It seems the idea of a South African high-speed railway is not likely to disappear soon.⁽²⁾ Initially, the brainchild of former Minister of Transport Jeff Radebe and the 2005 National Transport Master Plan (NATMAP) to revitalise South Africa’s commuter rail network, the idea has been reviewed by current Transport Minister Sibusiso Ndebele, who hopes the project will revive the rail industry, while simultaneously unlocking South Africa’s economic potential and assisting in job creation.⁽³⁾ Due to appear on Cabinet’s agenda within the next few weeks, this project involves a 566km link between Durban and Johannesburg that would incur travelling times of three hours or less.⁽⁴⁾

However, this idea has surfaced numerous allegations of corrupt practices, with claims that this railway is nothing more than another opportunity for politically exposed persons and their companies to boost financial turnover. Nevertheless, the proposal of a long-distance high-speed railway has triggered both national and international interest.⁽⁵⁾ This discussion paper aims to investigate this proposal in order to determine if the allegations of corruption are unfounded, or if the smoke indeed signals a flame. The following sections will each discuss a series of events that took place since August 2010, from the international, state and private levels.

Bilateral partnerships

In August 2010, President Jacob Zuma was accompanied by a 370 strong entourage⁽⁶⁾ of ministers and businesspeople on an official state visit to the People’s Republic of China. A member of the entourage, Ndebele concluded a memorandum of understanding with the Chinese Minister of Railways, Liu Zhijun.⁽⁷⁾ This agreement essentially recognised the challenges faced by each state regarding rail and other transport related issues, and agreed to therefore actively seek cooperative investments in trade and industry between South Africa and China,⁽⁸⁾ as well as foster a closer relationship in matters concerning rail infrastructure, rail maintenance and development, financing, network safety and the transfer of technology. Additionally, these ministers further agreed to help facilitate joint ventures between both South African and Chinese firms and railway-focused consortiums.⁽⁹⁾

Enter the private sphere

In March 2008, the Industrial and Commercial Bank of China (ICBC) purchased a 20% stake in the largest financial services company in Africa, Standard Bank.⁽¹⁰⁾ Because the ICBC is state-owned, this move effectively granted China access to 17 African states in which Standard Bank maintains a presence. On the same day that the memorandum of understanding was signed between the Ministry of Railways and the Department of Transport, two other agreements were also signed. The first memorandum of understanding, between the Chinese Railway Construction Corporation (CRCC) and Standard Bank, noted that Standard Bank would cooperate with CRCC in finding funding for rail and infrastructure projects within South Africa,⁽¹¹⁾ of which Standard Bank would be responsible for 30-40% of the required capital.⁽¹²⁾

The second memorandum of understanding was concluded between the CRCC and a South African company by the name of Afripalm Horizon, which agreed that the two companies form a joint venture to pursue opportunities in South Africa, with specific preferences towards the construction, development or maintenance of transport infrastructure projects such as that of ports, railways and roads.⁽¹³⁾ What is most interesting about this joint venture is that the Afripalm Horizon board of directors includes such persons as Lazarus Zim, the newly appointed chairman of Telkom,⁽¹⁴⁾ Duduzane Zuma, son of President Jacob Zuma and Rajesh (Tony) Gupta, youngest of the three Gupta’s.⁽¹⁵⁾

The involvement of the state

Although the issue has been raised of what a high-speed link would cost the state to develop, Ndebele reiterated that the mandate of the Department of Transport was to provide safe, reliable, efficient and affordable public transport systems.⁽¹⁶⁾ It is the view of Government that this project would aid in South Africa’s development and create the jobs that the state so desperately needs. The link would be managed by Transnet, the state-owned rail, port and pipeline operator, which recently announced the appointment of Brian Molefe as their new Chief Executive Officer.⁽¹⁷⁾

Molefe, who beat 63 other candidates to the position, has come under some fire for his appointment. Apart from his appointment being an incredibly quick process,⁽¹⁸⁾ there has been an indication that the ruling party, the African National Congress (ANC), and their alliance partners, COSATU and the South African Communist Party were both unhappy with the lack of consultation on this and other cases of appointment.⁽¹⁹⁾ COSATU shortly thereafter announced an investigation in the appointment of Molefe, citing a belief in the involvement of the Gupta bothers.⁽²⁰⁾

Concluding comments

When one considers all these events, it is not difficult to assume a degree of interconnectedness. After all, the idea to build a railway could potentially greatly enrich a few key stakeholders, with the Afripalm Horizon directors being the most likely. The involvement of Standard Bank, however, seems most coincidental. This is in view that China needed a financial partner in Africa, and if the agreement had not been made with Standard Bank, then it would have been another institution. The only issue of concern regarding this matter is that when the United Kingdom (UK)-based Barclays Bank sought a stake in South Africa’s ABSA, the deal became a matter of public debate. The same occurred in mid-2010 when UK based HSBC entertained ideas of a stake in Nedbank. The ICBC’s interest in Standard Bank was not publicised until the deal was concluded.

While the COSATU investigation revealed that the Gupta’s were indeed ‘friends’ with Molefe, allegations of interference in his appointment were denied.⁽²¹⁾ Surely this relationship could be purely circumstantial? It may be. However, when the Gupta-owned newspaper, The New Age, reported under good authority in December 2010 that Molefe would be appointed as Transnet CEO, as well as naming a number of other new appointees to the Board, one cannot help but raise an eyebrow and ignore the claims of non-interference.⁽²²⁾

NOTES:

(1) Contact Megan Erasmus through Consultancy Africa Intelligence’s Asia Dimension Unit (asiadimension@consultancyafrica.com).
(2) Williams, D., “Rail – High speed links: Fast track to nowhere”, Financial Mail, 17 February 2011, http://www.fm.co.za.
(3) “Department of Transport ready to take high-speed rail to Cabinet”, South African Department of Transport, 22 February 2011, http://www.info.gov.za.
(4) Ibid.
(5) Ibid.
(6) Naidoo, P. “China-SA trade: Great leap forward”, Financial Mail, 3 September 2010, http://www.fm.co.za.
(7) “Statement on the Minister of Transport Sibusiso Ndebele signing transport agreements during state visit by President Jacob Zuma to China”, Department of Transport, 23 August 2010, http://www.info.gov.za.
(8) Ibid.
(9) Ibid.
(10) “China Africa linkage to spur on economic growth”, Standard Bank News Centre, 9 February 2011, http://corporateandinvestment.standardbank.co.za.
(11) Standard Bank did, however, comment that this agreement did not refer to a specific project and on 3 September 2010, Jacko Maree stated that Standard Bank held no stake in the proposed rail link between Johannesburg and Durban.
(12) “China Railway talks on $30billion South African Bullet-train project”, Bloomberg, 24 August 2010, http://www.bloomberg.com; “South Africa’s Standard Bank to work with China Rail”, Reuters, 24 August 2010, http://af.reuters.com.
(13) Webb, M., “Lazarus Zim’s Afripalm forms infrastructure alliance with Chinese group”, Engineering News, 24 August 2010, http://www.engineeringnews.co.za.
(14) Marais, J, “Lazarus Zim vows more deals after ventures with Gupta’s”, Business Times, 26 February 2011, http://www.businesslive.co.za.
(15) Brummer, S., Shamase, N. and Sole, S., “Steel of a deal for Zuma Jnr”, Mail and Guardian centre for Investigative Journalism, 25 February 2011, http://amabhungane.co.za.
(16) “Ndebele dismisses luxury speed claims”, Government Communication and Information System, 7 March 2011, http://www.buanews.gov.za.
(17) Cohen, M., “Brian Molefe named CEO of South Africa’s Transnet”, Bloomberg, 16 February 2011, http://www.businessweek.com.
(18) Sixteen days passed between the close of applications and the announcement by the Minister of Public Enterprises, Malusi Gigaba of Brian Molefe as CEO.
(19) Sole, S. and McKune, C., “Going off the rails?”, Mail and Guardian Centre for Investigative Journalism, 4 March 2011, http://amabhungane.co.za.
(20) “Molefe posting irks COSATU”, Sunday Times, 27 February 2011, http://www.timeslive.co.za.
(21) Mabuza, K., “Guptas open books for scrutiny”, Sowetan Live, 2 March 2011, http://www.sowetanlive.co.za.
(22) Sole, S. and McKune, C., “Going off the rails?”, Mail and Guardian Centre for Investigative Journalism, 4 March 2011, http://amabhungane.co.za.

Written by Megan Erasmus ⁽¹⁾