discussion and evidence of state capture: the …

DISCUSSION AND EVIDENCE OF STATE CAPTURE: THE DENEL CASE

THE PEOPLE’S TRIBUNAL ON ECONOMIC CRIME - 7 FEBRUARY 2018MR BEN THERON – CHIEF OPERATING OFFICER

AGENDA• Background - the Denel Board

• Criminal charges against the chairperson of Denel – Mr Lugisani Daniel

Mantsha

• Irregular joint venture between Denel and VR Laser Asia to establish Denel

Asia

THE DENEL BOARD

A NEW BOARD FOR DENEL• 24 July 2015

– New board appointed by Minister Lynne Brown;

– Minister Lynne Brown commended outgoing

board – referred to Denel as on a path to

positive sustainability;

– Daniel Mantsha appointed as non-executive director and chairperson of the board;

– The rest of the board was new, except Mr Johannes Motseki.

THE REALITY OF THE NEW BOARD

0

500

1000

1500

2014 20152016

2017

ZAR

Mill

ions

Financial Year

Operational Expenses

Net Profit

• Under the new board:

– Operational expenses went up from

R939m to R1,483m;

– Nett profit increased from R270m in 2015

to R 395m in 2016, but decreased to

R333m in 2017;

– When measured against operational

expenses, Denel was in financial

downward spiral.

THE REALITY OF THE NEW BOARD• Mr Johannes Motseki

– Only “old” board member to be retained;

– Involved with the Gupta family in 2010;

– Mr Motseki’s company (he was the sole director) was allocated 1.3% in the

Gupta owned Shiva Uranium;

– Guptas sponsored a trip to Mumbai and Delhi in 2010;

– As treasurer of the MK Veterans Association he facilitated a donation of

R850,000 from the Guptas to fund a conference.

THE REALITY OF THE NEW BOARD

• The list of new board members – not the original list prepared by DPE.

• As the State Capacity Research Project notes, the new Denel Board “also lacked skills and

experience: there was, for example, not a single engineer (Denel being a highly technical

SOE) and most never served on a corporate board before”.

• The chairperson appointment – Mr Daniel Mantsha – raised many questions.

THE REALITY OF THE NEW BOARD• Mr Daniel Mantsha

– Shortly after his appointment, Mr Mantsha suspended the following Denel employees:

• CEO - Mr Riaz Salojee;

• CFO - Mr Fikile Mhlonto; and

• Company Secretary - Ms Elizabeth Africa.

– No formal reasons given for the suspensions at time.

– Subsequent charges were questionable.

– Strong suspicions that the three company managers were suspended to make way for

the Denel – VR Laser Asia deal.

DANIEL MANTSHA

THE SHOPPING LIST 20/11 (DPE PRESENTATION TO PARLIAMENT)

• Energy: R174bn in Government Guarantees total R350bn (Eskom Build program)• Broadband: Infraco launched Commercial offering• Defence: R1.85b was secured as interim support to Denel. • Forestry: The Department initiated work on SAFCOL’s future • Transport: Contract between Transnet and GE. 90 of the 100 locomotives in RSA,

Richards Bay Coal Terminal and Sishen Saldanha. SAA took delivery of A330-200• Mining: Alexkor land mining rights transferred to Richtersveld Mining Company • Cross-cutting Initiatives: A policy for Programmatic and Transactional Procurements

for Loco fleet

DAN MANTSHA – GUPTA RELATIONSHIP• #GuptaLeaks

– Evidence obtained from the email server of Sahara Computers shows improper

relationship between Mr Daniel Mantsha and the Guptas.

– The improper relationship was fully investigated.

– OUTA laid charges against Mr Mantsha in September 2017.

A full report on Mr Mantsha will be discussed and a written report will be submitted to the Tribunal

DAN MANTSHA – CORRUPTION & FRAUD CHARGES• Background information:

– Mr. Mantsha is an attorney - obtained a B Juris in 1991 and LLB in 1993 both from the

University of Venda.

– Current director of Lungisani Daniel Attorneys and Lungisani Management.

– Became non-executive director and Chairperson of Denel Board in July 2015.

– Served as Minister Faith Muthambi’s legal advisor (Department of Communications).

– Mantsha was struck from the roll of practising attorneys in 2007.

– Re-admitted in 2011 (OUTA could not ascertain the reason for his readmission.

Requested his file from the Law Society).

EVIDENCE - #GUPTALEAKS

AUTHENTICITY OF THE #GUPTALEAKS• OUTA obtained #GuptaLeaks on 30 May 2017.

• Hard drive delivered anonymously to OUTA offices.

• Authenticity of the emails:

– Analysed by cyber forensic team.

– Authenticity of emails was confirmed through an analysis of metadata in

email headers.

• Authenticity of all hard drive contents will be tested in court.

TIMELINE OF ACTIVITIES (EVIDENCE)Date Description3 August 2015 Ashu Chawla applies for a 3 month tourist visa for Mantsha. The visa applications

clearly show that the Guptas are planning to take Mantsha on trips to Dubai and India, presumably to promote their Denel/Denel Asia plans.

TIMELINE OF ACTIVITIES (EVIDENCE)Date Description3 August 2015 Mantsha’s office ([email protected]) sends an e-mail to Ashu Chawla with a

copy of his municipal account attached. The message in the mail reads “For urgent attention”.

mailto:[email protected]

TIMELINE OF ACTIVITIES (EVIDENCE)Date Description6 August 2015 Mantsha was flown to India, in the Gupta’s jet (ZS-OAK). He was accompanied on this flight by Mrs

Angoori Gupta, Mr Rajesh “Tony” Gupta, Mrs Arti Gupta, Mr Sashank Singhala, Mr AmankantSinghala, Mr Salim Essa and the Gupta body guard Mr Gysbert van den Berg.

8 August 2015 Mantsha was a passenger on the Gupta owned Jet (ZS-OAK) that flew back from India (Mumbai –Delhi) to South Africa on 9 August 2015.

TIMELINE OF ACTIVITIES (EVIDENCE)Date Description

6 – 8 August 2015

Mantsha stayed at the Club ITC in India. The invoice is made out to Mr Mantsha with Sahara’s South African address as the reference address and as reference to SES Technologies, a Gupta owned company in India. It clearly shows that the invoice was for Sahara’s South Africa address.

TIMELINE OF ACTIVITIES (EVIDENCE)Date Description29 September 2015

Mantsha’s office ([email protected]) sends an e-mail to Ashu Chawla with a copy of his passport attached. Ashu Chawla send the copy of Mantsha’s passport to Halima Allana at Travel Excellence (Travel Agency) with an instruction to apply for a Dubai visa.

mailto:[email protected]

TIMELINE OF ACTIVITIES (EVIDENCE)Date Description28 November 2015

Mantsha received a mail from Marietjie Strydom from Denel. Attached to this mail is a PFMA Section 54(2) Pre-notification on the Proposed formation of Denel Asia, from Lynne Brown, Minister of Public Enterprises. The letter from the Minister is clearly marked “Confidential”. On the same day, Mantsha forwarded this notification to Ashu Chawla.

TIMELINE OF ACTIVITIES (EVIDENCE)Date Description30 September 2015 Travel Excellence received the Dubai visa for Daniel Mantsha and forward it to Ashu Chawla

and confirm the booking for Mantsha to fly back from Dubai to South Africa on 6 October 2015 and attached the electronic ticket.

TIMELINE OF ACTIVITIES (EVIDENCE)Date Description30 September 2015 Ashu Chawla send a mail to the Oberoi Hotel informing them that Mantsha will be a guest

there together with Duduzane Zuma. Hours later the Oberoi Hotel confirm the booking for Mantsha from 3 Oct to 9 Oct. Chawla informs the Oberoi that Mantsha will check out on the 6th of October 2015 and the Oberoi confirms that the Mantsha booking has been changed as instructed.


6 October 2015 After his stay in the Oberoi Hotel, Mantsha flies back from Dubai to OR Tambo on flight SA7163

with a ticket booked and paid for by the Gupta company – Westdawn Investments (Pty) Ltd. The

amount paid for the flight ticket - R33,280.00.


31 October 2015 Mantsha sends a letter that was prepared and sent to the Minister of Finance to Ashu Chawla. The content of the letter is Denel’s PFMA Section54(2) pre-notification for the proposed formation of Denel Asia.


Mantsha received an email from Keromamang Mhlongo from the Department of Public Enterprises. The annexure to the email was Minister Brown’s response to Denel’s notification to her regarding the proposed tie up of the Denel joint venture. The email was marked confidential and was meant to advise the government and the Denel executives in their dealings with the Gupta’s.


Mantsha forward the confidential letter he received from the Minister on 23 November 2015, to Ashu Chawla. He used his law firm’s email address to send this information to the Guptas.

TIMELINE OF ACTIVITIES (EVIDENCE)Date Description3 January 2016 Mr Ashu Chawla confirmed travel arrangements for Mr Mantsha. Mantsha was booked into

the Oberoi Hotel in Dubai from 3 – 6 January 2016. Chawla arranged a concierge service for Mantsha to the exclusive housing estate in Dubai, L35 Emirates Hill, where the Guptas reside. Mantsha arrived from OR Tambo International at the Dubai airport on flight EK768 at 19:20. During this time, 4 – 5 January 2016 Matshela Koko of Eskom also stayed at the Oberoi Hotel on the Gupta’s expense.

CHARGES• On 30 August 2017 OUTA laid criminal charges of Corruption and Fraud against Mr Mantsha.

• Remarks:

– Mantsha is a qualified attorney and served as Minister Faith Muthambi’s legal advisor at the

Department of Communications.

– With his qualifications and professional experience -should have known better as to accept

favours from the Gupta’s.

– Sharing confidential documents and accepting favours from a company who wants to partner

with a SOE, was unethical, irregular and criminal.

– As a lawyer and a former advisor for a minister he should have known that he was grossly

violating the regulations of the PFMA.

IRREGULAR JOINT VENTURE TO ESTABLISH DENEL ASIA

DENEL ASIA – JOINT VENTURE• Mr Mantsha oversaw conclusion of the Denel Asia joint venture between Denel and

VR Laser Asia.

• VR Laser Asia - wholly owned by Salim Essa (known Gupta business partner).

• Mr Essa has an associate company of VR Laser Services, a South African steel

cutting business.

• Westdawn Investments (t/a JIC Mining Services) has a 25% stake in VR Laser

Services, and Salim Essa has a 75% stake (Duduzane Zuma and Tony Gupta

control Westdawn Investments).

DENEL ASIA – JOINT VENTURE• VR Laser Services is registered to Sandton Office Park where Gupta businesses are based.

• VR Laser Services has three directors:

– Salim Essa, Pushpaveni Govender (a director of other Gupta companies) and Kamal

Singhala (family).

• 10 December 2015:

– Day after Des Van Rooyen appointed as Minister of Finance,

– Mantsha submitted Denel’s application to National Treasury for approval of the Denel Asia

joint venture. The venture was formally announced in January 2016.

– The joint venture was concluded by Denel without approval from the Minister of Finance or

the Minister of Public Enterprises, as prescribed by the Public Finance Management Act.

DENEL ASIA – JOINT VENTURE• The incentive - allegedly a US $4 billion tender to deliver long range artillery to the Indian army.

• The terms of the deal were weighted heavily in favour of the Guptas.

• Drafts of the joint venture agreement forwarded to the Guptas and Mr Richard Seleke (DG of Public Enterprises) show Denel gave up its intellectual property to Denel Asia.

• Done for a promise of a R100 million marketing contribution from VR Laser Asia treated as an interest- bearing shareholder’s loan to the company by VR Laser Asia.

• Denel Asia proposed joint venture with an Indian investment company controlled by Anil Gupta and Adani Enterprises allowing the Indian investment company right of first refusal to manufacture any products that Denel SOC Ltd. had licenced Denel Asia to manufacture or sell.

DENEL ASIA – JOINT VENTURE• In the 2015/16 Denel Annual Report Mr Mantsha in his capacity as the Chairperson of Denel said

the following in an attempt to justify the Denel – VR Laser joint venture:

– “Denel still sees massive potential for growth in the Asia-Pacific region which will soon

command more than half of global defence procurement outside of the United States. At a

time when defence budgets are contracting in many countries, Asia-Pacific is expanding and

opportunities are opening up for Denel to find new markets for our world-class products,

especially in the fields of artillery, armoured vehicles, missiles and unmanned aerial vehicles.

The establishment of Denel Asia as a joint venture in Hong Kong was done to create a

stronger foothold in this region. We are currently looking at various options to address this

market”.

discussion and evidence of state capture: the …

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