AFRICASCAN CONFIDENTIAL, No 2

open | 16 May, 2006

Barnevik´s charity partners´ poor reporting skills. Did Swedish businessman Percy Barnevik, a member of South African President Thabo Mbeki´s international investment advisory council, check out his favoured charity partner Hand in Hand before he started to sign rather large checks, asks an aid consultant who´d seen Africascan´s story about the former ABB and Investor executive´s foray into the business of helping poor people.

Percy Barnevik has, generously, donated millions and on top of that his own time and name, to Hand in Hand´s projects in Tamil Nadu, where hundreds of thousands of women are targeted to become entrepreneurs. Barnevik decided to bring the whole concept across to South Africa where rural women are going to be targeted.

Africascan Confidential, AC, was told that Hand in Hand had a long-standing disagreement with Forum Syd, a Swedish NGO charity co-ordination body about what was considered to be very poor reporting on received funds for projects in India.

The Forum Syd fact file grew rather large before the matter, with threats of court action hanging, was settled.

According to Hand in Hand´s General-Secretary Johan Rådmark the case concerned “old funds (that goes back many years…) and where Hand in Hand´s former boards disagreed with the donor about the quality of the reports. All that has been settled amicably with Forum Syd”.

ANC sorts out Zuma its own way

It did not come as a surprise that ANC´s NEC gave Jacob Zuma his office key´s back after he had been declared innocent of rape in a Johannesburg court.

Zuma had taken voluntary leave during the period of the rape trial, so it was natural that he wanted to “resume his duties” as ANC´s Deputy Chairman.

ANC´s decision could be seen as a bit questionable morally, considering that Jacob Zuma´s “one down, one to go” situation, where he is awaiting the start his next trial where he is charged for fraud and corruption.

He will then also be able to keep an eye on cadres that are leaning toward´s the Mbeki camp.

It may disturb foreign investors that he is not suspended for the duration of the fraud and corruption trial, where his former advisor is already sentenced to 15 years in prison (he is out on appeal). But then again, that is just the way it works within the ANC.

The advantage with having Zuma carrying out his duties is that he would be more of a bother if he ran around unchecked and mobilized the so called populists ahead of next years crucial ANC conference, which will decide who is to replace Thabo Mbeki as leader for the ANC and therefore also to become South Africa´s next president.

There is also no doubt that the populist camp would be able to exploit their conspiracy allegation against Mbeki and “the technocrats” further if Zuma had been suspended from his leader position within the ANC.

For sure, the conflict within the ANC, which the General Secretary Kgalema Motlanthe called “a friendly argument” – a strong indication that strong, conflicting views are up against each other - cannot be taken lightly. ANC´s left are frustrated that the Government is doing too little for the poor and is too much voicing middle class concerns.

Worries that Saab gets to good a deal with Denel.

Swedish home-based analysts and media have always been suspicious about Swedish arms company Saab´s investments- and offset programme in South Africa. They believe it is bound to translate into a massive cost – that is not accounted for in the company´s financial reports.

South African´s unsurprisingly sees Saab´s presence in the country from a different angle.

The view among Government technocrats and the arms intelligencia is generally that Saab is a suitable partner, the Swedish company´s size and culture fits better with the South African arms industry than BAe Systems or other super-sized arms dealers – there are also often strings attatched that South Africa does not want to accept.

So Saab is more than welcome, to an extent that there is a worry in that South African arms industry that the South African government is giving too much away to its favoured partner - that Saab may get too much out of a deal with the country´s leading, government owned arms conglomerate Denel.

Saab is, according to South Africa´s State Enterprises minister Alec Erwin, about to sign a deal with Denel to take management responsibility and a stake in a new division set up by Denel called Denel Aerostructures.

Industry sources say that the South African Government and Denel is giving away the Denel division for a song to Saab against too loose promises of future investments.

They also say that Saab has managed to convince the South African government to accept the deal as part of the Gripen offset programme, despite that offset projects are not meant to cover acquisitions.

There is also some surprise that a deal is struck about the relatively labour intensive, newly created, Aerostructures division and not the more technologically advanced divisions of Denel. Strategically, it is pointed out, South Africa should get Saab to continue its involvement in South Africa´s military high-tech scene – as it has done through the acquisition of Grintek last year.

But then again, Saab is also discussing to take over at least one, possibly two other Denel divisions where there is more high-tech content.

From a shareholders point of view it is desireable that the risks around Saab´s offset obligations are ring-fenced.

Saab´s Denel deal may do the trick. With it comes new responsibilities, such as sorting out a ill managed, under capitalized arms company that The South African Government doesn’t want to carry itself any longer. But that is at least, unlike investments in gold- and platinum jewelry, a Saab core business activity to do so.

Partnership fund to get the chop?

The principals have not taken the final decision yet, but it would be surprising if the Sweden South Africa Business Partnership fund, SSBF, did not get the chop.

The fund was set up in 2000 and was meant to spearhead a new relationship between Sweden and South Africa where aid will eventually be replaced by an equal partnership.

The fund was given a five year lifetime and was evaluated by a consultant last year. The conclusion was that the fund had not lived up to expectations and that changes would have to be made. Either to make it more efficient or to close it down.

The two principals, the Swedish state development agency Sida, and South Africa´s Department of Trade and Industry (DTI), have different concerns.

Sida is worried that it has given money away to private enterprise, which it is not allowed to do. Out of the SEK 80 million, about SEK 40 million have been used up in the projects (likely to be written off) and another 14 million have been spent on administration. Sida admits that the way the fund was set up was a bit of a mistake.

Some say it slipped through because Gabor Bruszt the man who came up with the idea of SSBF as part of a Sida-sponsored study had Government friends in high places. He became the funds first Chairman.

The other principal, DTI, has so many other funds to deal with and for DTI it would be a lot more practical if the Swedes just chipped in the money in one of its many entrepreneurial funds.

Another option, less likely to happen, is to re-capitalise SSBF and turn it into a real partnership fund, where DTI also contributes.

It´s a tricky matter. If SSBF is sent to pasture, there isn´t that much left of the partnership between Sweden and South Africa - development of business on an entrepreneurial level between the countries is a crucial cornerstone together with science- and cultural relations after the development programmes have been phased out.

The same consultant who did the latest evaluation of SSBF has been tasked with coming up with a solution. Maybe, who knows, SSBF will pop up in a new, more market-driven shape.