Controversial business tycoon Khulubuse Zuma is sitting on a R100?billion oil fortune in the Democratic Republic of Congo (DRC),?which he allegedly obtained with the help of his uncle, President Jacob Zuma.
A City Press investigation has discovered that President Zuma played a crucial role in a 2010 decision by DRC President Joseph Kabila to allocate two oilfields in the northeast of the country to his nephew.
Eight months before Kabila issued a decree for Khulubuse Zuma to bag two of the most prized oil licences in sub-Saharan Africa, Jacob Zuma met his DRC counterpart in Kinshasa, where they allegedly discussed the oilfields.
A top-level intelligence source with inside knowledge of the relationship between the two men said the meeting took place in September 2009 during Zuma’s state visit to the DRC.
According to the source, Kabila told Zuma the untapped DRC oilfields should also be of benefit to “South Africa, the ruling party and even the [Zuma] family”.
The source said although Zuma did not accept Kabila’s invitation to personally profit from the oilfields, it was “no coincidence” that his nephew appeared on the DRC’s “oil horizon”.
He said the message to Zuma was clear: We want to do business with you or your proxy. Let us help each other.
The source said: “This is how Kabila does business. It’s all about what can benefit him and his cronies.
“Kabila needs South Africa to bring about security in the areas around the oilfields so that he can reap the tax and production agreements benefits.”
The source said Kabila also needed South Africa’s support, expertise and patronage for the development of the world’s largest hydroelectrical power scheme.
Six months after the Zuma/Kabila summit, Khulubuse Zuma set up two companies in the British Virgin Islands.
A month later, the companies?–?Caprikat and Foxwhelp?– signed a production-sharing contract for oil blocks with the DRC government.
The oil contract between Khulubuse Zuma and the DRC government was rapidly confirmed by Kabila’s “smash-and-grab” presidential decree in June 2010.
In that process, Kabila appropriated the oilfields from Irish oil giant Tullow Oil and allocated them to Khulubuse Zuma.
“The allocation [of the concessions] to Khulubuse Zuma reinforced the friendship between the two men,” said the City Press source.
Another source said Kabila had intended for the DRC oilfields to benefit the ANC. But he said, instead, that Khulubuse Zuma registered their ownership in the Virgin Islands?–?a haven of corporate anonymity.
A Panamanian law firm registered the two companies and a Swiss lawyer specialising in “business crime defence” was listed as the sole director of the two companies.
Khulubuse Zuma said this week that he was not the one to comment on an alleged discussion between his uncle and Kabila about the oilfields.
Neither Kabila’s office nor the presidency responded to any requests for comment.
Khulubuse Zuma said through his media relations adviser, Vuyo Mkhize, that as a rule, he did not discuss details of his business dealings with the president.
City Press asked Mkhize what the DRC oil blocks were worth and what stake or shareholding Khulubuse Zuma held in them.
Mkhize said that over Khulubuse Zuma’s lifetime, and based on current oil prices, the value was R100?billion.
But he said he was not at liberty to discuss his client’s stake in the blocks.
The DRC oilfields are the largest in sub-Saharan Africa and have been found in the Lake Albert Rift Basin, which straddles the DRC-Uganda border. The field contains an estimated 2?billion barrels of oil.
London-listed Tullow Oil was awarded licences for blocks 1 and 2 in 2006. Tullow has interests in more than 150 oil licences across 25 countries with 67 producing fields. In 2012, they produced an average of 79?200 barrels of oil a day.
The campaign group, Platform, which focuses on the social, economic and environmental impacts of the global oil industry, calculated that the DRC state lost $10?billion (R103?billion) in revenue as a result of dumping Tullow in favour of Caprikat/Foxwhelp.
At the time, Tullow declared it was absurd to give exploration licences in a sensitive environment to a company with no oil experience.
Khulubuse Zuma said this week it was not true he had no experience in oil exploration. The Caprikat/Foxwhelp production share agreement accords the companies 60% of net revenues for the first 12?million barrels?–?this will later drop to 55%.
Commentators suggest that neighbouring Uganda offers companies only 20% to 31.5% on similar deals.
According to Platform, “nothing in this contract looks like a long-term plan?–?we’ve never seen the state share of ‘profit oil’ so low”.
The DRC official website said Caprikat/Foxwhelp had paid a $6?million “management fee” for the concessions.
According to newspaper reports, several big multinational oil companies were, at the time, scouring Kinshasa for concessions and were prepared to pay 10 times that amount.
Khulubuse Zuma had signed the contracts with the DRC authorities on behalf of Caprikat, while Jacob Zuma’s legal adviser, Michael Hulley, had signed for Foxwhelp.
Khulubuse Zuma said afterwards Hulley was also his legal adviser and had signed on behalf of the one company because he couldn’t sign for both. It was a “technical” thing.
Monitor Global Outlook, a global intelligence and research service of The Christian Science Monitor, has just reported that Caprikat/Foxwhelp has established a company, Oil of DRCongo, as an operator of the concessions.
Oil of DRCongo is owned by Fleurette, a company held by controversial Israeli billionaire Dan Gertler.
He is also a DRC citizen, is close to Kabila and is one of the most powerful men in the country.
A Fleurette spokesperson said two months ago that Oil of DRCongo has so far invested more than $70?million in the exploration of the concessions. It now plans to sink four wells.
The senior intelligence source said the oil concessions were the cherries on the top of Khulubuse Zuma’s business interests in the DRC and that he also had vast mining and construction investments in that country.
Mkhize said Khulubuse Zuma first visited the DRC in or about 1998 to explore business opportunities.
“As a private citizen who is almost exclusively invested in private companies, he has no duty to publicly disclose details of his business dealings,” said Mkhize.
SA’s military role in spotlight
The involvement of South African troops is crucial to stabilising the volatile eastern DRC to allow for oil exploration and drilling, according to Andre Roux, a senior researcher at the Institute for Security Studies.
South Africa has sent 1?300 troops to the DRC as part of an intervention brigade that works with the UN peacekeeping mission.
The intervention brigade’s unorthodox mandate allows it to take offensive measures. The
3?069-strong brigade consists of Malawian, Tanzanian and South African troops.
Some intervention brigade soldiers are based in the unstable Ituri region in northwestern DRC – near the untapped oilfields in and around Lake Albert.
Roux says much of the DRC’s wealth is situated in eastern Congo, but that President Joseph Kabila and his government receive no income from the mining and exploration because much of the area is controlled by rebel groups.
Roux says there are at least 34 such groups operating in the area and they exploit the resources in the region to finance their activities.
He says South Africa’s best troops and equipment are with the intervention brigade.
“Kabila owes South Africa a debt of gratitude for its loyal military support.”
The Grand Inga Project
It promises to be one of the world’s biggest construction projects, is destined to solve many of the subcontinent’s energy and water problems, and will cost more than the income of a small country.
It has been named the Grand IngaProject and will be a hydroelectric power complex situated on the DRC’s mighty Congo River, the world’s second-largest waterway.
It will cost a staggering $80?billion-$100?billion (R828?billion-R1?trillion) and in October last year, President Jacob Zuma and his DRC counterpart, Joseph Kabila, signed an agreement to jointly develop the project.
South Africa does not have the money to develop Inga alone, but our involvement is vital as the primary energy recipient and an underwriter to investors.
A senior intelligence source says Khulubuse Zuma is eyeing aspects of the project and talking to the “right” people.
He will “definitely” be involved in the construction of the project, according to Roux.
Khulubuse’s media adviser, Vuyo Mkhize, will neither confirm nor deny claims of his client’s interests in Inga or any other project in the DRC or elsewhere.