It is important in my experience to know what you know. But it’s more important to know what you don’t know. There is an important distinction between not knowing something and being precisely aware of what it is that you don’t know.
Over the weekend, the finance ministry, in a brilliant act of faux innocence, went to court to obtain a declaration that it was not permitted to cajole local banks to open bank accounts of the Gupta family. It purportedly did so in recognition but not in support of the family’s pleas.
It was a genius double-switch, because in doing so, it creates a legal basis to request from the Financial Intelligence Centre (FIC) a list of reportable transactions.
The total amount on that list is a staggering R6.84bn. Who knew the family was flashing that kind of cash? What is more, large amounts that were previously the subject of pure speculation are now quantified exactly. One notable transaction concerns the Optimum Mine Rehabilitation Trust, and the amount involved was R1,341,426,562.
The history of this huge wodge of cash has been the subject of a host of articles. (Columnist Stuart Theobald picks up the topic in his column in Business Day today). Briefly, the Guptas and the president’s son, Duduzane Zuma, agreed to buy Optimum Coal Mine out of business rescue in November 2015 for R2.1bn. The deal raised eyebrows: who would buy a bankrupt coal mine fined massively by Eskom for substandard product for R2.1bn?
Then it turned out that by lucky chance, the mine came with a R1.5bn rehabilitation fund — essentially a trust set aside in terms of the mining law to clean up the environment when the mining ends in about 2030. Now if the Guptas could get hold of that money, suddenly the deal becomes much less difficult to understand. But how to get hold of the cash?
The legal documents released over the weekend include a letter from the business rescue unit to the Reserve Bank asking whether the bank would have any concerns about transferring the money to the Bank of Baroda.
This was just after the local banks had said they were closing the Gupta’s bank accounts. No answer is apparent from the documents.
What this letter does say is that Minister of Mineral Resources Mosebenzi Zwane — the same minister who wants the FIC moved to the security cluster — had approved the transaction.
That is a bit of a bombshell, since the ministry has in the past dodged the question.
Legislation allows mines to either establish a rehabilitation fund, or provide an undertaking backed by a bank guarantee that it has provided for rehabilitation. Why on earth would any responsible mining minister allow a rehabilitation fund to
be mobilised? And, by the way, the Treasury makes the point that if the money were moved out of the trust, it’s subject to different tax. It turns out the Treasury is not the only one capable of a double-switch.
When Business Day approached the Gupta family about the fund, its justification was that since the account was going to be closed, it really had no choice, because it didn’t want the funds to be unavailable to rehabilitate the mine. Hence, the closure of the accounts was used as a justification to mobilise the cash. Very convenient.
But all will be well if the money has been transferred from a trust at Standard Bank, to a trust in the Bank of Baroda.
Here is where we get to the knowing what you don’t know part. The list of transactions reported by the FIC includes all transactions in terms of Sections 28, 29, 30(2) or 31 of the FIC Act. These sections refer to transactions above a certain size; suspicious and unusual transactions; and moving cash in or out of the country.
What we don’t know (yet) is who the beneficiaries were, and, importantly, which one of the sections the transaction falls under. What we do know is that the Bank of Baroda, a very large and reputable Indian bank, has an office in SA, but several international licences. It does operate in SA, but it does not have an officially designated local corporate subsidiary.
A huge proportion of the transactions listed occurred in April and May 2016. My guess is that after the local banks refused to do business with the Guptas, the family began liquidating all their available cash, partly because they had to and partly because they wanted to. Taking money out of the country is not illegal, but even for small amounts, you need authorisation.
But the real question is, where did the money go? Because if it left the country without authorisation, the Guptas are in big legal trouble. That is the known unknown.
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