Jacob Zuma didn’t bring Guptas to South Africa

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Jacob Zuma did not bring the Guptas to South Africa. His folly is allowing the Guptas to be bigger than the Oppenheimers

Atul settled in Johannesburg and sold shoes downtown. Then he started a company — Sahara, named after the family hometown — importing computer parts and assembling them for sale.

And by chance, he made a personal connection to the A.N.C. that would prove far more consequential.

During a trip home to India, Atul met a South African of Indian origin in New Delhi: Essop Pahad, the right-hand man of Thabo Mbeki, who was then Mr. Mandela’s deputy.

In an interview, Mr. Pahad recalled that he had ordered some tailor-made Nehru-style shirts. But he had to return to South Africa before they were ready. Atul volunteered to pick them up and personally deliver them to Mr. Pahad’s office in Johannesburg. After that, they ran into each other at functions at the Indian consulate.

“He talked about Ajay a lot,” Mr. Pahad said. “Then I said, ‘Who is this Ajay of yours?’
When Mr. Pahad finally met Ajay, he was immediately impressed. Ajay got the big picture in South Africa, and seemed to understand that there was a place in it for the Guptas.

When Mr. Mandela was released from Robben Island in 1990, Anglo American executives visited him at his home in Soweto. Other businessmen followed, to Mr. Mandela’s delight, according to an authorized biography describing how he stayed at the estates of white tycoons and accepted gifts from them.

Mr. Mandela was particularly close to Mr. Oppenheimer, who gave him money, said Michael Spicer, a former executive at the company.

But nothing was free.

Mr. Oppenheimer put together a team of economic advisers for Mr. Mandela called the Brenthurst Group — named after the Oppenheimers’ palatial estate in Johannesburg. In meetings, A.N.C. leaders joined the country’s top white businessmen to set the nation’s post-apartheid economic course, Mr. Spicer said.

Soon enough, Mr. Mandela, who had supported nationalizing the economy, endorsed pro-business policies. Some historians argue that the policies contributed to South Africa’s income inequality, and to an economy still based on cheap black labor.

But after becoming president, Mr. Mbeki moved to dampen the power of white businesses. He created his own group, which met at his residence each month, Mr. Pahad said. It included cabinet ministers, top businessmen, rising stars in the A.N.C. and an unknown figure: Ajay Gupta.

Ajay said he enjoyed the meetings. Mr. Mbeki sometimes even dropped by for lunch.

Only a few years after settling in South Africa, Ajay had forged links to the highest levels of the A.N.C., thanks to his friendship with Mr. Pahad.

Even as the Guptas thrived off their ties to Mr. Mbeki’s allies, they were reaching out to his archrival, Mr. Zuma, the No. 2 in the party.

The two leaders fought bitterly. So Mr. Pahad, Mr. Mbeki’s right-hand man, was surprised to learn that the Guptas had cultivated ties with the other side.

“They were having some function at their home, and Ajay said to me, ‘Do you mind if we invite Zuma?’” Mr. Pahad recalled.

Money was an unspoken dynamic in the battle between Mr. Mbeki and Mr. Zuma: Who in the A.N.C. had gotten rich since the end of apartheid? And, perhaps more important, who had not?

Mr. Mandela and some others — including South Africa’s current president, Cyril Ramaphosa — became wealthy, in part through connections to white business leaders.

During Mr. Mbeki’s tenure, his allies got their chance, often by directing the course of the country’s Black Economic Empowerment policies, which required white businesses to take on black partners.

So when Mr. Zuma became president in 2009, it was his faction’s turn.

But Mr. Zuma, plagued by personal and political scandals, was distrusted by the white business establishment. And more than a decade after apartheid, many white businesses felt they had done enough to help — a sentiment that angered people close to Mr. Zuma.
The Oppenheimers had sold their shares in Anglo American and De Beers for billions. The heirs to the fortune — Nicky Oppenheimer and his son Jonathan, both passionate aviators — opened an ultraluxury private terminal in Johannesburg’s main airport in 2014, with fine dining and a gallery with art for sale.

But the Oppenheimers couldn’t get permission to handle international flights. Despite countless letters and calls to A.N.C. officials, the Oppenheimers were getting nowhere.

Eventually, they sued the government, accusing the Guptas of using their political influence to stall the business. The brothers, the Oppenheimers said, wanted in on the terminal.

According to court documents, the Guptas sent a message to the Oppenheimers that they had “the wrong B.E.E. partner” — referring to the Black Economic Empowerment program. If the Oppenheimers chose a partner endorsed by the Guptas, the documents said, their “problems would go away.”

The last straw was another appointment: In late 2015, Mr. Zuma chose an unknown lawmaker — considered close to the Guptas — as finance minister.

Alarmed, the business establishment and its A.N.C. allies struck back, forcing Mr. Zuma to remove the minister after only four days.

Within weeks, a major South African bank cut ties with the Gupta family. The country’s other big banks followed.
Everything might have worked out for them had Mr. Zuma’s ex-wife won. But one of her supporters, David Mabuza — who had become a kingmaker by diverting government money to finance his political rise — flipped his votes at the last minute, handing Mr. Ramaphosa a slim victory.

It wasn’t the usual handshake on a deal. One hand, white, belonged to Nicholas Oppenheimer, scion of the family that controls much of South Africa’s gold- and diamond-mining. The other, black, belonged to Cyril Ramaphosa, a prominent foe of the old, white-ruled South Africa and leader of a crippling 1987 miners strike.

The $900 million deal that the two men signed last month sells a large piece of the Anglo American Corporation, the Oppenheimer flagship that by some estimates accounts for 25 percent of South Africa’s gross domestic product, to a consortium of blacks led by Mr. Ramaphosa.

Both sides got a bargain. Blacks bought a big share of the nation’s best-known company at 11 percent below market price. Anglo hopes it bought a shield against the potential hostility of a new black Government for the decades it supported apartheid and profited from a cruel system using migrant labor.

Anglo announced two years ago that a major subsidiary, the Johnnies Industrial Corporation, often known as Johnnic, was for sale — if the right group of blacks could be found. Other buyers made inquiries.

”We told them they were wasting their time,” an Anglo American spokesman, Michael W. Spicer, said. It waited for a black group to assemble. This spring, Mr. Ramaphosa became the group’s negotiator when he retired as executive secretary of the African National Congress.

Anglo offered the consortium its 48 percent stake in Johnnic, a holding company worth 8.5 billion rand — $1.88 billion at current exchange rates — that owns big stakes in other large companies including South African Breweries, Premier Milling, Omni Media, and Toyota South Africa.
Small businesses and investors can also buy in at the 50 rand price — and if they need cash, Anglo will lend them 90 percent at low interest, keeping the shares as security and repaying the loans from dividends and capital appreciation.

”The indications are now that we will find the money,” Mr. Ramaphosa said, borrowing from South African banks, insurers and union pension funds.
Mr. Ramaphosa said Anglo American had been motivated by ”both guilt and fear.” The company’s spokesman, Mr. Spicer, was circumspect.

The decision to sell Johnnic was ”not pure altruism,” he said, ”but we think it’s enlightened self-interest.”
The founders of black-empowerment vehicles are often coy about the source of their seed money. It is widely reported, for example, that one group, Thebe Investments, began with $2 million given to the African National Congress in exile by Scandinavian countries, Japan and others who wanted to help the liberation struggle but not buy guns
Some critics see another side to the movement, contending that corporations are co-opting people close to the Government to make sure no anti-business legislation is passed. The A.N.C. has stopped talking about nationalizing the economy, but South Africa businesses benefit from practices including price-fixing cartels and secret corporate ownership that are illegal in other countries.

A former Anglo executive who heard some of the discussions two years ago that led to the Johnnic deal was blunter, saying co-opting the new Government had been the goal. The executive said the deal was discussed in crude racial terms, with talk of throwing the blacks ”a bone.”