Gangster State: Ace Magashule and Vivian Reddy

Image source: eNCA

The corruption allegations against Magashule are contained in Gangster State, a book by journalist Pieter-Louis Myburgh. Magashule is accused of having given favours to his family and friends, including the Guptas.

Halfway into Myburgh’s book, Gangster State the author fingers a series of individuals including Edison Power’s Vivian Reddy and son, Shantan Reddy.

This is an extract from Gangster State. Unravelling Ace Magashule’s Web of Capture by Pieter-Louis Myburgh, published by Penguin Random House.

All the President’s Pals: Reddy to rumble

The Guptas were not the only connected businesspeople from the Zuma fold who raked in government contracts in Magashule’s backyard.

Enter the Reddy family. Durban-based energy tycoon Vivian Reddy is the founder of the Edison Power Group (EPG), which is probably best known for a contentious R1-billion electricity smart meter tender it secured from the City of Johannesburg’s power distributor, City Power, in 2012. Reddy’s son, Shantan, is Edison’s deputy chairman.

Vivian Reddy has never been coy about his relationship with the ANC and Zuma. He once openly admitted that he had lent Zuma money to help pay for his Nkandla homestead.

When I asked if he had also donated money to the ruling party, an Edison spokesperson responded as follows: ‘Mr Reddy has supported the ANC since the 80’s and will never stop doing so as it’s the organization that fought for our freedom and dignity.’

This financial support was in no way related to the tenders Reddy’s companies have clinched from the ANC-led government, insisted the spokesperson.

‘Mr Reddy has publicly stated that his support for the ANC is unconditional and he requires nothing in return. Ninety per cent of Mr Reddy’s various business interests are in the private sector.’

The first indications of contact between Reddy and Magashule surfaced as far back as 2009. In that year, the Mail & Guardian reported on a court case in which it was alleged that Reddy had facilitated a meeting between businessman Bongani Biyela and Magashule. Reddy had also attended the meeting.

According to the report, Biyela was trying to sell his company’s stake in a casino in Welkom, but the Free State’s gambling authorities apparently blocked the transaction. When the parties later met in Bloemfontein, the report continued, Biyela was asked to pay a ‘bribe’ into the account of Magashule’s long-time lawyer friend Kenosi Moroka, allegedly in exchange for the then premier’s support for the casino deal. At the time, Magashule, Moroka and Reddy all denied any impropriety.

‘The entire allegation was hogwash and part of the politics playing at that time,’ an Edison spokesperson told me in December 2018. ‘Mr Reddy was not “familiar” with Mr Magashule in 2009.’

If Reddy and Magashule were not well acquainted back then, they certainly became close later. When Reddy turned sixty in early 2013, the Free State premier was among the politicians and other VIPs who attended the businessman’s birthday bash in Durban.

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And they clearly remained in touch after Reddy’s party. Few people know this, but Reddy absorbed one of Magashule’s children into his business empire, just as the Guptas had done with the former premier’s eldest son, Tshepiso.

Tshepiso’s younger brother, Thato, worked for Edison Power, the crown jewel in Reddy’s business empire. I picked up this titbit from sources who had once been close to Magashule’s family, and it was confirmed by records I consulted. Edison confirmed that Thato had worked there, but the company denied that this in any way influenced its work in the public sector. ‘Thato Magashule was partly involved in our Africa operation,’ the company informed me. ‘He was not involved in any of our activities in SA due to our corporate governance policy and to avoid any perception of perceived political influence.’

Magashule senior’s diary, which I obtained through a Promotion of Access to Information Act application, revealed that he met Reddy in Cape Town for a ‘private lunch’ at the time of the ANC’s 103rd birthday cele brations in January 2015. Edison said it was ‘normal’ for Reddy to host people on the day before the party’s birthday.

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On this occasion, forty people from all over South Africa and two international guests attended Reddy’s ‘luncheon’ in Cape Town, the company told me.

‘There was at no time any business discussions whatsoever with anyone. It was a celebration.’ Edison maintained that Magashule’s diary incorrectly described the gathering.

‘This was not a “private lunch” but a private function,’ the company said.  During this time, Reddy’s son Shantan got involved in some business activities with Magashule’s daughter Thoko Malembe. In February 2015, a month after Reddy’s ‘function’, Shantan registered a company called SVR Group. Thoko became a director in SVR two months later. 

‘This company was established with eight directors for a venture that did not get off the ground,’ said Yuri Mohan, one of Shantan’s business partners. ‘All of the directors except Shantan Reddy resigned. We are unaware that Thoko Malembe is Ace Magashule’s daughter.’ Whatever they may say, by around 2015 there was an undeniable level of familiarity between the Reddys and the Magashules. It serves as the backdrop to a troubling series of government contracts worth a neat R230 million awarded to one of Shantan Reddy’s companies. 

In February 2015, coincidentally the same month in which Shantan founded the SVR Group, the Free State Provincial Treasury awarded a R60-million contract to Central Lake Trading 149, of which Shantan Reddy is the sole director. This company trades under the name Empire Technology. It was tasked to provide the province with software that would help it manage its database of suppliers. It was known as the Free State Supplier Management System, or the FSSMS.

The contract was first advertised in The New Age newspaper in May 2014, according to a written response from the Free State Provincial Treasury. The department received bids from four IT firms, but it seems only Empire Technology ever stood a chance.

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‘Other than Empire Technology, all the other bidders did not meet the minimum score for the functionality and were therefore disqualified,’ read the response. At least one of the disqualified firms has contested this assertion. ‘I can guarantee that we met the minimum score. We were never informed that we didn’t meet the minimum functionality score; we were simply told that we weren’t successful,’ the owner of one of the three losing bidders told me.

The auditor-general also questioned the contract and found that it was irregular. Government departments and entities are legally required to procure IT-related goods and services through the State Information Technology Agency (SITA), but the Free State Treasury had circumvented the agency when it appointed Empire Technology, the AG found.

* This is an extract from Gangster State. Unravelling Ace Magashule’s Web of Capture by Pieter-Louis Myburgh, published by Penguin Random House.

Pieter-Louis Myburgh is an award-winning investigative journalist. He has done work on multibillion-rand contracts at the Passenger Rail Agency of South Africa (PRASA); shady intelligence projects at the State Security Agency (SSA) and the #GuptaLeaks. He is the author of the bestselling The Republic of Gupta. Myburgh is a member of Scorpio, the Daily Maverick’s celebrated investigations team.

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