How a Russia-linked mine may keep the ANC in power
JUST A FEW months ago the African National Congress (ANC) had the bailiff at its door. A court had ordered the seizure of assets from its headquarters over an unpaid 102m rand ($5.6m) bill for campaign posters produced for the previous election in 2019. It was not the first time of late that courts had been asked to force the ANC to pay up. In 2022 employees of the party, which has ruled South Africa for 30 years, sued over unpaid salaries. It was so broke that it said it was trying to find lawyers willing to work pro bono on its case.
The latest cash crunch could not have been more dangerously timed. On May 29th the ANC will face its toughest general election since Nelson Mandela won power in 1994. Pollsters reckon its share of the national vote will fall below 50%, with recent surveys putting its support in the mid-40s. The higher its share, the more able the ANC will be to form a coalition with small parties in which it is dominant. A poorer showing would force it to share power with either the liberal opposition Democratic Alliance or with radical populists such as the Economic Freedom Fighters.
Quite how well or badly the ANC will do in the election will depend in no small part on the size of its war chest. Campaigning in South Africa is less about television advertisements than it is about getting the vote out. That means hiring costly stadiums for rallies, printing T-shirts, and plastering its logo on streetlamps across the country, not to mention the expenses of supporting its organisational machine on election day. Yet as campaigning enters its final stretch, the ANC seems to have put its financial woes behind it.
The cause of its transformed fortunes may be found near Hotazhel, a dusty town in the Kalahari Desert that takes its name from the area’s sweltering summer heat. There United Manganese of Kalahari (UMK), a controversial mine with Russian connections, digs up manganese. Calculations by The Economist show that UMK and some of its shareholders have been responsible for almost half of all declared donations to the ANC since the introduction of disclosure requirements in 2021.
“The mine belongs to the Russians and the ANC,” says Kgomotsego Mabejane, a local who accuses its owners of breaking a promise that the company would bring riches to the area. The mine’s investors include firms linked to Viktor Vekselberg, a Russian billionaire placed under Western sanctions for, among other allegations, supporting Vladimir Putin’s seizure of Crimea, and a South African consortium dominated by a politically connected businessman and Chancellor House Trust, an ANC funding front named after Nelson Mandela’s old law-firm offices.
The mine is lucrative: it has declared almost $500m in dividends since 2013. Some of the payouts to the South African shareholders have been reinvested to increase Chancellor House’s stake in the mine to about one-fifth, says Dewald van Rensburg of amaBhungane, a South African investigative-journalism outfit that first uncovered UMK’s finances.
The mine is probably not Chancellor House’s only source of funding. In addition to its mining interests, its website lists a portfolio of investments in energy, engineering and manufacturing, though without providing any details. Nor was the mine its only controversial investment. In 2015 Hitachi, a Japanese firm, agreed to pay a $19m fine to America’s Securities and Exchange Commission (SEC) to settle corruption charges relating to payments of about $6m to Chancellor House, to which it had sold a 25% share in a South African subsidiary. The SEC, which called Chancellor House a front company and funding vehicle for the ANC, said Hitachi made payments to it “for its exertion of influence” during bidding for two large contracts that it was awarded by Eskom, the state-owned electricity utility. Hitachi’s settlement was not an admission of guilt and Chancellor House denied wrongdoing at the time.
Trapped cash
Yet the dividends and assets that piled up in Chancellor House could not easily flow to the ANC after 2021 because of the enactment of a campaign-finance law that was intended to keep big money out of politics. Until this month that law prevented political parties from accepting more than 15m rand a year from a single donor and also required parties to disclose all contributions worth more than 100,000 rand. Finance Uncovered, another investigative-media unit, reckons Chancellor’s share of UMK is worth $125m-180m. The cap meant that it would have taken Chancellor House more than 150 years to donate the full value of its stake to the ANC.
A crude way of evading this limit was to have Chancellor House, UMK and a holding company linked to the South African consortium donate money separately, in effect tripling the 15m-rand cap. But even this appears to have been insufficient to slake the ANC’s thirst for finance. On May 7th Cyril Ramaphosa, the president, signed a law abolishing the cap and disclosure requirements and giving himself the power to set new ones. Until he does so, parties are free to stuff their coffers in secret, says Robyn Pasensie of My Vote Counts, a watchdog that has applied to the high court to throw out parts of the new law. “This places South Africa’s constitutional democracy and party accountability in peril and would facilitate the undue influence by certain companies and actors in South Africa’s political and governance system,” the organisation said in its application. “It is plainly unconstitutional.”
The timing of the new law may, perhaps, have been coincidental. But the notion that the government might have legislated with the aim of allowing unlimited secret donations to the ruling party just before an election seems entirely in character with how, in an act of self-dealing, the ANC-led government gave a slice of a valuable mining company to Chancellor House in the first place.
In 2004, just as Mr Vekselberg arrived in South Africa looking for opportunities, a new law was shaking up South Africa’s mining industry. Firms had to reapply for rights to prospect and mine. Black economic empowerment (BEE) rules favoured applications led by those who had been excluded from the economy under apartheid.
Up for grabs underneath the red soil of the Northern Cape province were four-fifths of the world’s manganese reserves. The richest seams were thought to be in three plots that today form the core of UMK’s mine. Applications to mine these should have been assessed on a strict first-come-first-served basis by the Department of Minerals and Energy.
Yet Vicki Robinson and Stefaans Brümmer, two journalists, found the scales had been tilted towards Chancellor House and its partner, Pitsa Ya Setshaba, a firm led by Lazarus Mbethe, a businessman. Pitsa Ya Setshaba was a new company that had not been incorporated until months after several other viable bids had been submitted, including one made in partnership with Xstrata, a mining giant. Chancellor House, meanwhile, had not even bid for the three key plots. Another bidder complains that its applications for these were ignored and instead it was allocated “crappy farms” it had not asked for: “I applied for apples and I got pears,” said the bidder.
At the same time there was a flurry of economic diplomacy between Russia and South Africa, in which Chancellor House and Pitsa edged in front of other politically connected BEE groups that were jockeying to partner with Mr Vekselberg’s Renova group. At the time the government defended the decision to award the rights to Chancellor House and Pitsa Ya Setshaba by saying that Mr Mbethe had been involved in another consortium which had bid earlier. Mr Mbethe, UMK, Chancellor House and the ANC did not respond to requests for comment.
One last hurdle was to secure local support for the project in an area blighted by poverty. Mr Mbethe set up the Kuruman Community Trust in 2005, promising representatives of 27 surrounding villages that they would share in the mineral area’s wealth via the trust’s shareholding of 4% in the mine. Today that stake in UMK should be worth at least $20m, but many villagers feel little has trickled down.
A demonstration at the UMK’s front gate and a documentary by South Africa’s main investigative broadcast show, Carte Blanche, have failed to persuade Mr Mbethe to reveal the trust’s finances. The protesters say they are planning to sue. “They said they were going to change our lives,” says Mrs Mabejane. “They used us so they can get a mining permit.” Nnuku Matilo, another local activist, argues that the ANC’s link to the mine has created a conflict of interest that compromises the government’s oversight of it and the enforcement of the agreement to ensure that surrounding communities benefit.
Since the Ukraine war began, analysts have wondered why South Africa has refused to condemn Mr Putin’s actions. The muscle memory of historical ties between the Soviet Union and the ANC cannot fully explain the situation, as many of the party’s guerrillas were trained in Ukraine. William Shoki, the editor of Africa is a Country, a blog, believes that the ANC’s equivocation is useful internationally, where it is trying to establish itself as a non-aligned “superpower”. Standing up to America may also be a vote-winner. “Lacking domestic political legitimacy, the ANC has found a new lease of life by fashioning an external adversary,” he says.
Yet there may also be baser motives. UMK makes some of its money from Russia: it has sold ore worth some $70m to Russian smelters over the past two years. And it has historic and current links to Mr Vekselberg, whom America’s treasury department has described as having close ties to Mr Putin and directly or indirectly “having acted or purported to act for or on behalf of” the Russian government (which he denied in 2019). When the ANC’s leadership considers its geopolitical stance, there may be conflicts between the national interest and the party’s financial goals. ■
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