Zuma’s son took stake in Tegeta 3 wks before Optimum buy

Johannesburg - A firm that’s almost half-owned by President Jacob Zuma’s son, Duduzane, obtained shares in a company founded by the Gupta family weeks before that firm bought Glencore’s Optimum coal complex in South Africa, share register documents show.

Tegeta Exploration & Resources, the company set up by the Guptas, agreed to pay R2.15bn for the Optimum mine, which supplies the state power company and holds the right to almost a 10th of the export capacity of Africa’s biggest coal port, in a deal announced on December 11. The purchase was announced three weeks after Duduzane Zuma took the stake in Tegeta.

The sequence of the transactions underscores complaints from President Zuma’s political opponents that he, his family and allies have benefited financially during his seven years as president. The controversy comes at a time when Zuma is already under attack for unexpectedly changing his finance minister and shepherding an economy that’s on the brink of having its sovereign credit rating being cut to junk status.

State capture

“It looks terrible,” David Lewis, the executive director of South African transparency group Corruption Watch, said of the timing of the transaction in a phone interview. “There’s no explanation for this sort of stuff that’s persuasive. It goes to the capture of the state by business figures in connection with the political elite, right up to the president.”

Calls to Duduzane Zuma’s office and mobile phone weren’t answered, while Glencore officials declined to comment.

Representatives for the Guptas and the Department of Mineral Resources denied any impropriety. Bongani Majola, a spokesperson for President Zuma, declined to comment.

President Zuma said as recently as January 10 that he is friends with the Guptas, who since arriving in South Africa in 1993 have built a business empire ranging from computers and media to uranium mining.

Mines Minister Mosebenzi Zwane said in a February 8 interview that he helped complete the deal for the Optimum coal mine when he flew to Switzerland to meet Glencore Chief Executive Officer Ivan Glasenberg. Zwane said that while he wasn’t favouring Tegeta, he helped persuade Glencore to sell the operation, which was in bankruptcy protection, to try and save jobs.

Deal influence

On November 20, about half of the shares in Tegeta Exploration, the coal company until then controlled by the Gupta family and their employees, were transferred to Mabengela Investments, a company part-owned by Zuma’s son, Duduzane, and a company known as Elgasolve.

Oakbay Investments, a company owned by the Guptas, said Zwane didn’t influence the deal. Oakbay owns 34.5% of Tegeta Exploration.

“The ministry of mineral resources was in no way involved in the acquisition of Optimum and was not party to the negotiations, nor was any other government minister, department or employee,” Oakbay said in emailed responses to questions.

"We are clear that our transaction was completed on an arms- length basis and governed by good corporate governance. The transaction was completed by a willing buyer and a willing seller following transparent negotiations between the parties over several months."

Mabengela owns 28.5% of Tegeta, Elgasolve 21.5% and a Dubai-based company called Fidelity Enterprises owns 15.5%, Oakbay said. It said it was not immediately able to confirm the date of the share transfers.

* Disclaimer: Peter Grauer, chairperson of Bloomberg LP, the parent of Bloomberg News, is a senior independent non-executive director at Glencore.

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