Ministers visit as friends - Ajay Gupta
Ferial Haffajee and Adriaan Basson, City Press
Johannesburg - Brothers Ajay and Atul Gupta believe that they are losing millions of rands due to the “constant negative publicity” surrounding their friendship with President Jacob Zuma and his family.
In a wide-ranging interview with City Press editor Ferial Haffajee and assistant editor Adriaan Basson at the Midrand offices of their newspaper, The New Age, the annoyed brothers – flanked by their business partners, Jagdish Parekh and Duduzane Zuma – said:
» They do not think the multimillion-rand Ayigobi BEE deal with steel giant ArcelorMittal, of which they are beneficiaries, will be approved by the company’s shareholders;
» The turnover of their IT firm, Sahara, had halved by R1bn in the past financial year due to the negative publicity; and
» When government ministers visit their luxury compound in Saxonwold, northern Johannesburg, they do so as friends and not in their official capacity.
They also slammed the notion that the family’s businesses only really took off after Zuma became president, showing City Press pictures of former presidents Thabo Mbeki and Kgalema Motlanthe attending functions hosted by the Guptas.
The Guptas deny that they have benefited from South Africa’s BEE laws. According to Ajay Gupta, the opposite is true. “Sahara did its own empowerment transaction. We gave 26% to black people, the transaction was funded by Nedbank. It’s not that we’re taking anything, we’re giving.”
On their relationship with businessman Lazarus Zim, Ajay says Zim was looking for an investor and the family’s Oakbay Investments bought 30% of Zim’s Afripalm Holdings.
“This has nothing to do with empowerment. I went in as an investor and until today, I did not get a single cent in dividends from that company,” he says.
Atul Gupta adds: “We all know the Gupta family only entered in 1993. We’re like Europeans, let’s say it that way, in the status.”
But Ajay intervenes: “That’s not the issue. The issue is simply that we are doing an empowerment transaction. How can we take advantage of that?”
On the V&A Waterfront deal, the Guptas claim their stake in the recent purchase of the property by a consortium, led by property group Growthpoint and the Public Investment Corporation, had been exaggerated in the extreme.
Ajay: “I pray that someone gives me some money out of that.”
Parekh explains their involvement: “The Guptas’ Oakbay Investments owns 33% of Afripalm.
Afripalm owns 35% of Unipalm. Unipalm owns 33% of a trust, that is Growthpoint’s BEE partner, and Growthpoint has a 14% BEE equity component.
“So you can imagine just how watered down our share is. If you turn the table around and you see what is the see-through effect right up to our Oakbay, it is less than 0.5%.”
According to Ajay Gupta, they decided two years ago to develop an infrastructure project through attracting foreign direct investment to South Africa.
They approached the China Railway Construction Company, which was doing lots of work in Nigeria at the time.
Lazarus Zim contacted them and a memorandum of understanding was signed during Zuma’s official state visit to China last year.
Ajay stresses that South Africa’s ambassador to China requested them to sign the deal during the visit and that 33 other agreements were also signed by other companies on the trip.
“It’s very clear – we’re not looking to state enterprises, we’re not looking to the government. We are looking at foreign direct investment that can put in infrastructure in this country, and we can work together with our speciality.”
Asked about speculation that they would partner with the Chinese company to build Transnet’s planned Johannesburg-Durban speed train, Ajay says he “didn’t even know about that (project)”.
Ajay Gupta says the deal is yet to be approved by the company’s shareholders. “No money has been made yet. I believe personally that this deal is not happening.”
He pins this statement on the fact that the Ayigobi transaction has not been presented to the company’s shareholders. “If it was happening, it would have already been taken to the shareholders,” he says.
Asked about a potential conflict with him advising on and benefiting from the transaction, Ajay replies by saying it was unfair to call him a “transaction adviser”.
“He (ArcelorMittal chairperson Lakshmi Mittal) asks me, when he does these BEE deals, as a friend, it’s nothing official to do with ArcelorMittal South Africa. I’ve never even met the company’s CEO or anyone in the company.”
Ajay says he knows Lakshmi Mittal “very well” and Mittal told him “many times” that he wanted to do a deal.
While Mittal was “finalising” the deal, he asked Ajay again for a “new entrant”, to which he replied: “This is the group, why don’t you take it to them? I recommended Dudu (Duduzane Zuma) also.”
In exchange for the $50m funding he (Ajay) provided, he asked for a stake in the consortium.
Of the 26% BEE stake in ArcelorMittal, 10.5% would go to Imperial Crown Trading (Parekh’s company, which he declined to discuss during the interview); 5% to ArcelorMittal employees; 5.25% to another BEE grouping that pulled out; and the majority of the remaining 5.25% would be split between the Guptas, Duduzane Zuma and businessman Sandile Zungu.
Ajay puts a total value of $150m (about R1bn) on the deal. After five years, Zuma Jnr’s company would get $2.5m (about R18m) and the Guptas $1.5m (about R11m).
Ajay Gupta: “If, in Sahara’s books, you find one cent that I’ve made from the government, you expose that.”
He adds: “I have a billion rand or two billion rand turnover (with Sahara). Of this, maybe R20m or R30m comes via direct or indirect (government deals).
“I don’t count this as the influence of government business. It’s a very nominal amount, which has nothing to do with influence. But our intention is very clear: we don’t want any business from the government.”
Parekh points out that the state controls about 60% of the country’s total expenditure on IT, but that the Guptas have decided not to pursue government tenders “because of the friendship with some of the leadership”.
Sahara was one of six companies that won part of a tender in Gauteng in the early 2000s to install computers in schools.
Atul says the company was only allocated about “500 boxes in 500 schools” and that his “heart was sore” they didn’t win more.
Asked whether their Saxonwold compound has become a centre of political discussion and socialising for ministers and senior government officials, Ajay says: “The two things, we don’t mix them.”
He denies that government policies or tenders are discussed at their home, but easily admits that they have lots of politician friends who spend time at their estate.
This includes Zuma; Human Settlements Minister Tokyo Sexwale, who visited the family last Saturday to deliver “gogo atchar” to the Gupta matriarch and share a “Zulu meal” with them; and Mining Minister Susan Shabangu, who he says could not be benefiting them because they receive many critical queries from her department about their mines.
As an example, the Guptas say they host a big function at their home yearly to celebrate Diwali, to which ministers “and a few hundred people” are invited.
Ajay denies that their access to top ANC politicians is extraordinary.
Asked why other top businesspeople don’t have this kind of access, Ajay says: “Because they want the access for some benefit.
“I’m not using this thing for any commercial benefit or advantage. So that’s why people are more comfortable with me.”
Parekh adds: “In a lot of instances, these relationships predate them (the politicians) being in office.”
Asked to explain how these relationships with politicians start, Atul says the question shows a lack of understanding of cultural differences.
Ajay says: “Come with me to my hometown of Saharanpur (in India), and maybe a few hundred people will come to meet with me. Across the border, the politicians feel comfortable because I have no conflict of interest with them. If I have a conflict of interest, they will never come to me.”
Ajay Gupta says he meets politicians in “any way ... it can be someone who feels this is a good guy, let’s meet with him, and yes, sometimes I also invite people to my functions. Most of them are long-term relations”.
Prompted to explain further, Ajay says: “For you he’s a minister, for me he’s a friend. Please understand that. If I ask a minister about his budget, he won’t even say hello to me.”
Ajay then cites Essop Pahad as an example: “He is not a minister, but he is still my friend and a mentor of the family. Why are people not understanding this thing?”
According to him, he had “almost the same access” during the Mbeki regime.
“I did not do anything; now I have the same access to the Zuma regime. I am one of the only few members (who remained) on the International Marketing Council, at that time and now also,” he says.
Ajay says there has been a “microscope” over the family since Zuma was elected ANC president in December 2007.
To challenge the belief that they’ve benefited from the Zuma presidency, the Guptas gave City Press pictures of Mbeki, Motlanthe and former deputy president Phumzile Mlambo-Ngcuka attending their functions.
Ajay says he attended “a lot” of state functions in the past, which he used as a networking platform to meet people.
Apart from a few bottles of pickles and small plants, the Guptas insist they are not benefiting from their “friendships” with politicians.
When asked whether Zuma or his family have received any financial benefits or gifts from the Guptas, Ajay responds with a categorical “no”.