Rigged tenders, cronyism and kickbacks for politicians: SA’s history of friends with benefits

Everywhere you look, there seems to be a new case of tender fraud. One day, it’s the revelation that the winning bidders in a R255m tender to eradicate asbestos from roofs in the Free State did pretty much nothing, while paying about R800,000 to companies nominated by the state’s former premier, Ace Magashule. The next it’s that the husband of presidency spokesperson Khusela Diko was implicated in crooked tenders to supply personal protective equipment during the Covid-19 pandemic.

Even this week, reports emerged that a company linked to a family friend and former private secretary to health minister Zweli Mkhize scored irregular communications contracts worth R82m from the department of health during Covid-19.

The stench is everywhere. Even the procurement of essential supplies to fight the Covid-19 pandemic has been a "disgraceful chapter" in SA’s history, with some setting out to "steal millions in public money, misuse state property and divert resources meant for the SA people" — President Cyril Ramaphosa said last month — even as people were dying.

Much has been made about whether this unethical behaviour is a throwback to a particular era — most notably the Jacob Zuma presidency, in which state institutions and assets were re-engineered to suit the will of the Gupta family.

The truth goes much deeper. The ANC’s history of "friends with benefits" predates Zuma. Think of the 1996 Sarafina 2 scandal, in which then health minister Nkosazana Dlamini Zuma was accused of giving a contract to good friends and ignoring procurement laws. Or Winnie Madikizela Mandela’s 2003 fraud conviction involving loans on behalf of ANC Women’s League employees. Or UDM leader Bantu Holomisa’s allegations that former public enterprise minister Stella Sigcau received R50,000 from former Transkei chief George Matanzima.

But while the ANC may have modernised the gravy train, it didn’t invent it. SA’s history of "friends with benefits" goes back at least to the arrival of the Dutch in this country.

So rather than considering corruption as an aberration linked to a specific individual or party, we need to see it as a long-term structural creation driven by a far more complex set of dynamics, and bolstered by distorted power relations, poor transparency over how contracts are awarded, and a wholesale lack of accountability.

To understand this, we can look back more than three centuries, to 1700 and the rule of Cape Colony governor Willem Adriaan van der Stel.

In an attempt to shift attention from his own extremely profitable estate at Vergelegen (established almost entirely at the expense of the Dutch East India Company), Van der Stel granted favours to the commander of the garrison, the priest, the treasurer and the company surgeon.

It meant, according to historians Leo Fouché and Anna Böeseken, that Van der Stel and his comrades "soon became the formidable rivals of the regular farmer".

"They enjoyed preference, both in the disposal of their produce to the company, and in the purchase of anything they required from the company," Fouché and Böeseken write. "Moreover, unlike the farmer, they paid no tithes."

It was an important moment, for it was here that SA’s gravy train left the station. And there would be no stopping it any time soon.

An odd head on Yonge shoulders

Cape Colony, 1799-1801: Sir George Yonge was such an unpopular governor that he kept his job for only 16 months. Yonge was, writes George McCall Theal, "decidedly the most incompetent man who has ever been at the head of affairs in the colony".

One of the first things he did was to build a wall around the Company’s Garden, turning a public park into his own private pleasure dome. As Lady Anne Barnard, who suffered through his short tenure, wrote: "Had he torn the Magna Carta of the Cape into a thousand tatters, he could not have put the Dutch into such an alarm."

Yonge also imposed new taxes on hunting, billiards and brandy.

But it was his overly intimate relationships with corrupt businessmen and relatives that would lead to his downfall.

Whenever a tender or farm was up for grabs, he would grant it to one of his mates — on the understanding that he would receive a kickback.

Yonge’s contemporary, Roger Curtis, wrote: "A great picture of corruption gradually disclosed itself. It was discovered that the secretary of the governor [Richard Blake] was engaged in a mercantile house at Cape Town and directed to it, almost exclusively, the stream of His Excellency’s favour and partiality, exemplified in monopolies and exclusive privileges to the prejudice of the rest of the merchants."

Blake was soon appointed "wine taster" for the colony — a new and entirely unnecessary position that allowed him, according to Theal, to "search any premises where wine was sold, to open casks, and to destroy on the spot all wine of an inferior quality".

Blake then teamed up with Michael Hogan, another of Yonge’s cronies, who had been granted a monopoly on the sale of wine. The nepotistic loop was neatly closed when Blake offered to "approve [wine] of any quality, and … share the profit" three ways.

But Yonge was prepared to stoop even lower.

Under the laws of the time, any slaves found aboard vessels captured in combat were considered "fair prize" and could be sold for the benefit of the captors. So, when Collector, a ship owned by Hogan, docked in Table Bay bearing a cargo of 164 slaves, the governor was quick to believe the captain’s story that the slaves had been captured in Mozambique from "a prize brig run ashore and burnt".

It would have ended there, had a Danish ship not docked a few hours later. Its officers swore they’d seen the 164 people being captured on Mozambican soil — in direct contravention of the law.

Yonge made "veiled threats" to prevent further investigation into the matter. But under pressure from Barnard and others, a commission of inquiry was appointed.

When one of Collector’s officers testified that two logbooks had been kept during the boat’s voyage, "the defence was given up".

Though not proven, it was alleged that Hogan had paid Yonge about R30m (in today’s money) to turn a blind eye to the slaves’ true origins.

Yonge lost his job and died a pauper in England. Hogan, whose lucrative career as a slave-smuggler and privateer took him to all the world’s continents, married an "Indian princess" and became a fixture of New York high society.

Today, the tabloids would talk of Dubai.

Somerset’s all too familial story

Cape Colony, 1814-1825: By the time a new secretary to the government, Richard Plasket, arrived at the Cape in 1824, governor Lord Charles Somerset’s corrupt and nepotistic rule there had taken its toll.

As Plasket wrote: "Almost every single department under this government is in a state of total incompetence to carry on its business … A number of other offices, not of any consequence excepting as swallowing up a great portion of the revenue, are held by military officers belonging to Lord Charles’s staff … We are perfect bankrupts, and it is needless to conceal it, as we have not enough money to pay our own salaries."

A commission of inquiry was set up to examine Somerset’s rule, and his former secretary, Col Christopher Bird testified: "I believe great irregularity to have prevailed in the payment of the expenses of that useless and extraordinary burden to the colony, the Cape Corps."

In a nutshell, Somerset had emptied the state purse on the Cape Corps because of the position of his son, Capt Henry Somerset, in it. When Henry was posted to the Cape, his father appointed him "commissioner of stamps" at a top-up of £600 a year (R1.1m today), while demanding no work of him.

Later, Henry would be given hundreds of hectares of free land in and around Grahamstown.

He was also exonerated by his father from paying his military bills, which led to the bankruptcy of a local farmer, one Mr Burnett, who supplied the army with barley.

Guess who presided over the court case brought against his son? Yes — Lord Charles.

The governor also turned a blind eye to the illegal sale of freed slaves in the Cape.

The captain of the port, Charles Blair, and the comptroller of customs William Wilberforce Bird, colluded in turning liberated African slaves into profit, assigning them as indentured servants to people in lieu of money they owed them. They also sold property with the indentured servants included in the price.

It was illegal according to the Slave Trade Act of 1807, but when Blair was taken to court, Somerset did his best to protect him by arresting the lawyer and the plaintiff. He even arrested the scribe who took down the plaintiff’s story.

As one lawyer asked: why had Somerset not arrested "the papermaker or the goose, whence the pen which it was written was plucked?"

Oom Paul Kruger’s ‘third Volksraad’

ZAR, 1881-1900: From 1890 onwards the Zuid-Afrikaansche Republiek (ZAR) was governed by a first and second Volksraad. But many in the republic said neither had anything like the power of the unofficial "third Volksraad" — a coterie of tenderpreneurs who used and abused president Paul Kruger’s porous concessions policy.

The policy dated back to 1881, when a Jewish Hungarian named Hugo Alois Nellmapius (who later paid for the house in which "the Oom" lived) presented Kruger with a proposal to establish the ZAR’s first liquor distillery.

Nellmapius, in return for an annual contribution to the Treasury of £1,000 (R2.7m today), demanded "the privilege of the sole right to build such a factory … and to manufacture the above-named products" for a period of 15 years.

With Sammy Marks (another member of the "third Volksraad" who showered Kruger and his wife with gifts) at the helm, the distillery took a while to turn a profit. It was not the mint that Marks, Nellmapius or Kruger had hoped for.

In 1886, everything changed when gold was discovered on the Witwatersrand. In a few short years, Joburg (or Duiwelstad, as Kruger called it) grew from a smattering of tents into a global financial centre. The mining industry’s appetite for dynamite and railways was insatiable. But still Kruger clung to a concessions policy designed to encourage industrialisation in an agrarian backwater.

The ZAR’s many railway concessions offered an opportunity to make a quick buck, as with the Selati line in what is today the Kruger National Park. After this concession was granted to Volksraad member Barend Vorster, it was sold to a French fortune-hunter called Eugène Oppenheim.

By contracting the construction work out to a mate, who got a subcontractor to do it for less, Oppenheim, at "the stroke of a pen", made £519,600 (R1.5bn today) for himself.

To conceal his crooked books, Oppenheim had bribed 21 of the 25 Volksraad members. Percy Fitzpatrick, a lifelong critic of Kruger, said these bribes included "American Spiders [a fast and lightweight carriage; the BMW Z3 of its day], Cape carts [more of a Toyota Hilux], gold watches, shares in the company and sums in cash".

Kruger’s dynamite concession was equally explosive.

Instead of allowing mines to import dynamite from Europe, Kruger in 1887 granted a 16-year monopoly to Edouard Lippert, whose Zuid-Afrikaansche Maatschappij voor Ontplofbare Stoffen Beperkt was permitted to "import all raw materials and machinery free of duty; but not dynamite itself".

For people like Lippert, such rules were only made to be broken. Soon rumours circulated that Lippert’s substandard (and downright dangerous) dynamite was being manufactured in France and that his "factory" was nothing more than a glorified labelling facility.

He and Kruger denied everything, but the government finally agreed to conduct tests on the "raw materials" imported by Lippert. And so it was that, during the Volksraad’s mid-morning coffee break, "the stuff that Lippert alleged was not dynamite exploded with terrific force, throwing great masses of rock into the air" of central Pretoria.

Kruger told the Raad that cancelling Lippert’s contract "would destroy the credit of the state completely and bring rejoicing to our enemies".

So instead, he simply restructured the monopoly: Lippert remained a shareholder, but Marks was cut in on the deal. Between 1894 and 1896 the company sold 1.1-million cases of dynamite, at a total profit of about R6bn in today’s money.

Rhodes’s inside track

Cape Colony 1892-1898: While prime minister Cecil John Rhodes and his favourite cabinet minister Sir James Sivewright were enjoying a tour of Europe and Egypt, a letter appeared in the Cape Times claiming a contract for railway refreshments had been given to James Logan — a friend of Sivewright’s who had run the bar at Matjiesfontein.

In fact, Logan had been given the contract for the next 18 years, without it going out to tender. This was an aberration as, by then, the legal framework for tenders was surprisingly similar to our own today, and contracts were normally granted for five years.

What ensued became known as the "Logan scandal".

Disturbed by the letter in the Cape Times, another of Rhodes’s cabinet ministers, James Rose Innes, wandered down to the railway department to have a look at the contract. Rose Innes then dashed off a letter to Rhodes stating that "anything more improper, in my opinion, it would be difficult to conceive".

"Please show this to Sivewright I should like him to see. This is not a cheerful letter. However, I can’t help it. I like fighting, but I do not like hanky-panky!"

Sivewright had simply handed his friend the contract. When the news broke, he was suddenly implicated in corruption extending from the Cape to Kruger’s ZAR.

Writer Olive Schreiner said in two letters that she’d overheard Rhodes and Sivewright colluding, on the station platform at Matjiesfontein, over government land. Schreiner said she never spoke to either man again.

Despite the evidence against Sivewright, Rhodes would not fire him. Instead, he protected him from the press, Rose Innes and corruption-buster John X Merriman.

In a parliamentary commission into Sivewright’s wrongdoing, Merriman testified: "Looking to the fact that the contract was made in secrecy, without any of his colleagues knowing it, looking to the fact that Logan was an improper man, and that tenders were not called for", he had "no hesitation in saying that the action was a mammoth job [of corrupt cronyism]". Yet Sivewright, with Rhodes’s help, got off the hook.

As historian Eric Rosenthal puts it, Sivewright "probably stands unique as the only civil servant who managed to enter the millionaire class".

By 1895, he was worth more than £1m (R2.5bn today).

This was not the only stain on Rhodes’s political pants.

When Rhodes established his British SA Company (BSAC) he handed out shares to cronies. His political allies in the Afrikaner Bond party, led by "Onze" Jan Hofmeyr, were given large numbers of shares not available on the open market.

When Rhodes fell out with the Afrikaners after his involvement in the Jameson Raid, Hofmeyr was slow to criticise him.

Hofmeyr’s son-in-law, DC de Waal (owner of 2,500 shares), was even worse: in parliament, he did his best to divert attention from Rhodes’s culpability.

In 1898 Thomas Smartt, who had been a member of the Bond Party, claimed Hofmeyr had made a profit in BSAC shares of £30,000 (R88.2m today).

Hofmeyr later published a broker certificate showing that his profits were a meagre £2,456 (R6.7m today).

A small price, perhaps, for his silence.

Baantjies vir boeties

SA, 1930-1976: The country would have to wait until the mid-20th century for baantjies vir boeties (jobs for brothers) to be perfected by the Broederbond, the secret Afrikaner organisation that controlled the apartheid government.

At the centre of the broeders from the 1930s until the mid-1970s were two men: Nico Diederichs and Piet Meyer. Both had direct links to Hitler’s Nazis in the 1930s. Meyer even sported a Hitleresque moustache and named his son Izan (which, spelt backwards, read "Nazi").

Journalist Allister Sparks wrote that "it was Diederichs who laid the philosophical foundation [for apartheid, while] Meyer … was its key backroom strategist".

These two men were bound in friendship with an industrialist and Broederbonder by the name of Anton Rupert.

Diederichs (minister of mining and later finance) was the first chair of Rupert’s Rembrandt, in 1948, while Meyer was the head of its public relations from 1951 to 1959. Meyer, who had also been the head of propaganda for the fascist Ossewabrandwag, would later head the SABC.

Rupert claimed that he started Rembrandt with £10. But by 1968 Rembrandt’s pre-tax profit amounted to R54.7m (R4.1bn today).

While Rupert became a verligte in later years, Rembrandt’s origins were problematic. The company’s first cigarette factory in Paarl made a point of employing only Afrikaner women and children.

Meyer even made this part of an advertising campaign, stating that all cigarettes were "untouched by African hands".

Historian Dan O’Meara points out that this policy also had the benefit of keeping the company’s production costs to a minimum, as it was much cheaper to employ women and children.

As the book The Super Afrikaners relates, a Broederbond member said Rupert’s tobacco products were always distributed at meetings and they "were asked to smoke and ‘hoes’ [cough up] for volk en vaderland".

Later, Rupert’s political opinions changed. He let his membership of the Broederbond lapse, and described the organisation as an "absurdity". And in the 1980s he helped arrange talks between the exiled ANC and the National Party government.

After the 1948 election, won by the National Party, other Broederbond concerns saw extraordinary financial growth.

In 1935, the year of its founding, banking group Volkskas made a profit of just R17. By 1950, its assets had soared to R40m, and to R538m by 1969 — due to business from the apartheid government.

By 1979, deposits in Volkskas amounted to R210m — nearly threefold the R76m of the next highest, Barclays Bank. Similar growth was seen at other Broederbond-controlled institutions such as building society Saambou and life insurance company Sanlam.

However Diederichs, known as "Dr Gold", was unhappy that by 1950 Afrikaners controlled just 1% of the mining industry.

This changed, thanks to the parastatals Eskom, Iscor and Sasol.

Two of Eskom’s biggest power stations were deliberately built next to coal mines owned by a small company called Federale Mynbou, run — unsurprisingly — by members of the Broederbond.

Mynbou was handed government tenders that guaranteed its survival.

And soon the Broederbond-dominated parastatals became laws unto themselves, refusing to account publicly for their actions.

These corporations, according to Brian Bunting, became "bafflingly secretive about their policies and activities", while handling public money.

They refused to provide any salary information at all — so it was equally unsurprising that it was later revealed that their managers received pay of up to 45% more than those of similar levels in the public service.

In the 1960s, however, the public began to ask if facilities such as swimming pools, massage salons, sunrooms and air-conditioned underground wine cellars were necessary for these sorts of public corporations.

Everything the Sun King touches

Bophuthatswana, 1976-1994: The 1965 decision to ban gambling in SA (because, in BJ Vorster’s words, "it undermines the morale of any nation") came as a severe blow to Sol Kerzner, who had opened the country’s first five-star hotel a year earlier.

A 1971 Act that gave bantustans the powers to write their own laws gave Kerzner a gilded opportunity to "undermine the morale" of some brand-new nations.

He opened casinos in several of SA’s homelands under dubious circumstances.

In 1986, he admitted in a signed affidavit to paying Transkei prime minister George Matanzima R2m in exchange for exclusive gambling rights within 100km of Umtata.

But Kerzner’s close relationship with Bophuthatswana’s Lucas Mangope was his longest, most lucrative homeland friendship.

In 1976, a year before "Bop" achieved "independence", Kerzner signed a deal with Mangope that would give his company exclusive gambling rights in the bantustan.

At Sun City, Kerzner managed to pull off the seemingly impossible by getting both the Bophuthatswana government (which co-owned the resort) and the supposedly prudish National Party to fork out millions of rands on the construction of his salacious scrubland pleasure palace.

The SA government footed much of the bill for the infrastructure. According to historian Nicola Sarah van der Merwe, Pretoria chipped in R800,000 to build a new tar road to the resort and a further R10m (R340m today) for other infrastructure. It also gave a virtually interest-free loan of R8m for upgrades around the town of Heystekrand, where Sun City is located.

By 1983, according to Time magazine, Sun City’s "slot machines, roulette wheels and befeathered chorus girls attract[ed] as many as 50,000 visitors a day, mostly well-to-do whites … from Pretoria and Joburg".

One also had to factor in the magnetism of sanctions-busting concerts by Frank Sinatra and Dolly Parton, and big-ticket boxing matches and golf tournaments.

With Sun City’s ballooning profits came a hefty tax bill, which wasn’t to Kerzner’s liking. In 1984 Bophuthatswana finance minister Leslie Young agreed that any investment by Sun International "that marketed apartheid SA internationally would be tax deductible in Bophuthatswana", writes Van der Merwe.

Kerzner later struck another deal with Young, which effectively subsidised the eye-watering amounts required to get Queen and Elton John to play at Sun City.

When Young announced that he would return 90% of the funds raised through a tax levied on high-earning international performers to Sun International, Kerzner’s hotel group agreed to augment the finance minister’s personal salary to the tune of R20,000 (about R200,000 today).

While Mangope suffered a very public fall from grace in March 1994, Kerzner navigated his way into the "new SA" more effectively.

In 1990, two weeks after his release from prison, Nelson Mandela praised the "young Jewish man … creating thousands of jobs out in the African countryside".

With Madiba onside, and the Miss World pageant in the bag, Kerzner would consolidate his position as one of the world’s most successful hoteliers.

The gravy train steams on …

This is hardly an exhaustive account of SA cronyism. A comprehensive list would include Louis Luyt and the "information scandal"; the selloff of Wouter Basson’s chemical and biological weapons programme to Magnus Malan’s nephew; Brett Kebble and his cronies; Gavin Watson and Bosasa; and the Guptas, who have left us the seemingly interminable Zondo commission of inquiry into state capture.

But it shows that vaccinating our society from a pandemic of pals isn’t a problem that has arisen in a vacuum — nor is it one that can be easily quashed by changing one or two individuals at the top of the political apparatus. It’s a deeper structural issue, for which true accountability is a vital antidote to a culture of impunity, even if it’s not the entire remedy.

Blackman and Dall are authors of the upcoming book Rogues’ Gallery: An Irreverent History of Corruption in SA, from the VOC to the ANC

State corruption runs back down the centuries, through governors, presidents, administrators and ambitious businessmen — and, of course, their families

—  What it means: