Seven business scandals that rocked South Africa in 2023

The original article can be found here.

While 2023 was a year of recovery for some South Africans, it was also a year of scandals.

Phala Phala couch cushion cash

Since news broke in June 2022 that over half a million dollars had been stolen from under a couch cushion at President Cyril Ramaphosa’s Limpopo game farm, key questions have gone unanswered. Was the money declared to the taxman? Was it legal to keep forex for more than 30 days? Did the president or his business need to pay VAT?

In August, the SA Reserve Bank’s Financial Surveillance Department weighed in on whether the cash broke exchange control laws. The short answer? No.

The long answer is more complicated. The central bank said its probe found that neither Ramaphosa nor Ntaba Nyoni Estates – which owns Phala Phala – needed to report the stolen $580 000 to authorities because the transaction had not been “perfected” or fully completed.

While the ANC said the bank’s “unambiguous and definitive” findings put the matter to rest, opposition parties and civil society groups scoffed at the report.

The worst year yet for loadshedding

Loadshedding may be old news, but that doesn’t mean it can’t still break records.

2023 was the worst year for power cuts in South Africa – with the most loadshedding days yet. Eskom repeatedly implemented Stage 6 cuts, even as it spent billions of rands on diesel to fund the operation of open-cycle gas turbines to keep the cuts from worsening.

And 2024 got off to a bad start, with load shedding implemented on New Year’s Day despite low demand from business and industry.

Things aren’t expected to get much better this year. If there is a silver lining, it is that around 2.5GW of rooftop solar was added in SA last year, as households and businesses tried to decrease reliance on Eskom.

Who is funding Zuma’s legal costs? 

The friendship between outspoken Gauteng diamond dealer Louis Liebenberg and former president Jacob Zuma is, on the face of it, odd.

Liebenberg, 59, is a self-styled advocate for an Afrikaner homeland who is being probed by the SA Human Rights Commission for using racist language. Liebenberg has denied wrongdoing, and the case has not yet been heard in court.

Zuma, meanwhile, has spent much of the past year embroiled in a private prosecution bid against his corruption prosecutor Billy Downer and News24 specialist legal writer Karyn Maughan.

The pair are not only friends. The businessman is also contributing to Zuma’s legal costs.

The full extent of the diamond dealer’s financial support for the former president only became clear this year during ongoing liquidation proceedings against Liebenberg’s company Tariomix. The company, which finances the buying and selling of diamonds, has for years attracted criticism that it operates like a pyramid scheme, a claim Liebenberg has consistently denied.

When Tariomix’s provisional liquidators got access to the company’s accounts earlier this year, they found that at least R3.2 million had been paid to advocates and attorneys on Zuma’s legal team.

Collapse of the BHI Trust

In early October, a 60-year-old Johannesburg investment manager handed himself over to the police.

Craig Roy Warriner, the former chairperson of the Old Boys’ Association of St Stithians College in Johannesburg, had run the BHI Trust investment scheme for a decade.

The trust, which had no website or social media presence, used word of mouth for recruitment. It promised annual returns of around 12% by investing in blue chip stocks such as Anglo American, Billiton and BAT.

Warriner told the police he wanted to come clean, fearing his life may be in danger. He did not apply for bail and is still in custody.

If the investment manager’s motives for giving himself up are still opaque – so are the trust’s finances.

According to the state’s charge sheet, Warriner confessed to having defrauded about 220 people of an estimated R1.18 billion in what it says was a pyramid scheme. But the trust’s provisional liquidators only found R4.5 million in the group’s main bank account.

Warriner is expected to stay behind bars until his case is next heard in March, unless he changes his mind and launches a bail application.  

South Africa is greylisted

Before 2023, it’s unlikely many South Africans had heard of the Financial Action Task Force (FATF), the Paris-based intergovernmental body that sets global standards to combat money laundering and terrorist financing.

In February, SA was for the first time placed on FAFT’s “grey list” – officially referred to as Jurisdictions under Increased Monitoring – putting the country in the company of places like Syria, Haiti and Yemen. To be added to the list, FAFT must identify “strategic deficiencies” in how states tackle money laundering and terrorist financing.

The greylisting was another black mark against SA’s financial ecosystem. And while analysts downplayed its immediate impact, they cautioned that it would further strain on the economy if SA didn’t get off the list quickly.

In October, the watchdog said that while SA had taken some steps to improve compliance, more needed to be done – such as showing it could investigate and prosecute complex money laundering cases.

Post Office enters business rescue

In 2023, the government-owned Post Office was placed into provisional liquidation – meaning it is insolvent and unable to settle its debts.

Had the matter proceeded to what some called the “nightmare scenario” of final liquidation, there would have been no going back. Liquidators would have been legally entitled to close up the Post Office’s branches and sell off everything they could find.

If the provisional liquidation was a severe jolt to the government – it was hardly surprising. The Post Office had been losing billions of rands for years, with a bloated workforce whose salaries cost more than what the state-owned entity earns in revenue.

The government quickly stepped in and convinced a court to stop the liquidation proceedings and let the Post Office instead enter business rescue-  a type of bankruptcy protection that would stop it from going under.

The price? Cutting more than half of the group’s 11 000 jobs and closing over 400 loss-making branches.

The business rescue, meanwhile, plan is contingent on unlocking a state-sponsored R3.8 billion bailout. 

Port Chaos

2023 was the year that long-simmering problems at SA’s network of government-owned and run ports finally came to a head.

A backlog of tens of thousands of shipping containers built up outside Durban port, which authorities said would take months to clear.

As congestion worsened, global shipping companies started to add port congestion surcharges for transporting cargo to South Africa.

At the port of Richards Bay, meanwhile, the local municipality has had enough of thousands of coal dump trucks clogging up the roads to bring coal to the export terminal there.

The municipality threatened to sue Transnet over its failure to maintain the region’s rail infrastructure, arguing the coal carried by the dump trucks should be transported via freight rail.

Meanwhile, Transnet acknowledged the trucks had caused a “logistics nightmare” at the port.