COMMISSION OF INQUIRY INTO STATE CAPTURE
HELD AT
PARKTOWN, JOHANNESBURG

10

19 NOVEMBER 2018

DAY 25

20

19 NOVEMBER 2018 – DAY 25
PROCEEDINGS HELD ON 19 NOVEMBER 2018
CHAIRPERSON: Good morning Mr Pretorius?
ADV PAUL PRETORIUS SC: Good morning Chair.
CHAIRPERSON: Good morning everybody. Good morning Mr Gordhan.
MINISTER PRAVIN GORDHAN: Good morning Chair.
CHAIRPERSON: Thank you. Mr Pretorius.
ADV PAUL PRETORIUS SC: Before we begin with the evidence of Minister Gordhan
Chair, may we just place on record that there is an application for condonation before
you. That application deals with the late service by 2 and 3 days respectively on certain
persons who were issued 3.3 notices in terms of the rules on the assumption that they
might be implicated by the evidence of Minister Gordhan.
The application has been served on the various parties, there is no opposition
to the application, but there may be applications to cross-examining forthcoming
nevertheless.
Unfortunately due to logistical issues, the hospitalisation of the person making
copies, last night of the application we only have a copy of the application for you, which
is not indexed and paginated and you have not had an opportunity to read it. So, subject
to what any of the parties present may say, we ask that that application be deferred until
tomorrow morning.
CHAIRPERSON: I think that would be in order, unless there is any affected party that
has an objection to that application being heard tomorrow.
ADV PAUL PRETORIUS SC: It may – I am sorry Chair, it may be apposite to mention
that there is no opposition, but parties are present, they may wish to place themselves
on record and tell you of their attitude.
CHAIRPERSON: Well firstly, with regard to the application, if there is no opposition then

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I would imagine that as far as it being heard tomorrow, there should be no problem. But
to the extent that there are counsel who would like to place themselves on recor d, let us
deal with that now.
ADV PAUL PRETORIUS SC: As you please Chair.
ADV DALI MPOFU: Good morning Chairperson.
CHAIRPERSON: Good morning Mr Mpofu.
ADV DALI MPOFU: Thank you. Yes Chairperson, I am here placing myself on record
as representing one of the implicated persons in the application that Mr Pretorius referred
to, namely Mr Thomas Moyane who is listed as the 7 th such person.
CHAIRPERSON: Mr Thomas?
MR DALI MPOFU: Thomas Moyane M-o-y-a-n-e [spelt].
CHAIRPERSON: Okay thank you.
ADV DALI MPOFU: I am instructed by Mabusa Attorneys. I would just like to indicate
Chair that tomorrow morning I personally might not be here, but my junior will be here.
But seeing that the application, the condonation application is not opposed by us, it
should make no difference.
CHAIRPERSON: Yes.
ADV DALI MPOFU: What we do want to place on record is that we would like to exercise
our rights to apply for cross-examination subject to that application.
CHAIRPERSON: Yes.
ADV DALI MPOFU: As the court pleases.
CHAIRPERSON: Okay no thank you. In that regard is there already an application that
you have lodged, or not yet for leave to cross-examine?
ADV DALI MPOFU: We have not lodged a DCJ, we have got an application that is
incomplete. Unfortunately our client is indisposed today. So I am discussing with

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Mr Pretorius that we serve it within the 14 days, which would be by Wednesday.
CHAIRPERSON: Okay alright.
ADV DALI MPOFU: Thank you.
CHAIRPERSON: Thank you.
MR PHILLIP MAHLATSE: Good morning Chairperson.
CHAIRPERSON: Good morning.
MR PHILLIP MAHLATSE: Morning. My name is Phillip Mahlatse.
CHAIRPERSON: Yes.
MR PHILLIP MAHLATSE: I hold my rooms at Peter Chambers in Central Johannesburg.
CHAIRPERSON: Yes.
MR PHILLIP MAHLATSE: In these proceedings I would be led by IM Simanye SC who
is unfortunately not present today. We align ourselves with the position held by Mpofu.
In fact there was a confusion over the weekend as to whether or not our client
Mr Shaun Abrahams was in fact served with the Rule 3.3. I have liaised with my
colleagues and they have given me in fact proof to the effect that that was done on the
7th. Effectively mean that the deer's would then expire on Wednesday this week.
Our position is that we want to participate to the extent obviously based on the
evidence that would be led by Mr Gordhan and we also then reserve our right at a later
stage to launch an application, or to in fact come through to put our version to this
Commission. Thank you Chair.
CHAIRPERSON: Thank you very much. It looks like that is everybody that needed to
place themselves on record. Yes Mr Pretorius.
ADV PAUL PRETORIUS SC: It appears so thank you Chair. The second housekeeping
matter that must be dealt with Chair is the issue of the bundles. You have before you
bundles which form part of the statement made by Minister Gordhan with annexures

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compiled by the legal team of Minister Gordhan. There are six of them. May they be
marked M1 "A" to "F"? They are probably already marked on the spine of your bundles.
CHAIRPERSON: The lever-arch files?
ADV PAUL PRETORIUS SC: Ja I am instructed by the majority of the legal team Chair
that it should be "N" for Nelly.
CHAIRPERSON: Okay. And the majority ...[intervenes]
ADV PAUL PRETORIUS SC: So it will N1 "A" to "F".
CHAIRPERSON: And the majority buys the minority?
ADV PAUL PRETORIUS SC: I am sorry Chair?
CHAIRPERSON: And the majority buys the minority?
ADV PAUL PRETORIUS SC: Yes it does.
CHAIRPERSON: Okay.
ADV PAUL PRETORIUS SC: Certainly in this case.
CHAIRPERSON: You say it should be "N" you said?
ADV PAUL PRETORIUS SC: "N".
CHAIRPERSON: "N" for Nelly?
ADV PAUL PRETORIUS SC: N1 "A" to "F".
CHAIRPERSON: Ja "N" for Nelly?
ADV PAUL PRETORIUS SC: "N" for Nelly.
CHAIRPERSON: Okay the lever-arch files submitted by Minister Gordhan will be
marked as EXHIBIT N and they will be from N-A to F, "A" being the lever-arch file that
has got his statement. How do I identify the other ones Mr Pretorius?
ADV PAUL PRETORIUS: That is in N1 "A".
CHAIRPERSON: Oh Exhibit N.
ADV PAUL PRETORIUS: N1 "A" contains the statement.

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CHAIRPERSON: 1 "A" has the statement and then how do we know the next one?
ADV PAUL PRETORIUS: Are they – may I ask Chair have they been marked on the
spine?
CHAIRPERSON: Oh they have been marked. But they have not been marked Exhibit N,
they have been marked Exhibit M. I see Exhibit M1, the two of them have got Exhibit
M1, it looks like all of them have got Exhibit M1. Is "M" correct or should it be "N"?
ADV PAUL PRETORIUS: It should be "N" I am informed. There is already Exhibit M, I
am told.
CHAIRPERSON: Okay. Can we then – will you arrange that maybe during the break,
they be corrected?
ADV PAUL PRETORIUS: I will do so Chair.
CHAIRPERSON: So that they will be Exhibit N1 and then there will be N1 "A" up to "F".
ADV PAUL PRETORIUS: Yes.
CHAIRPERSON: Okay.
ADV PAUL PRETORIUS: There is an additional bundle, which I am instructed that you
have which is a supplementary bundle prepared over the weekend and that is N2. That
will be that bundle Chair.
CHAIRPERSON: Ja well I think this is the one, the handwriting is so beautiful I struggle
to see whether this is supplementary, but it is, I have got it.
ADV PAUL PRETORIUS: That will be referred to during the course of evidence as well
as the supplementary bundle.
CHAIRPERSON: Yes. The ones that the witness have been appropriately marked?
ADV PAUL PRETORIUS: Yes.
CHAIRPERSON: Okay.
ADV PAUL PRETORIUS: The witness is aware, he has his own bundles from the

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original compilation.
CHAIRPERSON: Ja.
ADV PAUL PRETORIUS: The copies that were made for you Chair and the copies that
have been made for the legal team were made subject to the logistical difficulties that I
have mentioned.
CHAIRPERSON: Okay alright.
ADV PAUL PRETORIUS: Thank you.

By your leave then Chair, we call Minister

Gordhan who will make an affirmation.
CHAIRPERSON: Before we do that, there was the other matter that needed to be
mentioned.
ADV PAUL PRETORIUS: As you please Chair.
CHAIRPERSON: Do you want to say anything?
ADV PAUL PRETORIUS: I do not want Chair.
CHAIRPERSON: Yes. I just want to announce that Mr Paul Pretorius brought to my
attention over the weekend certain allegations that were in the media relating to him and
I request or demand that he should consider recusing himself from the Commission
because of a matter in which he represented a certain Mr Lackay and an allegation that
he is close to Minister Gordhan and that he should recuse himself for that reason. Within
the time available, Mr Pretorius has given me a clarification in regard to the matter. But
I think that those who may wish to request that he should recuse himself should write to
the Commission with a substantiation of the allegations, so that they can then be looked
into properly. But from what Mr Pretorius has told me so far within the time available to
him, I am satisfied that there is no problem with him continuing.
If and when at a later stage there are other facts that are put before the
Commission that are not known to me at this stage, the matter would be looked into again

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at that stage. But the party concerned, if they send written – a written complaint to the
Commission with substantiation of facts, their appeal or request will be looked into
properly. Thank you.
I think the registrar will then administer an affirmation to Minister Gordhan.
REGISTRAR: Please state your full names for the record?
MINISTER PRAVIN GORDHAN: Pravin Jamnadas Gordhan.
REGISTRAR: Do you have any objection in making the prescribed affirmation?
MINISTER PRAVIN GORDHAN: No.
REGISTRAR: Do you solemnly affirm that the evidence you will give will be the truth,
the whole truth and nothing but the truth?
MINISTER PRAVIN GORDHAN: I affirm.
REGISTRAR: If so, please raise your right hand and say, I truly affirm.
MINISTER PRAVIN GORDHAN: I affirm and I truly affirm.
CHAIRPERSON: Thank you, you may be seated, thank you very much.

Before

Mr Pretorius begins, I just want to thank you Minister Gordhan for coming forward to
assist the Commission. We have been making a call to all South Africans who may have
information about the matters that we are investigating, to come forward and we have
made a call to President past Ministers, Deputy Ministers, Directors General and so on
to please come forward with regard to any knowledge or information that they have on
matters that fall under what we are investigating and some have come forward and we
grateful for that and we are grateful that you also have come forward. Thank you very
much.
MINISTER PRAVIN GORDHAN: Thank you Chair. You see that is our responsibility.
CHAIRPERSON: Thank you.
ADV PAUL PRETORIUS: Good morning Minister.

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MINISTER PRAVIN GORDHAN: Good morning.
ADV PAUL PRETORIUS: Minister you have before you in Bundle N1 "A" a statement of
some 60 odd pages and your signature appears on page 68, is that correct? Before we
ask you to confirm your statement, I am told that there is a correction you wish to bring
at paragraph 79?
MINISTER PRAVIN GORDHAN: Thank you Mr Pretorius and Chairperson, I thought we
will do the correction when we get there, but Mr Pretorius is right.
CHAIRPERSON: I am sorry Minister Gordhan. Maybe you might wish to raise your
voice, I am struggling to hear you from here. I must check at the back whether they can
hear you. Can you hear the witness from there? There are indications of yes and no.
MINISTER PRAVIN GORDHAN: Well good morning to everyone.
CHAIRPERSON: So I think with a raised voice it should be fine, thank you.
MINISTER PRAVIN GORDHAN: So at paragraph 79 Chairperson, sorry I am not sure
whether the protocol is Chairman or Chairperson?
CHAIRPERSON: No that is okay.
MINISTER PRAVIN GORDHAN: Particularly with reference to the last sentence, where
it says:
"Rand depreciated sharply from 13.40 to 15.40 in relation to the
US Dollar overnight."
We obtained more accurate numbers from Bloomberg yesterday.
CHAIRPERSON: I am sorry. Did you say paragraph 89?
MINISTER PRAVIN GORDHAN: 79.
CHAIRPERSON: 79.
ADV PAUL PRETORIUS: May I interject Minister Gordhan?
...[intervenes]

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For the present page

19 NOVEMBER 2018 – DAY 25
CHAIRPERSON: Oh I have got it now.
ADV PAUL PRETORIUS: ... you need to just delete the sentence.
MINISTER PRAVIN GORDHAN: We can delete the sentence and we will give you the
numbers later, if that is okay.
CHAIRPERSON: Which sentence must we delete?
MINISTER PRAVIN GORDHAN: The last sentence.
CHAIRPERSON: Oh.
ADV PAUL PRETORIUS: Paragraph 79 the last sentence.
CHAIRPERSON: Is that the only correction on that paragraph?
MINISTER PRAVIN GORDHAN: Yes.
ADV PAUL PRETORIUS: Yes Chair.
CHAIRPERSON: Okay.
ADV PAUL PRETORIUS: Then Minister Gordhan the signature on page 68 that is your
signature I understand?
MINISTER PRAVIN GORDHAN: Yes.
ADV PAUL PRETORIUS: Are the contents of the statement true and correct?
MINISTER PRAVIN GORDHAN: Yes.
ADV PAUL PRETORIUS: If I may just by way of introduction tell the Chair that your
intention is to give your evidence in your own words. But there are portions of the
statement that you wish to read and we will come to them in due course. They are mainly
quotations from other sources.
MINISTER PRAVIN GORDHAN: That is correct.
ADV PAUL PRETORIUS: Right.

Just to deal with the scope of your statement

Minister Gordhan, by way of introduction we are dealing with terms of reference 1.1 to
1.3 which deal principally with the appointment and dismissals of Ministers of State. Your

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evidence, as I understand it, is intended to deal with the circumstances prevalent at the
time of the appointment and dismissals of Ministers, some who have already testified and
about which witnesses have testified?
MINISTER PRAVIN GORDHAN: That is correct.
ADV PAUL PRETORIUS: You will also deal to a certain extent with issues of
Governance and particularly in relation to State Owned Enterprises I understand?
MINISTER PRAVIN GORDHAN: That is part of the statement yes.
ADV PAUL PRETORIUS: But there are aspects of the terms of reference which you may
wish to deal with at a later stage, or your Department, the Department of Public
Enterprises may wish to deal with at a later stage?
MINISTER PRAVIN GORDHAN: That is with particular reference to State Owned
Enterprises and what we are beginning, and we are only beginning to discover in terms
of both Governance issues and malfeasance Chairperson in these enterprises. We are
in the process as a Department of identifying as many documents as possible.
Representatives from the Department have been in touch with the investigating team of
the Commission, they had many exchanges to-date and we have a possible document
or copies thereof had been handed to the Commission. Obviously some documents may
well have been destroyed already, but when we come to that we will keep you informed.
ADV PAUL PRETORIUS: Right. There are also, I understand, matters in relation to
Treasury and your portfolio previously as Minister of Finance that may have to be dealt
with at a later stage.
MINISTER PRAVIN GORDHAN: Some of them Chairperson I actually dealt with in this
statement by way of illustration of some of the requirements of 1.1 to 1.3. But there are
also – which I am sure Mr Pretorius will come to, certain questions that your team has
asked me to cover, which is also contained in the statement.

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ADV PAUL PRETORIUS: Yes. Before I invite you Minister Gordhan to make any
opening comments that you wish to, may I just place on record with your assistance the
history of the statement which is before the Commission at present.
A draft statement, not an affidavit, was presented to the legal team on the
30th September, you recall that?
MINISTER PRAVIN GORDHAN: Yes.
ADV PAUL PRETORIUS: Certain additions were made to that statement, as a result of
requests from the legal team of the Commission asking you to address specific issues
that they wished you to deal with?
MINISTER PRAVIN GORDHAN: That is correct.
ADV PAUL PRETORIUS: A further statement was then produced and together with a
bundle was delivered on the 13 th October received, I understand on the 15 th October by
the legal team?
MINISTER PRAVIN GORDHAN: Yes.
ADV PAUL PRETORIUS: And that is the statement before you?
MINISTER PRAVIN GORDHAN: That is correct. May I with your permission Chair at
this stage ask your permission to following that particular question for the benefit of the
Commission's investigation into the so-called "leak" of this document?
CHAIRPERSON: Yes.
MINISTER PRAVIN GORDHAN: Indicate that the draft statement with which – or on
which both I and my legal team had interactions with Mr Pretorius and company. It was
only sent to Mr Pretorius and the team and yet there are tweets which seem to draw
comparisons between the draft and the final statement. So this is for the record. It is a
matter for the Commission to look into. If there is a very limited circulation of the first
draft as compared to the final version, it is quite intriguing to say the least that certain

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parties seem to have access and are able to comment in that particular regard.
CHAIRPERSON: Yes.
MINISTER PRAVIN GORDHAN: But that is just for the record.
CHAIRPERSON: No, no thank you. The investigation into the lexis is continuing and
we issued – I caused the sector of the Commission to issue a media statement on Friday,
which I understand was circulated, asking for those who have indicated in the media that
they know who was responsible for the leaks to bring evidence. So but investigation is
continuing.
ADV PAUL PRETORIUS: Thank you Chair. Minister at paragraph 1 of your statement
you refer to the submission of your statement to this Commission. Just again to place
on record for clarity sake, the statement and the bundles annexed were prepared by your
legal team?
MINISTER PRAVIN GORDHAN: Correct.
ADV PAUL PRETORIUS: In paragraph 2 you deal with the scope of the statement,
which I have already mentioned in opening. Do you have any comment?
MINISTER PRAVIN GORDHAN: No as I said earlier Chairperson the statement clearly
refers to the appointment and dismissal of Ministers. I am not sure if I hold the record in
that regard, but we will come back to that. Related matters which illustrate, what were
the issues that might have had a bearing on the events that unfolded as far as
appointments and dismissals are concerned. Thirdly, the additional issues that I was
asked to address.
ADV PAUL PRETORIUS: Before we proceed into the content of your statement, do you
wish to make any further opening comments?
MINISTER PRAVIN GORDHAN: No as soon as you allow me to, I will go to paragraph 4
and present my opening statement.

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ADV PAUL PRETORIUS: In paragraph 3 you mention that the account is based on your
own recollection, but that your memory has been refreshed by certain officials working
with you. Do you have any comment there?
MINISTER PRAVIN GORDHAN: No just to make the point that, particularly with
reference to Chairperson, the job of a Minister of Finance, it requires that there are many
different events about the internationally and locally and many different types of meetings
and that not all of the events or meetings are fresh in one's mind. I did rely on checking,
for example my diary of the Treasury, or checking with my former Chief of Staff or officials
at the treasury where it was appropriate and possible for them to recollect what really
happened. So some I have been trying caricature, the memory factor, but you know we
are getting a bit on in the age as well, one must confess that and that is the basis upon
which the statement is drafted.
ADV PAUL PRETORIUS: Thank you. At paragraph 4 you deal with your own personal
background and the approach that you have taken historically in your political career.
Before we go into those paragraphs, you said that you wish to make some opening
remarks. Could you also inform the Commission of your history in Ministerial positions
and as a member of Parliament?
MINISTER PRAVIN GORDHAN: Well if I may state and amplification of paragraph 4 as
I get into your question Mr Pretorius. Having an activist from the late 1960's and we
might recall that at that time the ANC was banned, but one of the arms of the Congress
Alliance says it was known then, was not, and that is an Italian then Congress. An older
generation of Congress activists in early 1970's decided to reactivate the Italian then
Congress.

An older generation of Congress activists on early 1970's decided to

reactivate the Italian then Congress as a flight bureau of the Freedom Charter within the
country at the time. That was the organisation that began to politicise a lot of us who

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were on campuses at the time, as did the Black Consciousness Movement of the time as
well.
Secondly, we did not see politics as a career, it was a commitment to changing
this country for the betterment of all the people of this country. We had an instinctive, if
you like, belief that whatever happens at which ever stage in our history the benefits of
those events and transformation processes that unfold must be benefits that accrue to
the majority and not to a small minority. An issue that is not irrelevant to the evidence
that we are going to give here today.
Thirdly the process leading up to becoming a Minister started firstly in the
negotiations, in the early 1990's at CODESA and the multi-party negotiations which I had
the privilege of participating in. Secondly, then becoming a member of parliament in 1994
until 1998, when I became the Deputy Commissioner of South African Revenue Service.
Then between 1999 and 2009, April, I was the Commissioner of the
South African Revenue Service, and in early 2009, Chairperson, I was in fact interviewed
for the job of CEO of Transnet, interestingly, and was even offered the job, and I had
accepted the job, but the ANC requested that I hang on and after the elections in 2009 I
was asked by the President to serve as the Minister of Finance between 2009 to 2014.
After the 2014 elections I was designated or assigned to the COGTA Portfolio
Cooperative Governance and Traditional Affairs…[intervenes]
CHAIRPERSON: I am sorry…[intervenes]
MINISTER PRAVIN GORDHAN: Where I served until 13 December 2015.
CHAIRPERSON: Okay, I am sorry, let me interrupt you. If you could just go back to how
you said the ANC, I think, said something when you had accepted the job for, I think it is
for the Group CEO for Transnet I think it was.
MINISTER PRAVIN GORDHAN: That is right.

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CHAIRPERSON: What did the ANC say and why did it say what it said?
MINISTER PRAVIN GORDHAN: No, just that I should wait until after the elections, no
promises.
CHAIRPERSON: Okay.
MINISTER PRAVIN GORDHAN: And no intrigue either.
CHAIRPERSON: Oh, okay, alright, thank you.
MINISTER PRAVIN GORDHAN: So that takes us, Chair, to 13 December 2015 on the
evening of which I was requested to go over to Mahlamba Ndlovu, the residence of the
then President Zuma, had a meeting with them and I am sure we will come to that in the
rest of the statement, and at which meeting he asked that I take the portfolio of finance
again.
I was reluctant to do so. I actually suggested two other names of people who
would be very appropriate for that position given their experience. One was Mr Jonas,
who has already appeared before you, and the second Mr Jabu Moleketi who was
previously Deputy Minister of Finance and was under or with Mr Manuel at the time.
Notwithstanding those two suggestions I was requested to take up the job and
the context of course was the turmoil in the financial markets after the dismissal of
Minister Nene and the appointment of Mr van Rooyen as Minister of Finance, and a lot
of concern and panic over that Thursday, Friday and Saturday about what would happen
in the markets on the Monday, i.e. 14 December 2015.
Eventually after consulting my family I did take the position and served in that
position until just past midnight on 30 March when watching television and the intrigue
that was unfolding at the time, and learned from the TV screen that a number of us were
in fact dismissed. That included Minister Hanekom, Minister Ramatlhodi, amongst many
others.

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CHAIRPERSON: So you were not informed ahead of the TV announcement that you
were no longer going to continue in the position?
MINISTER PRAVIN GORDHAN: No, regrettably I was not extended that courtesy. I then
remained as a member of parliament, which I was from the 2014 th elections and remained
as a member, serving on the Public Enterprises Committee and had an interesting year,
during which we, under the leadership of Ms Rantho, who was the Chair of the Enquiry
into Eskom.
At the time we learned a lot about the malfeasants and corruption and state
capture of that institution. We then have the events of the governing party in December
2017 which led to Mr Cyril Ramaphosa becoming President and then subsequently
February 2018 when Mr Ramaphosa becomes the President of the country and thereafter
another cabinet reshuffle and I was asked to serve in my present capacity as the Minister
of Public Enterprises.
CHAIRPERSON: Thank you.
ADV PAUL PRETORIUS SC: Minister you were a member of parliament, or you
remained a member of parliament rather, commencing May 2014, I understand?
MINISTER PRAVIN GORDHAN: That is correct.
ADV PAUL PRETORIUS SC: And during the period March 2017 or April 2017 to
February 2018 you occupied no ministerial position, you were a member of parliament
only?
MR PRAVIN GORDHAN: That is right.
ADV PAUL PRETORIUS SC: And during that time what position did you hold in
parliament, in relation to portfolio committees?
MINISTER PRAVIN GORDHAN: Just a member of Public Enterprises and one other
portfolio committee.

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ADV PAUL PRETORIUS SC: And you will testify about that period in due course. In
paragraph 6 of your statement you refer to the preamble to our Constitution and you have
made brief reference to it already. Now do you have any further comment?
MINISTER PRAVIN GORDHAN: If I may, Mr Pretorius and Chairperson, read into the
record some of the paragraphs from 6 onwards.
CHAIRPERSON: Ja.
MINISTER PRAVIN GORDHAN: So that will make it easier…[intervenes]
CHAIRPERSON: Yes.
MINISTER PRAVIN GORDHAN: For yourselves as well.
CHAIRPERSON: That is fine.
MINISTER PRAVIN GORDHAN: If I may?
CHAIRPERSON: That is fine, ja.
MINISTER PRAVIN GORDHAN: So, I take us back to paragraph 4 with your permission?
"I am a lifelong activist and a member of the African National
Congress. I believe in the principles of the freedom charter and
in our Constitution.
achievement

of

a

I am committed to contributing to the
constitutional

democracy

and

the

establishment of a democratic government guided by the
preamble of the freedom charter that "South African belongs to
all who live in it, black and white and that no government can
justly claim authority, unless it is based on the will of all the
people". The preamble of our Constitution commits us to uplift
the poor as do the objectives of the ANC Constitution. To
eliminate any inequalities, promote economic development for
the benefit of all and to create a society in which social justice

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and economic emancipation occur within a far reaching
transformation of our society.

This transformation is multi-

dimensional being political, institutional, social, economic and
cultural."
And I am sure there are many other dimensions as well.
"But transformation and transitions also can unleash the forces
of greed, corruption and new means of exploitation.

So

participation in government as an ANC cadre is not just a
technical or technocratic role, but one aim of achieving the vision
and goals of our leaders such as Nelson Mandela, Walter Sisulu,
Lilian Ngoyi, Braam Fisher and many others. In contrast state
capture and corruption are consequences of the unleashing of
the worst human instincts.

Self-enrichment, neglect of the

higher mission, placing oneself interest and one might add one's
pocket before the community's interest. Reflecting on the period
2009 to 2017 now, it would appear that I was witness to the
events, some of which are set out below and it seems an
unwitting member of an executive in the earlier part of this period
which was misled, lied to, manipulated and abused in order to…"
And these are parts of Section 10, paragraph 10.
"…benefit a few families and individuals…"
And this, Chairperson, is a theme that you will find throughout this statements
and the pivotal question, if I may say so respectfully for the Commission as well, who
benefits from all of these activities? Is it the masses of South Africa that we all proclaim
to serve? Or is it the few who have now probably stolen hundreds of billions of Rands of

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our own resources.
"Released the worst forms of recklessness and corruption, rob
ordinary people of schools, clinics and education. Abuse and
decimate key institutions of our democracy including SARS, the
HAWKS, the NPA, SOEs, the State Owned Enterprises like
Eskom, Denel, Transnet and others. And of course damage the
economy, increasing joblessness, forsaking the youth and
increasing the marginalisation of women. State capture became
a sophisticated scheme or racket that advanced false narratives,
including racist pejoratives. Used external agencies like Bell
Pottinger and the services of professional advisors, including
management consulting firms, auditors, lawyers, one might add
a whole list of other professional to entrench itself. Marginalised
and dismissed honest public servants and replaced them with
compromised or incompetent individuals."
Again if I may pause here, Chair? One of the things that we need to look at
perhaps as the Commission, but generally as a society, is the kind of damage that we
have done to the lives of individuals and their families and the communities that they
actually come from. People were left jobless. They were maligned. Their reputations
were tarnished, all through a project which said it is important to do that in order to, in a
sense, engage in, what I will call later the politics of destruction.
So you – in any war as you know, or even a robbery a familiar tactic is you
create a decoy in one place so that something else can happen elsewhere and we see
that the human cost of what we are up to is quite a formidable one. We allowed a climate
of impunity in respect of crime and corruption to emerge. A question that I am sure will

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come up is, where does the governing party fall in all of this?
CHAIRPERSON: Certainly that will have to come up.
MINISTER PRAVIN GORDHAN: You see I am anticipating. So if I may, Mr Pretorius,
also continue.
"The ANC at its most recent elective conference in December
2017 noted and resolved as follows: And the resolution is
headed ANC credibility and integrity dealing with corruption."
The resolution reads as follows, Chair:
"Noting an increase in corruption, factualism, dishonesty and
other negative practices that seriously threatened the goals and
support of the ANC. That these practices contradict and damage
our mission to serve the people and use the country's resources
to achieve development and transformation. That corruption
robs our people of billions that could be used for their benefit.
That the lack of integrity perceived by the public has seriously
damaged the ANC image, the people's trust in the ANC, our
ability to occupy the high moral ground and our position as
leader of society.

That current leadership structure seem

helpless to arrest these practices, either because they lack the
means or the will or are themselves held hostage by them."
ADV PAUL PRETORIUS SC: Before you continue may I just ask you whether you have
your own views in relation to the contents of that particular paragraph? Do you know
what…[intervenes]
MINISTER PRAVIN GORDHAN: First of all the test for all of us, Chairperson, is when
you see or observe or become a marginal part of any malfeasants what do you do? Do

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you turn and look the other way? Do you try to find ways of resisting, that which is
occurring? Do you actually bring to the attention of people that you are interacting with
that what is going on is not in the best interest of the country or the government, and I
will read into the record later extracts from my first medium term budget policy statement
speech in 2009, October, where I raised the question of corruption and its pot ential
damaging effect.
Of course we did not understand state capture at that point in time. The next
extract that I will read into the record would be from the budget speech of 2010 where
similar observations are made as well, but I will also in a moment come to what the
Secretary General of the ANC at that point in time Mr Mantashe had to say at various
forums of the ANC, raising the same concern.
So the challenge I think, Mr Pretorius is raising, is how do you resist
malfeasants when you see it? An observation that I made to him and others as well –
well some of us watch rugby, do not play it, others are familiar with soccer or other sport,
but when you are the sportsperson on the field and are asked to apply your mind very
quickly whether you do A or B in order to advance your team's cause, you work at that
particular moment in time. But the spectators sitting on the stand or the sports critic has
all the time in the word to say that there were E, F and G as options as well.
And so the structure and the limitations of one's position needs to be taken
into account in terms of the kind of possibilities that are open and the tactics if you like of
resistance to malfeasants and corruption as well. So there can always be the argument
one could have done more as well, but, you know, we have many advocates of the
anticorruption drive who suddenly find themselves on the other side of the line defending
corruption in one form or another as well.
So one must ask, what drives people to do these sort of things in this kind of

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context? May I continue?
ADV PAUL PRETORIUS SC: We will come back to that during the course of your
evidence.
MINISTER PRAVIN GORDHAN: Should I continue with the resolution, Chairperson?
CHAIRPERSON: Yes, I am sorry. I also want to ask one or two questions in relation to
the preamble, but I prefer you finish quoting the preamble then I can ask, so yes.
MINISTER PRAVIN GORDHAN: Alright.
CHAIRPERSON: Thank you.
MINISTER PRAVIN GORDHAN:
"At times we do things that are not according to the ANC or
government policy and/or not legal or constitutional and wait for
courts to correct our actions. Our association with and the
closeness of our leaders to business people facing allegations
of corruption."
This is still part of the noting section.
"That the ANC is in danger to the point of losing credibility in
society and power in government. That our leadership election
processes are becoming corrupted by vote buying and gate
keeping.

That the state investigative and prosecutorial

authorities appear to be weakened and affected by factional
battles and unable to perform their functions effectively.
Resolves. That the 2015 NGC resolution plus other existing and
new measures are implemented urgency by the NEC and the
provincial executives to one, strengthen our understanding of
our values, ethics and morality and the demands that the people,

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the Constitution and the Rule of Laws place on us as the
guardians of the state and its resources. Two, demand that
every cadre accused of or reported to be involved in corrupt
practices accounts to the integrity committee immediately or
faces DCP (Disciplinary Committee Processes)."
And it continues, just one second, Chair. To say:
"Three, summarily suspend people who failed to give an
acceptable explanation or to voluntarily step down while they
face disciplinary, investigative or prosecutorial procedures.
Four, we publicly disassociate ourselves from anyone, whether
business donor, supporter or member accused of corruption or
reported to be involved in corruption. Five, all the ANC members
and structures should cooperate with the law enforcement
agencies to criminally prosecute anyone guilty of corruption.
Six, the ANC should respect the Constitution of the country and
the Rule of Law and ensure that we get the best possible legal
advice in government to ensure our compliance wherever
possible, rather than waiting to defend those who stray. Seven,
the ANC deploys to cabinet, especially finance, police injustice,
should strengthen the state capacity to successfully investigate
and prosecute corruption and account for any failures to do so.
Eight, secretaries at all levels will be held accountable for any
failure to take action or refer matters of corruption or other
negative conduct in terms of the ANC's code of conduct to the
relevant structures.

Nine, within the ANC nomination and

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election process ban all slates and enforce the ANC code of
conduct and disciplinary procedures, investigate and prosecute
all cases or support of vote…"
I am sorry, I beg your pardon.
"…investigate or prosecute all cases of voter support buying or
membership of branch gate keeping. And finally, ten, implement
the NEC resolution on state capture including the expeditious
establishment as requested or demanded by the public
protector's report, the establishment of a judicial commission of
enquiry which of course is this one."
I said earlier on that I would make reference to the medium term budget policy
statement speech in October 2009, and I want to place that quotation…[intervenes]
CHAIRPERSON: I am sorry, maybe before you do that, now that you have finished
quoting the resolution I just want to ask one or two questions.
MINISTER PRAVIN GORDHAN: Sure.
CHAIRPERSON: I think that there may be a lot of – a lot more questions that may be
asked arising out of the resolution, but maybe that might belong to a little later when you
have dealt in your evidence with a number of things that we are going to hear about. But
I just want to ask this question in relation to paragraph 1, 2, 3, 4, 5 of the resolution, on
the page that starts with noting. Then paragraph 5 it starts with "the current leadership,
structures seem helpless to arrest these practices" and those practices are of course –
are those that are mentioned in the first paragraph, that is corruption, factionalism,
dishonesty and other negative practices that seriously threatened the goals and support
of the ANC. I think that is the one that they are talking about, am I correct?
MINISTER PRAVIN GORDHAN: Yes.

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CHAIRPERSON: Am I correct that the practices, is it your understanding too that the
practices referred to in that paragraph starting with the current leadership would be the
practices referred to in the first paragraph?
MINISTER PRAVIN GORDHAN: Yes.
CHAIRPERSON: Yes, okay. Now that paragraph says the current leadership structure
seem helpless to arrest these practices. I assume, and you must tell me whether your
understanding is different. I assume that those leadership structures that the paragraph
is talking about would have been the leadership structures that existed before the
conference at which this resolution was made? Because obviously they could not have
talked about the ones to be elected, they may have just been elected?
MINISTER PRAVIN GORDHAN: That is correct.
CHAIRPERSON: Okay. That paragraph appears to me and you must tell me if your
understand is different, appears to be an acknowledgement by the ruling party that the
leadership structures that it had up to that stage were failing to arrest corruption and
these other practices that are mentioned there. Is that your understanding of the
paragraph as well?
MINISTER PRAVIN GORDHAN: That either they are failing or they are inadequately
managing.
CHAIRPERSON: Just repeat that please?
MINISTER PRAVIN GORDHAN: So either they are failing.
CHAIRPERSON: Yes.
MINISTER PRAVIN GORDHAN: Or they are inadequately managing.
CHAIRPERSON: Oh, you may…[intervenes]
MINISTER PRAVIN GORDHAN: To deal with those issues.
CHAIRPERSON: Be right, because they say they are helpless?

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MINISTER PRAVIN GORDHAN: Yes.
CHAIRPERSON: To arrest these practices.
MINISTER PRAVIN GORDHAN:

The word seems, Chairperson, appears before

helpless. So somebody is perceptive.
CHAIRPERSON: I agree. It says seems helpless, but of course I would imagine that a
resolution such as this would have been taken after quite some deliberation?
MINISTER PRAVIN GORDHAN: Yes.
CHAIRPERSON: Ja, okay thank you. We may proceed. I think we will deal with some,
these and other aspects of the resolution when we maybe deal with the role of the
governing party.
ADV PAUL PRETORIUS SC: Yes, I would just like to ask one or two questions in relation
to the resolution…[intervenes]
CHAIRPERSON: Thank you.
ADV PAUL PRETORIUS SC: If I may.
CHAIRPERSON: Ja.
ADV PAUL PRETORIUS SC: The last paragraph under noting, Minister, refers to
investigative and prosecutorial authorities. At the stage the resolution was taken what
was the position in your view? That is just before the word "resolves", the reference to
state investigative and prosecutorial authorities?
MINISTER PRAVIN GORDHAN: That was, Chair, again a conclusion that many people
in our country had come to, and when we come to the issues around what constitutes
state capture and what constitutes effective state capture? Then we will come to the
conclusion that the first object is to control some elements of political authority. The
second is to then use that political authority to control key institutions which give out big
tenders or engage in big procurement practices, and the third is then to ensure that

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nobody will properly investigate that malfeasants and the fourth is if there is no proper
investigation or even if there is some investigation then no effective prosecution takes
place.
And I think in the public domain what I am often struck by is the question that
members of the public would put to myself and I am sure to many of you as well, why is
it that no real big figure finds themselves in orange uniforms yet? In other words why are
they not being prosecuted effectively? And there are all sorts of narratives which other
people can come to the Commission with, but how many files are waiting on the desk of
the National Prosecuting Authority where investigations have been done, charges have
been formulated, but prosecutions have not been either initiated or completed.
And the lesson that one can draw from my tax experience and this is a lesson
that we learned from Australia, Sweden, Canada and many other countries that a tax
authority does not work effectively unless it combines two things, and in our context a
third thing. The two are providing good service to honest tax payers. The second is a
variety of forms of enforcement to dishonest tax papers. If you make a mistake on your
tax form you should not be sent to jail, but if you are fraudulent in not declaring all of your
income as I am sure is fairly common practice today, because the rate of stealing that is
going on I am sure it does not find itself on the tax returns that people actually submit to
the tax authority.
And if there is no effective enforcement then why bother? Because you know
that you can get away with it. Which was the situation in South Africa pre the 2000's
when more effective capability was developed. The third elements to that, that we added
in our own context was education. The vast majority of our people were excluded from
meaningful economic activity and the importance of paying tax or the importance of
paying any dues is quite a crucial civic responsibility and we find it today in the form of

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payments for electricity or water, even if people cannot afford to actually pay, and that
results in the kind of debt that accumulates in the hands of water boards and indeed of
Eskom as well, load shedding notwithstanding.
So we must apologise for the country for that.
ADV PAUL PRETORIUS SC: The intention at least, Minister Gordhan, is stated in
paragraph 7 over the page, but at the instance of the, Chair, we will defer any further
questions about implementation of the resolution for later consideration in your evidence,
if we may.
CHAIRPERSON: Sorry, I did not quite get the point?
ADV PAUL PRETORIUS SC: Paragraph 7.
CHAIRPERSON: Yes?
ADV

PAUL

PRETORIUS

SC:

Records

the

resolution

in

relation

to

investigation...[intervenes]
MINISTER PRAVIN GORDHAN: Yes.
ADV PAUL PRETORIUS SC: And prosecution of corruption and accounting for failure
to do so, but I wanted to just mention that to note it for this stage there will be further
evidence that you will give later on and perhaps further questions from the Chair in that
regard in due course.
MINISTER PRAVIN GORDHAN: And if I may say so Chair the comments made by the
many candidates that were interviewed by the panel looking into a new Director of
National Prosecutions over the past week or so might be quite relevant here in relation
to the state of the NPA and what – it sounded like politicians canvassing a little bit, but
what they would do if they were actually appointed to that position.
CHAIRPERSON: Yes.
ADV PAUL PRETORIUS SC: The comments you make, unless you want to read

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paragraph 13 onto the record I wanted to...[intervenes]
MINISTER PRAVIN GORDHAN: There is two extracts here that I want to read if I may.
CHAIRPERSON: Yes?
MINISTER PRAVIN GORDHAN: Into, onto the record. As I said earlier on the first is an
extract from the October 2009 medium term budget policy statement where we say the
following as Treasury.
"For us to succeed we need a shared compact across all the
divides in this house and indeed across the nation. We will not
tolerate corruption. We will act forcefully against wastage and
we will resist or we will insist on value for money for the billions
that we spend."
The second is from the 2010 budget of February 2010 and I quote;
"Measures to combat fraud and corruption. A major site of both
wastage and inefficiency is in our procurement system. Through
a combination of corrupt practices, inefficient procurement, poor
planning and in some instances collusion by the private sector
we are not getting the kind of value from our purchases that our
people deserve. Even where there is absolutely no corruption
we sometimes give contracts to people who cannot implement
them and so houses are left without roofs, roads crumble when
it rains, water schemes break down and school books fail to get
delivered. Mr Speaker, corruption is an ever present threat to
our ambitions.

All South Africans must constantly and

consciously work to root out this cancer. If we are to address
this scourge we need improved management capability,

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governance, enforcement and oversight in government and in
the business sector."
So we go back at that period with the context here Chair is also relevant. This
was the period when South African began to experience the aftershocks of the financial
crisis that started in the United States and in Wall Street in particular in 2007/2008. You
will recall that as Minister, Mr Zuma's first administration came into office one of the
announcements that had to be made by June or July that year is that tax revenue would
fall by R50 billion as a result of growth falling and so started the whole process of what
we today call fiscal consolidation. In other words trying to manage your expenditure in
line with the revenue base that you actually have, but secondly taking a closer look at
procurement practices where savings could actually be derived whether that be at a
municipal level, which is quite important for us today as well. We had all sorts of
malfeasance going on there or at a provincial level or national government sphere level
and that is the context for this emphasis and each six month period both Treasury and
other departments would produce lists of achievements on the one hand or new ideas.
So we tried to manage the ceiling if you like for the cost of cars or the number of overseas
trips that could be made and so on, which was part of the context that we found ourselves
in.
The second part Chairperson is as I said earlier on a few extracts from the reports
that the General Secretary, it is actually Secretary General Mr Mantashe placed before
various structures of the ANC and this particular one was a diagnostic organisational
report prepared by him and his office and I make this available to yourselves, but at one
paragraph he says the following and I quote;
"Stories of corruption in our government make weekly
newspaper headlines. There is no effort to rebut them thus

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creating space for them to take root. An emerging narrative is
that we must not talk about corruption unless we have evidence,
because it hurts the ANC. Society on the other front expects the
ANC to take a stand against corruption. By taking serious action
or being seen to do so it expects our movement to deal with –
and he uses the quotation – both tigers and flies when it comes
to corruption. In other words big corruption and small corruption.
They expect to see arrests, prosecution and conviction of both
the small fries and important individuals. With more of half of
the MEC members having been to China on a political exchange
program the ANC leadership should be able to understand the
concept of - and the quotation - dealing with both tigers and
flies."
So that is the first extract. The second extract was part of his organisational
report presented at the December 2017 conference and I quote;
"Many in our movement are in denial that state capture is a
reality facing our country. There is a strong view that state
capture is a narrative mainly developed by the media and
beneficiaries of the apartheid state in which case the state
cannot be regarded as captured if not all of its three arms are
not captured. The debate is raging on with society having strong
views on the matter. The ANC therefore cannot afford to be
perceived as confused or defensive in the face of this debate.
This conference must provide concrete guidance to the
leadership not only on the position the ANC must take but also

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how it should engage this debate. At this point in time the ANC
is divided in this debate to a point of seeing our disagreements
as boxes of enemy camps."
And I am sure when the ANC appears before you Chairperson they will be able
to elaborate on this as well.
CHAIRPERSON: Yes.
MINISTER PRAVIN GORDHAN: This was followed by the last extract that I want to place
before you during the January eight statement delivered by the President and I quote;
"We shall confront corruption and state capture in all the forms
and manifestations that these scourges assume. This includes
the immediate establishment of a commission of inquiry into
state capture.

The investigation and prosecution of those

responsible will be given top priority.

Mechanisms for the

appointment of individuals to senior government positions, state
owned entities and law enforcement agencies will be
strengthened to improve transparency, prevent undue influence
and ensure adequate vetting of candidates. We must work to
restore the credibility of public institutions including state
enterprises and law enforcement agencies by addressing
excessive turnover in senior positions, undue political
interference, poor coordination and corruption."
And in some I think what the Secretary General is saying is that we as the ANC
and I am sure he will be in a better position to articulate this when he appears before you
cannot be in a denialist mode that it is in the interest of the organisation, which has long
served this country to enable it to confront this cancer so that it can indeed stick to and

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accomplish what is intended in its slogan i.e. unity and renewal and renew the ANC so
that it could continue to serve South Africa on the basis of the kind of principles that it
was built and if you put this in simple terms Chair when one has a cancer and goes to a
surgeon you cannot say to the surgeon take a little bit of the cancer out. You either take
it all out or if you leave some it is going to kill you eventually and I think that is the
message that we are trying to understand and also propagate as extensively as possible.
ADV PAUL PRETORIUS SC: Before, thank you Minister. Before you continue that
perhaps will form a background to your evidence in paragraph 14 and certain questions
that the legal team would like to put to you in regard to the contents of that statement,
but Chair it is past 11:15. May we take the short adjournment?
CHAIRPERSON: Okay no that is all right. Before we do that let me check again people
at the back here Mr Pretorius well, as well. Okay they say they do. Thank you. We will
take the short adjournment and we will return not at half past but at 25 to. Thank you.
ADV PAUL PRETORIUS SC: Thank you Chair.
CHAIRPERSON: We adjourn.
HEARING ADJOURNS
HEARING RESUMES
CHAIRPERSON: Before you proceed Mr Pretorius, Minister Gordhan the extracts which
you read from your own budget speech as well as the then Secretary General's speech
about more or less ten years ago was that, were they both around 2009?
MINISTER PRAVIN GORDHAN: The budget extracts from 2009 the Secretary General's
points go back from December 2017 to I think midyear 2017 and some are further back.
They are much more recent.
CHAIRPERSON: Okay all right, but I seem to remember that even before the time of
President Zuma his predecessor President Mbeki had in his speech also been talking

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quite strongly on issues of corruption. Is that your recollection as well or not really?
MINISTER PRAVIN GORDHAN: That might well be the case, but we can check that
Chairperson.
CHAIRPERSON: Yes. Now I consider myself reasonably informed in terms of what is in
the public domain but I struggle to remember any instances I may have heard of or read
of in the media over a very long time of the ruling party taking disciplinary action against
its own members in regard to issues of corruption. Is your recollection different?
MINISTER PRAVIN GORDHAN: There might be...[intervenes]
CHAIRPERSON: That is, maybe I must qualify that without waiting for state institutions
in other words without waiting for criminal prosecution just taking disciplinary action in
those matters where there may be allegations of corruption.
MINISTER PRAVIN GORDHAN: The first qualifier Chair that I wish to put forward in
response to your point is I am not representing the ANC and that...[intervenes]
CHAIRPERSON: No, no I accept that.
MINISTER PRAVIN GORDHAN: So when officials of the ANC appear before you they
must answer that, but to assist you I think the narrative has emerged in different forms.
So probably earlier in the 2000's there was a debate about whether you, one, a member
should recuse himself or herself from active ANC programs if one, the person is merely
charged or must that person first go through a trial then a court decides and thereafter
the person then has to do the necessary, but usually it would appear from the one or two
instances that I seem to remember that that applies to the constitutional provisions about
whether you can be a member of parliament or not because if you have a criminal record
as you know you cannot. So I think what the Secretary General is saying in other
documentation also is that he is saying is that we need to do better and do more in that
regard not just as the ANC, but as the constitutional structures of the state as well.

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CHAIRPERSON: Now maybe I must just mention for what it is worth why I am asking
this question and I am sure that you understand.
MINISTER PRAVIN GORDHAN: Yes.
CHAIRPERSON: And a lot of people would understand. The ANC was given power by
the Electorate and the Electorate would expect it to govern in accordance with certain
values and principles and one can imagine that people in the Electorate - the Electorate
or sections of the Electorate would keep an eye and watch what is happening and they
may be saying to the extent that there has been or may have been state capture what
did the ANC do once it realised there were certain practices and so on and so on and it
may well be that, probably will be that the Commission must look at everything to see
what may have constituted fertile ground for state capture to happen or to happen the
way it may have happened and what is it that an important player such as the ruling party
should have done or did or did not do which may have assisted to get state capture to
where it is and as I always mention I proceed on the basis that my terms of reference
says allegations of state capture and I have got to look at the matter in that way until the
findings are made. So that is the context in which I was asking that question.
MINISTER PRAVIN GORDHAN: No it will be fair to say that Chairperson. As you say
that firstly as and if I may say so I would rather call the ANC a governing party. There
are many in South Africa who would like to be rulers.
CHAIRPERSON: Yes.
MINISTER PRAVIN GORDHAN: So we do not want to be a ruling party but as a
governing party and the statements that I have read out indicate that already our first
accountability is to the South African public. It is to ensure in terms of our core mission
articulated in the Constitution of the ANC that we serve the South African people, all of
them.

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But secondly we have got to correct the historical wrongs that the majority of
our people have been subjected to over time and thirdly as the Constitution eventually
says as well we have got to both transform this country and arrive at a situation where
we say that we are advancing social justice every single day if that is actually possible.
Have we fallen short of that mission? Probably but I think it would be wrong
to leave an impression that the ANC equals everybody because like any other voluntary
organisation there would be differences in terms of how one interprets principles and
values but more importantly how one practices – puts into practice the principles and
values as well.
But secondly as we will come to later in the statement there is the phenomenon
of the fight back. There is the phenomenon which says that those who have engaged let
alone engaging in but those who have engaged in malfeasance as I said earlier engage
in the politics of destructions.
So find as many distractions as possible using modern technology which has
become quite a feature of the Bell Pottinger and do whatever you can so that the spotlight
does not fall on you. The spotlight must constantly be moved to others for one or other
reason.
As you know, Chair, and you might want to get an expert on this throughout
the world including our own situation fake news is a reality. So academics are talking
about fake news, post factual news and so on and so on. I am sure there is some expert
sitting here that can help us in that particular regard but all of that is to ensure that elites
or small groups of people become beneficiaries of extractive processes and enjoy their
status as elites whilst the people that they nominally indicate that they are serving fall by
the wayside and that is in fact one of the big causes of a) the inequality we see across
the world and in South Africa and secondly, the disenchantment with elites be they

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political, business and other elites in societies and thirdly there is a lot of literature
available which would indicate how populism becomes a fact in many societies, largely
rightwing populism and sometimes disguised in leftwing rhetoric and that again serves
the purpose of particular groups and that then gives rise to particular political outcomes
as well.
So people will defend their largess or access to their largess in some way or
the other and you will see a lot of it. In my short experience in the Public Enterprises
Portfolio as soon as one identifies a senior executive who has quite evidently participated
in a number – over a number of years in one or other kind of malfeasance and their
transactions after transactions do actually prove it and forensic evidence to prove it the
pattern that is emerging is one where if you like clients would have been developed over
the years and these are what you might call sub capture processes.
So there is big capture if I may suggest that but there is also small capture
where as a CEO or as a CFO or as a Senior Manager you develop your own client base.
You supply them with money so when you get into trouble they are there to defend you
in one form or another and we have seen that in real life as well and that then becomes
part of the phenomenon that I described earlier on.
You then get this masking effect but also the fight back or counter attacks in
one form or another as well. So coming back to the core of your point there will be those
of us who fervently still believe that the core principles of the ANC Constitution and our
own Constitution as the country the key principles that must drive our conduct we are
human so we are fallible.
It does not mean we do not make mistakes but as best as we can we try to
achieve those objectives in the day to day practices we actually engage in and one hopes
that the kind of reflection that the new President of the ANC is trying to induce within the

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ANC itself as part of the renewal project will begin to set the governing party right on the
right course and there is some evidence that we are moving in that direction.
CHAIRPERSON: No, thank you very much. I am sure we might revisit later on but I am
happy that you proceed subject to what Mr Pretorius has.
ADV PAUL PRETORIUS SC: Thank you, Chair. Well perhaps Minister Gordhan a good
place to start now is paragraph 14 of your evidence where you state that your own
knowledge and understanding of state capture like that of the rest of the country evolved
over time it is a partial answer to the questions being raised by the Chair.
The first point I would like to emphasise in paragraph 14 is you talk of state
capture rather than corruption and you will later give evidence about how you understand
the distinction between those two concepts but if you would like to deal, please, with the
issues in paragraph 14 and allow me if I may to ask you one or two questions about what
you say in paragraph 14.
MINISTER PRAVIN GORDHAN: Sure. With reference to both 13 and 14, Chair if I may
the one important qualifier that one must and I must put before you is that this is just one
contribution if you like to contributing or providing a piece of a jigsaw puzzle.
So the jigsaw puzzle will eventually give you the state capture as we know it.
I am not claiming that I have full knowledge of everything but within my experience and
the experience of colleagues that I have worked with here is a piece of that puzzle and
one hopes that the commission itself having collected the pieces in various ways will be
able to pull it together.
The second point as Mr Pretorius points out is that state capture as one of the
distinctions that one could draw between corruption as a fragmented ad hoc activity so
to speak unconnected to what in law you probably would call racketeering or an organised
crime and the organised crime here is the systematic takeover of key institutions in order

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either to loot or to protect the looting process in some way and by protection of the looting
process it means also acting against those who want to fight against the looting process
be they in the governing party, other political parties, civil society formations and even in
the courts for that matter as well.
So if one chooses the latter as the paradigm within which to actually work then
I thought it is useful to ask the Commission to look into the Betrayal of the Promise Report
done by or prepared by a number of academics which provides as I indicate in paragraph
16 a useful conceptual framework and what I would suggest is that this is a hypothesis
you work with when the pieces of the puzzle are available.
You can work out whether the hypothesis has relevance or not but the
framework certainly provides one and yourselves with an opportunity and indeed the
public as to what is this picture called state capture? What are the key components of
it? Who or what could be the key actors within it? What roles do they actually perform
and how do those roles all contribute to the process of extracting funds and locating them
in whatever place they simply get located.
ADV PAUL PRETORIUS SC: Minister, you have asked for a certain document to be
included in the bundle.
MINISTER PRAVIN GORDHAN: Yes.
ADV PAUL PRETORIUS SC: Which we have included in the supplementary bundle but
before we go there may I take you back to paragraph 14 of your statement? In that
paragraph you say that your knowledge and understanding of state capture evolved over
time and you say in relation to state capture I emphasise as opposed to corruption the
interrelationship of such events were revealed progressively and often only in hindsight.
May I just ask the question has been raised indirectly I think by the Chair,
perhaps even directly that the evidence of state capture must have been known or ought

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to have been known to the executive and as you refer to it the governing party and the
response thereto was somewhat delayed. What do you say to that?
MINISTER PRAVIN GORDHAN: Well if you go back to your first point which is that the,
I will try and look for an analogy but again let us use the jigsaw puzzle as an analogy.
Once you empty the box of the 100 or 500 or 5000 pieces they do not all suddenly appear
as a picture in front of you. They are merely pieces.
So the picture actually evolves as the pieces begin to fit in the right place you
put in the wrong place of course you get the wrong picture or it will not fit at all. I am sure
all of us has had experience with jigsaw puzzles at one stage or another and so the point
I am making here is that what we – what might have been seen as fragmented ad hoc
corrupt activities did not give rise to the notion of state capture certainly in our
understanding at a particular point in time.
Again I draw reference to the comments made in the 2009 – you have made
reference Chair to President Mbeki's remarks possibly prior to that as well and all that
suggests is that you have a build-up of evidence which says there is something a lot
more sinister than just individual acts of corruption that is actually going on and that then
gives rise to the notion that once enough dots appear and the dots themselves are clear
enough then one might have the ability or to opportunity to connect those dots and then
see the beginnings of a picture and as we go through this process and go through each
forensic report that we are now either conducting or looking at having been conducted
earlier on more dots are appearing and they appear at different levels of detail if you like
and connecting those dots then gives us the opportunity particularly after the release of
the Gupta e-mails, which the Commission has access to I believe, a more complete
picture of who was involved, what role were they involved in and in a moment when we
refer to that particular annexure there is a suggestion from the authors of the Betrayal of

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the Promise report about how one could look at this particular picture.
So the notion, the second point was about delayed action. If a matter is evolving
over time and evolving in the fragmented way I am suggesting then one must ask whether
specific acts of corruption were dealt with or not dealt with and I am sure if one goes into
a detailed study there would be some evidence to suggest that there was action taken or
there were steps taken from the Treasury and from other entities as well to stop those
acts of corruption to ensure that the regulatory frameworks created around procurement
and constantly improve were beginning to have some kind of impact and would act either
as a limitation to what people wanted to do. So we will give you later on the case of
Denel Asia where provisions of section 54 and section 51 of the PFMA required certain
things to be done and certain approvals to be obtained before any state entity can just
go ahead and create another entity and that is the check in balance within government
that allowed some pre-emptive steps to be taken to stop different forms of corruption and
other stages I am sure and I have not, I must say, undertaken any study in this regard
although I see in the audience Mr Brown who is the former head of the Procurement
Office in the Treasury who might when they come to you and give you some interesting
evidence as well in terms of his experience.
So was there resistance to the fragmented instance of corruption? I bet there are
instances in that regard. Some of them pre-emptive, some of them post facto. Was there
resistance in relation to state capture as it began to be evident in a more wholistic way,
definitely, otherwise we would not have seen some of the activities around Mr Nene's
dismissal and the events that have followed since then and the various changes that now
post facto or in retrospect we can see in boards of SOEs, management of SOEs as well
and the extraordinary efforts that different parties undertook to become part of this
process.

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So one of the documents that the Commission might want to look at is this one.
It is an Eskom inquiry reference book that we used in parliament which is very clear
illustrative both of the timelines, in other words changes at the level of the executive,
changes in management and the various procurement projects that were undertaken at
different stages from 2010 onwards and it is a classic case, it is well researched, which
is illustrative of the state capture narrative. So I want to suggest that many people inside
and outside of government who A, began to understand state capture for what it was. B,
did offer resistance. C, themselves who then became victims of harassment and attacks
of all sorts and D, continue to be the subjects of such attacks as well. That means those
who are attacking us have something to hide, something to protect, something to distract
the public with. The question is what? I suppose that will come at some stage or the
other and the setting up of the Commission and the work of the Public Protector must be
applauded, because that then gives rise to where we are today and the opportunity to
canvas all of these issues on a much more exhaustive way.
ADV PAUL PRETORIUS SC: Perhaps Minister we can deal with questions of timing of
all the approaches and the extent of knowledge to which you have referred when we deal
with matters in more detail later, but you have made the distinction between acts of
corruption however widespread those acts might be on the one hand and organised
project or the state capture project as you might have referred to it on the other and you
deal with that in paragraph 15 of your statement. If you would just deal with that please
and allow me to ask you one or two questions about those issues you raise in that
paragraph.
MINISTER PRAVIN GORDHAN: So I can best illustrate that Chairperson in relation to
15.1 which makes reference to executive appointments and dismissals which is within
the purview of 1.3 to 1.1 and I just try to remember changes in executive positions over

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the last six or seven years. So if one looks at the following departments and traces a
number of changes that they went through, but also in parallel what were, what were
those departments looking at either in procurement terms or other financial transactions.
The one will be the Department of Energy. Two will be Public Enterprises. Three is the
National Treasury. Four is Transport. Five is Minister Resources. Six, possibly is
Communications particularly the digital migration process and seven, COGTA particular
in relation to a small agency it has called MISA which was set up some years ago for the
purposes of infrastructure development in municipalities. So it has a budget of about
R300-R350 million.
CHAIRPERSON: What is it called?
MINISTER PRAVIN GORDHAN: MISA, Municipal Infrastructure – something, sorry I
forget the other two letters.
ADV PAUL PRETORIUS SC: And of course Minister executive appointments and
dismissals may also be relevant and certainly will be dealt with in evidence in due course
at the level of state owned enterprises as well.
MINISTER PRAVIN GORDHAN: Yes.
ADV PAUL PRETORIUS SC: May I ask you one of the legal team has asked me to raise
with you the relationship between what you say in paragraph 15.1 about appointments
and dismissals at any level of government including the executive and the ANC policy of
deployment. Do you have any comment about that?
MINISTER PRAVIN GORDHAN: Yes must has been made of the word deployment, but
I thought it might be useful for the Commission Chairperson to look at the United States
as an interesting example and not because of the current incumbent but the practice that
they have there. When a presidential election takes place in November and the new
president is inducted in January 6 000 people walk out of the halls and corridors of

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government. 6 000 people are supposed to walk in "the next day" and of course between
November and January a transition team is created. There is a new book by Michael
Lewis who actually wrote about the financial crises in the post 2009 period about this
particular transition after the current president became, was elected as president. So
essentially the party that wins and the president who wins has a choice to deploy 6 000
people in essence and the transition team is supposed to prepare that, but this book is
about how it worked and did not work I believe. I have not read it. The second is that
deployment is a practice that you would see in most political organisations that one you,
the political organisations and parties are there as you pointed out earlier Chair to win
elections. Once they win elections they need to have people in place for the right reason
or the wrong reason in order to prosecute whatever are their programs for which the
electorate has actually supported them and so after the municipal elections of 2016 for
example if the Commission just undertakes a short study you will find some very
interesting examples of deployment as well. Thirdly to come to my own organisation the
ANC it follows the same pattern that it will look at certain areas of government and the
first line of deployment is Cabinet. So immediately after, as you know the President is
inaugurated virtually within 24 hours the president announces his choices in terms of who
occupies which ministerial or deputy ministerial position. So that is the first level of
deployment. The second would be in various institutions and here again there is a
practice that you consult with the Head of State if there are vital issues in relation to a
board or a critical position, which does not means taking instructions but has been
consulting to ensure that one is doing the right thing or moving in the right direction or
one is aware of all the facts surrounding either a position or an individual and in that
particular regard for example in appointing boards of SOEs we go through a process
either advertising en masse to say anybody interested in X, Y, Z please apply, which is

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what we did when we came into office or apply advertising in relation to a particular
institution. So if you are interested in forestry or SAFCO you can indicate your interest
there and then you make some choices after checking the candidates that are available
and invariably many of the choices that come out of that process are accepted, but there
might be suggestions about entertaining other ideas as well or other people. I am not
sure that adequately addresses...[intervenes]
ADV PAUL PRETORIUS SC: You deal later in your evidence Minister with appointments
at the level of SOEs and perhaps we can revisit the topic at that stage. You refer to the
work by the group of academics entitled Betrayal of the Promise. The extract you
requested to be placed in the supplementary bundle is at page 82. In paragraph 16.1
and following you refer to various categories of actors. Perhaps for the less informed
such as myself you could give examples of the persons or the offices that you are
referring to in paragraph 16.1 and following to allow us to understand your contention a
little more clearly.
CHAIRPERSON: I am sorry Mr Pretorius did you refer us to the supplementary bundle
or not yet?
ADV PAUL PRETORIUS SC: Yes supplementary bundle page 82.
MINISTER PRAVIN GORDHAN: 82?
CHAIRPERSON: So, thank you.
ADV PAUL PRETORIUS SC: May I ask are you able to hear? Put it this way am I
speaking loudly enough, let me put it differently Chair.
CHAIRPERSON: No I think I did hear the question then, but having to look for this page
has made me forget.
ADV PAUL PRETORIUS SC: Okay.
CHAIRPERSON: So you might wish to repeat that question.

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ADV PAUL PRETORIUS SC: Yes it deals with...[intervenes]
CHAIRPERSON: I have got the page now...[intervenes]
ADV PAUL PRETORIUS SC: The persons referred to in paragraph 16.1 and 16.5 in
the...[intervenes]
CHAIRPERSON: In the statement.
ADV PAUL PRETORIUS SC: In the statement that you made in relation to the analysis
by the group of academics that you referred to.
MINISTER PRAVIN GORDHAN: So the summary I offer is based on page, your
reference 82, but page 56 of the Betrayal of the Promise report and two or three pages
after that where there are two illustrations Chairperson that they offer. It is not me that
has done this. So on page 85 there is a schema or a schematic diagram which reflects
what I am going to say and the more generic form of that appears on page 82 of the
annexure. So what the Betrayal of the Promise report suggests is that there is a hierarchy
of operatives who are involved in a state capture project. The first is the people they call
the controllers. These are very senior political people often through the research that
they have done who are strong men who secure access to and maintain control over
resources and they are the patrons if you like of resources and on page 85 of the
annexure they put in the names of Mister Zuma at the head of that but the Guptas could
also be referenced as playing such a role because of the access they appear to have to
influences.
The second category in the hierarchy is described as the elites and these are
people who are in the networks that can attract resources with the controllers and who
establish and maintain patronage networks that facilitate the distribution of benefits and
these could be Ministers in our terms as well as Senior Managers for example in state
owned enterprises who could play that role and on page 85 of your annexure you will see

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some names that they have attached there.
The next category is brokers and these are people who have access to
resources that can facilitate the trade of resources and these are people usually on the
outside. The names that appear in some of the documents not necessarily this one is
the kind of role Iqbal Sharma would have played as Head of what was then called Assets
and Something Structure within the Transnet Board, the kind of role Issar Essa would
have played in the Denel Asia case in the 1064 locomotive case in relation to Transnet
and I am sure there are many others.
So these are the people who as the word correctly suggests broker the deals
and have a sense of how the mechanics of that would actually work.
The fourth and fifth categories in this hierarchy will be what are called mobility
controllers and dealers and these are people who have the ability to control the
movement and access to resources working closely with the brokers and the dealers are
the people who are responsible for managing and hiding financial transactions and
laundering money and the financial institutions often play a key role because of the kind
of infrastructure they have both within a country and between countries so at a global
level as well and as you know in today's terms depending on how exchange controls are
managed by the South African Reserve Bank on behalf of the National Treasury with the
click of a button billions of Rands in one form or another can find their way out.
So at a click of a button a thousand transactions can take place of a
R100 million each for example and you can have that kind of massive transfer. The latter
becomes quite important, Chair when we start looking at the question how much was
stolen appropriated by these people and projects and secondly where did the money go
to and thirdly how do we track that money down and fourthly how do we reclaim that
money through the various agencies and again if we do not have law enforcement

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agencies working well then whatever bilateral agreements you have between justice
departments and enforcement agencies those will not be put into action because of
obvious reasons and you will not be able to serve South Africa by getting all of those
hundreds of billions of Rands back.
ADV PAUL PRETORIUS SC: Yes. Thank you.
MINISTER PRAVIN GORDHAN: So that is the analytical framework.
ADV PAUL PRETORIUS SC: Yes. From the point of view of the Commission obviously
Minister you introduce the Betrayal of the Promise Report as a conceptual framework or
an analytical framework according to which you suggest the Commission might analyse
the evidence before it.
Of course much of the evidence still is not before the Commission and before
we get to the stage of making conclusions that evidence will have to be presented and
analysed. So by asking the questions in the manner we do we do not intend to forestall
or foreshadow any factual findings that we have to make as a result of our investigations.
May I just ask you briefly to go back Minister to paragraph 15? You mention
there four features of the state capture project that you described which would distinguish
state capture from individual acts of corruption. Would you just mention please for the
sake of the Commission the items in 15.1 to 15.4 which would constitute that distinction?
MINISTER PRAVIN GORDHAN: Well 15.1 makes reference as I have indicated to
Chairperson the executive appointments and dismissals. 15.2 To persecution and
campaigns of harassment and intimidation. 15.3 Major public procurements projects and
15.4 commandeering and neutralising key state law enforcement agencies.
I am sure many others can be added but I have just highlighted those four.
ADV PAUL PRETORIUS SC: Yes. May we then go to paragraph 18 of your statement
and ask you to comment on paragraphs 18 and 19 before we get to the role of National

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Treasury at paragraph 20.
MINISTER PRAVIN GORDHAN: Chairperson in the context of having connected the
dots so to speak and the various reports being in the public domain the South African
Council of Churches as an important component of civil society initiated a process of
unburdening.
Basically anybody involved in malfeasance would you like to come to us as
religious figures and unburden yourself? Tell us what happened. How did you do it
etcetera, etcetera and the outcome of that was the release of a report in May 2017 which
documents the accounts of corruption and state capture from members and
whistleblowers in different – in their different congregations and I wish to read into the
record the following extract from the report if I may.
CHAIRPERSON: You may.
MINISTER PRAVIN GORDHAN: And I quote:
"It now seems that the problem is far greater than corruption but
organised chaos. We have now come to learn that what appears
to be chaos and instability in government may well be a systemic
design of the madness that ails our governmental environment,
a chaotic design. A careful analysis makes the case for the
following observable trends of inappropriate control of state
systems through a power elite that is pivoted around the
President of the Republic that is systematically siphoning the
assets of the state. They do this by:
1) Securing control over state wealth through the capture of
state owned companies by chronically weakening their
governance and operational structures.

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2) Securing control over the public service by weeding our
skilled professionals.
3) Securing access to rent seeking opportunities by shaking
down regulations to their advantage and to the disadvantage
of South Africans.
4) Securing control over the country's fiscal sovereignty.
5) Securing control over strategic procurement opportunities by
intentionally weakening key technical institutions and formal
executive processes.
6) Securing a loyal intelligence and security apparatus.
7) Securing parallel governance and decision making
structures that undermine the executive."
So that sums up pretty much what I have been saying and what the Betrayal of
the Promise Report says but this is an excellent example of our demographic balances if
you like in our society, Chairperson where the religious community also saw it as their
responsibility to both analyse and bring to the awareness of the South African public what
was going on and how do you paint a picture of what was going on so that we both – we
all understand this phenomenon called state capture.
ADV PAUL PRETORIUS SC: Then we get Minister to your evidence in paragraph 20
where you deal with National Treasury. There has been much evidence about the role
of National Treasury in the issues or matters that we will cover in our terms of reference
and have covered in our terms of reference and from a public interest point of view I
would ask you to explain to the Commission and to the public what you know through
your experience of the role of National Treasury and in particular the role of the Minister
of Finance.

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In that regard we have referred you to a document prepared by a former Minister
of Finance Trevor Manuel and that document appears at page 86 of the supplementary
bundle and perhaps I can ask you to comment on the contents of that document.
At paragraph 86 in the first paragraph former Minister Manuel refers to the roles
and responsibilities of the Minister of Finance. You could take a moment to look to that
or if you wish to read it onto the record.
MINISTER PRAVIN GORDHAN: Let me read that for the benefit of both the people here
and people sitting at home and elsewhere watching if I may, Chair?
CHAIRPERSON: Yes you may.
MINISTER PRAVIN GORDHAN: The first paragraph says:
"The roles and responsibilities of the Ministry of Finance are
distinctly different from all others. Firstly the functions are
performed through a number of discreet departments and a
series of agencies. Secondly, there is a reality that even the
tasks of the National Treasury alone are sufficiently diverse for
the department to be considered an amalgam of different but
interrelated functions. Unfortunately the official handover report
follows a set template for departments that does not adequately
capture the complexity of tasks."
ADV PAUL PRETORIUS SC: We can go on then, Minister to the next page, page 87
where the work of the Ministry of Finance as described in more detail under the head The
Job Description of the Minister of Finance.
MINISTER PRAVIN GORDHAN: Again I quote Chair.
"Even in the best of economic times and these are not the best
of times, and he is referring to that period when the financial

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crisis had just hit South Africa, being the Minister of Finance
means playing a role in government that will not always lead to
unqualified popularity. This is partly a result of the role of the
Minister of Finance in the budget process and all the expenditure
management tasks that go with that. In this role the Minister of
Finance must advise cabinet about what is affordable and just
as controversially must recommend which of the contending
priorities needs immediately resourcing and which might have to
wait. Inevitably this means that the Minister of Finance is
sometimes cast in the role of an obstructionist or scrooge and
becomes the obvious target for blame if and when delivery
agencies appear to fall short of their aims and objectives."
The next paragraph says:
"Another reason for the unpopularity has to do with the fact that
the policy role of the Ministry abuts those of a number of other
Ministries.

This means that there may sometimes be

contestation between the Minister of Finance and other
members of Cabinet about the appropriateness of particular
policies which fall outside the formal domain of the Minister of
Finance."
ADV PAUL PRETORIUS SC: May we then ask you to go to the next page, Minister under
the head The Core Responsibilities of the Minister of Finance now.
MINISTER PRAVIN GORDHAN: Again I quote, Chairperson.
"The most significant entities for which the Minister of Finance is
politically responsible are the two national departments for which

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the Minister is the executive authority the National Treasury and
the South African Revenue Services and three regulatory
entities the Financial Services Board, The Financial Intelligence
Centre and most recently establish the Co-operative Banks
Development Agency. He or she is responsible for two state
owned entities the Development Bank of Southern Africa and the
Landbank. The Minister is also responsible for Statistics South
Africa."
Some of this has since changed, Chairperson.
ADV PAUL PRETORIUS SC: If you could just pause there a moment, I believe there
is a request for the supplementary bundle so that the legal representatives of
interested parties can follow it. Perhaps I will make sure ... [intervenes]
MINISTER PRAVIN GORDHAN: Ja.
ADV PAUL PRETORIUS SC: Perhaps I will make sure they are distributed and then
come back to this.
CHAIRPERSON: Okay, no that is fine and I guess the areas or passages that have
been read by the witness can be marked for purposes of helping the legal teams to
see which paragraphs were quoted.
ADV PAUL PRETORIUS SC: I only have one more extract to deal with and that
appears at page 91.
CHAIRPERSON: Yes.
ADV PAUL PRETORIUS SC: And deals with the functions of National Treasury but
we can do that in due course.
CHAIRPERSON: Thank you.
MINISTER PRAVIN GORDHAN: If I may just comment on one phrase that I made

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reference to and that is Fiscal Sovereignty Chairperson. It is a term that I think Minister
Manual coined at the time, but an important one for South Africans to understand.
Then after we dealt with the effects of the burden that the apartheid state left for the
first democratically elected President and his administration , Mr Mandela, and
overcame the issues of debt and so on, South Africa can proudly say that most of its
expenditure came from taxes that itself collected from its own citizens. Secondly that
South Africa has not subjected itself to acquiring loans or assis tance in the form of
finances from bodies like the International Monetary Fund. Therefore South Africa is
very different from a majority of developing countries where the IMF for example,
particular in its old mode, is not able to come to South Africa and give instructions to
its government on what to spend its money on and how to spend its money on the
different projects that it actually intends to. And when we see, look into further the
effects of state capture and the kind of destruction or undermining of key institutions,
is that the ultimate effect could well be that we begin to impact on economic growth.
We begin to impact therefore on revenue, both for the reason that economic growth is
lower but also the revenue collection agency is not in the state that it should be in, and
ultimately that impacts upon the expenditure framework that you can afford at any
particular point in time. And you go through then, a period of constraining expenditure
rather than being not necessarily expansive but certainl y supportive of both economic
growth and social transformation as well. So protecting Fiscal Sovereignty in our case
is as important as protecting our democracy in terms of the constitution.
ADV PAUL PRETORIUS SC: Minister would you then please go to paragraph 20. I
am not going to ask you to comment on another former minister's views but just to
place your own views on record in relation to the role of National Treasury and what
you have brought before the Commissioner in the paragraphs which follow on page 11

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and 12 of your statement.
MINISTER PRAVIN GORDHAN: The paragraph 20 then takes us back to the role of
the Treasury, and it is to repeat the point that Minister Nene I think has already
presented to you, which is that the Finance Minister is in eff ect [indistinct] to the CFO
of a big corporate. Of course there is no big corporate as big as the South African
State, and the relationship between the CFO and the CEO, in this case the President,
has to be a harmonious one in order for the two key player s within an enterprise to do
that which is necessary in the interests of the enterprise itself and of society more
generally.
National Treasury is one of the key institutions, as I read through the extract,
and it has many, many roles actually. In the first instance it has the role of formulating
macroeconomic policy. So monetary policy is executed by the Reserve Bank at its
own discretion and in its own independent right but the inflation target for example is
set and were set many years ago by government via the advice of National Treasury.
The second component of macroeconomic policy is fiscal policy. In other
words how will we spend our money, where will we get our revenue from, how much
will we borrow, how much of interest on debt can we afford, ho w close to 60%, which
is the nominal sort ceiling that ratings agencies and the world will place on borrowings,
that is your debt to GPD ration. So how far would you allow that to creep towards
60%, the responsibility that the Minister of Finance Mr Mbowe ni has today. And so
that is a function that constantly monitors what happens in the economy, which are
the growth drivers in the economy, which sectors of the economy, for example
manufacturing or agriculture or mining as the case might be, at different stages is
either at on the plus side or on the minus side, and how do they each contribute to
what we nominally call GDP, the Gross Domestic Product.

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And that advice then takes the form of a macroeconomic framework, which
is the basis upon which cabinet ultimately decides the budget process and the budget
content in numbers terms each year, both prior to the October MTVPS and finally
before the budget in February each year.
The second is the budgeting process, and there is a budget office within the
treasury, and that budget office in a sense brings together and coordinates a number
of sub-functions. So the first is the macroeconomic analysis, so what will growth look
like and what are the growth projections for the next three years, because we work on
a three year cycle, called the medium term expenditure framework.
The second is what is the anticipated revenue? It used to be a fairly ad hoc
process in the past. More recently there is a formal structure which involves the
Reserve Bank, Stats South Africa, Treasury and SARS, which emerges with some
level of consensus on the estimates of the revenue that is expected.
The third is to anticipate, and not just anticipate but in the more recent years
set an expenditure ceiling. We can only afford to spend this percentage, and you will
find that in the numbers and the budget review that is about 30% of our GDP that we
are – or of total expenditure, no sorry of GDP. So that is the expenditure parcel within
which I described in Minister Manuel's text is the al location process that actually
occurs. Then of course the allocations themselves in terms of their expenditure
framework, in other words which department receives how much of money.
So what does the court receive versus the defence department or basic
education, and those priorities emerged usually from the manifesto of the governing
party, translated into a medium term strategic framework and yet again translated
together with the aspirations that we set to the national development plan into priorities
that government would support any particular stage. So that is the expenditure

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framework.
There is an important task that the Treasury performs in terms of what it
calls assets and liabilities. It is a complex function which most big corporates would
have, and in many of the bigger state owned enterprises this is where institutions like
Trulling and Regumens entered the terrain and "earned fees" for functions that the
people employed there should actually perform. And essentially that function is, at
the most basic level, each day of the week and each week of a month there must be
X amount of cash available. So that is where it starts.
The next is how much of that cash will come from revenue collected, which
ultimately goes into an account held in the South African Reserve Bank, and that
account is "swept" every night so that we – or the banks are swept so that we know
how much is available. Then this section then decides on what are called short term
borrowing instruments, for a week, for a month or sometimes a few months, called
treasury bills. And so if you are running short of R3 billion this year they will issue you
a treasury bill, just get that R3 billion in so that the expenditure side can actually work
and the money flows where it is supposed to actually flow.
But much more important, which comes up later in the statement is the
longer term borrowing. Borrowing for ten years, 20 years, 30 years. It is a complex
function and that is when we have these investment roadshows, after the budget and
after the MTDPS, because it is largely foreign investors and local investors that buy
the bonds of government, and they basically say to government we will buy your ten
year bond at a particular rate, but you can get one of the technical experts here to
come and explain to you how all of that works. But the process involved here is to
inspire sufficient confidence in those, let us call them portfolio investors or bond
investors, that we are running out of finance as well. That medium to long term future

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is in good hands and that they can be – I mean their bottom line requirement, are you
going to pay back the money. It is a popular phrase to say these days of course,
another context pay back the money. But – and there is a lot of people who need to
pay back the money.
But coming back to this particular instance are you able to and are you
willing to pay, and are you running your economy well. Are you going to undertake,
and you will see these in reports, particularly of the credit ratings agencies, are you
undertaking the reforms that your economy requires to function at its optimum. And
ever economy in the world cannot remain static, it needs to constantly change in order
to both overcome weaknesses in the economy but also seize opportunities that might
avail themselves at a particular point in time.
So we have internal roadshows within South Africa because assets
managers in South Africa would also invest in our bonds. So I spoke to a group of
investors last Friday, telling them about SOE transformation processes and what are
we doing to stabilise them. Because many of them would have inves ted an Eskom
bond or a Transnet bond or whatever the case is.
But externally much of our money comes from Europe, Frankfurt is the
centre for that, London, I suppose there is not going to be much part of Europe for
longer after Brackset but London is an important asset base. And then Boston, New
York and sometimes both San Francisco and Los Angeles is where the big money lies
and these are the people you need to convince to buy the bonds.
I think the number at the moment is that we have, as our total deb t parcel
just over R2 trillion, which would have maturity levels [indistinct] payment dates
stretching from now into the next 20 or 30 years over this particular period. So that is
an important – the assets and liability function, I can go on talking abou t that.

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In addition to that you have a public finance function, and that is the function
related to the expenditure side, and here you have a number of officials who in
essence are allocated to a particular set of departments, who follow the expenditure
patterns, understand their programmes, understand some of the policy changes that
they want to make or have made already, and are able to interrogate the department's
numbers, and whether they have actually spent the money in the right way or whether
the promised outcomes have actually been achieved or the rate of expenditure is being
kept with in terms of the promises that they have actually made. And it is the final
outcome of those discourses that happen between Treasury officials, and there are
others who come from other departments as well, because this is a technical process
which is called MTEC, that the officials go through. It involves the presidency, I think
the Department of Planning [indistinct] and Evaluation and a few others as well, they
collectively decide what is to be allocated or what is to be cut or what is to be cut in
one place and diverted to another at the end of the day.
There is also a set of regulatory functions, the Accountant General accounts
to the Minister as well, and the Accountant General sets accounting standards for the
public sector. And there are then also institutions like IRBA, I just forget the – but it is
responsible for – it is for the Independent Regulatory Board for the audit profession,
which accounts to the treasury as well.
There are also IT systems that the Treasury runs either with other
departments or in its own right. I do not know what they are called these days but
there used to be a system on the expenditure side, which then tracks the expenditure
of different departments. And then there was a system on the personnel side called
Persal. So once one becomes an employee of a particular department one's details
are put onto Persal and the Persal is the system that pays out your salary at the end

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of each month as well.
So those would be your main functions. There are regulatory functions as
we have indicated, in respect of financial sector of the Bank's Act is assigned to the
Treasury as well, and the Minister of Finance, and this is the Act that regulat es our
financial system. More recently, after the impact of the great recession of 2007, 9, 10,
globally there was a major shift in the way in which regulation would occur, of financial
institutions, and that resulted in a policy document called the Twin Peaks regulatory
framework, which today assigns new and bigger functions of the South African
Reserve Bank as I understand it, for what I call prudential regulation of insurance
companies and banks and so on, and market conduct regulation is assigned to a new
body which is a successor to what I referred to earlier on as the Financial Services
Board. So that is another key function.
There is an additional piece of legislation in relation to exchange control.
The legislation is the responsibility of the Treasury but the function is executed on
behalf not he Treasury by the South African Reserve Bank, and so they are able to
actually monitor the flow of funds into and out of the country, which does worry some
people in an interesting way because is the ability to actually follow the money so to
speak as well.
Maybe the last thing I want to mention Chair, is the procurement function.
After the kind of lessons that we have learnt about the maleficence in the procurement
area, the procurement legislation has been crafted in the Treasury. There is another
version of it; I think they are working on currently or about to complete. And so in
terms of the current requirement a few things that you might want to note, I must
update my information on this, the first is some years ago we introduced let us call it
national procurement across different entities, meaning that instead of each

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department or each entity or each Province buying ECG machines for example, but in
this case the first, I think experiment was with antiretroviral drugs. So in the past it
was a very fragmented procurement process, which means that you did not get
economies of scale and the benefits of buying large quantities. When Mr Brown and
others actually put the system into place I think there was a benefit of R2 billion to R3
billion per year in lower costs in terms of procuring those drugs. There are a whole lot
of other items that have entered that category of procurement.
The second is that where there is major procurement items like the PRASA
locomotives or the Transnet locomotives or the coal procurement in Eskom, after the
Tegeta Saga and so on, is a particular set of approvals if you like, that are required.
What I forgot to mention is an important component in the Treasury called
intergovernmental fiscal relations. So Treasury also monitors what is currently an
allocation of about 44% of noninterest expenditure. So if you are expending a trillion
Rands collectively outside of paying interest, then 44% of that, that means R440 billio n
goes to the provinces and about 9% goes to local government. And treasury has
various mechanisms in place to monitor what each Province does with its particular
allocation.
In terms of the constitution they get a bulk allocation and the Province then
decides what does health get, what does basic education get, etcetera. So there is a
function within treasury that monitors provinces and a certain category of
municipalities. Only the top 20 of them and the rest are assigned to provinces
themselves to actually monitor. So that gives you some idea of this ... [intervenes].
CHAIRMAN: Thank you very much.
ADV PAUL PRETORIUS SC: Perhaps as a background, which will excuse us from
returning to former Minister Manuel's document, and if we could go there to par agraph

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21 of your statement where you talk about the pressure or conflict in which Treasury
found itself, which is the theme which will carry through in the factual portion of your
evidence later on, if you want to assist the Commission then with the alleg ations on
page 11 and 12 of your statement.
MINISTER PRAVIN GORDHAN: So in relation to paragraph 21, by way of example
Chair, is – I think what Mr Jonas was told by the Guptas, that if he accepted the finance
position one of his priorities would be to get rid of four officials and they were named
as the Director General Fuzile, Mr Momoniat, Mr Donaldson and Mr Brown amongst
others.
Now in an institution like Treasury, but indeed SARS as well, and I am sure
many others, institutional wisdom and knowledge is quite crucial. If you lose 20 years
of experience, and Mr Fuzile for example was at the Treasury for 20 years before he
left for his current position, and that 20 years cannot be taught in two years. So that
is a classic example.
The more recent attacks that Mr Momoniat and others have been facing in
Parliament, and elsewhere, is yet another illustration. The electronic media or digital
media has been another mechanism through the various pots and how they work, to
also put the Treasury under pressure. And then from time to time there would be this
narrative, which needs to be read in the context of what Mr Manuel was saying. In
fact a former Finance Minister of Chile said to me on one occasion the most frequent
word a Finance Minister uses is no. So as Mr Manuel says that is what you become
unpopular for, using the word no too frequently.
And so – ja so as an institution there have been occasions when the allocations
expected in one direction went in another direction and there would be criticisms about
not enough money being made available. But if you look at the context, in other words

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here is where the economy is, this is what the revenue picture is, these are the
constraints and boundaries within which we need to work in terms of debt levels,
interest payments and so on, and credibility, then this is all that we can afford, and
now we will have to learn how to share it in the first instance, but also we will have to
determine what our priorities are as well.
Now we cannot all be priority and we do have some difficulty in setting priorities
sometimes, as I am sure all of us do as individuals.
ADV PAUL PRETORIUS SC: Yes. Minister ... [intervenes]
MINISTER PRAVIN GORDHAN: So you have those sorts of narratives which says
National Treasury is bigger, too big for its boots or whatever the case might be,
because of the kind of function an invidious function that it needs to actually perform.
ADV PAUL PRETORIUS SC: Minister, you have referred then in your evidence, to
the institutional or interest based roots of tensions between Treasury and other
departments, given their different functions and roles, whether there is more to it than
that in relation to the conflict that Treasury found itself in, in past years, will emerge
perhaps from your later evidence. We need not deal with it now in general terms.
But I want to ask you in relation to paragraph 23, you say in your six and half
years as Minister of Finance, we understand that to be during the period 2009 to 2014,
and then from 2015 to 2017. May I ask when in that period did you become aware of
the distinction between state capture on the one hand and corruption on the other
hand? In other words when did the picture of state capture, as you have testified to,
emerge for you or on what event did it emerge for you?
MINISTER PRAVIN GORDHAN: Well corruption, as you can see from the quotation
that I gave the budget statements Chair, is a phenomenon and I think you might well
be right that there were prior references to this phenomenon earlier than 2009 as well.

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So the individual acts of corruption were known. I mean the most popular reference
point if you like, we had, was these bottle of water. So if you walk into a retailer you
pay R3 to R4 for a bottle of water, there will be any number of ins titutions that would
be paying R30 to R40 for each bottle of water, and similar price escalations would
occur on other items as well.
Later, I cannot remember but probably closer to 2014 but maybe even prior to
that, across to the current period, a new phenomenon began to arise which the
Department of Trade and Industry will call fronting but this is a peculiar form Chair,
that we began to discover when we started looking at state owned entities, and it
seemed to spike quite phenomenally in many of them in 2015. It is a strange thing
that there is a peak in these activities in 2015 in so many institutions all at the same
time, and that is that where you have complex pieces of equipment and spares that
need to be bought, for example for an aircraft, a policy position was taken by a board
for example, which says that you shall not buy directly from the original equipment
manufacturer, what is referred to as the OEM, but if you bought it directly from there,
for example you could pay 40 Dollars or 40 million Dollars for it, you are now required
to go through a company in the East Rand which has no relationship or capacity to
actually produce that part, but to that East Rand company you will pay 60 million
Dollars for the same piece of equipment, let us call it that. Had you bought it directly
you would have paid 40. So there is a 50% premium for doing nothing.
Now we find this ... [intervenes]
ADV PAUL PRETORIUS SC: Sorry may I interrupt?
MINISTER PRAVIN GORDHAN: Sure.
ADV PAUL PRETORIUS SC: As I – perhaps my question was not put clearly enough.
It is not the corruption or forms of corruption that is the subject matter of the question,

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it is rather when or on what event you came to understand, as you have stated in your
evidence, that state capture was at play as opposed to just different forms of
corruption? My apologies for interrupting you.
MINISTER PRAVIN GORDHAN: No, no, but this is just to illustrate for people here
and elsewhere, the level at which it starts and then how it – because in order to instruct
somebody to purchase in this particular way, through an intermediary, for example
SAA Technical has a budget of R3.4 billion this year. You could probably save 50%
of it if you buy those parts directly. That is what the CEO tells me, and that is a waste
of R1 billion, plus minus.
CHAIRPERSON: I know you are still going to ... [intervenes].
MINISTER PRAVIN GORDHAN: I am going to come back to the question.
CHAIRPERSON: To deal with it but I just want to say I have struggled to understand
most of the time, that kind of thing, because it seems to be quite common in
government departments where sometimes things that you know, can just walk to a
shop and buy and get them at a certain price, they want to go through or they go
through somebody else who then adds some percentage and then they pay a lot of
money and it is taxpayers' money.
MINISTER PRAVIN GORDHAN: Yes.
CHAIRPERSON: It may well be that there may be, and you might know better, that there
may be certain cases where it is things that are difficult to find that maybe you might have
to do that, but for many things I do not see why it should happen, but it seems to be quite
common.
MINISTER PRAVIN GORDHAN: Well I hope Chair someday somebody interrogates that,
but a popular example in that first period was laptops for instance. If you walk into a
retailer laptop A would cost you R10 000, but go through SITA and you pay R20 000 for

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it. So there are many such examples. So to come back to Mr Pretorius' question – and
somebody benefits. So the constant question perhaps that would help the Commission
is who benefits? From each of these events who benefits, where does the money go,
who designs these processes and for whose benefit at the end of the day? So those are
a set of questions that would be perennial if you like across many of these instances.
CHAIRPERSON: But as far as you know - and you have been in government for many
years – as far as you know generally this would not have been an official government
policy or would it have been just individual officials deciding to do or individual
departments just deciding to do things in a certain way?
MINISTER PRAVIN GORDHAN:

No individual institutions.

So it would not be

government policy in terms of procurement policy.
CHAIRPERSON: In general, yes.
MINISTER PRAVIN GORDHAN: But the way it is implemented, because nobody
monitors has the effect that we have just described.
CHAIRPERSON: Thank you.
MINISTER PRAVIN GORDHAN: So to come back to Mr Pretorius' question using these
illustrations as an example when did we notice what, when the first boards were being
changed after Ms Hogan was dismissed from Cabinet for example it looked like an
ordinary set of events. One, X number of people coming in and Y a number of people
leaving and then it still was not clear until more of these changes were being made, but
the picture was still I would think fairly hazy and then the kind of events that took place
at the Treasury in late 2015 the manner in which the nuclear issue was dealt with for
example all began to suggest that there was more to it than an individual act of what we
today call corruption that there is a wider set of intentions and scheme if you like that
underpins it in some way.

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So I suppose late 2014 but mainly in 2015 these issues become clearer but the
final penny and the connecting of the dots began late 2016. After the kind of harassment
that we were subjected to during 2016 I mean the logical question must be why? I mean
if you want, if a principal does not want somebody he or she has appointed to a particular
position you dismiss the person or find grounds to dismiss the person. In this instance
you do not need grounds as you know you just do not have to like the person or like what
they are doing and that is the end of your career or your holding of that particular position.
So when you begin to see a campaign being run, which we describe later then one has
to ask the question why and that is some interesting answers that one can actually give
to that.
So I think spanning that period 2015 to early 2017 that picture and the haze
becomes clearer and the final penny drops if you like once the Gupta e-mails come into
the public domain. That then provides us with the evidence that so and so suggested
such and such to a person of authority or even as early as which we now discover as
early as the four day period during which Minister Nene's replacement was in office
documents that the DG then have prepared around the economic outlook and what our
options were as a country. Now the e-mails show were distributed by it would appear the
advisors to the then Minister in office. So clearly the intentions were there during that
time and there was a particular interest momentarily during that, it was actually two
working days not four days, but in the two working days there was a peculiar interest in
SAA for example, because that was the time as we illustrate later when the Airbus so called deal was being undertaken, which also involved a fair amount of money if you went
in one direction. Interestingly it involves $40 million as well compared to another direction
that we finally took.
ADV PAUL PRETORIUS SC: Thank you Minister. The need is pressing to continue with

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your statement at paragraph 13 but may we do so with the leave of the DCJ after the
long adjournment?
CHAIRPERSON: Okay thank you. We will take the lunch adjournment now and we will
resume at 14:00. We adjourn.
HEARING ADJOURNS
HEARING RESUMES
CHAIRPERSON: Yes Mr Pretorius?
ADV PAUL PRETORIUS SC: Thank you Chair. Minister Gordhan if we could take your
statement at paragraph 28 and go from there. You deal there with the relationship that
needs to be in place in your opinion between the President and his or her Minister of
Finance.
MINISTER PRAVIN GORDHAN: Thank you, good afternoon Chair.
CHAIRPERSON: Good Afternoon Minister.
MINISTER PRAVIN GORDHAN: It is a point I have made earlier on Chair, which is that
this is analogous to the relationship between CEO and a CFO in a corporate environment
and most experienced Minister of Finance that I have interacted with over the years from
other parts of the world will tell you the same and that is that there needs to be a
relationship of trust and sufficient confidence, which in the early years I think did exist
because we had to advise the President as a Treasury on, excuse me, how best to deal
with the financial crisis. What kind of fiscal policy stances must we take. How do we
make the choice between what the UK has done in relation to austerity measures versus
a much more careful fiscal consolidation to which we must give credit to Mr Mbeki and
Mr Manual because what we inherited in 2009 was a situation where compared to today
where we have debt to GDP close to just below 60 percent. Then it was about 23 percent.
What you are paying as interest on debt that time was a few tens of billions of Rands

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compared to two years ago it was R70-odd billion. There was a budget surplus compared
to a deficit of about a R150 billion and a deficit means that you do not have the money.
You must go and borrow that money as well.
So it was not an easy period. The world was not at one. They were at one in
terms of saving the banks globally. It did not affect South Africa. We were one of the few
countries in the world together with Australia, Canada and India where our regulatory
environment protected our banks from the worst of the crisis, but for the rest that
relationship of trust is absolutely crucial.
ADV PAUL PRETORIUS SC: And then to go to the next point you make in paragraph 28
Minister is the need for a relationship of trust between the Minister of Finance and various
other categories of person.
MINISTER PRAVIN GORDHAN: So here we are talking about the taxpayer in the first
instance, which I refer to in 28.2 and essentially a taxpayer would be willing to pay taxes
in most environments if there is a legitimacy that the authorities enjoy among citizens.
Secondly, they would have some understanding of how their money is spent. So if you
go back into the earlier years of SARS you will see we did not just talk about people
paying their taxes we also said to the public how are your taxes used, for clinics, for
hospitals, for schools, for social grants for example. It is only the kind of good economic
climate plus revenue collection in the 2000's which enabled government to introduce
social grants and the child support grant for example, because we had the fiscal latitude
to actually do so. So that is the relationship with taxpayers. Then with the public I mean
here we are saying to the public you can be assured that the money that we control on
your behalf is used for your benefit and so we are saying to people living in informal
settlements that sooner rather than later you will have decent housing. You will have
decent transport. For the younger people we are not just making claims and slogans that

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there is going to be a job, but you have got to grow the economy, support entrepreneurs
amongst many other things in order to make sure - including education and training - that
young people have either self-created job opportunities or job opportunities in the
commercial sector, but essentially most of our people are in the lower income brackets if
any income bracket at all and what do we say to them about the use of resources and
how do we create confidence, because the public, you know, can be bluffed some of the
time, but not at all the time as the saying goes and we have to show proof that we are
using money in the right kind of way. Then thirdly investors. I have mentioned this earlier
on that it is quite crucial to constantly communicate with investors both domestic and
global and that is why we have the road shows that we have as I indicated earlier. A, to
keep them informed on where we are going economically speaking, but today attention
has also shifted to areas of governance stability in the governing party, the state owned
entities which have appeared on the screen you will see later in the statement a few
years ago as an area of concern and the area of concern arises from the fact that the socalled bailouts are often requested of the state and the bigger the casualty and SOE
would be of malfeasance then the bigger the reliance on the state to fill whatever gap
there is and then you have a fiscally constrained environment that becomes an extremely
difficult exercise. So that is the point being made in 2003.
ADV PAUL PRETORIUS SC: Before you move on Minister the duty to communicate
appropriately with investors domestic and foreign is that a duty which falls on the Minister
of Finance himself or herself?
MINISTER PRAVIN GORDHAN: Primarily, particularly in relation to investors in our
bonds. That is the key responsibility that the Minister of Finance would have, but they
are of course fixed investments in the economy so if you want people to invest in the
mining industry then the Minister of Mineral Resources is the person they would direct

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themselves to and the President and ask whether you are creating a consistent, reliable
and foreseeable policy framework because mining involves investments of 20 and 30
years. So you make a big decision today to start investing R20 billion or $10 billion you
want to know how would it pan out in the next eight, ten years and is the policy framework
something that you would be certain about. Similarly other Ministers would have other
roles as well.
ADV PAUL PRETORIUS SC: Thank you. If we can then move on Minister to paragraph
29 in the period during which you were SARS Commissioner. You deal with that in
paragraph 29. If I may correct it...[intervenes]
MINISTER PRAVIN GORDHAN: 29 is on the after effects of the 2008 global crisis.
ADV PAUL PRETORIUS SC: Yes that is of course after you...[intervenes]
MINISTER PRAVIN GORDHAN: And...[intervenes]
ADV PAUL PRETORIUS SC: You were Commissioner.
MINISTER PRAVIN GORDHAN: Yes.
ADV PAUL PRETORIUS SC: Now to deal with the appointment of the Commissioner in
the period...[intervenes]
MINISTER PRAVIN GORDHAN: So what we have put in place Chair is if you like a
transitional mechanism where Mr Oupa Magashula has in paragraph 30 was appointed
as Acting SARS Commissioner to bridge the pre-election and post-election gap and then
once I became Minister of Finance we had to then address the question of a permanent
appointment as the SARS Commissioner then as – if I may continue to paragraph 32
where we are all linked?
ADV PAUL PRETORIUS SC: Yes if I may just ask you to pause there a moment at page
119 of the supplementary bundle? You will see there...[intervenes]
CHAIRPERSON: Do we – Mr Pretorius...[intervenes]

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ADV PAUL PRETORIUS SC: Where the relevant provisions of the South African
Revenue Service Act that deals with...[intervenes]
CHAIRPERSON: Do we now have – have they now been marked these bundles
appropriately?
ADV PAUL PRETORIUS SC: I believe labels are being printed.
CHAIRPERSON: I guess that answer says...[intervenes]
ADV PAUL PRETORIUS SC: I am not sure if that commentary was necessary and I
apologise.
CHAIRPERSON: I guess that answer says they have not been marked.
ADV PAUL PRETORIUS SC: Yes and my apologies. Handwriting would have done.
CHAIRPERSON: All right. No that is fine. Okay you – what page did you refer to in the
supplementary...[intervenes]
ADV PAUL PRETORIUS SC: 119.
CHAIRPERSON: Okay. All right 119 of your supplementary bundle.
ADV PAUL PRETORIUS SC: Just to clarify where the powers of appointment lie in
respective Acting Commissioners and Commissioners of the Revenue Service. You have
before you paragraph – clause 6 of the Act which says that the President appoints a
person as the Commissioner for the South African Revenue Service and that amendment
was introduced in 2002.
I understand before that it was the Minister of Finance that did so, is that
correct?
MINISTER PRAVIN GORDHAN: That is correct.
ADV PAUL PRETORIUS SC: And then the Acting Commissioner on the other hand in
terms of Section 7 is designated to act by the Minister of Finance.
MINISTER PRAVIN GORDHAN: That is correct.

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ADV PAUL PRETORIUS SC: And that amendment also came in, in 2002?
MINISTER PRAVIN GORDHAN: Correct.
ADV PAUL PRETORIUS SC: Thank you. Yes I am sorry I interrupted you Minister. You
were – wanted to move to paragraph 32.
MINISTER PRAVIN GORDHAN: So the point I made, Chair, here is the appointment of
let us call it a permanent SARS Commissioner. At Annexure 2 page 72 of the – I must
get used to your terminology of bundles, of the annexures we show you the advert,
advertisement for that particular position.
So there was an advertisement and then the appointment process for Directors
General and Deputy Directors General is normally that you advertise. You receive a list
of applicants. There is a short listing process and then depending on the level of the post
one or more Ministers is involved, one or more Deputy Ministers involved and external
Director General might be involved and then a candidate is chosen, a Cabinet memo is
crafted, the necessary documentation is then prepared, handed over to Department of
Public Service and Administration and that department normally in some instances
presents the candidate to Cabinet for approval.
Alternatively in certain instances the Minister concerned can do the same as
well either via a Cabinet Committee or directly to Cabinet. So that is the procedure that
was pursued to appoint Mr Magashula as the Commissioner.
He then subsequently in terms of paragraph 33 resigned for various reasons
and that is in page 74 of the annexures and Mr Ivan Pillay was appointed as Acting
Commissioner from that date and the position of SARS Commissioner was then
advertised in the latter half of 2013 but we were now close to the 2014 elections and what
we eventually did was to extend Mr Pillay's contract, ensure that it had a provision which
would allow the incoming Minister of Finance post the 2014 elections to make his own

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choices either about the acting position or by re-advertising or choosing a candidate from
the 120 applicants or outside of that if he wanted to headhunt for a candidate as well. So
that is the procedure up to that point in time.
ADV PAUL PRETORIUS SC: And then how did the final appointment occur and what
was that appointment?
MINISTER PRAVIN GORDHAN: Sorry?
ADV PAUL PRETORIUS SC: The appointment of Mr Moyane was that during your period
of Ministry?
MINISTER PRAVIN GORDHAN: No it was during Minister Nene's period.
ADV PAUL PRETORIUS SC: Can we deal then with paragraph 36 and the end of your
first term as Minister of Finance.
CHAIRPERSON: I am sorry before you deal with that question as I understand your
statement before the 2014 general elections your department had advertised the position
of Commissioner.
MINISTER PRAVIN GORDHAN: Commissioner yes.
CHAIRPERSON: And a committee had been put together which then interviewed
candidates, is that right and that is how you – then there was 120?
MINISTER PRAVIN GORDHAN: No.
CHAIRPERSON: Is he talking about...[intervenes]
MINISTER PRAVIN GORDHAN: The number is the number of applicants.
CHAIRPERSON: Number of applicants.
MINISTER PRAVIN GORDHAN: Applicants to that position. We did not get to as far as
I can recall the interview stage.
CHAIRPERSON: Oh, okay. So it was not a short listed?
MINISTER PRAVIN GORDHAN: Yes.

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CHAIRPERSON: Yes?
MINISTER PRAVIN GORDHAN: So then that is where we made the point between 34
and 35 about what does section 6 (1) of the SARS Act mean? Does it mean that that
power or authority is exercised as the President would exercise his or her power to
appoint a commission of enquiry, I forget the section of the Constitution or is this power
exercised in the way I have just described which is you follow a normal transparent
process, make a nomination and the final appointment is made by the President and I
think what I had explained and what might be useful for you, Chair, if you intend to go
into this further is that there was prior to 2002 if I remember correctly Ministers were
appointing Directors General and that its own set of issues.
Arising from those issues the President was made the authority and that s till
remains the position today.
CHAIRPERSON: I guess it too has its own issues?
MINISTER PRAVIN GORDHAN: That has its own issues as well.
CHAIRPERSON: Yes.
MINISTER PRAVIN GORDHAN: You are correct and so the President then appoints but
the Minister is the one, let us call it the accountable executive authority. So if you want
to apply for leave, your terms and conditions of employment whatever else, what your
basic job is and your accountability at an operational level for what you do all that
accountability is with the executive authority and not with the President and the question
that arose across this pre and post-election process was what does the power of the
President as implied in 6 (1) mean?
Unilateral decision to put somebody in place or a decision made after a
process? So that is an important distinction and one of the issues that has often been
brought to my attention is that I might have been seen to be "interfering" by suggesting

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that the President follow the process I described for the appointment of any other Director
General or Head of Institution and so that is the issue that arose there and that flows into
36, Chair.
CHAIRPERSON: Well actually that is where my question was going.
MINISTER PRAVIN GORDHAN: Yes.
CHAIRPERSON: Because when I read the statement it seemed that prior to the elections
a certain process had been initiated which was a transparent process and certain – a
great number of people had applied.
MINISTER PRAVIN GORDHAN: Yes.
CHAIRPERSON: But then after the elections an appointment was made and I did not
get the impression that the person who was appointed came from the 120 but he might
have come from the 120. I was not sure what happened to that process.
Was it just abandoned or was it – what was the position and I thought I would
ask you. Maybe you might be able to say more because you may or may not have been
involved in any discussions. You may have been involved in discussions that migh t
explain what happened.
Were those who had applied just told I am sorry that process is no longer going
to be followed? Were they not told anything? What happened?
MINISTER PRAVIN GORDHAN: Well that happened. That process happened, Chair
after the 2014 elections as you point out and in paragraph 35 we say that the date on
which that appointment took place was the 23 September.
So that was quite an extensive period that had flowed. I think Mr Nene is in
the best position to explain the intricacies of what happened in that period.
CHAIRPERSON: Okay, thank you.
ADV PAUL PRETORIUS SC: In relation – may I proceed?

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CHAIRPERSON: Yes thank you.
ADV PAUL PRETORIUS SC: In relation to the appointment process and it was perhaps
appropriate to deal with it later but as the issue has been raised now may I ask you what
is the status of the process you described?
It may be a question that is one for legal advisors as to whether the President
exercises the power as part of the executive in Cabinet or whether the President
exercises the power individually under section 74 of the Constitution. Do you have any
comment on that?
MINISTER PRAVIN GORDHAN: I think one always assume that it was the former and
not the latter in this particular instance but you have a lot of lawyers there. They can tell
you...[intervenes]
ADV PAUL PRETORIUS SC: Yes.
MINISTER PRAVIN GORDHAN: Whether I am right or wrong. So the point we make in
paragraph 36 pursuant on Mr Pretorius' question, Chair is that and perhaps the
appointment of the SARS commissioner is one of the first illustrations of it. There might
be others as well that we might come back to is this extraordinary interest in what
happens in some of these appointment processes. So that is the point that we make in
point 36 – paragraph 36.
ADV PAUL PRETORIUS SC: So in certain instances the statutes would oblige him to
not only take an interest but to actually make the appointment albeit subject to Cabinet
consultation or unilaterally. So there are clearly occasions where the Minister does have
a profound interest and responsibility.
MINISTER PRAVIN GORDHAN: The President.
ADV PAUL PRETORIUS SC: Sorry, the President.
MINISTER PRAVIN GORDHAN: Yes.

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ADV PAUL PRETORIUS SC: And...[intervenes]
MINISTER PRAVIN GORDHAN: I think there are some offices for example the National
Commissioner of Police which does not necessarily require this process but as President
Ramaphosa has done he is not obliged to put in place the process that he just has for
the Head of the Prosecuting Authority but he did and that shows a level of transparency
about these appointment processes. So you can compare chalk and cheese if you like.
ADV PAUL PRETORIUS SC: Yes. As to the legalities and the processes and the status
of processes we will take it upon ourselves ...[intervenes]
MINISTER PRAVIN GORDHAN: We leave that to your wisdom.
ADV PAUL PRETORIUS SC: Yes. Then if you would tell the Commission please about
the events preceding your deployment to the Cooperative Governance and Traditional
Affairs Portfolio in May 2014. You deal with that in paragraph 37.
MINISTER PRAVIN GORDHAN: The purpose of that, Chair, is to use a few examples of
key let us call them projects which happened prior to the elections in 2014 and then
flowed into periods subsequent to 2014 as well and the experience that my colleagues
and I had at that particular point in time.
The caution that I wish to submit to the Commission is that these projects run
across terms. So each of the Ministers who were there will have a particular segment of
the project that takes place in terms of time and events during his or her term of office
and with respect it is the Commission that will have to patch it together or the officials in
the relevant department can help the Commission to actually do that.
ADV PAUL PRETORIUS SC: In paragraph 37.2 you say that these projects or the
features of these projects may be suggestive of a pattern that may be relevant to
understanding the methodologies and aims of the state capture project. That sentence
may suggest two things. One, that you have a subjective doubt about the statement

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made there or that you on the other hand defer to the findings of the Commission in that
regard. Which is it or both?
MINISTER PRAVIN GORDHAN: No, no I said we do not have any doubt. All I am saying
is I accept the limitations of the places I was at in government at various stages and a
personal conclusion about that is quite different from the commission having a vantage
point of looking at all the pieces of the puzzle and then being able to say here it the total
picture. So what I am respectfully submitting is that all of us who appear before you can
supply you with pieces of evidence and we leave you to connect the dots and come to
the conclusions you wish to.
ADV PAUL PRETORIUS SC: May I take you back to paragraph 34? I have been asked
to ask you in turn to expand upon the second sentence where you say I advised and you
are referring to former President Zuma that he may want to put his preferred candidate
through the usual process. Would you expand in particular who was the candidate and
what was the content of your exchange with President Zuma in this regard?
MINISTER PRAVIN GORDHAN: Well in reference to what I have said already. A, this is
how we have made appointments in the past. As illustrated, excuse me, in relation to
Mr Magashula and his appointment. B, we have already advertised the position and had
120 applicants. C, one could sense a bit of hesitation about allowing that process to
continue. Mr Moyane's name might have appeared in a conversation. I cannot quite, I
will not, you know die by that, but I seem to remember it vaguely and four, one was trying
to be helpful to the President to say, you know, test your candidate against the others
and allow for the process to go through as one normally would and then look at the
outcome, but this was getting closer to the election process.
ADV PAUL PRETORIUS SC: Do I understand from your answer there that it was not
certain at that stage that Mr Moyane was indeed the preferred candidate or your

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recollection is not clear on the point?
MINISTER PRAVIN GORDHAN: Let us say his name was floating around, but you had
the other 120 as well.
ADV PAUL PRETORIUS SC: Understood.
CHAIRPERSON: I take it from what you say in paragraph 34 last sentence in the event
it would appear that he ignored this suggestion. I take it that the former President did not
articulate his views in regard to the suggestion you made about what process you were
thinking should be followed?
MINISTER PRAVIN GORDHAN: Well in the event it was ignored. I think. Well at that
stage and then Mr Nene needs to tell you what followed after the elections.
CHAIRPERSON: Yes. Yes, no what I am saying is I am assuming, I think you are saying
I became aware that former – okay in 34 you say you advised him which I think is the
President Zuma that he may want to put his preferred candidate through the usual
process. What I am saying is I take it that he did not articulate to you any views about
your suggestion at that time. We know that later on he did not follow that process or you
cannot...[intervenes]
MINISTER PRAVIN GORDHAN: Not in an explicit way.
CHAIRPERSON: Yes okay.
ADV PAUL PRETORIUS SC: May we then proceed to paragraph 38 where you deal with
the nuclear deal as you put it?
MINISTER PRAVIN GORDHAN: What I describe Chair in paragraph 38 and what follows
in subsequent paragraphs is firstly that nuclear power both in reality and in terms of the
integrated resource plan was part of the energy mix in South Africa and, so you had coal
power, nuclear power, we get a bit of hydro power from Mozambique and more recently
you have renewables making their appearance as a reasonably significant contributor to

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the grid. So that is the point we make in paragraph 38 and the second important point in
38 is the 9,6 kilowatts because that is consistent with what it appeared the so -called
Russian/South African nuclear deal would have amounted to in the amount of electricity
that would be supplied over the period indicated 2023 to 2030. In 39 we are drawing
your attention to the two, to a particular structure that existed and I think it was changed
later. So this is the structure established on 9 November 2011 and it was supposed to
provide oversight and make decisions regarding nuclear energy policy, the new build
program, following investigations into costing, financing, technical and other operational
options some of which I elaborated in subsequent paragraphs.
ADV PAUL PRETORIUS SC: Yes then...[intervenes]
MINISTER PRAVIN GORDHAN: If I may continue.
ADV PAUL PRETORIUS SC: If I may just interrupt that appointment or establishment of
the National Nuclear Energy Accepted Coordination Committee was announced by
Cabinet on the 10 th of November 2011 and appears at page 83 of the bundle. It is not
necessary to go there, but just to say at this stage at that stage in 2011 whose
responsibility was it to investigate costing and financing?
MINISTER PRAVIN GORDHAN: Department of Energy.
ADV PAUL PRETORIUS SC: We will come to the persons who populated that committee
in a moment. If you could just continue then from paragraph 40.
MINISTER PRAVIN GORDHAN: So paragraph 40 came after the structure was created.
It was evident that the President and the Department of Energy were pursuing the
procurement of 9,6 kilowatts of power from Russia and that it might amount to a cost of
about a trillion Rand. I have just done a little bit of homework to illustrate what does a
trillion Rands mean in relation to that particular fiscal year. Let me offer you some
numbers. So and remember that in big projects your initial cost is never your eventual

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cost. So that is a trillion to start with. You take Medupi and other such projects as an
example, the fuel pipeline from Durban to Gauteng is yet another example of that where
costs escalate and sometimes even scope escalates or changes as well, but let us
compare the trillion Rand expenditure to what the budget framework looked like in the
fiscal year 2011/2012. So the anticipated revenue in that year was R824 billion plus
minus. R824 billion total revenue. You can add to that borrowing of a R154 billion. The
total expenditure would have been about R979 billion. So your total budget for that fiscal
year was less than a trillion Rands. You are talking about one project that is equal to
your entire expenditure budget for that year. Just to give you some sense of proportion
the nett debt at that time – and you will find all of these numbers in the budget review of
February 2011 – was at a trillion Rands. In other words that is the total amount of
collected, collective debt that the State was owing as a sovereign and the debt service
cost that is the interest that you pay on debt each year which is estimated in that year as
R76 billion.
So to repeat R979 billion of which a R154 billion would have been borrowed and
R824 billion would have come from the tax revenue base of the country. Just to give you
a sense of proportion by way of illustration.
ADV PAUL PRETORIUS SC: Before you go on...[intervenes]
CHAIRPERSON: So it was, it was just something completely out of our financial
liabilities?
MINISTER PRAVIN GORDHAN: Yes and that is why in the subsequent discourse even
after my reappointment in the first press conference that we had the Deputy Minister and
I on the 14 th of December I think 2015 one of the issues that arose is the nuclear issue
and the language we have always used is at a pace and scale that we can afford. In
other words you can set your ambition wherever you wish to, but what you do in each

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year or each three year cycle depends on what you have before you as resources that
are available.
Now you have a variety of statements coming from various sources which say for
example the State will not have to pay anything. This will be sub financing. Leave that
for now, but this project became quite central for whatever reason and if you like come
what may and the cost implications if it was not managed in a physically responsible way
for South Africans as a whole and our social programs, our housing programs and so on
could have been quite serious and that then creates what Minister Manuel refers to as
this tension between managing the fiscus in a responsible kind of way whilst having
whatever ambitions one has in respect of particular projects.
CHAIRPERSON: But just to go back to the statement that you say you and your then
deputy Mr Jonas made in December 2015 that whatever was done it would have to be
done at a pace that at which it could be afforded.
MINISTER PRAVIN GORDHAN: Yes.
CHAIRPERSON: Even at a pace at which it could afforded it would have taken manymany years, is it not, for it to be completed in terms of – it would have to be done in
very...[intervenes]
MINISTER PRAVIN GORDHAN: Yes...[intervenes]
CHAIRPERSON: In bits and pieces.
MINISTER PRAVIN GORDHAN: Bite size.
CHAIRPERSON: Over a long time.
MINISTER PRAVIN GORDHAN: Yes.
CHAIRPERSON: Yes. Okay thank you.
MINISTER PRAVIN GORDHAN: But I mean there might be other experts who might give
you another view. So I concede that.

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CHAIRPERSON: Okay, all right thank you.
ADV PAUL PRETORIUS SC: May I ask you to turn to page 141 of the supplementary
bundle? You have spoken about the establishment of the NNEECC that is the National
Nuclear Energy Executive Coordinating Committee. On that page 141 appears according
to our information at least the membership of that committee in August 2013. Is that
correct as far as you recall?
MINISTER PRAVIN GORDHAN: As far as I can ascertain yes.
ADV PAUL PRETORIUS SC: So that would be the then President Mr Jacob Zuma the
Minister of Energy Mr Ben Martins, the Minister of Public Enterprises Mr Ma lusi Gigaba,
the Minister of Finance yourself, the Minister of State Security Siabonga Cwele it should
be, the Minister of Defence Ms Nosiviwe Mapisa-Nqakula, the Minister of International
Relations and Cooperation Ms Maite Nkoana-Mashabane.
CHAIRPERSON: I thought, I though Mr Gordhan when I read your statement I thought
that this body was called by this name when it was chaired by the then Deputy President
Motlanthe, but I see that here they have put former President Zuma as the chairperson,
but the name has not changed and I thought he chaired it in terms of your statement
when its name was changed into something else?
MINISTER PRAVIN GORDHAN: There was a prior structure and that was chaired by the
Deputy President at the time Mr Motlanthe and it was called slightly differently. The name
was different.
CHAIRPERSON: Yes.
MINISTER PRAVIN GORDHAN: So this was a new structure established with the
President...[intervenes]
CHAIRPERSON: Not the other way around?
MINISTER PRAVIN GORDHAN: As far as I recall it Chair. So I will...[intervenes]

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CHAIRPERSON: Security, security cabinet some committee, committee, I though from
your statement.
MINISTER PRAVIN GORDHAN: Yes.
CHAIRPERSON: I may have misunderstood. I thought initially this was the initial name
for the body.
MINISTER PRAVIN GORDHAN: No.
CHAIRPERSON: And then I thought it was changed to Security Cabinet somethingsomething and then it was chaired by the President then.
MINISTER PRAVIN GORDHAN: So the sequence I remember Chair is that there was
an initial structure established under the chair of the Deputy President Mr Motlanthe and
then there was a subsequent structure chaired by the President.
ADV PAUL PRETORIUS SC: If you go to page...[intervenes]
MINISTER PRAVIN GORDHAN: We will try and clarify the names for you.
CHAIRPERSON: Okay. I may have misunderstood.
ADV PAUL PRETORIUS SC: Go to paragraph 45 that may assist you and indeed our
instructions may be incorrect and we will clarify that.
CHAIRPERSON: Okay.
ADV PAUL PRETORIUS SC: Because it seems that the NNEECC may have been
chaired by someone else, but...[intervenes]
CHAIRPERSON: Okay...[intervenes]
ADV PAUL PRETORIUS SC: If you give us an opportunity...[intervenes]
CHAIRPERSON: Yes we will check later...[intervenes]
ADV PAUL PRETORIUS SC: We will clarify our instructions may be wrong.
MINISTER PRAVIN GORDHAN: Yes you are right I think 45 clarifies.
CHAIRPERSON: Okay, all right.

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MINISTER PRAVIN GORDHAN: Thank you Mr Pretorius.
ADV PAUL PRETORIUS SC: Then if you could continue please at paragraph 40.
MINISTER PRAVIN GORDHAN: So I have explained the numbers as they apply to 40.
Then 41 onwards I describe some introductions with the President on this particular
matter. Then 41.1 I describe a meeting with the former President at his residence in the
latter half of 2013. At that meeting as I describe in 41.2 where President Mr Fuzile the
then Director General of the National Treasury and when we get there we also see that
and I described in 41.3 that Mr Thobejane was also part of the conversation and he was
the advisor to the then Minister of Energy Mr Martins and in the latter part of that
paragraph I indicate that as in Annexure 7 Mr Thobejane is then dismissed from his
position as advisor by Ms Joemat-Pettersson who succeeded Mr Martins as the Minister
of Energy.
ADV PAUL PRETORIUS SC:

Just in regard to that, Minister the circumstances

surrounding that dismissal and what you refer to as his sudden departure from his
position. I understand you do not wish to comment on the merits of what appears in the
annexures. That is a matter that is perhaps for other persons to testify to.
MINISTER PRAVIN GORDHAN: Well the then Minister is the best person to inform you
of that.
ADV PAUL PRETORIUS SC: And then may I ask whilst you go through this chronology,
Minister to inform the Chair and the Commission as to the sequence of the involvement
of the Russian Federation and other countries in the process.
MINISTER PRAVIN GORDHAN: If I could conclude paragraph 41 and then I come back
to that question. So Chair in 41.4 we describe there let us call it a preliminary discussion
while we were waiting for the President with Mr Thobejane and we being Mr Fuzile and
myself.

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In 41.5 as I remarked Mr Martins was not president nor his Director General.
41.6...[intervenes]
ADV PAUL PRETORIUS SC: And they were from the Department of Energy.
MINISTER PRAVIN GORDHAN: That is right. The President then joins us in this
discussion and explains the importance of obtaining more nuclear power.
I indicated to the President as in 41.7 that nuclear procurement would be a
complex issue and there were lots of interested stakeholders meaning that there are
countries like China, Korea, France, the United States amongst others that would have
an interest as suppliers if we were interested in entering the market and yes such as that
on the one hand the suppliers on the other hand environmentalists and other civil society
organisations.
41.8 I indicated to Mr Zuma that the National Treasury would undertake an
exercise to design a procurement process for such a significant project and to ensure
that it complied with the applicable legal framework for both public procurement and
energy procurement.
So that was an offer to say how do we in terms of existing legislation designer
process whether it involves a request for information, request for proposal, the bid
processes and whatever else that follows.
41.9 I made this an undertaking. I am going to read this, Chair.
CHAIRPERSON: Yes.
MINISTER PRAVIN GORDHAN: After I indicated to the former President that it would
be appropriate to follow lawful procurement processes for such an expensive project to
avoid becoming mired in scandals or a scandal like the so-called Arms Deal.
I wanted to impress upon the former President that undertaking the nuclear
procurement required careful consideration of its costs, the choice of supplier, due

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process and the likely challenges to any decision to proceed.
I mean it will be quite easy for example a bidder from the United States or
another country to contest whomsoever new contract to deal with in the final instance
and one could be mired in that for many years if one is not careful.
In 41.10 I say that I indicated to Mr Vusile and Mr Thobejane ought to
exchange telephone numbers so that the former could explain procurement processes in
line with the Constitution and applicable legal framework the one explaining to the other.
To the best of my recollection no further engagement regarding the nuclear
deal occurred with Mr Thobejane and Mr Fuzile nor between myself and the then
President and this is what Ministers by the way if I may confess normally do, Chair which
is once you arrive at an in principle decision on a matter you say to the officials work out
the details.
So that is why you see this actually happening but when Mr Fuzile appears
before you he can – his shall I say involvement to the extent he was allowed to be
involved then spans this period right up to the time he leaves.
CHAIRPERSON: Okay.
MINISTER PRAVIN GORDHAN: So he has a good picture.
CHAIRPERSON: Okay.
MINISTER PRAVIN GORDHAN: In terms of the completeness of the overview of this
project.
ADV PAUL PRETORIUS SC: So although what you testify to in paragraph 42 and
following is not your personal or not within your personal knowledge you are doing it just
to complete the chronology I understand?
MINISTER PRAVIN GORDHAN: Yes and I indicate that in the latter part of the first
sentence when I indicate that I am advised "by officials within National Treasury" that as

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part of its pre procurement process and in preparation for the envisaged nuclear new
build the Department of Energy furnished officials at the National Treasury with an
extensive set of documents and these included a draft feasibility study report titled Draft
Feasibility for the Nuclear Program of the Republic of South Africa together with a wide
ranging accompanying research papers, costing, licensing, localisation, fuel cycle, waste
disposal which is an important part of any nuclear project, environmental impact which is
equally important, skills development, international agreements and conventions and the
power industry structure if you like.
ADV PAUL PRETORIUS SC: I have to formally get the permission in terms of the rules
from the DCJ to lead hearsay evidence but I trust Chair it is in order that it is done for the
purpose of completing the chronology.
CHAIRPERSON: Yes I think it is fine just for the sake of that but before you proceed I
wanted to go back to that meeting between yourself, Mr Fuzile, the President and Mr
Thobejane. You made certain suggestions in terms of procurement processes and Mr
Thobejane and Mr Fuzile exchanging their cell numbers or phone numbers.
What was the outcome of the meeting and what was the reaction if any of the
former President to your suggestion about procurement processes? The statement does
not make it clear.
MINISTER PRAVIN GORDHAN: It was a short meeting but the outcome was that the
two officials will deal with the detail meaning as I indicated the Treasury would advise on
the procurement process, Mr Thobejane being the Energy expert will indicate what
direction the Energy Department wanted to take in this particular matter and then
obviously come back to some structure to report on the work that they have done and
that then follows after my departure.
CHAIRPERSON: So there was at least at that meeting there seemed to be no problem

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with the suggestion you made in terms of procurement processes to be followed?
MINISTER PRAVIN GORDHAN: Well I did not go into any detail, Chair.
CHAIRPERSON: Into details yes.
MINISTER PRAVIN GORDHAN: But the principle that the two gentlemen start working
on the detail.
CHAIRPERSON: Yes.
MINISTER PRAVIN GORDHAN: At a fairly high level I would imagine.
CHAIRPERSON: Yes.
MINISTER PRAVIN GORDHAN: It was accepted.
CHAIRPERSON: Okay thank you.
ADV PAUL PRETORIUS SC: At the stage referred to in paragraph 42 Minister Gordhan
had the Treasury Department at that stage become involved in examining costing and
financing? Do you know? Can you recall?
MINISTER PRAVIN GORDHAN: Well I am aware when I returned to the Treasury that
what did happen is that and this is preceding Mr Nene's dismissal, Chair on 9 December
2015. Again the details Mr Fuzile and Mr Nene can provide you with but the Energy
Department did its costing and other technical work and the Treasury had to look at
costing but also in relation to the point you made earlier on, Chair where does this fit into
the fiscal framework and fiscal affordability and how would they manage that and the idea
was that both these reports would then merge somewhere along the line process wise
and that then leads us to the meeting of the Cabinet on 9 December 2015 and we will
come to that in a moment where Cabinet made a decision to continue with the project
but subject to costing and other factors being taken into account and reverting to Cabinet
once those details were available.
ADV PAUL PRETORIUS SC: Yes we will get there in due course, Minister. If you would

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deal with the evidence you have put forward at paragraph 43 please?
MINISTER PRAVIN GORDHAN: That is what I have just described and it indicates here
Energy's approach to National Treasury for input on this. Oh, I think the main point here
is firstly the point the Chair referred to earlier on or you might have, I forget, about the
so-called deal or agreement signed with Russia which is the first part of 43 and the
second part is how awareness of this agreement appeared on the screen and it appeared
because the Department of Energy approached Treasury to comment on a tax incentive
which the Russians required as part of this deal and the tax expertise obviously they were
then or lies in the National Treasury in this particular regard and that is when the officials
became aware of that fact and secondly as the statement says is assess the implications
under the Public Finance Management Act.
So that again would follow whether you are following process properly or not
and officials who in Treasury raised concerns with the draft agreement and its clear
objective of creating firm fiscal commitments to Russia.
So I mean we sign many memoranda of understanding with different countries,
Chair on different matters or between different agencies but a memorandum of
understanding is precisely that. It cannot constitute a firm fiscal commitment and this is
where the timing and the scaling and so on of this project becomes quite material.
So I think the key point being made in 43 is how did the Treasury colleagues
become aware that there was this agreement and that is what it actually describes.
ADV PAUL PRETORIUS SC: Then if you could move to paragraph 44 please where you
deal with the attitude of the National Treasury to the proposals of the Department of
Energy and the undertaking to prepare a feasibility study or a commentary on Energy's
feasibility study.
MINISTER PRAVIN GORDHAN: I think you have described it. I accept your description

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that the Treasury...[intervenes]
ADV PAUL PRETORIUS SC: Well...[intervenes]
MINISTER PRAVIN GORDHAN: Objected, objected to the crafting within the agreement
on the one hand and on the other hand undertook to prepare a commentary on the
feasibility study and financing studies that the Energy Department had actually done.
ADV PAUL PRETORIUS SC: Did National Treasury follow up on that undertaking?
MINISTER PRAVIN GORDHAN: So that, that would have happened post 2014, but
before the 9 th of December 2015.
ADV PAUL PRETORIUS SC: And you refer to a continual interaction between Treasury
and the Department of Energy in regard to costing and financial aspects.
MINISTER PRAVIN GORDHAN: That is what I am advised by the officials.
ADV PAUL PRETORIUS SC: Proposed billed program.
MINISTER PRAVIN GORDHAN: That is what I am advised by the officials.
ADV PAUL PRETORIUS SC: Then what happened in June 2014 to the NNEECC?
MINISTER PRAVIN GORDHAN: So look this is where the...[intervenes]
CHAIRPERSON: [Indistinct].
MINISTER PRAVIN GORDHAN: Chair's point comes in that in June 2014 that is after
the elections the NNEECC was converted into the Energy Security Cabinet
Subcommittee and was chaired from then on by the former President in place of the
Deputy President Mr Motlanthe. So earlier references might have to be corrected and
the ESCS as it is now called was responsible for oversight, coordination and direction of
activities for the entire energy sector, but clearly the focus was on the nuclear part of it
at that point in time and we then list under 45 the Ministers who constituted that
committee.
ADV PAUL PRETORIUS SC: And they were? Would you mention their names please?

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MINISTER PRAVIN GORDHAN:

Minister of Energy, Minister of, well Ms Joemat-

Pettersson, Ms Lynn Brown, Ms Maite Nkoana-Mashabane, Mr David Mahlobo, Mr Nene,
Doctor Davies, Mr Patel, Advocate Ramatlhodi and Ms Mapisa-Nqakula.
ADV PAUL PRETORIUS SC: You invite the Commission at paragraph 46 to investigate
the rationale for these changes. I understand there were at least two changes. The one
in the scope of the committee and two the membership of the committee. Do you have
any particular issue in mind and perhaps suggestion to the Commission?
MINISTER PRAVIN GORDHAN: And three the chair of the committee.
ADV PAUL PRETORIUS SC: Chair of the committee.
MINISTER PRAVIN GORDHAN: As well. So...[intervenes]
ADV PAUL PRETORIUS SC: I understand ...[indistinct].
MINISTER PRAVIN GORDHAN: I think I have heard, sorry, I have heard anecdotally
chair that this was quite material to the eventual outcome of this process culminating in
the memorandum to the Cabinet on the 9 th of December 2015 from the officials of the
Treasury and Mr Nene would be able to add more light to this as well, but my perception
from the outside was that this committee was constituted in a way to ensure that a
majority decision in favour of whatever proposal was put forward would not be too difficult
to obtain.
CHAIRPERSON: Well I was about to ask you whether to your knowledge there was any
significant reason for the change in terms of who was chairing it. There was a change
of, I do not know if chairmanship is the right word, there was a change in terms of who
was the chair. To your knowledge do you know whether there was any specific reason
for that particular change?
MINISTER PRAVIN GORDHAN: I can only surmise that a new sense of urgency was
entering the equation.

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ADV PAUL PRETORIUS SC:

The Energy Security Cabinet Subcommittee is I

understand one of many subcommittees that would have operated within the jurisdiction
of Cabinet, am I correct?
MINISTER PRAVIN GORDHAN: Yes they are called by different names Chair so you
can have inter-ministerial committees, you can have task teams which we will come to or
you could have structures of this sort as well.
ADV PAUL PRETORIUS SC: And I have been requested to ask you do you know how
many cabinet subcommittees or committees the former President chaired or as general
practice a President would chair generally speaking?
MINISTER PRAVIN GORDHAN: Not too frequently is all I can say, but I am sure the
Presidency can assist you with that.
ADV PAUL PRETORIUS SC: And do you know by what standards participation in a
cabinet committee or subcommittee is established?
MINISTER PRAVIN GORDHAN: Normally the criterion would be you have a material
interest in the matter under discussion or task that is given to for example an IMC, an
inter-ministerial committee.
ADV PAUL PRETORIUS SC: Thank you. If we may then move on to just mention in
passing the litigation that you became aware of. That application is complex and to an
extent quite technical and it is not necessary to go, not necessary to go into it at this
stage, but you became aware of two things whilst you were Minister of COGTA. Firstly,
the litigation that ultimately succeeded at the hands of the applicants to set aside certain
memoranda and certain basic decisions. The reasons we can leave for another occasion
and then the inter-governmental agreement with the Russian Federation. Do you have
any comment there and maybe this is the time to deal with the sequencing of the
involvement of the Russian Federation and then other countries as well.

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MINISTER PRAVIN GORDHAN: Well once it became known publicly that there was this
agreement Chair with the Russian Federation then it appeared that the Department of
Energy and the Minister concerned had similar agreements entered into with a range of
other countries that have the capacity to supply nuclear power stations and...[intervenes]
CHAIRPERSON: The agreements, I am sorry, the agreements being a reference or the
reference to agreements being reference to memoranda of understanding?
MINISTER PRAVIN GORDHAN: I am using my language.
CHAIRPERSON: Yes, okay.
MINISTER PRAVIN GORDHAN: Let us use the word agreement. Sorry about that.
CHAIRPERSON: I just want to make sure when one reads the transcript one knows if it
is a reference to the same thing.
MINISTER PRAVIN GORDHAN: Yes.
CHAIRPERSON: Okay thank you.
MINISTER PRAVIN GORDHAN: So, I am not sure what they officially were titled.
CHAIRPERSON: Yes.
MINISTER PRAVIN GORDHAN: But here we refer to inter-governmental agreement. So
that is what we are talking about and there was also the issue about whether within the
kind of procurement legislation we have government to government procurement was
actually permitted or not permitted or what process would be required as opposed to
government procuring from a private sector. So that was one of the confounding factors
that needed to be clarified as well.
ADV PAUL PRETORIUS SC: At the stage your evidence is that in relation to the nuclear
deal here at paragraph 49 had any final Cabinet decision been made to proceed with a
particular class of procurement?
MINISTER PRAVIN GORDHAN: Not at that time as I remember it.

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ADV PAUL PRETORIUS SC: And at that stage what was the attitude of National
Treasury? You deal with that in paragraph 48.
MINISTER PRAVIN GORDHAN: That as I have said on several occasions now Chair
that there had to be a proper evaluation of the costs. Now let me give you an illustration.
Often in many of the let us call it international procurement agreements that entities or
governments enters into the exchange rate is an important factor. So you could start a
whole calculation based on an exchange rate of say R8 to the Dollar, but by the time you
conclude the agreement or move ahead in any firm sense the Rand to the Dollar
exchange rate could be R12 to the Dollar. That means your entire cost structure is
miscalculated and sometimes you have deliberate misstatement of the Rand Dollar
exchange rate and that then begins to impact on all of the other numbers and then you
do not – that is why reference is made to the true cost. So you need to check all of the
assumptions that underlie. So in some of the transactions for example the estimated
cost of oil would be a factor. Remember at some stage a few years ago and it is not too
long in the past we thought oil would fall to $10 a barrel. Today it is somewhere between
$60 and $70 to the barrel. It was only three, four weeks ago when it was heading towards
$80 a barrel. Now if oil is a key factor in this, in a particular transaction and you calculate
it at $25 to the barrel and again your whole calculation goes completely off track. So I
am just trying to illustrate the importance of assumptions and costs arrived at and what
might actually be the true cost if the assumptions are based correctly.
ADV PAUL PRETORIUS SC: May we then proceed to your evidence in relation to the
Petro SA/Engen Petronas acquisition or proposed acquisition?
50...[intervenes]
MINISTER PRAVIN GORDHAN: 50, yes.
ADV PAUL PRETORIUS SC: Of the statement.

Page 96 of 121

It is at paragraph

19 NOVEMBER 2018 – DAY 25
MINISTER PRAVIN GORDHAN: So this was a transaction that came to the Treasury
and my attention in, I cannot remember exactly how, but it involved Chair the assets of
Petronas in South Africa which is what we know as Engen and they are the retail fuel
stations that we are familiar with but there were other businesses like the lubricant
business and others that were attached to the assets that Petronas had in South Africa
and it appeared that there were discussions between Petro SA which accounts to the
Department of Energy and Engen to purchase the assets in particular the fuel stations of
Engen which was, had quite a footprint both in South Africa and I believe in other parts
of Southern Africa as well.
ADV PAUL PRETORIUS SC: Minister there are a number of issues of concern that you
have raised under this head. The first was the apparent difference between the market
value of the business to be purchased and the asking price. The second was the request
to give guarantees and the third the request to Treasury to give guarantees and the third
was that due diligence and the performance of the due diligence became an issue. Would
you care to deal with those issues?
MINISTER PRAVIN GORDHAN: And this is pursuant Chair on paragraph 53 of the
statement. So Mr Pretorius is right the asking price shifted somewhere between R17
billion and eventually R18,68 billion for these assets and in various interactions with
people familiar with the industry including a leading black business person that I had
interactions with and I thought this could be a very interesting black empowerment
transaction entering this market space with this kind of infrastructure and footprint. He
said "I will not touch it." I said "why" and he said "no, the market price is between
R12 billion and R14 billion." So here is 12 to 14 billion and there is 18,68 billion. So here
is this difference between asking price so to speak and what appeared to be market
value. So that is the first concern as Mr Pretorius points out. The second is that as when

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you go through the documentation there were some agreement struck and again
Mr Martins is in a best position to give you some of the details. We had a more distant
view, but the idea was that Petro SA would enter into some kind of partnership with
Sonangol which is the Angolan oil company and that Sonangol will provide some of the
cash or other financial instruments that are actually necessary for this transaction. Now
for that to happen in most instances nobody is going to put in this amount of cash or part
thereof if there is not what is commercially known as due diligence. Some of the lawyers
here might be familiar with that, that is undertaken. I think in the Sonangol letter that you
see in the annexures at Annexure 11 they also talk about firstly one of the top 20 banks
in the world not 20 banks in Africa should be involved in this transaction.
But they also make reference to the necessity for a due diligence and for some
reason what was being asked of the South African side of the transaction is to accept the
due diligence that Petronas had undertaken and you will find that in the documentation
as well but I think normal commercial practice would be if I am going to invest I want my
own investment advisors and so on to undertake the due diligence. So there was a gap
here which needs to be explained.
The third was a request from Minister Martins to the Treasury to provide a
guarantee for the sum of R9.5 billion.
ADV PAUL PRETORIUS SC: Now Minister there may be some confusion or lack of
understanding as to how that R9.5 billion guarantee request relates to the R18 billion or
the 12 to R14 billion. If you would turn to page 139 your legal team did some work
overnight on the calculations, 139 of the supplementary bundle.
MINISTER PRAVIN GORDHAN: So this is some arithmetic that will help everyone. So
the value claimed by the Energy Department R18.68 billion as I indicated to a market
value between 12 and R14 billion. Sonangol gets...[intervenes]

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ADV PAUL PRETORIUS SC: Perhaps we just better introduce Sonangol into the
evidence. They were to be a partner in the deal.
MINISTER PRAVIN GORDHAN: I indicated that.
ADV PAUL PRETORIUS SC: Yes.
MINISTER PRAVIN GORDHAN: And they get 49 percent and they indicate in their letter,
Chair that they will take 49 percent now but eventually sell off different percentages in
the marketplace and possibly to Black Empowerment partners over a period of time.
Petro SA gets 51 percent.
Together they pay 80 percent of the purchase price which amounts to 14.4 and
the guarantee as Mr Pretorius indicates of 9.5 is to cover Petro SA which is required to
find 4.6 billion.
ADV PAUL PRETORIUS SC: 5.6.
MINISTER PRAVIN GORDHAN: 5.6 I beg your pardon and Sonangol 5.4 although that
does not add up to 9.5 but it is to actually look at the lenders who would come up with
4.1 billion. So it is that that gives you your 9.5.
In the event and there was my former DG informs me or reminds me that whilst
we were concluding the year end revenue numbers at the Revenue Service which was a
tradition at the time which is indicated in paragraph 54 that there was a telephone call
from the President that I took who was enquiring about whether we had concluded the
provision of the guarantee and I want to come back to that in a moment.
There was also a meeting between myself and Minister Martins on 1 April
which is indicated in 54.2. That is the first enquiry rather and 54.4 indicates the 1 April
meeting with Mr Martins where after Treasury does give a letter of guarantee but which
is conditional upon a number of factors being met including the completion of a due
diligence exercise. Finally of course this deal fell through at the end of the day.

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The issue of guarantees being provided by the Treasury might pop up a few
times. I thought it might be useful to explain how this works. In the Treasury over the
years what has been set up is what is called a Fiscal Liabilities Committee.
It is made up of a few senior officials within the Treasury who if you like act as
an objective team and if another official or an entity wants to have a guarantee of say in
this instance R9.5 billion you provide the paperwork.
If need be you make yourself available to answer questions to them and then
they decide having a look at both the credibility of the business case that has been
provided and the fiscal environment at that point in time whether and the viability of what
is being proposed.
They decide whether a guarantee will be issued or not. Now guarantees
constitute in both legal and financial terms contingent liabilities. So I can give you a
guarantee that Paul Pretorius will pay you R2 million tomorrow but if he does not then I
have to pay it. So I have not paid it yet so it is contingent.
Some ratings agencies when you start approaching debt to GDP over 50
percent then begin to look at not only the actual debt that you are committed to but also
add the contingent element to see what level of risk do you constitute as a sovereign, as
a country and that is why there is a lot of importance placed on process and objective
and viable business [indistinct] being provided and then the FLC, the Financial Liability
Committee makes a recommendation to the Director General and that finally ge ts to the
Minister.
CHAIRPERSON: And looking at that –those contingencies by those rating agencies
would be quite legitimate because what if the risk materialises or not.
MINISTER PRAVIN GORDHAN: That is the point.
CHAIRPERSON: Yes.

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MINISTER PRAVIN GORDHAN: So that is the point, Chair. So for example Eskom has
a guarantee standing at the moment of R350 billion, of which I forget the immediate
number but it probably used up between R220 and R240 billion of that guarantee.
In other words it has actually borrowed against the guarantee and its total debt
is R400 billion. So there are some non-guaranteed debt and there is some guaranteed
debt. In some instances lenders also have I hope I get the technical term right but a cost
default clause which means that if one of your state entities does not pay up on the due
date it could have a domino effect on others as well.
So not only will they ask you to pay what that entity was supposed to pay R5
billion for example, a cost default clause will involve the others as well and then you place
the whole country at risk. So one of the things that we – that Treasury applies its mind
to and government as a whole is not to ever get into that position where there is a default
on debt by its entities but guarantees are not automatic.
It does not mean if you request one you will get one and that contestation and
that pushback from the Treasury is very useful as part of the check and balance process
within government itself.
CHAIRPERSON: Thanks.
ADV PAUL PRETORIUS SC: The exchange between yourself and the former President
and between yourself and Mr Martins on these topics at this time are dealt with in your
evidence at paragraph 54.2 to 54.4. Is there anything you wish to add?
MINISTER PRAVIN GORDHAN: No the only points to emphasise is that there was the
request, there was the deficiency in relation to the price differential, there was the issue
of due diligence being allowed and why the hesitancy by some parties to entertain what
is normal commercial practice and again that an unqualified guarantee was not going to
be forthcoming but that would be irresponsible of the treasury to do and so you have the

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qualified guarantee and I suppose in some instances people would be upset because
they do not understand or appreciate or have regard for the kind of concerns as Mr
Manuel pointed out in his document the guardianship role if you like that the Treasury is
assigned over the fiscus and the kind of check and balance role that it actually has to
play on behalf of government.
ADV PAUL PRETORIUS SC: As I understand your evidence Minister Gordhan it was
Treasury's insistence that there be a due diligence and an agreement to issue a
guarantee subject to conditions. I will get back to your comment in paragraph 54.5 in a
moment but would you go to page 110 please?
MINISTER PRAVIN GORDHAN: Of?
ADV PAUL PRETORIUS SC: Of the bundle in front of you in which your statement
appears. It is 110. It is Bundle M1A. It is the bundle in which the statement appears.
The first bundle at page 110.
CHAIRPERSON: What page must I look at?
ADV PAUL PRETORIUS SC: 110.
CHAIRPERSON: 110. Yes Mr Pretorius?
ADV PAUL PRETORIUS SC: What document is that? You will see on page 111 it
appears to be signed by yourself. Is this the guarantee?
MINISTER PRAVIN GORDHAN: That is a fraudulent signature. No, I am joking. No that
is signed by myself, Mr Chair and that is the guarantee document that I referred to earlier
on and the first paragraph after number six in the third line makes reference to a
comprehensive due diligence that I indicated earlier on as well.
ADV PAUL PRETORIUS SC: So it appears from this document that a guarantee of R9.5
billion was afforded or issued subject to the conditions in paragraphs one to six but also
subject to a comprehensive due diligence being undertaken.

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19 NOVEMBER 2018 – DAY 25
MINISTER PRAVIN GORDHAN: That is right.
ADV PAUL PRETORIUS SC: Now the origins of this document appear to be highlighted
in your evidence at paragraph 54.4 arising out of a conversation you had with Mr Martins.
Would you relate the contents of that conversation or that exchange if it was more than
a conversation to the Chair please?
MINISTER PRAVIN GORDHAN:

Well what 54.4 indicates, Chair is that in that

conversation pursuant on the call from Mr Zuma I indicated to Mr Martins on 1 April that
it is quite important to have a) further information, b) the detailed due diligence on the
transaction before any guarantee could be provided. A due diligence is a as we point out
in the paragraph a comprehensive appraisal of a business undertaken by a prospective
buyer especially to establish the value of its assets and liabilities and in order to evaluate
its future commercial potential.
Sonangol's participation in the transaction as I indicated earlier was
conditional on the successful completion of a due diligence exercise. I think if one had
to explain it for the public in simple terms it is like buying a second hand car without
examining it right and somebody says you know if you buy a new one it is going to cost
you R500 000. I am offering you this for R400 000 but you do not know what is below
the bonnet.
Due diligence could well be if you are a good mechanic you can check the car
yourself or ask a trader or some car shop to check it for you or the AA and once you are
satisfied that it is worth R400 000 then you will be willing to pay the R400 000.
So I think we will all understand that we would not part with R400 000 without
understanding what we are buying. The same applies here except there is one additional
factor, the commercial viability and essentially what that means I imagine is that am I
buying something that is going to last for a long time and that is going to make me money

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because I am investing in it at the end of the day and that is a simple proposition that in
a day to day exercise each one of us might have to encounter.
ADV PAUL PRETORIUS SC: You then make a comment in paragraph 54.5 regarding a
possible view that existed that the due diligence or a due diligence should not be
conducted. Was that factually correct? Was there resistance to a due diligence?
MINISTER PRAVIN GORDHAN:

That is what it appeared like from the various

interactions that I had yes. Otherwise if you wanted to sell Sonangol as a serious partner
and they make explicit in their letter they want to conduct a due diligence before they
could part – before firstly they agree to a partnership and secondly before they part with
any money and if you are serious about the partnership then I imagine Chair that you
agree to a due diligence exercise and wait for the two week or three week period for that
exercise to be completed.
CHAIRPERSON: In other words if you are selling somebody a second hand car and they
want to bring a mechanic to have a look at it.
MINISTER PRAVIN GORDHAN: Yes.
CHAIRPERSON: If you resist that you may be chasing them away.
MINISTER PRAVIN GORDHAN: Ja.
ADV PAUL PRETORIUS SC: If I may ask you to go back? A query has been raised in
relation to page 110 of the bundle, the first bundle, M1A.
CHAIRPERSON: You have to be consistent now with what you call them.
ADV PAUL PRETORIUS SC: Yes.
CHAIRPERSON: Which one now?
ADV PAUL PRETORIUS SC: I am sorry, did I say M? I meant N, firstly, N1A.
CHAIRPERSON: The one with the statement?
ADV PAUL PRETORIUS SC: That first one.

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19 NOVEMBER 2018 – DAY 25
CHAIRPERSON: Okay, what page must we look at?
ADV PAUL PRETORIUS SC: 110, we need to go back to page 110, we have just been
there.
CHAIRPERSON: Oh, okay.
ADV PAUL PRETORIUS SC: I am asked to ask you to explain if you would, Minister,
how Phembani Group Pty Ltd came to be involved?
MINISTER PRAVIN GORDHAN: It appear that they were partners with Engen in the
Petronas stable.
ADV PAUL PRETORIUS SC: Right, and there was to be private equity as part of
the…[intervenes]
MINISTER PRAVIN GORDHAN: I cannot remember the full details of all of that.
ADV PAUL PRETORIUS SC: How did you conclude, Minister, that there was indeed and
it may be my fault, because I put words in your mouth. That there was a resistance to a
due diligence, what led you to conclude that this idea of a detailed due diligence was not
well received?
MINISTER PRAVIN GORDHAN:

Well firstly, as I said earlier on, Chair, in the

conversations that took place around this transaction. Secondly as I also indicated a
moment ago, you are saying or PetroSA is saying Sonangol is our 49% partner. That is
a big stake, that is not 5% and if Sonangol says I want a due diligence exercise to be
done, amongst other conditions it puts it in its letter by the way. Like the top 20 banks in
the world being involved in this transaction. Then if you are serious about the deal you
say yes, go ahead I will wait.
Now that wait could either be from the Petronas side, because there was some
deadline agreed upon between Mr Martins and themselves, about 31 March being a
critical date. So you can see phone calls on the 31 st, meetings on the 1 st and so on. So

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those are the two things, or two elements that lead one to the conclusion.
And again when Mr Fuzile appears before you, because he dealt with the
technical part of the details together with the other officials he could elaborate on this.
ADV PAUL PRETORIUS SC: But there is no suggestions that Mr Martins resisted the
performance of a due diligence is there?
MINISTER PRAVIN GORDHAN: I cannot say that with any conviction no, but I imagine
that if you are overseeing this transaction and you understand the importance of the
partnership and the kind of contribution that Sonangol is going to make and that due
diligence exercise are part of these big commercial transactions, then you provide the
space for it.
ADV PAUL PRETORIUS SC: Right. Can we just then conclude this chapter by telling
the, Chair, what happened ultimately to the potential transaction?
MINISTER PRAVIN GORDHAN: Yes, in paragraph 56 I indicate that the transaction did
not proceed, because Petronas withdrew from the deal after PetrolSA failed to fulfil the
financing conditions and a due diligence exercise was not performed. As a result I
understand that – the last sentence is in relation to the post 2014 process.
"As a result I understand that the guarantee was withdrawn by
my successor Mr Nene on or about 9 March 2015."
And at page 113 I think, yes, after bundle N1.
ADV PAUL PRETORIUS SC: N1A?
MINISTER PRAVIN GORDHAN: N1A, I beg your pardon, I got something wrong. Mr
Nene's withdrawal of the guarantee letter appears.
CHAIRPERSON: Did – was it ever revealed what the reason was for there to be such a
big gap between the market value and the asking price or that never got revealed?
MINISTER PRAVIN GORDHAN: No, there was no explanation and that is why we put

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this before the Commission that this is a potential – what could have turned out to be an
area of malfeasants.
ADV PAUL PRETORIUS SC: Minister you were the Minister of Finance in May 2014 and
then shortly after that you were asked to occupy a different ministry. You deal with that
under the heading my appointment to COGTA, would you deal with that please?
CHAIRPERSON: Actually he was Minister of one department of part of May 2014 and
Minister of another department for the latter part of 2014, May 2014.
ADV PAUL PRETORIUS SC: Yes.
MINISTER PRAVIN GORDHAN: As you know in the transaction process after an election
you remain a Minister until the next Minister is appointed. So yes, our term of office as
Minister of Finance extends into May 2014 and then as I indicate in paragraph 57 on the
evening of 24 May it was more like the morning of 25 May, because these processes that
I am describing can sometimes last until 06:00 or 07:00 the following morning.
After the inauguration ceremony I received a message to meet with the former
President and as is the tradition in making appointments to cabinet following an election,
I was then informed by the former President of my appointment of the Minister
responsible for COGTA.
ADV PAUL PRETORIUS SC: And your position as Minister of Finance was taken up by
Minister Nene at that stage?
MINISTER PRAVIN GORDHAN: That is right.
ADV PAUL PRETORIUS SC: Until then he had been your Deputy?
MINISTER PRAVIN GORDHAN: Yes.
ADV PAUL PRETORIUS SC: Then at paragraph 60…[intervenes]
CHAIRPERSON:

Before that Mr Pretorius, in paragraph 58 you say there was

speculation in political and media circles that you would be moved from post of Minister

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of Finance. Was there any indication as to who would follow or not really? Who would
succeed you?
MINISTER PRAVIN GORDHAN: There might have been that speculation as well.
CHAIRPERSON: Thank you.
MINISTER PRAVIN GORDHAN: In any pre and post-election process that is the sport
that the first two roles plays.
CHAIRPERSON: I see.
ADV PAUL PRETORIUS SC: Was there – or let me ask you, Minister, was there any –
especially informed speculation in regard to your potential removal?
MINISTER PRAVIN GORDHAN: No, I cannot recollect any. There might well have been.
ADV PAUL PRETORIUS SC: May we then go to paragraph 60 and deal with the
circumstances that existed which you have highlighted in your statement on page 26 and
following, at the time of the dismissal of Minister Nene as he then was. And you deal first
with Denel Asia. As I understand it you do not claim to know the exact reasons for the
removal, but you suggest to the Commission that there may be circumstances relevant
to that, about which you can testify, am I correct?
MINISTER PRAVIN GORDHAN: Ja, this is anecdotal material if you like. In relation to
Minister Nene, I think it is well known now and I think in his own testimony before you he
indicated that he refused to sign a particular document and the Russian Federation. And
the period some weeks before, not even weeks, perhaps two months before 9 December
there were very odd occurrences within cabinet itself and where – maybe in the public
domain I cannot recall now, where the Treasury came under constant attack and criticism.
And some had the very simplistic view, Chair, that as the Treasurer the job –
your job is just to find the money. In other words somebody decides how much is needed
go and find the money, because this is different from give back the money.

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And in the context of what I explained earlier on in relation to managing the
fiscus is not as simple as that. So, ja, one cannot – obviously there was something that
needed to happen in Minister Nene's term, I think he might have made reference to
issues around SAA, which goes post the 2014 elections, SAA was transferred to the
Treasury from the Department of Public Enterprises as well.
And we will come to that as well in the statement. So he had to deal with some
contentious issues there also and in that sense I suppose he began to share our
collective reputation as Finance Ministers for being stubborn, and not just conceding to
whatever might be needed at a particular point in time without raising potentially difficult
questions.
So that is the issue around Minister Nene. The rest of 61 then deals with the
creation of an entity called Denel Asia. I indicated to you previously and earlier on that
no government department or entity can create another commercial company without
prior consent, both from the relevant executive authority, that, that entity or department
falls under and further notification and approval in terms of Section 54 and 51 of the
PFMA. And this is one of those instances.
And, ja, there is this so-called pre-notification exercise that was engaged in by
Denel and we today know from the Gupta emails and so on that the Denel board was
"captured" so were some of the managers at some point in time and part of the cleaning
up processes involved some of those elements.
But on 30 October 2015 a so called pre-notification was received from Denel
by the Directive General of the National Treasury, so again Mr Fuzile when he appears
before you he can give you more detail into that and the – what that pre-notification
indicated is that a new structure between, as a result of a partnership agreement between
V R Laser a Gupta affiliated entity and Denel itself is going to be created called Denel

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Asia and the idea was that as we indicate on 62 that, and I will read the sentence from
this paragraph:
"The joint venture was contemplated purportedly to exploit
Denel's intellectual property and propriety information in India.
The joint venture was to be known as Denel Asia."
Now Denel, Chairperson, over the years has developed quite remarkable
technical capability and a lot of innovation capability. So this intellectual property is the
property of the state. So it is all collective property so to speak and it is much sort after
then and now. In fact there are lots of funny if I may use that terminology rumours going
around about how that intellectual property might be escaping our country at this point in
time. But we will come back to that at a later stage.
So what 62 indicates, Chair, is that V R Laser Asia, is a company owned by
Mr Salim Essa, I made reference to him earlier on. He is, I think in self-declared exile.
He is a Gupta, well known Gupta associate and he would be one of the brokers as we
described under a previous hypothesis and as a sole-shareholder and who has a
relationship with V R Laser RSA, that is South Africa, owned by Mr Duduzani Zuma and
Rajesh Gupta.
The joint venture was contemplated as I said to exploit Denel's intellectual
property and propriety information. They do not even say that they are going to act as
an agent to sell the products of Denel. It is to exploit the intellectual property. So they
were going to actually sell intellectual property, that is in fact the valued asset of the state,
it would appear.
ADV PAUL PRETORIUS SC: The allegations that were in the public domain, you have
included in the bundle N1A at page s118 to 119, I do not necessarily want us or need us
to go there, but simply to ask you, as I have been asked to ask you, you said in your

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evidence that the Denel board at that stage had been captured. On the basis of what do
you conclude that?
MINISTER PRAVIN GORDHAN: Well if you look at this page 18 and subsequent reports,
which cover the investigative journalism an excellent one at that as well, undertaken by
Amabongane and Scorpio, Chair, you will see how different personalities within the Denel
enterprise were regular visitors to Dubai, have their household bills paid for in terms of
the emails that were disclosed and featured in different ways as this article also indicates
in relation to the creation of Denel Asia.
And what followed in particular in terms of the behaviour of the then Chair, of
the Denel board, Mr Manshe, I think justifies a conclusion that there was serious
collaboration with this Gupta enterprise in this process.
ADV PAUL PRETORIUS SC: Your conclusions then, were they drawn to the analysis of
Amabongane or have you had sight of the emails themselves?
MINISTER PRAVIN GORDHAN: Well the rest of the statement covers the various stages
of this configuration that we had between the Treasury and Mr Manshe, so perhaps if I
take you through that some of the answers to the question, Chair, might appear more
clear.
ADV PAUL PRETORIUS SC: Thank you, if you would.
MINISTER PRAVIN GORDHAN: Alright, 64, Chair, we indicate that according to media
reports on the information contained in the Gupta leaks and your own investigators, Chair,
we have access to the emails, which can confirm this as well for you. One day after
Denel submitted its PFMA application to National Treasury on 30 October the Denel
Chair, Mr Manshe, forwarded the confidential document – this is a confidential
government document to Mr Ashu Chawla, a senior Gupta executive and CEO of Sahara
Computers, a company owned by the Gupta family.

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At 65 we indicate that on or about 23 November 2015 Ms Brown the then
Minister of Public Enterprises provisionally approved the initiative and set out the various
issues that needed to be covered in the former PFMA application.
As the pre-notification was not a formal PFMA process there was no
requirement for the Treasury to respond, nor did the Treasury usually respond to such
pre-notifications. At 66 emails contained in and reported on by the media following the
Gupta leak show that on 7 December 2015 interestingly it is two days before Mr Nene's
dismissal Mr Chawla emailed a copy of Ms Brown's in principle approval and a briefing
document directly to the personal assistant of Mr Nene.
67, before Mr Nene was removed as Finance Minister. No formal PFMA
application had been submitted seeking his approval…[intervenes]
ADV PAUL PRETORIUS SC: According to your evidence it is a requirement of the law?
MINISTER PRAVIN GORDHAN: That is in terms of the requirement of the law. Of the
establishment of Denel Asia, therefore Mr Nene had not approved the joint venture. Now
here is the coincidence, if you can call it that.
68, however, it Is not even days later, or a day later after Mr Nene was
removed on 10 December 2015 when Mr – sorry Mr van Rooyen was appointed as
Finance Minister, that is on 10 December 2015.
In terms of 69, by 11 December 2015the formal PFMA application seeking
approval for the establishment of Denel Asia was submitted, addressed to the newly
installed Minister. So this was just a day after his instillation. Mr van Roo yen did not
have the opportunity to approve the joint venture prior to him being removed as Finance
Minister.
So if you remember I said that he had just two working days, I think, in office.
ADV PAUL PRETORIUS SC: Just before you proceed again, I need to ask you, we know

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that at the time Minister Mansha, Daniel Mansha was the Denel Chair. Do you recall
from your own memory any other members of the Denel board at that time?
MINISTER PRAVIN GORDHAN: Several of them had resigned over a period. That time
we took over that responsibility earlier this year, in fact two board members remained.
And a completely new board was then appointed. But in my other capacity as member
of the Public Enterprises Committee, Chair, I did have vocation to be in a meeting of the
committee when Denel came along to present its, I think it is financials, and had some
interactions with both the senior management of Denel and Mr Mansha himself on that
occasion.
May I continue?
ADV PAUL PRETORIUS SC: What legal advice, as you refer to in paragraph 70 did you
obtain or did National Treasury obtain in regard to the necessity for approval?
MINISTER PRAVIN GORDHAN: This the officials would have done.
CHAIRPERSON: I am sorry. I am not sure whether when you asked whether you could
continue, you wanted to continue in terms of the meeting of the portfolio committee?
MINISTER PRAVIN GORDHAN: No, no, sorry.
CHAIRPERSON: Or you wanted to continue here?
MINISTER PRAVIN GORDHAN: Yes.
CHAIRPERSON: Oh, okay, yes, thank you.
ADV PAUL PRETORIUS SC: Alright you refer to legal advice in paragraph 70 and the
question is then what was the content of that advice? As asked was this received by you
and National Treasury once you had become Minister?
MINISTER PRAVIN GORDHAN: That is right, yes, because the application was now on
my desk so to speak, having been appointed to that position on 13 December 2015 and
as we indicate five lines, I think, down, into paragraph 70, the legal advice that was given

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was prior approval was required for the formal establishment of Denel Asia.
ADV PAUL PRETORIUS SC: And that was…[intervenes]
MINISTER PRAVIN GORDHAN: The information was communicated both verbally and
in writing on several occasions to Denel as well as to the then Minister of Public
Enterprises Ms Brown.
ADV PAUL PRETORIUS SC: Alright, and that approval was required in terms of the
several sections of the Public Finance Management Act and the approval was required
of the Minister of Finance?
MINISTER PRAVIN GORDHAN: That is correct.
ADV PAUL PRETORIUS SC: You mentioned the sections in paragraph 70. Then would
you continue with the fallout as it may be termed, that occurred.
MINISTER PRAVIN GORDHAN: So at paragraph 71, Chair, we make reference to the
following, that extraordinary diligent attacks were make on me personally and the
National Treasury, more broadly by Mr Mansha as Chairperson of the Denel board. He
demanded that I retract in writing to the Denel board comments and statements I had
made regarding the lawfulness and desirability of the joint venture and apologise to the
Denel board.
He also wanted me to acknowledge that National Treasury had failed to
discharge its duties in a diligent and responsible manner, even though the reverse was
actually the case. Furthermore…[intervenes]
ADV PAUL PRETORIUS SC: Just before you go on, these exchanges between yourself
and Mr Mansha were they personal exchanges? Were they written exchanges? Were
they exchanges between legal representatives…[intervenes]
MINISTER PRAVIN GORDHAN: They were media exchanges.
ADV PAUL PRETORIUS SC: Legal representatives?

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MINISTER PRAVIN GORDHAN: Media exchanges.
ADV PAUL PRETORIUS SC: Media exchanges.
MINISTER PRAVIN GORDHAN: I emphasise later in 71 that it is unheard of for a
Chairperson of a state owned company to attack a Minister of Finance in public and for
the Minister of Public Enterprises responsible for that SOE to take no steps to reign in
such attacks to the best of my knowledge.
You also see at page 148 of N1A, I got it right this time.
ADV PAUL PRETORIUS SC: Yes. If you would go there please, that is a Treasury
statement.
MINISTER PRAVIN GORDHAN: That is a Treasury media statement.
ADV PAUL PRETORIUS SC: Issued by Treasury.
MINISTER PRAVIN GORDHAN: Yes.
ADV PAUL PRETORIUS SC: By National Treasury.
MINISTER PRAVIN GORDHAN: That is right.
CHAIRPERSON: Mr Pretorius?
ADV PAUL PRETORIUS SC: Would you read that onto the record please?
MINISTER PRAVIN GORDHAN: The whole statement?
ADV PAUL PRETORIUS SC: Insofar as…[intervenes]
CHAIRPERSON: Do you want him to read it into the record or do you want him to read
it quietly?
ADV PAUL PRETORIUS SC: No, onto the record please. Well, perhaps we should just
deal with the first paragraph, if you could read the first paragraph onto the record?
MINISTER PRAVIN GORDHAN: Alright.
"The National Treasury has noted media reports that Denel may
have ventured into a joint venture to form a company that will

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operate from a jurisdiction in Asia."
So this company, Chair, is actually registered in Hong Kong and it is a
formidable task to deregister the company, because it had Mr Essa as a 50% partner and
Denel as a 50% partner I think, if I got the numbers right and to disestablish it in Hong
Kong requires both parties to agree and we cannot find the mysterious Mr Essa.
So the Denel – the current Denel board is having to enter into all sort of legal
gymnastics to ensure that the company is deregistered in Hong Kong, just as an update.
So the paragraph further says:
"National Treasury is currently engaging directly with Denel on
the matter. The statements seek to clarify facts relating to the
transaction."
And I may, Chair, the next paragraph indicates what the President said on 11
December 2015, that is President Zuma.
ADV PAUL PRETORIUS SC: 2015?
MINISTER PRAVIN GORDHAN: 2015.
"There is no state owned entity that can dictate to government
how it should be assisted."
And then it goes on. And then the third paragraph:
"The board of a public entity commits an act of financial
misconduct whereto wilfully or negligently, whether wilfully or
negligently fails to comply with the PFMA."
Then it says:
"The Treasury regulations specified that such allegations must
be investigated by the executive authority and if confirmed
appropriate disciplinary proceedings must be initiated."

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ADV PAUL PRETORIUS SC: Okay. Can we pause there, Minister? The statement then
goes on to quote sections of the Public Finance Management Act, which you have
referred to. We need not go there, but if you would go over the page please? And just
read onto the record the contents of the statement on the second page?
MINISTER PRAVIN GORDHAN:
"In terms of the conditions attached to the 1.85 Billion in
guarantees that have been provided by government to Denel
any significant transactions that Denel enters into requires the
approval of both the Minister of Finance and the Minister of
Public Enterprises."
So these are the conditionality's that I have referred to earlier, Chair, that
accompany guarantees.
"Section 54(3) allows for an entity to assume that approval has
been given if it receives no response from the executive
authority within 30 days or within a longer period as may be
agreed to between itself and the executive authority."
ADV PAUL PRETORIUS SC: That clause was subject to litigation which we will deal
with perhaps tomorrow, Minister.
MINISTER PRAVIN GORDHAN: Ja.
ADV PAUL PRETORIUS SC: If you could just deal with the next paragraph.
MINISTER PRAVIN GORDHAN: The litigation took place after my dismissal.
ADV PAUL PRETORIUS SC: Yes.
MINISTER PRAVIN GORDHAN: So again Mr Fuzile and his affidavit is of very – is very
material here. But an interesting point, just for the public to understand as well. You
submit an application on 10 December and the Christmas break and the New Year break

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is upon us. The 30 day period ends approximately on the 9 th or 10 January when most
people are still on leave.
Common sense, if not anything else dictates that you wait until people are
back at work. You enquire whether the application has been attended to and if there is
any further information required that you supplied the necessary information. Now Mr
Fuzile will describe other meetings that took place amongst the officials, between Denel
and the National Treasury, if you ask him to.
And that showed that, that is the kind of conversation that needed to actually
take place, rather than the assumption that once the 30 day period is over that is the end
of the story and you can go ahead and do what you like.
So one must ask the question why the urgency? If you waited another three
weeks or four weeks, what would not have happened? And what would the cost have
been to whom? And of course the flip side of that coin is who benefits by all of this, by
rushing it through?
So people who are involved in this, Chair, might want to then enlighten you on
those questions when they appear before you.
ADV PAUL PRETORIUS SC: Just to summarise then, Minister, in the third paragraph
no page 149 it is recorded by Treasury that Denel had submitted its application on 10
December 2015, but prior to that application being submitted National Treasury had
outlined the information that would be required comprehensively to assess the application
that the Minister of Finance was still considering the application and that further
information had been requested from Denel.
And then finally the last three lines indicate that on 13 April 2016 that is the
date of the media statement made on behalf of Treasury the application was still under
consideration and no decision had yet been made?

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MINISTER PRAVIN GORDHAN: And if I may add, Chair, Mr Pretorius, the first three
lines of the last paragraph is also very material. More significantly Denel is also required
to comply with Section 51(1)(g) which is unequivocal in its requirement that the board of
Denel obtain approval before establishing a company.
ADV PAUL PRETORIUS SC: Thank you. If I may just before the adjournment, just relay
one more question to you from the legal team. Do you know at all, Minister, why Salim
Essa who you have referred to earlier left South Africa? Do you have any knowledge?
CHAIRPERSON: Will you just repeat the question, I did not hear? Why, bla-bla-bla-bla?
ADV PAUL PRETORIUS SC: I am not sure if it is a fair question, whether you
are…[intervenes]
MINISTER PRAVIN GORDHAN: It is a very unfair question, Chair, with respect.
ADV PAUL PRETORIUS SC: Let me ask it…[intervenes]
MINISTER PRAVIN GORDHAN: I met Mr Salim Essa, he is not a drinking partner and I
only drink water, either, so I think some of his family might be around and you might want
to call them and ask them the question, where is your family member and why is he
ducking the authorities in South Africa?
ADV PAUL PRETORIUS SC: We will leave it there. Chair, is this a convenient time?
CHAIRPERSON: Okay, okay the time is 16:00. We will take the adjournment and it is
the understanding that you are still available tomorrow to continue?
MINISTER PRAVIN GORDHAN: At your service sir.
CHAIRPERSON: Thank you very much. We will adjourn until 10:00 tomorrow. Adjourn.
MEETING ADJOURNS TO 20 NOVEMBER 2018

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