The powerful Gupta family, at the heart of South Africa's biggest corruption scandal since apartheid, profited from a criminal scheme to loot $20-million (U.S.) from a farm project that was meant to help impoverished farmers, prosecutors say.
The allegations, contained in 120 pages of sworn statements, are the first formal accusation of criminal wrongdoing against the Gupta brothers, long-time business partners of President Jacob Zuma's son, Duduzane.
In one of the affidavits, a prosecutor described the dairy project as a "well-orchestrated plan" to "swindle" the government. He said the farm was a "mere façade" to allow fraud, theft and money laundering. The affidavits detailed how the money ended up in the bank accounts of the Guptas or companies controlled by the Guptas.
A court in Free State province, where the farm is located, has authorized prosecutors to freeze the farm's assets and the bank accounts that received the $20-million. Those assets were the "proceeds of crime," the court said. Most or all of the bank accounts were controlled by the Guptas and their companies, none of which had any connection to agriculture, the affidavits say.
The allegations will have implications for Canada's export credit agency, Export Development Canada, which loaned $41-million to the Guptas in early 2015 to help them purchase a $52-million luxury jet from Bombardier Inc. The agency has said it didn't see enough "political exposure" risk to reject the loan at the time, but it finally cancelled the deal late last year and is now seeking to recover the airplane.
South African media reports about the fraud scheme at the dairy farm first came to light in 2013. Both EDC and Bombardier have said they saw no indications of criminal wrongdoing when they did their due diligence review in 2014 of their business deals with the Guptas.
The two Gupta-owned companies that negotiated the Bombardier and EDC aircraft deal, Westdawn and Oakbay, were among the recipients of money looted from the dairy project, according to the prosecutors in their affidavits.
The Gupta brothers, who emigrated from India to South Africa at the end of apartheid in the 1990s, have created a vast financial empire that ranges from mining and media to information technology and consulting. Much of their business has come from state-owned enterprises.
Media reports and independent investigations since 2010 have documented how the Guptas profited from dubious business deals that benefited from their political connections. But police and prosecutors, loyal to Mr. Zuma, had always declined to take action against them.
Last month, however, South Africa's ruling party replaced Mr. Zuma with a new leader, Cyril Ramaphosa, who had campaigned on an anti-corruption platform. Since then, prosecutors have abruptly begun acting against the Guptas, and there are growing signs that Mr. Zuma could be forced to resign soon.
In another case this month, prosecutors are seeking to recover $50-million from Trillian, a company controlled by Gupta associates. Trillian received the money from South Africa's state-owned electricity monopoly, where Gupta associates were influential executives. Trillian did little or nothing for the money, whistle-blowers said.
In total, the South African prosecutors say they are seeking to recover about $4-billion from about 200 corruption cases. It is unclear how many of these cases will involve the Guptas, although the cases are described as "state capture" cases – the term normally used for the Gupta scandal.
The Public Protector, an official watchdog with the power to investigate corruption, released a report in 2016 with a wide range of evidence that the Guptas had gained benefits from their links to state-owned enterprises and had even used bribe offers to influence cabinet appointments.
The report recommended the appointment of a judicial inquiry. But Mr. Zuma fought the recommendation in court, and only this month did he finally announce that a judicial inquiry will be held.
The dairy farm project was first exposed by South African investigative journalists in 2013, and in a series of reports since then, but the government took no action until now.
Under a program known as "Zero Hunger," the farm project was supposed to provide cows to 80 members of an impoverished community nearby. But the community members said they got nothing. In 2014, journalists found the remains of 30 dead cows on the farm.
Two politicians, close allies of Mr. Zuma, pushed for the dairy project in its early days in 2013. One was Mosebenzi Zwane, then the agriculture chief in Free State, now the national minister of mining. The other was the long-time Free State premier, Ace Magashule, who was elected as secretary-general of the ruling African National Congress last month.
There have been long-standing allegations that Mr. Zwane and Mr. Magashule have close links to the Guptas. The mining minister, Mr. Zwane, gave approvals to the Guptas for a lucrative coal-mining deal.
Mmusi Maimane, leader of the opposition Democratic Alliance, issued a statement on Sunday saying that the two politicians are "crooks" and should be arrested and jailed.