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By Norimitsu Onishi and Selam Gebrekidan
First published in the New York Times
With loudspeakers blaring, city officials drove across the black township’s dirt roads in a pickup truck, summoning residents to the town hall in Vrede, Free State province. The main guest was a local figure who had soared up the ranks of the governing African National Congress and come back with an enticing offer.
Over the next few hours, the visiting political boss, Mosebenzi Joseph Zwane, sold them on his latest deal: a government-backed dairy farm that they, as landless black farmers, would control. They would get an ownership stake in the business, just by signing up. They would go to India for training, all expenses paid. To hear him tell it, the dairy would bring jobs to the impoverished, help build a clinic and fix the roads.
“He said he wanted to change our lives,” said Ephraim Dhlamini, who, despite suspicions that the offer was too good to be true, signed up to become a “beneficiary” of the project. “This thing is coming from the government, free of charge. You can’t say you don’t like this thing. You must take it.”
But, sure enough, his instincts were right.
The dairy farm turned out to be a classic South African fraud, prosecutors say: Millions of dollars from state coffers, meant to uplift the poor, vanished in a web of bank accounts controlled by politically connected companies and individuals.
The money from an array of state contracts like this one helped pay for a lavish wedding that a top executive at KPMG, the international accounting firm, described as “an event of the millennium,” according to leaked emails. And Zwane, continuing his meteoric rise, soon leaped to the national stage to become South Africa’s minister of mineral resources.
Almost nothing trickled down to the township or the scores of would-be beneficiaries after that first meeting in 2012. The only local residents to get a free trip to India were members of a church choir headed by Zwane.
Only a few have benefited from freedom
In the generation since apartheid ended in 1994, tens of billions of dollars in public funds — intended to develop the economy and improve the lives of black South Africans — have been siphoned off by leaders of the ANC, the very organization that had promised them a new, equal and just nation.
Corruption has enriched ANC leaders and their business allies — black and white South Africans, as well as foreigners. But the supposed beneficiaries of many government projects, in whose names the money was spent, have been left with little but seething anger and deepening disillusionment with the state of post-apartheid South Africa.
While poverty has declined since the end of apartheid, inequality has risen in a society that was already one of the world’s most unequal, according to a recent report by the World Bank and the South African government.
South Africa has a large, advanced economy, an aggressively free press and a wealth of independent organisations and scholars who keep a close watch on government malfeasance. But even with its vibrant democracy, in which the details of corruption schemes are routinely aired and condemned by the news media and opposition politicians, graft has engulfed the country.
The nation was governed for nine years by the scandal-plagued President Jacob Zuma, whose close ties with the Gupta family — three Indian brothers at the helm of a sprawling business empire built on government contracts, including the dairy farm — outraged voters. Their cozy relationship contributed to the ANC’s recent electoral losses and helped lead to Zuma’s ouster two months ago.
Promising a “new dawn,” Zuma’s replacement, Cyril Ramaphosa, has said that he would make fighting corruption a priority as the nation’s new president. But he is also a veteran ANC insider, and the early signs have not been encouraging.
Having become party leader by a razor-thin margin, Ramaphosa has tried to keep together a fractured ANC by moving cautiously. He formed his first cabinet by appointing some well-respected officials, but also included allies — his own and Zuma’s — who have been accused of corruption by the Public Protector’s office and good governance groups.
Beyond that, politicians who long oversaw provinces rife with public corruption, including the one where the dairy farm is, now sit at the top of the ANC’s hierarchy.
National prosecutors, often criticized for being servile to the sitting president, say they are trying to recover more than $4-billion lost to corruption related to the Gupta family’s undue influence on Zuma’s administration.
And that is just a small measure of the corruption that has whittled away at virtually every institution in the country, including schools, public housing, the police, the power utility, South African Airways and state enterprises overseeing everything from rail service to the defence industry.
Almost no one comes out of this looking good.
No Vrede accountability from ANC officials
At just under $21-million, the money lost in the Vrede dairy farm may seem small. But it is a big test of whether South Africa’s new government has the power and the will to confront public corruption at its source.
The police have apprehended some low- and midlevel officials involved in the dairy farm, the first arrests related to a high-profile case of public corruption during the Zuma presidency. But notably, they have yet to pursue any ANC officials. Zwane has not faced any charges. What’s more, the provincial premier who approved the project, Ace Magashule, was recently elected secretary general of the ANC, elevating him to the top ranks of the party’s leadership.
The endless scandals have also raised serious questions about the complicity of major Western companies, with multiple investigations scrutinizing the role they may have played in enabling corruption and weakening the country’s institutions.
South African regulators have urged the police to begin a criminal inquiry into McKinsey, the American consulting giant, over its relationship with a Gupta-linked company in a contract involving a state-owned utility. A South African court has frozen the $83-million McKinsey was paid for the contract, and the firm says it will return the fee.
Regulators say they have also pressed the police to investigate KPMG, the Big Four auditing firm based in the Netherlands, for its work for the national revenue service in 2015. KPMG has acknowledged that elements of the work “should no longer be relied upon” and offered to pay back its consulting fees.
SAP, the German software behemoth, is being investigated by the US Department of Justice and the Securities and Exchange Commission after it disclosed payments to intermediaries on state contracts that may have contravened the Foreign Corrupt Practices Act.
International banks have been ensnared in the scandals, too. HSBC and Standard Chartered have been accused by a British lawmaker of laundering the Guptas’ ill-gotten gains. HSBC says it has closed a number of accounts that belonged to front companies operated by the Gupta family.
Long-standing corruption
Many trace the deep corruption in the nation to a fundamental flaw in South Africa’s transition from white rule to democracy a generation ago. In the grand bargain struck between the apartheid government and the ANC, headed by Nelson Mandela, a transfer of power was carried out peacefully, disproving predictions of civil war and earning Mandela accolades as a visionary peacemaker.
But the deal was reached on what many South Africans today consider Pyrrhic terms: The black majority was allowed to control politics, but much of the country’s economic resources, including land, has remained in the hands of white South Africans and a small group of other elites.
In the early years of ANC rule, Mandela and other top leaders, who had helped defeat apartheid but had no personal savings, received houses, vehicles and money from white business leaders — essentially bribes, critics say.
A smattering of influential figures, like the current president, Ramaphosa, amassed extraordinary wealth. They were allowed to buy shares of white-owned companies on extremely generous terms and invited to sit on corporate boards. They acted as conduits between the governing party and the white-dominated business world.
Some of the ANC leaders who were left out of that bonanza quickly found a new road to wealth: lucrative government contracts. The public tap became a legitimate source of wealth for the well connected, but also a wellspring of corruption and political patronage, much as it had been for the white minority during apartheid.
Over the years, Zuma and his allies, while never admitting corruption, often played down its corrosive effect on society and emphasised the need to redistribute wealth to black South Africans. It is an argument that Zuma is expected to make in defending himself against recently reinstated charges of corruption in an arms deal from the late 1990s.
While Mandela is still revered in the West, his legacy is regarded more critically in South Africa, especially by some young black people. To them, he sold out the country’s black masses to the white business elite.
Even some of Mandela’s longtime supporters struggle to defend the deal that he struck to bring democracy to South Africa. Ultimately, it left most black people in poverty while benefiting a small elite, including the chief negotiator during the talks, Ramaphosa.
After 27 years as a political prisoner, Mandela did not understand South Africa’s political economy and agreed to a settlement that failed to secure black South Africans’ economic independence, said Mamphela Ramphele, an anti-apartheid activist who became close to Mandela. She later went on to serve as a managing director of the World Bank.
“He didn’t know any better,” Ramphele said.
Entrenched inequalities
The dairy farm case is emblematic of the many ills afflicting South Africa a quarter-century after the end of apartheid. It shows how corruption, in a government controlled at all levels by a single party, has entrenched old racial inequalities.
About 125 miles southeast of Johannesburg, in the province of Free State, Vrede is a small farming town with discount chain stores, two supermarkets and a gas station. A cemetery and a police station — buffers during the apartheid era — still separate Vrede from the neighbouring black township of Thembalihle.
As in so many other townships, the level of local corruption can be quickly gauged by the quality of government housing for the poor. In one of the most common sources of corruption, money and building materials are diverted from a housing project, often leaving behind shoddy dwellings for poor residents who have waited years or decades to move out of shacks.
In a new outpost of the township, single-family government houses were so poorly built that many have collapsed, while new houses are being erected on shaky foundations and frames, with deep cracks spreading across extremely thin walls.
In many ways, the area is a microcosm of the enduring economic imbalance in South Africa. Nationally, black people make up 80% of the population, but most remain shut out of economic opportunities. White people, accounting for 8%, retain an oversize influence on the economy.
Nearly all of the commercial farmers around Vrede are white, as is the main government contractor. In the adjoining township, black people operate small taverns and basic carwashes. But in the town of Vrede itself, white people still own all of the faded buildings on the main street, where they — along with immigrants from other African nations and countries like Pakistan and Bangladesh — operate shops. Black people, who were not allowed to live in the town under apartheid, now own or rent only about 10 percent of its residences.
“This system that was built for us, blacks, it’s very difficult for us to create our own businesses,” said Veli Thulani Tshabalala, 29, who runs a computer and cellphone repair shop with his cousin. They are the only black South Africans to operate a store in Vrede.
Pieter Bergh, 83, a white South African who served on Vrede’s City Council in the years immediately before and after the end of apartheid, agreed that little has changed for black South Africans since 1994 and that the economic inequality has remained static.
“They only received the power to vote — that was all,” Mr. Bergh said, adding that he “definitely” considered that a historical mistake.
In the late 1990s, officials were purged from city government and replaced by ANC appointees with little experience. The purge, which occurred at all levels of government across the nation, contributed to the corruption that emerged toward the end of Mandela’s term.
Magashule set corruption trend in Free State
Here in Free State, one of the first post-apartheid cases of corruption in government revolved around Magashule, the ANC’s current secretary general.
Magashule, now 59, has served as the party’s leader in Free State since the very end of apartheid in 1994. He grew up in Parys, a small town in the province. During apartheid, he was an underground ANC operative whose boldness caught the attention of Winnie Mandela, Nelson’s wife and an anti-apartheid activist.
After white rule ended, he oversaw economic development in the cabinet of the first post-apartheid provincial premier, Mosiuoa Lekota. In an interview, Lekota said he had caught Magashule stealing government funds — a charge that Magashule, whose spokespeople did not respond to interview requests for this article, has long denied.
Lekota said he had fired Magashule, but was overruled by his patron, the ANC’s deputy secretary general at the time: Zuma.
In the early days after the end of apartheid, Zuma openly complained about the ANC leaders who were getting rich. Most — like Ramaphosa and Tokyo Sexwale, another anti-apartheid activist — were favourites of Mandela.
“Zuma did go to some of the other guys and said to them, ‘This is what Mandela is doing. We must wake up and we must go for the money ourselves,’ ” said Lekota, who left the ANC to found his own party, the Congress of the People, in 2008.
Magashule went on to flourish inside Free State. He became premier of the province in 2009 just as Zuma became president.
Like other powerful premiers, he was able to turn his province into a fief, said Lekota and several provincial officials from the ANC, as well as its historical ally, the South African Communist Party.
Taxes are mostly collected by the national government, and the money is redistributed to the provinces, where it is spent with little oversight. Free State — a rural economy where black people remain dependent on the ANC for jobs and government contracts — has remained a stronghold for the party even as it has lost support among middle-class black voters in urban areas.
Magashule’s ambitions, however, were never confined to the province. Like Zuma, he forged a relationship with the Gupta brothers, who had befriended some high-ranking ANC figures after arriving in South Africa from their native India in the early 1990s. Magashule’s son, Tshepiso, worked for the Guptas, and, according to emails leaked from a Gupta-company server, served as a conduit to his father’s office.
Under Magashule’s governance, many of the province’s public services departments teetered on the brink of insolvency, according to ANC officials and opposition parties. In a harsh report in 2017, the national auditor said that Free State’s government showed “a lack of accountability and commitment towards clean administration,” adding that the situation had worsened in recent years.
“If you find that the one who is supposed to be the custodian of the purse like the premier — he is the one who is involved in corrupt practices — it becomes easy then for others also to get involved,” said Thabo Manyoni, an ANC official in Free State who was once a close friend and deputy of Magashule.
“You end up in a situation where nobody is able to stop anyone else because we all are doing it,” Manyoni said.
Suspicions from the start
To many, the dairy farm project appeared to be a swindle from the beginning.
For starters, there were ample suspicions about Zwane, the pitchman.
“I know this guy,” said Dhlamini, the would-be beneficiary who was also the chairman of Vrede’s arm of the African Farmers Association, a national organization for black farmers. “I don’t trust him.”
As he climbed the political ranks, Zwane often came back to Thembalihle, the black township next to Vrede. Sometimes, he doled out fistfuls of cash from the trunk of his latest luxury car, said ANC and opposition politicians, as well as many residents.
Throughout the township and town, many people shared the same wariness of Zwane. His meteoric rise had been too fast and seemed tied to the corruption taking hold in the ANC and in Free State.
Zwane, who declined through a spokesman to comment for this article, grew up on a nearby farm and moved to Thembalihle in his teens. People remember him as an undistinguished student who, after high school, taught the children of black farm laborers in a nearby village where he met his future wife. The couple lived next to the school building, in a low, two-room concrete structure that is still used as a schoolteacher’s residence.
There, villagers remember Zwane as an engaged teacher, at least until he became a district councillor and his interests turned to politics. Soon, Zwane rose swiftly in the party, as well as in local and district governments, thanks in great part to his close relationship with the province’s head of the ANC, Magashule, according to politicians in Free State. He joined Magashule’s cabinet in 2009 and a few years later took over the agriculture portfolio.
When Zwane became the provincial minister of agriculture, many black farmers in Vrede rejoiced. Like others in the country, they had neither capital nor land. With a local son heading the province’s department of agriculture, they thought their “lives were going to change,” recalled Meshack Ncongwane, the deputy chairman of Vrede’s African Farmers Association.
A dozen black farmers from Vrede chartered a bus, each paying about $20, to attend Zwane’s swearing-in ceremony in the provincial capital, Bloemfontein, about four hours away. Even the association’s chairman, the skeptical Dhlamini, went along.
“We were happy,” Ncongwane said, adding, in hindsight, “although we were happy for a crook.”
Big on talk, small on action
In 2012, Zwane and agricultural department officials arrived in Vrede to promote the dairy farm project. Flanked by the council speaker, Roseline Zwane, known as Topsy — who happened to be his wife — and by his longtime ally, Mayor Tlokotsi John Motaung, Zwane told the crowd about a dairy farm that would empower black farmers and create 150 jobs.
Shortly afterward, his department signed the first of its two dairy farm agreements with a company called Estina.
This was a peculiar choice. Estina was to buy cows for local farmers and process milk at the farm. But the company was headed by a businessman from India who had a background in information technology — not in farming. Yet, importantly, he had long worked for the Guptas.
Despite the project’s sketchy details, Zwane signed off on it and asked the provincial treasury to start paying Estina, according to an investigation by the National Treasury. Initially, he was overruled by lawyers in Magashule’s office, who deemed the contract invalid because procurement rules, like a competitive bid, had not been followed.
But that was only a hiccup. The province signed another contract with Estina the following month — this time with the lawyers’ blessing. That agreement stated that Estina would invest just under $20-million in the project and the province would contribute about $30-million over three years. Local farmers, the so-called beneficiaries, would retain 51% of the shares.
There was “something fishy” from the start, said Doctor Radebe, who was a councillor for the opposition Democratic Alliance in Vrede. Zwane and the agricultural officials presented no business plan or budget for the project, but they and the mayor insisted on pressing ahead, Radebe said.
The local municipality quickly decided to hand over 3 400 hectares, or about 8 400 acres, of land for the dairy farm.
In fact, the municipality was so determined to get the project underway that it compensated four white commercial farmers, who had been leasing the land for about $80 000 a year, in order to prematurely break their leases. Later that year, just before Zwane and his local choir left for India, on a trip sponsored by a Gupta company, the province leased the farm to Estina — rent-free, for 99 years.
In an interview, Mayor Motaung said, “We had no doubt that the plan will work.”
But the mayor acknowledged that Zwane presented no detailed plan or document about the proposed dairy farm. Even basic details — like the criteria for selecting the beneficiaries — were missing, the mayor said, acknowledging that his role in the project was now under scrutiny.
Empty promises and false hope
The payments to Estina began months later. Court documents show that the province deposited just under $21-million in two Estina bank accounts over three years. Days after every payment, the company transferred the entire sum to other accounts. From there, prosecutors say, the money was withdrawn by individuals and other Gupta-linked companies that had little to do with the farm.
In fact, prosecutors say that only about 1% of the money invested by the province actually went into dairy farming. Beyond that, the National Treasury found no evidence that Estina ever invested its own money in the project, despite its obligation to do so.
E-mails leaked from a Gupta company server indicate that some of the money was sent to the United Arab Emirates and put into accounts registered to the Guptas. The money then made its way back to South Africa through a maze of bank transfers, according to spreadsheets, logs and an invoice in the email trove.
The e-mails, amounting to thousands of exchanges, were leaked last year to South African news organisations and an anti-corruption group. It is not known who leaked them, though they soon fanned national outrage at the Gupta family and at Zuma. The Guptas denied the authenticity of the emails, but some ANC officials included in the correspondence confirmed that they were real.
In one of the emails, Gupta companies paid one another for expenses at a relative’s lavish four-day wedding in 2013, including fireworks, dancers, chocolates and scarves.
In another exchange, KPMG, then an auditor of the Gupta companies, ignored a junior employee’s protest and allowed the Gupta family to write off some of the expenses at the wedding as business costs.
“I have never been to an event like that,” Moses Kgosana, a KPMG executive who attended the wedding, gushed to a Gupta brother in one of the emails, calling it “an event of the millennium.”
The accounting firm has since acknowledged that its actions “fell well short of the quality expected.”
No actual farmers on the dairy farm
Many of the problems surrounding the dairy farm could have been ignored had the province not tried to tap into a national fund for struggling farmers. The national government initially agreed to give about $4-million to the project on the condition that the province submit, among other things, a list of 100 poor farmers who would benefit from the farm.
When the government found no evidence that local farmers were involved, it sent National Treasury auditors to investigate in 2013. Though Zwane, sometimes accompanied by his wife, had held meetings to look for beneficiaries, no official list had been drawn.
After the auditors started asking questions, a list of beneficiaries — between 80 and 100, depending on the version — was hastily assembled.
Some were genuine farmers. “Others, they are not even farmers,” Radebe said, adding that many were ANC supporters. “They don’t even have a cat.”
Estina did try its hand at dairy farming in Vrede. When the National Treasury’s investigators visited in 2013, they found about 350 cows and some buildings under construction. But the seemingly inflated costs — including $215 000 for a manually sliding gate and a guardhouse — drew scrutiny from the opposition party.
And while the beneficiaries were supposedly the farm’s owners, they were never informed of the project’s developments. They were not even allowed to visit the premises.
Those who were serious about farming started to complain. At a meeting with officials in the provincial government, Dhlamini and Ncongwane, of the African Farmers Association, said that when they raised questions about the project, they were dismissed as noisy “frogs.”
That especially stung Dhlamini, who once was the only black South African business owner in Vrede. He ran a small record store called “Siyathuthuka,” or “We’re moving forward,” in the Zulu language, but was forced to shutter his store because of rising rents. He was now focused full time on farming and owned 35 cows.
In early 2014, the National Treasury sent a scathing report to Magashule, the premier of Free State, and told the province to stop paying Estina. But it took Free State another six months to take the farm back. The province even continued to pay Estina another $11-million after officially terminating the contract, court documents show.
In the end, a project meant to empower black farmers like Dhlamini further enriched the Guptas and one of the wealthiest white men in Vrede, Willie Basson. With a fleet of vehicles, construction equipment and billboards advertising his business all over town, Basson is the main government contractor in Vrede and helped build the dairy farm.
But he said that Estina mismanaged the business so badly that he ended up having to dig graves for as many as 100 cows, even though he had delivered feed for them.
“They just do projects like this to get money,” he said in an interview in his office. “That’s how they operate, but, luckily, they paid me every cent,” Basson said.
“Hey! It’s rotten in this place here,” he exclaimed, pounding on the table in front of him. “And we work with all of them, so we know.”
Ignoring alarms
It was a measure of how corrupt South Africa had become a generation after the end of apartheid that nothing was done about the Vrede dairy farm case for years.
The national police and prosecutors looked away even after the National Treasury raised alarms about the project.
In Free State, some who spoke out against public corruption were suddenly killed in circumstances that, even in a country with widespread violent crime, aroused suspicions.
Moses Tshake, a provincial government auditor who inquired about projects in the agriculture department, was killed in a carjacking in 2013. In Warden, a town where Zwane has a large home, Vusi Mlaba, a politician who had campaigned against corruption in public housing, was fatally shot a dozen times just outside his home in 2016. Police investigations resulted in no arrests in either case.
As for Zwane, the dairy farm hardly hurt his career.
During Zuma’s presidency, the Gupta brothers increasingly acquired economic and political influence by forging close ties with the president, his son and political allies like Magashule, the provincial premier who endorsed the dairy farm project. A lawyer for Atul Gupta, from whom prosecutors tried to recover public money spent on the dairy farm, did not respond to a request for an interview with his client.
The Guptas’ influence, and possibly direct role, in the appointment of ministers and other important government officials has been investigated by the Public Protector and is expected to be a focus of a recently begun government inquiry into public corruption.
In August 2015, according to the leaked e-mails, Tony Gupta, the youngest of the three brothers, forwarded Zwane’s résumé to Duduzane Zuma, one of the president’s sons, who was a director of many companies operated by the Guptas. Two months later, Zwane, whose highest qualification is a teacher’s diploma, became South Africa’s new minister of mineral resources, one of the most important — and potentially lucrative — portfolios.
Shortly after his appointment, Zwane went to Zurich with Tony Gupta and met with an executive from Glencore, the giant international commodities and mining firm. At the time, the Guptas were trying to buy a Glencore coal mine. In a 2016 report on corruption, the Public Protector called Zwane’s lobbying in Switzerland “potentially unlawful.”
The ‘Premier League’
Last December, ANC delegates from all over the country chose Magashule, Free State’s longtime premier, as the party’s secretary-general — one of the top four positions in the party. Magashule had been one of Zuma’s fiercest backers, along with two other provincial premiers who became known in the South African news media as the “premier league.” They had endorsed Zuma’s chosen candidate as the ANC’s next president.
But, at the last minute, one of the premiers, David Mabuza, switched sides, handing a narrow victory to Ramaphosa. Afterward, Ramaphosa made Mabuza — whose province, Mpumalanga, became known for political killings and endemic corruption during Mabuza’s decade as premier — the nation’s deputy president.
With a new president in charge, the national police and prosecutors have started moving against some individuals involved in the dairy farm case. Eight people were charged with fraud, and others had their assets linked to the farm frozen. But a judge released most of the frozen assets in March. The next court hearing in the criminal case is scheduled for August.
Zwane, who was not appointed to Ramaphosa’s new cabinet, has kept out of the public eye in recent weeks. Neither he nor Magashule has shown any willingness to answer questions about the dairy farm from the news media or Parliament — reinforcing the public perception that ANC officials are above the law.
“What has gone wrong has gone wrong under their watch,” said Mathole Motshekga, a senior ANC official who is a member of the party’s decision-making body, the national executive committee, and is also chairman of Parliament’s justice committee. “We expect, and the public expects, that they should take responsibility for what has happened. We are waiting to hear what they have to say, because we don’t expect people in such positions to be absentee landlords.”
But many have given up on the ANC. Though the money lost in the dairy farm paled in comparison to the scale of corruption inside South Africa’s state-owned enterprises, it resonated deeply across the nation. Government money meant to help poor farmers simply vanished, the way it does across South Africa, and so far none of the ANC officials in charge at the local or provincial levels have been held to account.
As Ramaphosa pledges to clean up the South Africa he has inherited from Zuma, this case will test his capacity to do just that. A spokeswoman for Ramaphosa said he was unavailable for interviews.
One of the would-be beneficiaries, Adam Khatide, 55, retired early from his teaching job believing that the Vrede dairy farm would take off. In the fallout, he lost faith in the power of his vote.
“It’s voting for nothing,” he said. “Just taking people, putting them in office, and then they eat money.”
When democracy arrived for black people in 1994, Khatide drove elderly neighbours to voting stations, where they elected Mandela as the first president of the new South Africa.
“We managed to bring democracy, which is not working for us now. It’s working for individuals,” Khatide said, laughing. “I cannot cry. When I’m crying, it’s just the same. It’s better I must laugh.”
