Zuma Son Got Stake in Tegeta Weeks Before It Bought Optimum

  • Optimum had been placed in bankruptcy protection by Glencore
  • Optimum coal supplies state power company, has export rights

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 Plc’s Optimum coal complex in South Africa, share register documents show.

Tegeta Exploration & Resources Ltd., the company set up by the Guptas, agreed to pay 2.15 billion rand ($140 million) 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 Dec. 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 South Africa’s 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.”

Optimum Coal Mine
Optimum Coal Mine
Bloomberg

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 spokesman for President Zuma, declined to comment. President Zuma said as recently as Jan. 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.

Gwede Mantashe, secretary-general of Zuma’s ruling African National Congress, has defended Duduzane’s right to pursue his business interests, saying last month that family members of politicians are entitled to a life of their own and aren’t just an extension of the politician.

Mines Minister Mosebenzi Zwane said in a Feb. 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 favoring Tegeta, he helped persuade Glencore to sell the operation, which was in bankruptcy protection, to try and save jobs. 

Deal Influence

On Nov. 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. Duduzane is already a joint shareholder or director in at least a dozen companies with one of the three Gupta brothers, according to publicly available company filings.

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

‘Transparent Negotiations’

“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 e-mailed 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 percent of Tegeta, Elgasolve 21.5 percent and a Dubai-based company called Fidelity Enterprises Ltd. owns 15.5 percent, Oakbay said. It said it was not immediately able to confirm the date of the share transfers.

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

Before it's here, it's on the Bloomberg Terminal. LEARN MORE