State Capture

Guptas ‘poor cousins’ of real state capture by Russians

Zuma, Mahlobo Pushing Russia
David Mahlobo.jpg

The haste with which the Zuma administration is attempting to lock South Africa into a mega nuclear power build programme should have the state capture alarm bells ringing louder than ever.

The deal, forged over nearly two decades would not only help Russian president, Vladimir Putin realise his dream of Russia becoming the dominant actor in the global uranium and nuclear power sphere. It will also allow Russia to control SA’s strategic energy sector through state capture on a far bigger scale than anything the Guptas may ever have dreamt of.

Although Mr Zuma, his family and friends, the Gupta family remain bit players in the unfolding drama Putin and Russia would be the big winners. And there is more than just the nuclear sector at stake for the global community.

This is the picture that emerges from a report by veteran political analyst and strategic consultant Stef Terblanche of Africa-International Communications to its corporate clients.

The Intelligence Bulletin got hold of a copy of the report, called a “research note.” The comprehensive 19-page document, compromising more than 10 000 words, gives a summary of the background to recent developments and the implications involved and a detailed timeline of the how the Russian-South African/Gupta strategy developed – starting with a 1990 training course attended by Mr Zuma with another senior ANC official, Joe Nhlanhla in Russia.

In the past it has been speculated that, while Mr Zuma previously received military training in the Soviet Union, the 1990 occasion was for intelligence work training.

In 1995 a South African company secured a contract to secure Russian nuclear fuel for the Koeberg Nuclear Power Station from a Russian company, which since became part of Rosatom – party to the present deal with Eskom.

Then ANC-connected BEE interests, including a former senior official in the Department of Energy, muscled in on the business and eventually forced the original owners out. The stage was set for the final grab at control over South Africa’s energy sector.

Enter the Zuptas

In the meantime, the Gupta brothers arrived in South Africa, starting off with Sahara Computers. In the years that followed their wings spread considerably, amongst other to uranium mining.

The Russian uranium mining company ARMZ Uranium Holding Co. (ARMZ), a subsidiary of Rosatom, in 2010 acquired a 51% stake in Canada’s Uranium One. In 2013 Rosatom acquired full control in a $1.3-billion deal that included its US interests, and is now the subject of a US congressional inquiry and a public outcry in the US.

In South Africa the Guptas and Duduzane Zuma gained ownership of Uranium One’s South African uranium mine at unbelievably favourable terms.

In between these deals there were numerous trips to Russia by Zuma, Energy Minister Tina Joemat-Pettersson,  State Security Minisrer David Mahlobo and others, and deliberations with Putin, Rosatom and other Russian players.

One assumption that arises from the timeline of events, is that it seems likely that there had been a quid pro quo trade-off between the South African government, the Russians and the Guptas back in 2010 already, along the lines of: Rosatom sells its Uranium One mine in SA to Oakbay Resources and Energy Limited, owned by the Guptas and Duduzane Zuma, on very favourable, very discounted terms. In return, Rosatom is given the contract for the new nuclear-build programme in South Africa.

Such a deal would have provided the Russians their sought-after boots in the SA and global market and their South African partners handsome profits from the uranium mine as the only “dedicated uranium mine in South Africa” and boasting “the largest uranium ore body in South Africa and one of the top five in the world,” according to the Oakbay website.

Nuclear not where it ends

For Russia the advantage does not end with the nuclear deal. By capturing South Africa’s energy sector also opens the door to her expanded mineral resources, especially so-called rare earth metals.

Much modern technology applications, be it medical, military, electronic (cell phone) communication cannot survive without the 17 elements, mostly not available in large concentrations and difficult to mine, and extract. It is also not found in many countries in the world.

Currently Russia accounts for 1% of global rare earth elements production, but requires far more for domestic use, especially for its military sector and has not thus far succeeded in establishing a rare metals cartel with China – the largest producer in the world.

South Africa is currently not among the top 8 rare earth metals producers, however, it has significant undeveloped rare earth metals deposits and has in recent years started ramping up exploration and production significantly.

Some major Russian mining companies are already active in South Africa. Mineral products are also among SA’s biggest exports to Russia, especially precious and base metals, according to the Russian Embassy in Pretoria.

However, to take full advantage of the relations it has built up, first with the ANC during the liberation struggle days, then with the ANC in government, and especially with the Zuma administration, Russia desperately needs to have the energy deal signed and sealed before Zuma’s term ends, or is forced out early.

They must be nervously following developments in, and around the ANC in the final run up to its elective conference in a month’s time.     

Cost to South Africa

 If South Africa is to launch a nuclear build programme in partnership with the Russians, it would be burdened by a huge bill, weighing down on its economy for the next 35 years.

In an article on The Conversation website last week, professor Hartmut Winkler of the University of Johannesburg, wrote that the agreement with Rosatom could “mirror the USD$30 billion deal Russia signed with Egypt which, on the surface, will appear attractive because it would offer favourable terms such as annual interest of only 3% and the commencement of repayments after 13 years.

“But when scaling the 4.8 GW Egyptian agreement up to the 9.6 GW envisioned for South Africa, the total cost then already exceeds R1 trillion. Annual repayments from year 14 to year 35 then amount to about 5% of South Africa’s annual fiscus. Any cost overruns, which are common in many other nuclear builds, would vastly increase the debt further.”

The cost could bankrupt the country, cause ratings agencies to further downgrade it, will place control of its strategic energy sector in Russian hands and, immensely benefit the Zuma and Gupta families and their associates financially, as well as Russian individuals.

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by Intelligence Bulletin Team

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