The U.S. Treasury Department has imposed sanctions on South Africa’s wealthy Gupta brothers, describing them as “a significant corruption network” that used bribery and inflated contracts to steal money and wield illicit influence over the South African government.
The sanctions, freezing the U.S. assets of the Guptas and hampering their ability to do business from their current home in Dubai, will intensify the pressure on South Africa to launch the long-delayed prosecution of key figures at the heart of the country’s biggest post-apartheid corruption scandal.
The sanctions also raise further questions about the conduct of Canada’s federal export bank, Export Development Canada (EDC), which gave US$41-million in financing to the Guptas in 2015 to help them buy a jet from Bombardier Inc. The bank also provided US$450-million in financing to South Africa’s state-owned freight rail company at a time when Gupta allies controlled the company’s senior management.
In August, after an internal investigation, EDC admitted mistakes in the Gupta loan and promised to introduce a tighter screening process for any future loan requests from politically connected clients.
The sanctions are being imposed under the U.S. Global Magnitsky Act, which authorizes U.S. penalties against anyone who has committed severe human-rights abuses or acts of corruption. Canada has not announced similar sanctions against the Guptas.
The three Gupta brothers, the long-time business partners of the son of former South African president Jacob Zuma, fled to Dubai last year after the corruption scandal helped trigger the downfall of Mr. Zuma, who resigned in February, 2018.
Mr. Zuma and his son, Duduzane, have portrayed themselves as unfair victims of false accusations. This week, in testimony to a public inquiry into state corruption, Duduzane Zuma denied the corruption allegations and boasted that Rajesh (Tony) Gupta, one of the three Gupta brothers, is still a “very dear and close friend." He added: “He’s my guy.”
In a statement on Thursday, the U.S. Treasury Department said it was imposing sanctions on the three Gupta brothers – Ajay, Atul and Rajesh – and their top lieutenant, Salim Essa.
“The Gupta family leveraged its political connections to engage in widespread corruption and bribery, capture government contracts and misappropriate state assets,” the statement said, quoting Sigal Mandelker, the Treasury under-secretary for terrorism and financial intelligence.
The Guptas exploited a “pay-to-play” system of political patronage, which was “orchestrated at the expense of the South African people,” she said.
“The Guptas and Essa have used their influence with prominent politicians and parties to line their pockets with ill-gotten gains. We will continue to exclude from the U.S. financial system those who profit from corruption.”
Under the terms of the sanctions, the Guptas will be denied entry to the United States, will be prohibited from doing business with banks and companies that have U.S. subsidiaries, and can have any of their U.S. funds or assets seized.
“We commend the extraordinary work by South Africa’s civil society activists, investigative journalists and whistle-blowers, who have exposed the breadth and depth of the Gupta family’s corruption,” the U.S. statement said.
“The family has been implicated in several corrupt schemes in South Africa, allegedly stealing hundreds of millions of dollars through illegal deals with the South African government, obfuscated by a shadowy network of shell companies and associates linked to the family,” it said.
“Credible reports of these corruption schemes include the Gupta family offering members of the South African government money or elevated positions within the government, in return for their co-operation with Gupta family business efforts.”
In a separate statement, U.S. Secretary of State Mike Pompeo said the sanctions against the Guptas “make clear that those involved in corruption will face consequences.”
Shortly after the U.S. announcement, South African Justice Minister Ronald Lamola issued his own statement, welcoming the U.S. sanctions and emphasizing that they were a “collaborative effort” with South Africa’s own fight against corruption.
The sanctions would “ensure that the South African interests of justice unfold without any hindrance,” Mr. Lamola said.
Justice, he said, “must not be shackled by any boundary or border.”
Analysts have said that Mr. Zuma appointed his allies to the top ranks of South Africa’s prosecuting agency and elite police units, making it impossible for anyone to act against the Guptas. But since his departure last year, new President Cyril Ramaphosa has been slowly replacing many of the Zuma appointees.