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Thursday, August 30, 2012
Sexwale’s African ventures court controversy
Stefaans Brümmer & Craig McKune
Aug 24 2012
NEWS ANALYSIS: It is inconceivable that the minister does not know what his company does with his money
“Minister Sexwale remains placid and … having resigned from all business operations he remains focused on his ministerial responsibilities for the poor.” -- Xolani Xundu, June 22
“It is a well-known fact that Minister Sexwale has publicly resigned from all companies and will therefore not dignify faceless sources by confirming or denying any of their stories.” -- Xolani Xundu, June 28
“It is reiterated that no response will be entertained in respect of operations and activities of companies that the minister is no longer in charge of.”-- Xolani Xundu, August 16
Human Settlements Minister Tokyo Sexwale’s spokesperson, Xolani Xundu, earns his salary by not saying much these days, it seems.
And although Sexwale was worth R1.9-billion in listed equities when he joined the government in 2009, his parliamentary and Cabinet interest declarations are as taciturn as Xundu.
Sexwale’s 2011 Cabinet declaration gives a glimpse of the apparent reason why he does not make declarations and the exotic riches behind his silence.
Forget the shares in the mining, service and publishing companies that made Sexwale a household name in empowerment.
(See also: “Suspicion circles Israeli diamond maven who ‘understands negroes’”).
All that Sexwale declared was a 15% stake in a charter jet and a trust that “has investments in various immovable properties and a yacht”.
Only one of the properties was accorded further elaboration -- although not enough to confirm it was all of an Indian Ocean island, Quilálea.
The declaration simply said: “One of these is a property in Mozambique that has been used as a personal asset to date, but which could be developed for commercial purposes in the foreseeable future.”
Because of the possible commercialisation, Sexwale declared: “I have instructed my advisers to transfer the … shareholding in this asset to one of the ‘blind’ trusts to be executed as soon as possible.”
Put differently, Sexwale’s business interests are housed in “blind” trusts, the assets of which are not declared.
But who is kept in the dark? Sexwale, as he should to insulate him from conflicts of interest, or the public, which is deprived the right to know what fills his coffers (and may fuel his political campaigns)?
A blind trust, Wikipedia says, is one in which the trustees “have full discretion over the assets and the trust beneficiaries [read: Sexwale] have no knowledge of the holdings of the trust and no right to intervene in their handling”.
It is an arrangement popularised by developed-country politicians whose assets tend to be amorphous portfolios of listed shares, easily administered without their knowledge.
Sexwale’s holdings are different. Most of his known investments are through Mvelaphanda Holdings, which he co-founded with Mark Willcox and Mikki Xayiya after his first stint in government ended in 1997.
Although the trusts through which Sexwale co-owns Mvela Holdings may now be technically blind and beyond his control, it is inconceivable that he will be truly unaware of what the company, which Willcox still runs, does with his money.
For starters, Mvela Holdings’s listed investments have been there for all, including Sexwale, to see. Stakes in Absa bank and media company Avusa are examples recently in the news.
Much less visible to the public are the Mvela Holdings interests that went into African Global Capital (AGC), an offshore joint venture with United States hedge fund Och-Ziff.
Until recently, Willcox managed AGC through Africa Management Limited. AGC would not be invisible to Sexwale, though, both because he was actively involved when it was set up in 2007 and his Mvela Holdings associates remained involved.
AGC sprouted investment tentacles through a warren of island secrecy jurisdictions back into Africa and even to South Africa, where one of its investee companies, Coal of Africa, earned controversy for its mining development near the Mapungubwe heritage site in Limpopo.
Sexwale appears not to be as insulated from conflicts of interest as he should be. If he knows where his money is, as he arguably does, he may be tempted to use his power as a public representative to serve his interests over the public. Has he succumbed to the temptation?
Because the extent of his holdings is unknown, it is impossible to answer. But the Sexwale aura has been there for the exploiting. Signet Mining Services, a uranium explorer subsidiary of AGC, boasted on its website of “strong political alliances in Africa through Mvelaphanda”.
And in Congo-Brazzaville an unexpected controversy showed Sexwale’s apparent willingness to “show face” to assist another AGC subsidiary, oil junior New Age, to land a stake in a major gas field.
Sexwale, a trustee of the Nelson Mandela Foundation, gave permission to use a passage, apparently from an old Mandela speech, in a biography of Congolese president Denis Sassou-Nguesso.
When the passage was used as a foreword purporting to be purpose-written by Mandela, the foundation roared about the “brazen abuse”, sparking a diplomatic incident.
Sexwale, then more than six months in government, popped up in the Congo, placating Sassou-Nguesso on national television.
What was not known then was that New Age, the company Sexwale was invested in through AGC, was in the throes of negotiating a stake in the Marine XII offshore gas field with Sassou-Nguesso’s government. Six months later, in June 2010, New Age had the stake.
One person with knowledge of the negotiations claims that the Sexwale factor was crucial. “New Age appeared at the time as a South African company and there was a willingness from Congo-Brazzaville to improve its relations with South Africa, with the newly elected President [Jacob] Zuma and [his] new team in place.”
Sexwale, this person claims, “promoted” the New Age deal directly with Sassou-Nguesso during his visit.
The investments through AGC placed Sexwale in bad company -- that of Israeli businessman Dan Gertler -- as revealed by the Mail & Guardian last week.
Even if Gertler’s wildest antics were yet to come when they joined up, the unfolding events gave rise to the kind of reputational risk that usually sends politicians scurrying.
But Sexwale (or at least his money) stayed put — arguably as the risk of exposure was minimal owing to the opacity of his and AGC’s interests.
The formal relationship with Gertler started in 2008, while Sexwale was still actively in business. AGC invested $150-million with Gertler’s British Virgin Islands-registered Camrose Resources, which had some Democratic Republic of Congo (DRC) mining assets and acquired more with part of the AGC money.
The $150-million was more than a loan, as it was convertible to equity and the terms gave AGC quasi-ownership rights to Camrose.
For the next two years, Gertler was hocked to AGC through Willcox-run Africa Management Limited.
During those two years, Gertler embarked on a series of controversial “grab and flips” of mineral assets in the DRC (see also “Suspicion circles Israeli diamond maven who ‘understands negroes’”).
In these, Gertler (who denies all allegations) stands accused of using his connection with DRC president Joseph Kabila and the latter’s consigliere, the now-deceased Augustin Katumba Mwanke, to bag public assets cheaply and without tender, selling or part-selling them to established miners at great profit.
In August 2010, Gertler perfected the “grab and flip” that would lead to the greatest outcry, that of the Kolwezi copper and cobalt tailings project from which Canada’s First Quantum Minerals had been bumped by the authorities after spending $430-million developing the assets.
Gertler brought Kolwezi into Camrose, his company hocked to Sexwale and his associates, before onselling half of Camrose to a mining major.
Only then -- and it is understood largely at the behest of Och-Ziff, which as a United States company has to be particularly sensitive to reputational risk -- did Sexwale and associates exit Camrose, transferring their loan to another Gertler entity under arms-length terms.
Were Sexwale or his associates complicit in Gertler’s “grab” of Kolwezi? There is no evidence to that effect, but their involvement in a similar and simultaneous stunt suggests they were not simple bystanders.
In June 2010 and without any notice or tender, Kabila signed two Lake Albert oil blocks, already sold to Irish and South African concerns, to two entirely opaque companies, Caprikat and Foxwhelp, both newly registered in the British Virgin Islands.
South African presidential nephew Khulubuse Zuma initially claimed to be the owner of both, but fingers pointed at Gertler.
Zuma Jr has since disappeared off the scene and the DRC oil minister confirmed Gertler’s involvement two months ago.
The M&G revealed Sexwale and Willcox’s own proximity to Caprikat and Foxwhelp in 2010, when it showed that the addresses the companies used as legal domicilium belonged to Mvela Holdings and a Sexwale charitable foundation.
At the time, Willcox denied he, Sexwale or any associate had financial interest, saying he had simply given “strategic advice” to Zuma Jr.
Willcox is known to have been involved in subsequent attempts to onsell the oil blocks to oil majors -- arguably the flip after the grab.
There is no evidence he has done this by dint of ownership, but the facts suggest that Willcox, and Sexwale by extension, knew exactly what Gertler was doing. — Additional research by James Wood
Now read: “Suspicion circles Israeli diamond maven who ‘understands negroes’
Mail & Guardian
Comments by Sonny
Mr Mosima Gabriel Sexwale's controversial life always makes for good reading.....