And finally, some of the most prominent figures in the Guptas’
shadow state hailed from the Free State. Some of these people first served in Magashule’s provincial government. Others were in his inner circle years before the Guptas required their help.
In light of all this, if one had to identify the foremost enabler of the Guptas’ dodgy dealings in South Africa, it would be difficult to choose
between Jacob Zuma and Ace Magashule.
15
Reddy to rumble
The Guptas were not the only connected businesspeople from the Zuma fold who raked in government contracts in Magashule’s backyard. Enter the Reddy family. Durban-based energy tycoon Vivian Reddy is the founder of the Edison Power Group (EPG), which is probably best known for a contentious R1-billion electricity smart-meter tender it secured from the City of Johannesburg’s power distributor, City Power, in 2012. 1 Reddy’s son, Shantan, is Edison’s deputy chairman.
Vivian Reddy has never been coy about his relationship with the ANC
and Zuma. He once openly admitted that he had lent Zuma money to help pay for his Nkandla homestead. 2 When I asked if he had also donated money to the ruling party, an Edison spokesperson responded as follows: ‘Mr Reddy has supported the ANC since the 80’s and will never stop doing so as it’s the organization that fought for our freedom and dignity.’ This financial support was in no way related to the tenders Reddy’s companies have clinched from the ANC-led government, insisted the spokesperson. ‘Mr Reddy has publicly stated that his support for the ANC is unconditional and he requires nothing in return. Ninety per cent of Mr Reddy’s various business interests are in the private sector.’
The first indications of contact between Reddy and Magashule surfaced as far back as 2009. In that year, the Mail & Guardian reported on a court case in which it was alleged that Reddy had facilitated a meeting between businessman Bongani Biyela and
Magashule. Reddy had also attended the meeting. According to the report, Biyela was trying to sell his company’s stake in a casino in Welkom, but the Free State’s gambling authorities apparently blocked the transaction. When the parties later met in Bloemfontein, the report continued, Biyela was asked to pay a ‘bribe’ into the account of Magashule’s long-time lawyer friend Kenosi Moroka, allegedly in exchange for the then premier’s support for the casino deal. At the time, Magashule, Moroka and Reddy all denied any impropriety.3 ‘The entire allegation was hogwash and part of the politics playing at that time,’ an Edison spokesperson told me in December 2018. ‘Mr Reddy was not “familiar” with Mr Magasule in 2009.’
If Reddy and Magashule were not well acquainted back then, they certainly became close later. When Reddy turned sixty in early 2013, the Free State premier was among the politicians and other VIPs who attended the businessman’s birthday bash in Durban. 4
And they clearly remained in touch after Reddy’s party. Few people know this, but Reddy absorbed one of Magashule’s children into his business empire, just as the Guptas had done with the former premier’s eldest son, Tshepiso. Tshepiso’s younger brother, Thato, worked for Edison Power, the crown jewel in Reddy’s business empire. I picked up this titbit from sources who had once been close to Magashule’s family, and it was confirmed by records I consulted. Edison confirmed that Thato had worked there, but the company denied that this in any way influenced its work in the public sector. ‘Thato Magashule was partly involved in our Africa operation,’ the company informed me. ‘He was not involved in any of our activities in SA due to our corporate governance policy and to avoid any perception of perceived political influence.’
Magashule senior’s diary, which I obtained through a Promotion of Access to Information Act application, revealed that he met Reddy in Cape Town for a ‘private lunch’ at the time of the ANC’s 103rd birthday celebrations in January 2015. Edison said it was ‘normal’ for Reddy to host people on the day before the party’s birthday. On this occasion, forty people from all over South Africa and two international guests attended Reddy’s ‘luncheon’ in Cape Town, the company told me. ‘There was at no time any business discussions whatsoever with anyone. It was a celebration.’ Edison maintained that Magashule’s diary incorrectly described the gathering. ‘This was not a “private lunch” but a private function,’ the company said.
During this time, Reddy’s son Shantan got involved in some business activities with Magashule’s daughter Thoko Malembe. In February 2015, a month after Reddy’s ‘function’, Shantan registered a company called SVR Group. Thoko became a director in SVR two months later.
‘This company was established with eight directors for a venture that did not get off the ground,’ said Yuri Mohan, one of Shantan’s business partners. ‘All of the directors except Shantan Reddy resigned. We are unaware that Thoko Malembe is Ace Magashule’s daughter.’
Whatever they may say, by around 2015 there was an undeniable level of familiarity between the Reddys and the Magashules. It serves as the backdrop to a troubling series of government contracts worth a neat R230 million awarded to one of Shantan Reddy’s companies.
In February 2015, coincidentally the same month in which Shantan founded the SVR Group, the Free State Provincial Treasury awarded a R60-million contract to Central Lake Trading 149, of which Shantan Reddy is the sole director. This company trades under the name Empire Technology. It was tasked to provide the province with software that
would help it manage its database of suppliers. It was known as the Free State Supplier Management System, or the FSSMS.
The contract was first advertised in The New Age newspaper in May 2014, according to a written response from the Free State Provincial Treasury. The department received bids from four IT firms, but it seems only Empire Technology ever stood a chance. ‘Other than Empire Technology, all the other bidders did not meet the minimum score for the functionality and were therefore disqualified,’ read the response. At least one of the disqualified firms has contested this assertion. ‘I can guarantee that we met the minimum score. We were never informed that we didn’t meet the minimum functionality score; we were simply told that we weren’t successful,’ the owner of one of the three losing bidders told me. The auditor-general also questioned the contract and found that it was irregular. Government departments and entities are legally required to procure IT-related goods and services through the State Information Technology Agency (SITA), but the Free State Treasury had circumvented the agency when it appointed Empire Technology, the AG found. 5
As it turned out, Empire Technology’s Free State boon was just a stepping stone to an even fatter purse. In September 2016, the Mail &
Guardian revealed that Empire Technology had clinched a R171-million contract linked to South Africa’s controversial proposed nuclear energy programme. The national Department of Energy had appointed Empire Technology to supply an IT ‘management system’ for the nuclear build programme. 6 Shantan Reddy’s latest success could be traced all the way back to the Free State. Instead of opening a new tender process, the Department of Energy had ‘piggybacked’ on the Free State contract by exploiting a loophole in South Africa’s
procurement laws that allows state departments to transfer certain contracts between them.7 In Chapter 21, I explain how this process works.
In this case, there were serious problems with the manner in which the transferral had been executed, the Mail & Guardian revealed in a follow-up report. 8 When government entities or departments share contracts, the contract values need to be roughly the same. In this instance, the value of Empire Technology’s contract from the Department of Energy was almost triple that of the Free State contract.
The scope of work and duration of the respective contracts also differed too greatly to qualify for a lawful transferral, National Treasury later warned the Department of Energy in a letter. 9 The AG subsequently found that Empire Technology’s contract from the energy department had also been irregular, just like that of its project in the Free State. 10
>
Empire Technology’s nuclear contract was halted in January 2017, but by then the company had already pocketed almost R100 million. 11 This was on top of the R60 million that Empire Technology had secured from the Free State government shortly before.
According to the Mail & Guardian’s second report, a key player in the Department of Energy’s efforts to piggyback on Empire Technology’s Free State contract had been Thabane Zulu, the department’s director-general. After Empire Technology won the Free State bid, Zulu approached Yuri Mohan, Shantan Reddy’s partner in Empire Technology, requesting the company’s ‘approval’ for the transfer. 12 Empire Technology naturally had no objections. In December 2015, Mohan told Zulu that the company would accept the latest contract.
Zulu’s involvement immediately piqued my interest. As I explain in
Part VII, he played a key role in another controversial contract transferral involving a R255-million asbestos audit from the Free State Department of Human Settlements. Zulu was director-general of the national Department of Human Settlements before being moved to energy.
Regarding Empire Technology’s two successive IT contracts, the circumstances and sequence of events were curious. Without the Free State contract, the company would not have been able to clinch the even larger national contract, as orchestrated by Zulu. Why didn’t the Department of Energy run its own tender process? And how did Zulu find out about Empire Technology’s contract from the Free State Provincial Treasury in the first place?
I put these questions to Zulu and the Department of Energy, but did not get much of an answer. ‘The matter of Empire Technology is under investigation by the Office of the Public Protector,’ the energy department informed me. ‘Therefore, it is the Department’s view to allow the Public Protector to conclude her investigation without prejudicing any information under investigation.’
I could not help but wonder whether the Reddy family’s ties to Magashule and two of his children somehow played a role in the first of the two contracts awarded to Empire Technology, namely the R60-million contract from the Free State Provincial Treasury. When I asked the treasury if this was the case, the answer was a simple ‘no’. Empire Technology said it was insulted by the suggestion. ‘We are not aware of any role that the premier played in the award[ing] of this contract,’
Mohan told me. ‘We deny the offensive allegation that the alleged friendship [between Vivian Reddy and Ace Magashule] influenced
[our] business success in the Free State.’
Vivian Reddy seemed especially keen to put distance between him and his son’s company. After the Mail & Guardian first reported on Empire Technology’s R171-million nuclear contract, Reddy took the newspaper to the Press Ombudsman. He took umbrage at being mentioned in a report about his son’s activities. The Press Ombudsman’s appeals panel eventually decided that the Mail &
Guardian only needed to revise its headline. Instead of saying ‘Zuma pals clinch first nuclear deal’, in reference to both Vivian and Shantan, the headline should have mentioned only one ‘Zuma pal’, namely Shantan. 13
But I subsequently found plenty of proof that Edison and Empire Technology were closely linked. On their respective websites, both companies list the same address in Umhlanga for their KwaZulu-Natal offices. For its Gauteng office, Empire Technology lists an address on Sandton’s bustling 5th Street. When I went looking for their premises, I found the name ‘Edison Power Group’ on the office building’s shiny exterior. And when I phoned Edison’s Sandton office and asked a receptionist if I could speak to Shantan Reddy, she told me he was out, but that she would take a message. There’s more. Shantan and Yuri Mohan attended the 2015 edition of the Association of Municipal Electricity Utilities’ annual conference, according to a list of delegates. 14 At the time of the event, Empire Technology had already secured its R60-million contract from the Free State government.
However, according to the delegates list, Reddy and Mohan attended the conference as representatives of ‘Edison Power Group’. Finally, when I approached Mohan for comment in late 2018, he asked me to send him queries via email. ‘Send it to yuri@edison …,’ he began, before quickly correcting himself and giving me his email address at
Empire Technology. Curious, I copied the emails to the Edison address, and they seemed to go through.
When I asked Vivian Reddy about the close links between Empire Technology and Edison, his spokesperson, Brian Mpono, responded rather aggressively. ‘Your unsubstantiated malicious false allegations are considered hostile and offensive,’ he huffed. ‘Empire and Edison Power Group are two separate entities. Vivian Reddy is not involved in any manner whatsoever with Empire Technology.’ He said Edison and Empire did not share an office in Umhlanga, but failed to explain why the two companies listed the same address on their websites. He did, however, admit that Shantan’s partner in Empire Technology was linked to Edison. ‘Yuri Mohan does some consulting work for Edison Power,’ Mpono told me.
‘Both companies are independent entities and there is no cross-shareholding whatsoever and they operate in different ambits of business,’ Mohan concurred.
I got the distinct impression that Edison and Vivian Reddy did not want me sniffing around Shantan’s work in the Free State. When I first sent him queries, Mpono was quick to fire off this warning: ‘[Vivian Reddy] is very principled and does not hesitate to report misrepresentations and false perceptions created by the media to the Press Ombudsman and in some cases [he has] even sued.’
Then something strange happened. In response to my queries about the apparent links between Edison and Empire Technology, Mpono made this claim: ‘Mr Reddy is currently in litigation with the Mail &
Guardian for defamation so this issue is sub judice.’ But I later learnt this was not the case. The Mail & Guardian said they were not being sued by either Vivian Reddy or Edison. Mpono subsequently claimed
that there had been a mix-up; Edison was in fact suing City Press, not the Mail & Guardian. This was over a report on Edison’s City Power smart-meter contract in Johannesburg, an entirely different matter.
I continued digging and recalled an explosive newspaper report from September 2018. The Sunday Times had revealed that Magashule, Zuma and a host of other ANC figures opposed to President Cyril Ramaphosa had held a series of clandestine meetings in Durban. The purpose of these gatherings was to plan a fightback against Ramaphosa and his allies, the newspaper reported. Magashule, former South African Airways chairperson Dudu Myeni and former North West premier Supra Mahumapelo allegedly attended one of the meetings at Durban’s Beverly Hills hotel. When the gathering broke up, some of the alleged conspirators got into two Mercedes-Benzes, one of which belonged to Dudu Myeni’s son, Thalente. (He features in the next chapter.) The other car apparently belonged to the son of a well-known Durban businessman, the newspaper reported. ANC
leaders who spoke to the Sunday Times claimed the clandestine ‘plot’
and related activities were being funded by ‘tenderpreneurs’ who had benefited from government contracts during Zuma’s time as president. 15
The newspaper did not divulge the name of the latter individual, but I later got some interesting information from Qaanitah Hunter, one of the Sunday Times journalists who broke the story. The other Mercedes belonged to a company owned by Shantan Reddy, she told me. When the story was published, the Sunday Times could not get hold of him for comment, so they left out his name. Hunter gave me the car’s registration details. The Mercedes had been registered to Central Lake Trading 149, or Empire Technology, the very company that so richly
benefited from consecutive contracts from the Free State Provincial Treasury and the national Department of Energy. Empire Technology’s Mercedes was a white 2016-model SUV, which meant it had been purchased after the company secured the two government contracts.
‘Our instructions are to deny that Mr. S Reddy of our client [Empire Technology] had any knowledge of the alleged meeting at the Beverly Hills Hotel and furt
hermore, we have been instructed to place on record that Mr S. Reddy was out of the Republic at the time of the alleged meeting,’ Empire Technology’s lawyer told me in a letter. He strongly denied any suggestion that Empire Technology or Shantan Reddy were involved in funding the meeting or any other ‘political projects’.
But the alleged Durban plot was just the tip of the iceberg. My sources, including a former colleague of Magashule in the Free State’s executive council, described a disconcerting level of familiarity between the former premier and Shantan Reddy. It is a relationship that apparently goes back several years. One source recalled that the businessman once drove to the Free State in 2012 to meet with Magashule on the sidelines of a lekgotla for executive council members and mayors. ‘We were meeting at the Philip Saunders Resort outside Bloemfontein. Shantan and Ace held a private meeting,’ said the source, who had been privy to parts of the talks between Magashule and Reddy. The source claimed the meeting had been about a tender with a government entity that Reddy had apparently lost out on. Reddy maintained this never happened. ‘Insofar as you allege that you have been informed of a private meeting held between Mr. S. Reddy and Mr.
Magashule, in and during 2012, our instructions are to deny that such a private meeting occurred,’ said Reddy’s lawyer.
In late 2018, I received even more intriguing information regarding
alleged meetings between Shantan Reddy and Magashule. Two sources with direct knowledge of the Reddy family’s business dealings, whom I interviewed independently of one another, alleged that Magashule was a regular visitor to Edison and Empire Technology’s offices in Sandton throughout 2015. Both sources claimed that they had on several occasions witnessed with their own eyes how Magashule had walked out of the office building, and they were both able to recollect striking details about these alleged visits.
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