The chief executive of Bell Pottinger, one of the world's biggest and most famous public-relations firms, has resigned in a growing scandal over the firm's racially-tinged campaign on behalf of a powerful South African business family.
An independent review, released on Monday, confirmed that Bell Pottinger had created a "potentially racially divisive" media campaign in South Africa. It said the agency had behaved unethically and had misled or undermined journalists who were asking questions about the campaign. The review was conducted by international law firm Herbert Smith Freehills.
The London-based agency, founded by Margaret Thatcher's former spin doctor, has gained notoriety for polishing the images of repressive regimes and autocrats around the world, from Syria and Saudi Arabia to Belarus and Chile. But it got into serious trouble for its work in South Africa, where it is accused of fuelling racial hatred in a country struggling to heal apartheid's wounds.
James Henderson, the firm's CEO, resigned on the weekend as the firm prepared to release the independent review of its South African campaign. A British industry group, the Public Relations and Communications Association, will release its own ruling on Tuesday in response to a complaint from a South African opposition party. If it finds against Bell Pottinger, it could expel the firm from its membership.
Bell Pottinger has already apologized for its role in an expensive and highly divisive campaign against "white monopoly capital" on behalf of the controversial Gupta brothers, who have extensive ties to South African President Jacob Zuma and his family. The agency dismissed or suspended four staff in July when it apologized for what it admitted was "offensive" and unethical behaviour.
President Zuma has survived repeated challenges of his relationship with the Guptas over the years, but there is mounting scrutiny of the international companies – including some Canadian ones – that have done business with the Guptas, who run companies in the computer, mining, media, air travel and energy industries.
Testimony in a South African inquiry has alleged the Guptas offered bribes to a cabinet minister, controlled the appointment of other cabinet ministers and profited from lucrative deals with state-owned enterprises. They even used their Zuma connections to obtain a military airfield so that they could bypass the normal immigration controls for a planeload of wedding guests.
The Guptas, who have a business partnership with Mr. Zuma's son Duduzane, hired the British PR agency early last year through their corporate vehicle, Oakbay, for a monthly fee of about $170,000.
A cache of leaked Gupta e-mails has shown Bell Pottinger worked with the Guptas and Duduzane Zuma to create a divisive strategy that exploited South Africa's racial tensions to distract attention from the Guptas and tarnish their opponents. The campaign alleged that "economic apartheid" and "white monopoly capital" held a "stranglehold" on the economy.
In one leaked e-mail, a Bell Pottinger executive praised a youth leader in Mr. Zuma's ruling party who had threatened "civil war" against an opposition party.
Racial messages were also propagated by hundreds of fake Twitter accounts, often portraying the opponents of the Guptas as prostitutes or racists. It is unclear who created the fake accounts, but many were revealed to be linked to Gupta-owned companies, and critics accused Bell Pottinger of orchestrating the campaign.
The same cache of leaked e-mails has exposed a web of connections between the Guptas and a number of leading international companies, including Canadian firms. Bombardier Inc., for example, sold a luxury jet to the Guptas for $52-million (U.S.), and about 80 per cent of the financing was provided by a Crown corporation, Export Development Canada. The deal was finalized in December, 2014, at a time when the connections between the Guptas and the Zuma family had already been exposed in several years of media reports and in a government inquiry into the wedding-plane scandal.
Despite his resignation, Mr. Henderson remains a major shareholder in Bell Pottinger. An investigation by a law firm hired by the PR agency, to be released on Monday, is expected to criticize Mr. Henderson's oversight of the Gupta contract, according to a report in a British newspaper, The Telegraph.
"There were warning signs we should have taken heed of and for that reason I've resigned," Mr. Henderson told The Telegraph.
He said he hopes the company could "make amends" in South Africa. But many South Africans remain furious at the agency's interference in the country's politics. Many have demanded that Bell Pottinger donate all its profits from the Gupta contract to reconciliation programs in South Africa.
The Democratic Alliance, the South African opposition party that filed the complaint against Bell Pottinger at the industry association, said Mr. Henderson's resignation is "not in any way an act of valour" since he remains a major shareholder.
Mr. Henderson and his agency should repay all of the money that they received from the Guptas if they "truly appreciated the implications of their propaganda in South Africa," said a statement by DA spokesperson Phumzile Van Damme.
"Full disclosure of the nature of the contract it entered into with Zuma and the Guptas would have demonstrated goodwill and willingness to begin to repair the damage their work caused to South Africa," she said.