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A shallow-water marine mining vessel working for the Alexkor diamond mining company. Shallow water contractors work in the sub tidal concession areas, using pumps are used to suck gravel off the sea floor, which is later processed an an onshore dense media separation plant.
He earlier had been found guilty by the country’s Constitutional Court for refusing to appear before a judicial commission of inquiry into allegations of state capture, relating to the alleged use government resources for the personal enrichment of his family and associates during his nine-year presidency, from 2009 to 2018. That investigation now appears to include elements in the country’s diamond industry, albeit not the major corporate players, but rather smaller players associated directly with the state.
At the heart of the scandal were the Guptas – Ajay, Atul and Rajesh – three Indian-born brothers who moved to South Africa after the fall of apartheid in the early 1990s. Setting up a business called Sahara Computers, over the course of just a few years they built up a portfolio of companies which enjoyed lucrative contracts with South African government departments and state-owned conglomerates. Investigations have since indicated were the result of the Guptas employing several Zuma family members, including the president’s son, and providing massive benefits to them and a good number of other government figures.
Public officials who testified before the official commission of inquiry told of being directly instructed by the Guptas to take decisions that would advance the brothers’ business interests. Compliance was rewarded financially, while disobedience brought about dismissal.
The state-owned public bodies that were allegedly “captured” by the Guptas were the ministries of finance, natural resources and public enterprise, as well as the government agencies responsible for tax collection and communications, the state broadcaster SABC, South African Airways, the state-owned rail-freight operator Transnet and Eskom, one of the world’s largest utility companies.
But it now appears that another enterprise captured by the Guptas may have been Alexkor, a little known state-owned diamond company charged with mining of alluvial diamonds on land, in rivers, on beaches and in the sea along the north west coast of South Africa.
INFILTRATING A GOVERNMENT-OWNED DIAMOND COMPANY
According to report published by the Organized Crime and Corruption Reporting Project (OCCRP), the Guptas’ involvement with Alexkor began in late 2010, when Malusi Gigaba was appointed South Africa’s public enterprises minister.
A year later, in 2011, Alexkor joined with the Richtersveld Mining Company (RMC), a firm representing the diamond miners in the Alexander Bay area, to create a joint venture known as the Pooling and Sharing Joint Venture (PSJV).
Gigaba approved the appointment of Mervyn Carstens as the PSJV’s CEO in August 2012, and named Rafique Bagus as its chairperson. Both men were known to be associated with the Guptas.
In October 2014, PSJV began a search for company to market and sell its diamonds. It found Scarlet Sky, which not only had limited experience in the industry, but did not even hold a trading license, which is obligatory in South Africa.
The majority shareholder of Scarlet Sky was Kubentheran Moodley, who was connected to both the Guptas and President Jacob Zuma. He has formerly served as an advisor to the minister of mineral resources, Mosebenzi Zwane, who also was an associate of the Gupta family.
Jacob Zuma, who served as president of South Africa between 2009 and 2018, until he was resigned under cloud of corruption accusations.
A demonstration in South African against the Gupta family, who was believed with the help of the Zuma family and associates to have gained control of state assets, including the Alexkor miniing operation.
UNDERCUTTING THE TRUE VALUE OF DIAMONDS
Scarlet Sky’s modus operandi was described earlier this year by Gavin Craythorne, a local diamond industry member, who testified before the Zondo Commission, the official body investigating charges of state capture.
Craythorne estimated that Scarlet Sky undersold Alexkor diamonds by as much as 47 percent during its first year of operation in 2015, with goods worth about $61 million being sold to its cronies for just $32 million, about half their value.
According to Craythorne, his analysis of the numbers showed that 30 percent of the lots sold at auctions by Scarlet Sky were below the reserve price, and in some cases by up to 90 percent.
Interestingly, as dictated by South African law, 10 percent of the diamonds were set aside for the State Diamond Trader, a state-run agency that was created buy and sell rough diamonds to members of the industry from historically disadvantaged groups. But in 2016 Mervyn Carstens was appointed the State Diamond Trader’s chairman. At the time he was still serving as CEO of the PSJV, meaning that he was both the seller and buyer of Alexkor’s diamonds.
Jacob Zuma resigned from office in February 2018, and since then has been battling charges of corruption which, if convicted, could land him in prison for considerably more time that he the 15 months he received for a contempt of court sentence.
The Guptas fled South Africa and are now reportedly living in the United Arab Emirates, where to date they have successfully avoided requests by the South African authorities for their extradition.