Helen Suzman Foundation’s Letter of Complaint Received by the Public Protector
1 October 2015
On 29 September 2015, the Helen Suzman Foundation (“HSF”) sent a letter to the Public Protector, Advocate Thuli Madonsela (a copy of which is attached).
The HSF requested that the Public Protector investigate any unlawfulness relating to the allegations against Eskom, Chancellor House, and the ANC, pertaining to a complaint by the United States Securities Exchange Commission (“SEC”) against Hitachi Limited and the resulting settlement agreement concluded between the SEC and Hitachi.
In the complaint, which was lodged with the United States District Court for the District of Columbia, it is alleged that Hitachi engaged in fraudulent and other unlawful activities in order to secure lucrative contracts relating to the Medupi and Kusile power plants. The SEC alleges that Hitachi acted with the assistance of a front company for the ANC, namely, Chancellor House. Rather than defend itself in court, Hitachi settled for USD 19 million.
The HSF believes that there are prima facie grounds to warrant initiation of an investigation, under section 182 of the Constitution, by the office of the Public Protector of these and related allegations.
In the HSF’s letter to the Public Protector, we requested that all the allegations against organs of state (Eskom and Eskom Enterprises), and private companies (Chancellor House and Hitachi Power Africa) be investigated.
If the SEC allegations are correct, those implicated are likely to have contravened sections of, inter alia, the Constitution, Public Finance Management Act, 1999, Prevention and Combating of Corrupt Activities Act, 2004, Prevention of Organised Crime Act, 1999, and Companies Act, 2008. Particularly concerning is the apparent overlap between the private financial interests of members of the government and the ANC and the possible misuse of state funds.
The HSF trusts that the office of the Public Protector will take all necessary steps to investigate the allegations in the Complaint and, if required, take the appropriate remedial action.
Francis Antonie, Director
Kameel Premhid, Legal Researcher
Text of the letter:
c/o Public Protector
175 Lunnon Street Hillcrest Office Park
29 September 2015
Dear Advocate Madonsela
Allegations of improper and prejudicial conduct relating to, inter alios, Eskom Holdings SOC Limited (“Eskom”), Eskom Enterprises Proprietary Limited (“Eskom Enterprises”), Chancellor House Holdings Proprietary Limited (“Chancellor”), Hitachi Limited (“Hitachi”) and Hitachi Power Africa Proprietary Limited (“HPA”)
1. The Helen Suzman Foundation (“HSF”) is a non-governmental organisation whose objectives are "to defend the values that underpin our liberal constitutional democracy and to promote respect for human rights".
2. HSF refers to the settlement agreement concluded between the United States Securities Exchange Commission (“SEC”) and Hitachi, dated 28 September 2015. We annex hereto marked “A” a copy of the statement that was issued by the SEC on 28 September 2015, which provides details of the settlement agreement. Further, we annex hereto marked “B” the complaint that was lodged by the SEC against Hitachi, in the United States District Court for the District of Columbia, dated 28 September 2015.
3. In short, the SEC alleges that Hitachi, a foreign company, “sold a 25-percent stake in a South African subsidiary to a company serving as a front for the African National Congress (ANC)”. The “subsidiary” is HPA and the “front” for the ANC is Chancellor House, “a funding vehicle for the ANC”. From “2005 to at least 2008, Chancellor's parent organization, Chancellor House Trust, was administered by a member of the ANC National Executive Committee and a director of Eskom Enterprises, an Eskom subsidiary”.
Moreover, the “chairman of Eskom's board of directors, who also was a member of the ANC National Executive Committee, co-owned a separate investment company with the chairman of Chancellor House Trust”. The purpose of this “arrangement” was for Hitachi to secure “influence” over the ANC so that it could “secure the Eskom contracts” in relation to the construction of the Medupi and Kusile power stations. According to the SEC: “As a result, Hitachi was awarded power station contracts in South Africa worth approximately $5.6 billion”, in respect of which the “front company and the ANC” secured profits in excess of R 100 million.
4. The HSF notes with concern the allegations against Eskom and Eskom Enterprises, both of which are organs of state, and Chancellor House and HPA, which are private companies registered in South Africa and in which members of the ANC and government have significant financial interests. If correct, these parties are likely to have contravened, inter alia, provisions of the Constitution, the Public Finance Management Act, 1999, the Prevention and Combating of Corrupt Activities Act, 2004, the Prevention of Organised Crime Act, 1999, and the Companies Act, 2008.
5. Given the well-known and respected source of these allegations, it is respectfully submitted that there are prima facie grounds to warrant initiation of an investigation, under section 182 of the Constitution, by the office of the Public Protector of these and related allegations.
6. Should you require any further information, please feel free to contact me.
Francis Antonie Director
Issued by the Helen Suzman Foundation, 1 October 2015