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Major red flags for South Africa’s $8.5 billion energy deal

Business Leadership South Africa (BLSA) says that allegations from former Eskom chief executive Andre de Ruyter of corruption among high-level government officials are serious, and could put the country’s $8.5 billion Just Energy Transition (JET) deal at risk.

According to BLSA CEO Busi Mavuso, the allegations made by De Ruyter warrant a full investigation, adding to the call from various sectors that he file a formal case.

During an interview with E-tv’s Annika Larsen last week (21 February), De Ruyter made several explosive allegations about entrenched corruption at Eskom and within the government, including that a senior politician was involved in dodgy dealings – and a government minister was well aware of this.

He also alleged that corruption was entrenched within the governing ANC, and that moves were being made to “water down” controls around the $8.5 billion JET deal – which involves countries like the US, UK, France, Germany, and the European Union funding South Africa’s move away from coal energy.

Mavuso said that these allegations could spook the nations involved in the deal.

“Although unproven, De Ruyter’s allegations are serious. BLSA hopes that the JET-IP package is not now at risk, with the countries that are funding it already concerned about South Africa’s international positioning.

“The US House of Representatives, as an example, is considering a resolution filed by Republicans last week asking the Biden administration for ‘a thorough review of the current and future status of the United States-South Africa bilateral relationship’.”

Mavuso said that South Africa’s JET-IP package is being funded by countries and regions that do not tolerate corruption.

“These are not the sort of investors that will tolerate any hint of corruption, particularly at the very top. Many are governed by their own laws such as ‘know your client’ that demand due diligence is conducted to ensure there is no corruption involved with transaction counterparts.

“These regulations are driven by the international Financial Action Task Force (FATF), the very institution that has adjudged our systems to combat money laundering, including our ‘know your client’ regulations, to be sub-par.”

The FATF on Friday (24 February) put South Africa on its global ‘grey list’ – a list of countries that are being monitored for having sub-standard protections against money laundering and terrorist financing.

Despite attempts by the government to push through and fast-track a host of new laws to address concerns raised by the FATF in 2021, it was not enough to keep South Africa off the list, as many deficiencies persist. The country now has until 2025 to address these issues to try and get off the list as quickly as possible.

As alluded to by BLSA, being on the grey list puts many financial agreements between South Africa and other nations at risk, as stricter due diligence will now have to be completed before financing can be approved.

Mavuso said that on top of putting the $8.5 billion JET deal at risk, De Ruyter’s allegations – if proven true – also highlight how deeply entrenched corruption is in the country, despite the work done by the State Capture Commission. This puts further dents into South Africa’s reputation.

She said the response from the ANC – to attack De Ruyter’s character instead of addressing the seriousness of the allegations – was also illuminating.

“Despite the massive efforts undertaken to expunge corruption from state systems through the Zondo commission, it seems the focus is to deflect from the main issue and attack De Ruyter, and so continue to protect the ANC’s vast patronage network at the expense of the country’s interests,” she said.

“Would it not be better to take the allegations at face value for now and commit publicly to arriving at the truth – wherever it may lead?”

Mavuso said that if De Ruyter is found to have misrepresented anything, the result would simply be punitive to him personally, whether legally or merely reputationally.

The alternative, to denounce the individual and, in so doing, avoid mentioning the elephant in the room, is far worse – “a serious hit to the entire state’s reputation as a polity that is governed by the rule of law”.

“The one issue that needs urgent investigation is the very serious implication that a cabinet minister was aware of corrupt dealings of a fellow ‘senior politician’ but did not report it. That is a criminal act,” she said.

“BLSA is extremely concerned about the poisoned environment in which the energy market operates and believes these serious allegations, though unproven, require an urgent response from our government and appropriate agencies of state to ensure that the truth is uncovered and appropriate action taken.”

Source : Business Tech