Law firms asked to help move Gupta billions

The Gupta family sought advice on how to move tens of billions of rands to the United Arab Emirates, according to a Sunday Times report. It says the timing of the inquiries suggests they wanted to ensure they benefited from a new treaty between SA and the tax haven without being heavily penalised by local authorities. A former National Treasury chief director said there were ‘serious’ questions over why SA had signed the treaty. He said official Treasury policy was not to have money shifted to low or zero-tax havens. The report notes the Guptas and President Jacob Zuma's son Duduzane stand to benefit greatly from the treaty as it means massive tax breaks if they move money from SA. The treaty, signed in December 2015, became effective in March this year. In the months leading up to the treaty becoming effective, the family approached several top law firms for advice on how to go about moving the money. This intensified after local bank accounts belonging to the family, their businesses and other associates were shut down. Refusal by the firms, including ENSAfrica, Webber Wentzel and Hogan Lovells, to help saw the family approach UK and US law firms. Sources with knowledge of the approaches reportedly told the Sunday Times the brief was on how an ‘anonymous but prominent SA family and their associates’ could be assisted to move money from the country. The global law firms were also approached for advice on how to counter former Finance Minister Pravin Gordhan's court case over why he should not assist them in having the banks reopen their accounts.

Gupta family lawyer Gert van der Merwe confirmed his clients had approached SA law firms for ‘commercial advice’, notes the Sunday Times report. ‘I sat in on some meetings with ENSAfrica and Hogan Lovells. The advice, for example, was on possible commercial transactions. I'm involved in litigation and don't handle commercial matters.’ He also confirmed the Guptas turned to UK and US law firms, ‘in particular for advice on the Gordhan matter’. He said: ‘I would be surprised if they didn't go to international firms for other forms of assistance.’ He said he believed the refusal by South Africa's law firms to assist the Guptas was based on commercial pressure on the firms by both shareholders and ‘other clients’. Although industry experts said the treaty went against international best practices and SA’s obligations to global financial co-operation agreements, the Presidency insists it is of mutual benefit to both countries. The treaty stops the SARS from taxing high net worth individuals on their global incomes and assets should they become UAE residents simply by obtaining a three-year residency permit. While it allows SARS to claim a one-off 18% exit tax on South Africans' local assets and income when they leave the country, SARS loses all taxing rights thereafter, notes the report.

Full Sunday Times report

How the way was cleared for a Gupta-linked company to acquire Optimum coal mine is outlined in reports in City Press and Rapport. They say Pembani, the influential investment company that took over Deputy President Cyril Ramaphosa’s business interests, would have bought Optimum, but the acquisition was allegedly blocked by former Eskom chief executive officer (CEO) Brian Molefe. Quoting sources close to the transaction, City Press says Pembani – now managed by respected entrepreneur Phuthuma Nhleko – was ‘better qualified’ than Gupta company Tegeta to take over the mine because of funding availability. However, the latter eventually acquired Optimum after the mine was forced into business rescue by Brian Molefe, just six months after becoming Eskom CEO. Tegeta is controlled by the Guptas and Duduzane Zuma. Rapport reports that a source close to the transaction said: ‘There were two requirements to buy Optimum: the buyer had to provide proof it had financing for the purchase price and that it had a contract to purchase the four million tons of coal that Optimum produces for the domestic market every year. ‘Pembani had no problem with obtaining the financing, but couldn’t get a contract with Eskom. They only had one meeting with Eskom, but Molefe himself told Pembani at the meeting held in December 2015 that Eskom would not conclude a contract with them.’ This directly contradicts Eskom’s position on the matter, which was that it had to conclude hasty contracts with Tegeta because it urgently had to ensure the continued supply of coal from the mine.

Full City Press report

Full report in Rapport (subscription needed)