Publication: Business Day Issued: Date: 2004-03-15 Reporter:

A Week and a Promised Province Can Turn a Political Career on its Head



Business Day

Date 2004-03-15

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Human memory is short, fickle and convenient. Three months ago just about everyone and his dog was saying that Jacob Zuma, the country's deputy president, was a disgrace. He should do the decent thing and resign.

It got worse when we were told he was so wicked that a prima facie case of corruption against him had been established. He escaped prosecution because the state thought it might not have quite enough evidence to make the charge stick.

Since then and aided by Zuma's silence the world has changed. A general election is in the offing. April 14 is the day, and everything will be upside down again on April 15.

I observed in this column last week that business has now discovered it is perfectly all right to give money to political parties, and that it has been busy putting its cash behind those future presidential candidates it likes to think will be most amenable to the cause of commerce. But it may well be that it will find it has been chasing a spectre.

Some 2009 presidential hopefuls are well known. They have been in the public eye for years. Even though they may have fallen from grace and favour the African National Congress (ANC), which is or so I have heard it argued a multiparty democracy within itself which embraces many persuasions, has a well-developed, though, unofficial rehabilitation policy. But a general election is a profound leveller.

This time round, a lot is going to depend on Zuma.

Many in the ANC expect that, this year, he will "deliver" KwaZulu-Natal though there are those who are praying he will fail.

Everything I hear suggests Zuma will achieve what may turn out to be a massive win for the ANC in this populous province famous for its ever-present death wish. This will present, in turn, massive problems for business that may already have selected its favourites for 2009.

Because Zuma, who has been unreasonably paraded by his opponents as something of an unsophisticated rural hick, will then be a serious frontrunner. But then, I also said last week that every dirty trick will be used to discommode opponents.

The little informal think-tank I sometimes drop in on when it is deliberating has concluded, on the basis of the communications pouring in from diverse quarters, that Zuma who I have to say is rather better informed than some would want the rest of us to believe is, in any event, already a serious 2009 presidential contender.

Winning KwaZulu-Natal will simply increase his lead over the following pack. Of course, a lot can happen between now and 2007, which is when the ANC will next meet and when it will anoint its next pope.

As British prime minister Harold Wilson once famously remarked, a week is a long time in politics. But there can be no denying that delivering KwaZulu-Natal next month will give Zuma the look of a winner that the great and good of all political parties like their leaders to exhibit.

All this takes me back to the other presidential aspirants for 2009. None of them should be discounted, but business needs to be very aware of the process it has bought into. As I said last week, what matters here is how the money gets into party coffers. The identities of those who succeed in raising large sums will be carefully noted.

But it is usually the money raisers who do the informing of business opinion, not the other way round. This makes it dangerous. Business needs to be quite sure, before it hands over its cheques to those who lead the factions it effectively supports, that it has done its homework and done it thoroughly.

Politics is no more exacting or difficult than business itself. However and like business its many and varied dynamics need to be well understood before an investment is made.

A lemon by any other name

Over breakfast in a Sandton hotel this week, Myles Ruck, Liberty's CE, told me he was unhappy with my reporting of the argument between Liberty and Albert Swartz and thinks I have been unfair.

As Ruck reads the problem, Swartz invested R150000 with Liberty in 1994 for 10 years. He received in return life cover of R150000 over the 10 years, a monthly payment of R1492 for 10 years totalling R179009 and a final lump sum payment of R103448.

"Therefore in total he has received R282457 on his original investment of R150000."

Ruck emphasises that this is a return of 10,6% compounded "which represents a real return which is 49% above the average rate of inflation of 7,1% for that period".

In Ruck's view "these figures hardly support allegations of fraud or theft".

Ruck and I get on well he paid for breakfast but he is being disingenuous when he chooses to base a defence on such a charming and simplistic, but ineffective hypothesis.

What he is saying what Liberty is saying is that if it takes R100 of your money in year one and gives you back, say, R180 in year 10, then it cannot by definition have stolen any.

Oh, really.

Swartz's response is that if he had invested all R150000 in a risk-free SA bond yielding 15% a year back in 1994, his total receipts would have been R375000. "It is exactly this which I was talked out of," says Swartz, "on the misrepresentation that Liberty could guarantee a much better return. This is the basis of my fraud charge."

A major part of Swartz's complaint is that Liberty misappropriated some of his funds and tried to cover this up. "Equally serious," he says, "is that it (Liberty) invested my pension monies in what its managers describe as a volatile portfolio. This entirely ignores the reason that people hand their savings to big institutions is for security and preservation of capital.

"In any event, Liberty has already acknowledged and apologised for its bad investment performance.

"At least there is no argument on that point."

Swartz says his theft and concealment charges are still being prepared.

Meanwhile, the state has declined to press ahead with the fraud charge against Liberty but has given Swartz a nolle prosequi, meaning he is free to pursue his own criminal action against the assurer.

Swartz, who is a professional senior golfer, says he has every intention of doing so.

"I don't know," he says, "what Ruck is still doing messing about in the bunker guarding the first green."

Ruling means irrevocable guarantees are just that

MANY of the creditors in Retail Apparel, colloquially called RAG, still want to know just what the major lending bank, in this case FirstRand, intended for the company's future.

Documents available to the liquidators suggest strongly that the intention was to put the group into liquidation, then buy the business back using a section 311 of the Companies Act device, while leaving smaller creditors high, dry and desperate. To achieve this, it would have been necessary to secure the appointment of liquidators sympathetic to the plan. That process was derailed when the justice ministry intervened through the appointment of a liquidator, Enver Motala, unconnected with the major creditors at the time.

The section 417 commission of inquiry into RAG, which has already consumed weeks of expensive legal time and has probably cost about R10m in all, reconvenes on March 22 and will continue for another two weeks.

Meanwhile, the liquidators have recovered R106m paid over to McCarthy in January last year as an advanced payment against what had been deemed to be a secured claim. It has been quite a struggle. McCarthy sought originally to protect its receipt of the monies through the use of an interdict preventing the liquidators from reclaiming it.

Last week Judge Piet Combrinck overturned the interdict.

Interest due on the sum amounts to another R9m.

When payment was originally made out of the RAG estate, it was against an irrevocable guarantee of repayment.

The importance of the ruling in the Durban High Court is that it upholds the sanctity of irrevocable guarantees that might otherwise have been subject to widespread challenge.

With acknowledgement to the Business Day.