Photographer: Issouf Sanogo/AFP via Getty Images

Dairy Farm Blows Open South Africa’s Expanding Corruption Probe

Updated on
  • Zuma allies targeted as prosecutors seize farm, bank accounts
  • Opposition brings charges against mines minister, Guptas

Two armed security guards man a 10-foot-high steel gate at the entrance to a dairy farm in South Africa’s central Free State province that’s at the heart of a graft scandal embroiling some of President Jacob Zuma’s closest allies.

The state-owned farm near the tiny hamlet of Vrede was leased to little-known company, Estina Pty Ltd., under a free 99-year contract in 2012 and the regional government agreed to help develop it, ostensibly to create 200 jobs. Now prosecutors say most of the 220 million rand ($18.5 million) in public funds transferred to the company ended up in the hands of the Gupta brothers, who are in business with one of Zuma’s sons.

African National Congress Secretary-General Ace Magashule

GIANLUIGI GUERCIA/AFP/Getty Images

“Hearing about the corruption has been extremely disappointing,” said Jabulile Mthombeni, a 30-year-old mother of two, who lives in a township on the outskirts of Vrede. “This project was something that I and some of the people in the surrounding communities saw as the hope we need to have jobs and benefits to help us survive and maybe even overcome the poverty we live in. We are still not benefiting.”

Asset Freeze

The High Court on Jan. 19 gave the National Prosecuting Authority’s asset forfeiture unit permission to freeze the project’s assets, and bank accounts belonging to Atul Gupta, who allegedly received a direct payment of 10 million rand. A week later the police’s Hawks investigative unit raided the office of Ace Magashule, the newly elected ruling African National Congress secretary-general and outgoing Free State premier, and the provincial agriculture department.

The crackdown, which came just weeks after Cyril Ramaphosa replaced Zuma as head of the ANC, is the authorities’ most decisive action yet to deal with allegations of what’s known in South Africa as “state capture” -- the looting of billions of rand from the government by politically connected businessmen. While probes by parliament and a judicial commission are also underway, they’re likely to last months and will need prosecutors to follow up on their findings.

“We suddenly see a new lease on life in the NPA,” said Wayne Duvenhage, chief executive officer of civil rights group Organization Undoing Tax Abuse. “Improved governance is not going to happen overnight -- it’s going to take a number of years. But we believe a lot of very wealthy people who got rich out of state capture are going to be held accountable and face the music.”

Lavish Wedding

At the center of most of the graft allegations are the Gupta brothers -- Atul, Ajay and Rajesh -- who immigrated to South Africa from India and built up a business empire with interests ranging from mining to information technology.

Emails leaked to the amaBhungane Centre for Investigative Journalism and Scorpio, the Daily Maverick news website’s investigative unit, show money flowed from the provincial government to Estina, to bank accounts in the United Arab Emirates and back again to the Gupta’s business accounts.

Some of it was used to pay for a four-day family wedding at a luxury resort west of Johannesburg in 2013 when guests landed at the high-security Waterkloof air force base, breaching the law.

Read more about the Guptas.

The Democratic Alliance, the main opposition party, last year filed criminal charges against the Gupta brothers, their associates, and Mineral Resources Mosebenzi Zwane, who championed the project in Vrede, his home town, when he served as the Free State’s agriculture minister.

No Arrests

The Guptas, Zwane, Magashule, Zuma and his son all deny wrongdoing. NPA spokesman Luvuyo Mfaku said investigations are ongoing and no decision had been taken on whether to charge anyone. Zuma is facing mounting pressure from within the ANC to step down before his current terms ends next year, with some of the party’s top leaders likely to discuss plans for his exit at a meeting on Monday.

At the farm, the security guards denied Bloomberg access, and more than a dozen workers who were leaving the property at the end of their shift declined to be interviewed. Four metal cowsheds were visible through the gate, and a truck and tractor were seen driving along its dirt roads that traversed fields planted with corn. No cows were visible from the perimeter.

ANN7, a broadcaster formerly owned by the Guptas, reported on Jan. 30 that the 4,439-hectare (11,000-acre) farm employs 45 people and is milking about 200 cows.

Most Vrede residents remain in the dark about what will happen to the farm or why the project was so poorly handled.

“This whole process has been frustrating,” said Eric Kubeka, a 53-year-old father who was on a list of people identified to profit from the operation. “I really believed I would benefit through training or at least a job. I think a lot of people who were in charge of this project knew exactly what they were doing in their corrupt acts or the misuse of money. The law must take its course.”

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