups and incompetence.
It was the greatest public relations bonanza this country has ever had. But now, only these few weeks later, our government seems to be going out of its way to blot that new image. It has delivered a series of public relations disasters.
This began with some questionable interventions by the Department of Mineral Resources that appear to have been aimed at diverting mineral and prospecting rights into the hands of senior African National Congress (ANC) figures, including family members and friends of President Jacob Zuma . This has rattled the mining industry as well as investors at home and abroad.
The most dodgy of these deals began when the big steel company AcerlorMittal failed, apparently through oversight, to convert its prospecting rights at Sishen iron ore mine in Limpopo Province to new order rights, as the law required. That meant these rights reverted to the state.
Kumba , Mittal's biggest supplier of iron ore, grabbed the opportunity to hike its price to Mittal from a discounted figure fixed years ago when the old Iscor, which owned both the mine and the steel plant, was split and privatised. Kumba also seized on Mittal’s lapse and applied for the conversion rights for itself — only to find that a little-known company with no mining expertise, Imperial Crown Trading (ICT), had done likewise. And, hey presto, ICT was awarded the rights — although the issue is the subject of what is likely to be a long legal battle. Meanwhile, it just so happens that one of Zuma's sons, Duduzane, is a key figure in ICT along with the Gupta family, enormously wealthy immigrants from India who appear to have become the President's best friends and are on the point of publishing a new pro-ANC daily newspaper, New Age. The chief executive of the Gupta family's investment arm, Jagdish Parekh, also has a substantial shareholding in ICT, while Duduzane Zuma's twin brother, Duduzile, is a business partner of the Guptas. Sensing which way the wind was blowing in the conflict between Mittal and Kumba, Mittal has now moved to secure its supply of cheap ore from Sishen by offering ICT a cool R800-million for its rights plus R9-billion worth of shares in Mittal itself. All in the name of Black Economic Empowerment. It's an outrageous steal — “money for jam,” as one beneficiary brazenly put it — and a grotesque abuse of BEE. That policy was introduced to benefit the disadvantaged people of this country, and there is nothing disadvantaged about the beneficiaries of this windfall. They are already among the stinking rich, politically connected fat cats. Hardly had this shocker hit the news than another followed. The Department of Mineral Resources ordered Lonmin , an international mining company, to stop selling nickel, copper and chrome from a portion of one of its platinum mines, because it had awarded exploration rights for these minerals to an empowerment company called the HolGoun Group. HolGoun is an investment company controlled by the family of Sivi Gounden, a former Director-General of the Department of Public Enterprises. Political connections again. As it turns out, these other minerals cannot be separated from the platinum in the mining process, so the Department of Mineral Resources has rescinded its order. But the damage to South Africa's image in the investor community has been great. Mining is one of our major employers, and given our distressing unemployment figures we badly need to keep the industry going. Many of our mines are nearing the end of their productive lives, so it is imperative that we seek new deposits and open new mining operations. But opening a new mine requires huge capital investment. Nobody is going to make that kind of investment in a country where there is uncertainty about the security of mineral rights. So it is the poor and the working-class who are going to suffer from these shenanegans aimed at bloating the already rich and politically connected — all in the name of BEE. The rot spreads well beyond the mining industry. The ANC itself admits that it is a deeply corrupt organisation. One of its discussion documents prepared for next month's national general council meeting lists a number of "tendencies" leading to "organisational decay." What's more the ANC leadership has known this for years. When Deputy President Kgalema Motlanthe was still general-secretary of the ANC he admitted as much in a remarkably candid interview with the Financial Mail's Carol Paton. The trouble is, a fatal precedent was set right at the outset — right at the top. A 1995 document, unearthed from ANC archives at Fort Hare University and published by the Sunday Times last weekend, gives details of how then Deputy President Thabo Mbeki requested Shabir Shaik, of arms scandal notoriety, to set up a company that would fund the ANC through "patriotic" dividends paid out for major government contracts. The ANC was seriously strapped for cash in the early nineties. Its funds were seized when it was banned in 1960, it had no accommodation and no means to build its organisation and run election campaigns. The need for money was obvious and understandable, but the means of acquiring it turned out to be dubious. Shaik formed his company, Nkobi Holdings, which was to feature prominently in the arms deal scandal. That was the start of the corruption — and sadly corruption, once started, expands exponentially. Especially when started by heroes bearing the halo of heroic liberators. That is why the government has had to go to such extraordinary lengths to avoid any proper inquiry into the arms deal — and to avoid President Zuma’s having to go on trial, where he might well have blown the whistle on many others who were involved. That is why corruption is now rotting the very soul of the ANC. And that is why this desperate government wants to stop investigative reporting, because it is the media that keeps exposing the scale of the corruption which the government cannot stop because too many at the top are involved. But what Zuma and his government seem not to realise is that ending freedom of the media means ending free speech, and nothing can do more to shatter the image of a country than that. Because a country that does not have free speech is no longer a free country. Add to that the heavy-handed arrest and political interrogation of journalist Mzilikazi wa Afrika and investors begin to catch the repellent whiff of another Zimbabwe.