An important reminder: We are taking Friday, July 16, off as a mental health day for our team. As we mentioned before, June has been quite a hectic month for us, as we worked through weekends. So we’re giving ourselves a belated gift of a day of rest and sanity:) We will be back on Monday, July 19, all ready to go!

A Saharanpur scandal in South Africa

The TLDR: Former president Jacob Zuma has been arrested for refusing to appear in front of an inquiry into corruption during his tenure in office. His arrest has in turn led to rioting in the streets. At the heart of this corruption scandal are three brothers from Saharanpur who looted the South African state and controlled the levers of government—all thanks to their cosy relationship with Zuma. This is their story.

Meet the Gupta brothers

Life in Saharanpur: Ajay, Atul and Rajesh Gupta were raised in Saharanpur by their father—the owner of a ration shop. They were educated in a one-room Hindi-medium school. Ajay, the eldest, got his start selling smuggled electronic goods in Delhi—and soon expanded their business to Singapore, which offered an early indication of their special set of skills:

“At one point while in Singapore, Ajay approached an associate to set up a factory in Saharanpur to manufacture computer memory cards. But there was a catch: The factory wouldn’t actually produce anything. Instead, Ajay would send the memory cards fully assembled from Singapore, and the associate would simply ship them back, claiming they had been made in India. That way, Ajay could obtain an Indian government subsidy of $2 per card, while showing a loss of $1 on the books.”

Moving to South Africa: In 1993, Gupta Sr. sent one of his sons, Atul, to South Africa soon after the end of apartheid—insisting that it was about to become the “America of the world.” The family soon set up a company putting together computer parts and selling them under the name Sahara—after the African desert and as a tribute to their hometown. Their fortunes improved, as did their social status. And they soon rubbed shoulders with a South African politician of Indian origin—named Essop Pahad, who would become their conduit into the government.

Schmoozing the state: After the end of apartheid, South African leaders were eager to curb the power of white-owned businesses, and pivot away from Western nations like Britain. The Indian Guptas met both the criteria—and soon were in the inner circles of the government. As their wealth grew, so did their influence—which would reach unprecedented heights when they invited Jacob Zuma to one of their events. Zuma would soon be mired in a series of scandals—including a rape allegation—but the Guptas stuck by him, and were finally rewarded when Zuma became president in 2009.

Point to note: The South Africa the Gupta brothers encountered was at a moment of great transformation—and greed: “After years of enduring corrupt and ruthless white rule, many A.N.C. members were also hungry for self-enrichment, believing it was their ‘time to eat,’ as one anti-apartheid activist told me.”

And that greed suited the Guptas to a tee:

“In South Africa, the Guptas found a country with the allure of the white First World, but all the guile of the Third World in which they’d been raised. And unlike other Indians in South Africa, they were free of the country’s history of oppression; as Hindu males born in independent India, they had been like white men back home. Which is why, when opportunity presented itself in South Africa, they acted like white men before them—with impunity.”

By 2016, the Guptas were listed as the seventh richest South African family valued at over $800 million. Also, they look like this:

Meet the Zuptas!

‘Zupta’ has become the portmanteau term in South Africa to describe the close relationship between the two families. Zuma’s third wife Bongi Ngema-Zuma was employed by the Guptas’ mining company, his daughter Duduzile was made director of Sahara Computers, and son Duduzane held the same position in multiple firms:

“The brothers helped set him up in a $1.3 million apartment in the Burj Khalifa in Dubai, the world’s tallest skyscraper, and paid for his five-star vacations… In 2014, when Duduzane crashed his Porsche into a minibus, killing two passengers, the first person he called was Rajesh.”

As the New York Times notes, “the three brothers cultivated ties to the governing party so expertly that it became difficult to draw the line between their business empire and the president’s office.”

The looting of South Africa

Zuma soon developed a reputation of a leader willing to put his personal interests ahead of that of the nation—and make a lot of money doing it. And the Gupta brothers made the perfect partners—using government contracts to loot state-owned companies. Current president Cyril Ramaphosa has estimated that more than $37 billion was stolen from the state during Zuma’s rule. Here are some examples of how vast chunks of it ended up in the Guptas’ pockets:

Example #1: Zuma openly allowed the Guptas to personally handpick ‘simpatico’ people for key cabinet positions—and fire those who refused to play ball. For example, Mosebenzi Zwane who was appointed mining minister in 2015—despite being unknown. The reason: his close relationship with the Guptas. As agricultural minister, Zwane had helped a Gupta shell company acquire the rights to run a government-funded dairy farm meant to empower poor black farmers. By the end, the Guptas siphoned $16 million from the operation—and the cows were dying due to lack of feed.

Example #2: Here’s how things worked in almost every major sector of the South African economy:

“In 2014, Zuma’s associates awarded them [the Guptas] the largest-ever supply contract with Transnet, South Africa’s rail and port company—a deal worth $4.4 billion. The Guptas used the contract to secure millions in kickbacks—which they called “commissions”—from international players eager to do business with the firm. Zuma also installed four Gupta allies on the board of Eskom, South Africa’s power utility, which illegally handed the Guptas $38 million in government funds to buy the Optimum Coal Mine. (Eskom had hounded the mine’s previous owners into bankruptcy at the Guptas’ behest.)”

Example #3: It wasn’t just the South African government that got its hands dirty. Foreign companies behaved like pigs at the trough, as well:

“McKinsey & Company, the global consulting giant, partnered with Eskom on a scandalous deal—its largest-ever contract in Africa—that wound up funneling money to a Gupta-linked firm… The London-based P.R. firm Bell Pottinger used Twitter and fake-news Web sites to inflame racial tensions in South Africa, spreading the idea that ‘white monopoly capital’ was orchestrating the attacks on the Guptas to create ‘economic apartheid.’ And KPMG, the accounting firm, was hired for $1.65 million by a top Zuma ally to discredit South African tax officials who were investigating the brothers. The firm essentially copied memos provided by the government, portraying the officials as a “rogue unit” that illegally spied on the Zuma administration and ‘engaged the services of prostitutes during their leisure time.’”

Point to note: So great was their power, the Guptas soon began to flaunt it with impunity—which is what got them into trouble in the end. In 2013, for a daughter’s wedding, they flew in 200 guests in a specially chartered plane that landed… at a military base! And in 2015, they tried to bribe the wrong man: Mcebisi Jonas, the country’s deputy finance minister. They offered him the finance minister’s job:

“Ajay Gupta revealed that they’d already made 6 billion rand ($443 million) from dealings with the government, and wanted to make at least 2 billion rand more (about $147 million). When Jonas refused, they tried to sweeten the deal with 600 million rand (about $44 million) and an extra 600,000 rand ($44,318) in cash, right there.”

Gupta also said at the meeting: “You must understand that we are in control of everything. The old man will do anything we tell him to do.” Jonas would refuse, and later go public with details of the bribery attempt. 

And we all fall down…

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