Chancellor House | by Eleanor Momberg

by Sep 13, 2012Magazine

Chancellor house has become symbolic of the precariously close nexus between the state and the ruling party, and the creation of fortunes not only for maintaining power but also to benefit individual members of the ruling elite.

Though controversy stalks the ANC company, little is known about its operations and subsidiaries, which appear to be dominated by energy and mineral contracts.

However, there is little doubt that Chancellor House’s creation in 2003 has further embedded the ruling ANC elite in the Minerals-Energy Complex (MEC), the system which shaped South Africa’s deeply skewed apartheid economy and which continues to define the interdependence of its fossil-fuel and mineral extraction and export-oriented growth path. A new class of black elite has been cut into the pact with Chancellor House apparently the clearing house for mega deals that in turn generate party funding.

Right now, its mining arm, Chancellor House Mineral Resources, awaits approval of nearly 500 mineral exploration and prospecting rights permits from the Department of Mineral Resources, according to public records. Also pending are another 500 applications from other companies with close links to the ANC and the political elite, such as collier Exxaro.

Finding information about contracts already awarded is surprisingly difficult and no company reports are available for Chancellor House’s subsidiaries.

It was reported in 2010 that Chancellor House Mineral Resources had clinched deals for prospecting at 560 sites in the Northern Cape, North West and Mpumalanga. In the same year, controversy raged when Chancellor House Holdings paid Xstrata R25m for a 75 percent stake in Moloma Colliery in poverty-stricken and politically repressed Swaziland, with beneficiaries apparently including a top ANC official and the brother of one of King Mswati’s wives. The other 25 percent is held by the Swazi government.

Most alarming is the mega-million contract to supply boilers to Eskom’s new coal-fired power stations, partly financed by a World Bank loan that was granted despite global outrage over not only the tacit endorsement of South Africa’s carbon-intensive energy path, but also the contract’s undue benefit to the ruling party. Based on its shareholding,

Chancellor House stood to benefit over R5bn, although it has disputed this estimate. Deloitte and Touche cleared Eskom of conflict of interest in awarding the first R40m boiler contract, but the Public Protector differed.

More recently Chancellor House has clinched yet another Eskom tender – this time a 10 percent stake in Bateman Africa, an engineering company that concluded a R2 bn contract for the mega power plant, Kusile.

Even if these contracts are squeaky clean, suspicion remains that the coal-intensive path has been aided and abetted by the ruling party with the explicit intent of benefiting from contracts to supply two of the largest power plants in the world. The ANC’s assets through Chancellor House make it one of the richest political parties in the world. The company was allegedly started by former party Treasurer-General Mendi Msimang as

a funding vehicle for maintaining the party’s headquarters, owned by Dakawa Properties. This subsidiary of ANC-linked Thebe Investments has its own tentacles in the fossil fuel markets, such as Shell SA – which stands to gain billions should the controversial fracking for shale gas in the Karoo go ahead.

The creation of Chancellor House significantly boosted the ANC’s coffers, with assets worth R1.7 bn in 2007 despite debts of around R100 m not long before. Opinion on where this money came from range from arms deal backspin-offs to minerals and energy tenderpreneurship – with redeployed cadres and party sympathisers in key state positions providing kickbacks to party coffers.

One of Chancellor House’s first, but largest, mining investments was the 2005 Kalahari Manganese deal. Eighty percent of the world’s manganese is in the Kalahari.

The deal paired Chancellor House with United Manganese Kalahari (UMK) in a joint venture with Pitsa Ya Setshaba Holdings and Renova Manganese Investments (RMI), a Bahamas-registered subsidiary of Renova. Renova, controlled by Russian oligarch Viktor Vekselberg, funded the deal to the tune of US$20 m of which nearly half has been estimated by political scientist Zweletha Jolobo as being ‘effectively gifting’ money for Chancellor House and Pitsa. Pitsa is a BEE manganese company, whose directors include Lazarus Mbethe and Robinson Ramaite, a former public service director general. Bateman Africa is also a key player in the contract.

The similarity between the ANC’s empire building and that of the former National

Party is not lost on the ANC. As an official close to President Zuma told Amandla!, ‘It is very important that we learn from the past and it is clear that the old National Party was successful because they had their own businesses and people in business working for them. Why can’t we do it also?’

The adoption of what has been described as the ‘National Party option’ – which has ensured BEE became both the instrument of transformation and a source of funding for the ANC – is a bone of contention in top ANC echelons. In contrast to Zuma’s increasingly strident assertion that no law prevents the politically connected from participating in business, Deputy President Kgalema Motlanthe told Parliament that Chancellor House should not be doing business with government, nor should it be advantaged because it was the ANC’s investment arm. Finance Minister Pravin Gordhan has also questioned Chancellor House’s operations. And in 2007, shortly after becoming ANC treasurer general, Mathews Phosa attempted to break formal party ties with the set of companies but with no apparent success.

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