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ID CALLS ON THE AFRICAN DEVELOPMENT BANK TO SUSPEND THEIR $2 BILLION LOAN TO SOUTH AFRICA

16 SEPTEMBER 2010-ANC’s Chancellor House conflict of interest will be fuelled by this loan

NATIONAL ASSEMBLY

ANC’s Chancellor House conflict of interest will be fuelled by this loan

ID Spokesperson on Public Enterprises, Lance Greyling, has today written to the African Development Bank asking them to investigate the conflict of interest arising from their $2 billion to South Africa for the building of the Medupi coal-fired power station.

“I am taking this action today because the World Bank has claimed that their loan will not be used for the boiler contracts of Medupi Power Station of which Hitachi Power Africa, Chancellor House and the ANC will benefit,” stated Greyling.

“The African Development Bank loan was, however, granted last year in November and this money will certainly be used to pay for these boiler contracts. It is the ID’s firm conviction that the conflict of interest arising from the ANC benefitting from a government tender is in direct contravention of the African Development Bank’s framework for preventing and combating of fraud and corruption. The ID therefore hopes that this matter will be thoroughly investigated by the African Development Bank and that Chancellor House will finally be forced to divest its shares in Hitachi Power Africa.

A copy of the letter that has been sent to the African Development Bank is below along with the statement that was read out in Parliament today.


MEMBERS STATEMENT

16TH SEPTEMBER 2010

LANCE GREYLING, MP

INDEPENDENT DEMOCRATS

In March of this year I wrote to the President of the World Bank asking him not to grant the loan to South Africa unless the ANC in the form of Chancellor House divests its shares in Hitachi Power Africa.

The World Bank tacitly recognised this massive conflict of interest, but disingenuously avoided the controversy by claiming that their loan would not be used for the controversial boiler contracts.

While I vehemently disagree with their logic, I have today written the same letter to the African Development Bank whose U$2 billion loan to South Africa last year will most certainly be used to fuel this conflict of interest which is in contravention of their framework for preventing and combating of fraud and corruption.

The ID will continue to use all means at our disposal to ensure that the ANC is not allowed to swell their coffers through unethical means.
The ANC might deem my actions unpatriotic, but to paraphrase a famous politician, it is not the letters I write that are unpatriotic, but rather the fact that the ruling party is determined to profit off government contracts that is patently unpatriotic.


LETTER TO THE AFRICAN DEVELOPMENT BANK

Per Eldar Sovik
Director
Compliance Review and Mediation Unit (CRMU)
African Development Bank
B.P. 323, 1002 Tunis Belvédère
Tunisia

16 September 2010


Dear Mr Sovik,
Re: Serious governance concerns over African Development Bank loan to South Africa

I am writing this letter as a concerned Parliamentarian from South Africa who is trying to prevent a major conflict of interest occurring in my country’s electricity sector. This conflict of interest will be exacerbated by the African Development Bank’s U$2 billion loan that was granted to South Africa in November 2009 for the construction of the Medupi coal-fired power station.

This conflict of interest arises from the fact that the ruling political party in South Africa, the African National Congress (ANC), currently owns, through their front company Chancellor House, a 25% share in Hitachi Power Africa.

Hitachi Power Africa has been awarded the Government tender to build the boilers for both the Medupi and the proposed Kusile coal-fired power stations. This contract is worth in excess of R30 billion, or $4 billion. The ruling party’s share in this contract is therefore worth in excess of R5 billion or $800 million. These facts are well-known and have been widely reported in the media in South Africa. It has also been confirmed to me through a parliamentary question that I asked of our Public Enterprises Minister, Barbara Hogan, where a written response from her indicated that Chancellor House still possesses a 25% share in Hitachi Power Africa.

At present there are no laws in South Africa that deem such a blatant conflict of interest as being illegal. The reason why there are currently no laws is that the ruling party has not promulgated any, despite numerous assurances over the past six years that they would do so.
I would also like to draw your attention to the fact that the ANC’s own Treasurer-General, Mathews Phosa assured the media and the public in February 2008 that the ANC would divest itself from the deal in a “transparent” fashion, but the party has still not done so. Phosa said at the time that Chancellor House would appoint bankers to advise it on how to exit the deal. “There will be no deals in the corner. It will be very transparent. It will be handled by a reputable bank,” Phosa said. He added that the decision to exit the deal was reached because “governance is an issue and there is public focus on this.”

I am sure you will agree with me that such a glaring conflict of interest, in which the ruling party of a country stands to financially benefit to the tune of almost a billion dollars from a major public infrastructure build programme, flies in the face of the kind of good governance ethics the African Development Bank is attempting to nurture.

I would therefore request that you immediately investigate this issue as a possible breach of your Uniform Framework for Preventing and Combatting fraud and Corruption. I would then ask that you suspend the loan to South Africa until it is conclusively verified that the ANC, through Chancellor House, has divested all of its shares in Hitachi Power Africa, and that it will not in any way benefit financially from this Government contract.

I write this letter in defence of good governance and our young democracy. It would be a fatal setback for both these ideals if the ruling party of our country exploited the current lack of legislation governing political party funding to benefit financially from what should be a completely independent public build programme.

I realize that I am putting you in an invidious position by asking you to intervene in what is essentially a domestic governance issue. Given the size of the loan, however, and the dire implications that this will have for our democracy and our efforts at rooting out corruption and conflicts of interest at all levels of our public institutions, I believe that it is in your best interests for me to bring this matter to your attention. I also firmly believe that it would not be out of the ambit of your position to insist that the money that the African Development Bank loans a member country is not used to further a major conflict of interest, or in promotion of bad governance.

I therefore trust that you will give this issue all the attention that it deserves and that you will take the appropriate action. If you require any further information or clarification on this issue please do not hesitate to contact me.

I look forward to reading your response and hopefully witnessing strong action to prevent a major breach in good governance occurring in my country.

Kind Regards,


Lance Greyling, MP
Chief Whip
Independent Democrats

For media enquiries please contact Lance Greyling on 083 298 8553
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