Gupta family et al vs. Sunday Times

This ruling is based on the written submissions of Mr Stephan Deetlefs of Van der Merwe & Associates, on behalf of the Gupta parties, and those of Susan Smuts, legal editor of the Sunday Times newspaper.

Complaint

The Gupta family, Oakbay Investments and Tegeta Resources and Exploration are complaining about a story in Sunday Times of 31 January 2016, headlined Zuma’s allies in revolt against Guptas.

They complain that the newspaper:

·         unfairly prejudiced them in that it wrongly implied or suggested that they have used their alleged connections with government officials to strong-arm Glencore into selling a mine to a company (Tegeta) in which they have a minority shareholding (read: that the transaction was portrayed as corrupt);

·         reported unfairly, despite the fact that the journalist was properly informed about this matter;

·         did not properly verify the allegations; and

·         did not afford Tegeta sufficient time to respond to its questions.

The text

The article pertained to the sale of Glencore’s PLC Optimum Coal Mine to Oakbay Investments Group mining company Tegeta Resources and Exploration – a black-owned company in which the Gupta family has a minority shareholding.

The opening two sentences of the story, written by Thanduxolo Jika, Piet Rampedi and Sibongakonke Shoba, read, “President Jacob Zuma’s closest political allies this week broke ranks with the president over his close ties to the influential Guptas, in a move that has isolated Zuma and laid bare growing hostility in ANC circles to the family. Although there have long been whispers about the family’s close ties to Zuma and some of his ministers, this week Cosatu and SACP leaders went public with their growing irritation at the influence the Guptas are said to have on some leaders.”

This reportedly followed a visit to Zurich in December by Mineral Resources Minister Mosebenzi Zwane, who met the CEO of the Glencore mining conglomerate in the Swiss city, “apparently to help facilitate a deal for a Gupta-linked company to buy the distressed Optimum Colliery in Mpumalanga”.

The sale of Optimum coal mine to the Gupta family was reportedly announced a week later.

The journalists reported Cosatu president S’dumo Dlamini as saying that the federation was concerned about the Guptas’ perceived role in recent developments in the mining industry – including the acquisition of Optimum by Tegeta.

The arguments

Glencore ‘strong-armed’: misusing political connections     

The Guptas complain they were unfairly prejudiced in that the story stated or implied that they had improperly pressurized Glencore into the sale of Optimum Coal Mine to Tegeta, adding that the story also wrongly reported that workers had been threatened with retrenchment in this process.

Smuts says that the allegations, as they appeared in the story, were in the context of Pres Jacob Zuma’s allies breaking ranks with him at the ANC’s NEC lekgotla over his ties with the Gupta family, and the visit by Zwane to Zurich (apparently to facilitate the Optimum deal for the Gupta-linked company). In his interview with the newspaper, Dlamini said Cosatu was concerned about the Guptas’ perceived rold in certain developments, including their acquisition of Optimum and the retrenchments at Exxaro’s Arnot mine. “His comments were properly attributed … and not stated as fact.” The legal editor adds that a Glencore executive corroborated Dlamini’s version (that the company had been strong-armed into selling Optimum to Tegeta). His comments were also properly attributed, and not stated as fact: “The Glencore executive whom we quoted told us the mining company had been forced to sell the Optimum mine to Tegeta. Eskom’s refusal to renegotiate the coal price put the mine under financial strain. Tegeta made an offer which Glencore refused. Glencore was then issued with Section 24 health and safety compliance notices and inspectors threatened to close down the mines. It was only after these threats that Glencore entertained Tegeta’s offer.”

Deetlefs replies that, whatever the response of a subject in a story, the Press Code still enjoins journalists to ensure that the facts reported are substantially true. “The response received from the Sunday Times is flawed in that it does not take cognizance of the fact that the article contained untrue claims.”

Unfair, despite proper information

The Gupta family complains that Mr Nazeem Howa, a director of Tegeta and spokesman for the Gupta family, responded properly to Shoba’s questions and clearly refuted damaging allegations – but still, the journalist reported unfairly.

For example, Deetlefs says Howa provided Shoba with a copy of a media release by Business Rescue Practitioners (on behalf of Glencore). From this document, he argues it was clear that Glencore had at no stage been under undue pressure and that the transaction had been based upon due consideration “and in the view of the Business Practitioners (representing Glencore), [this had been] essential for the sustainability of the mine”.

He says Howa’s response was not intended to deal with each and every allegation, but to place on record that the allegations were serious and damaging to the reputations of those involved. He also provided the newspaper with online links to Business Day (BD), where the facts were reported correctly.

Smuts replies, “We reflected Mr Howa’s comments to the extent that they addressed meaningfully any of the questions we had asked him. We also published his full response online and advertised this fact in the print edition.” The legal editor adds that: ·         Howa’s response did not deal with the questions asked – it is “baffling” that he would treat an opportunity to give the Gupta family’s side of the story “with such cavalier disdain”. She argues that the complaint lodged with this office should be seen as an attempt to make up for his failure to respond adequately. “The Guptas now seek to lay the shortcomings in Mr Howa’s response at our door. They should not be allowed to do so…”; ·         instead of answering the questions, Howa made assumptions about the newspaper’s sources, pontificated about its duties, and referred the reporter to a media release and reports in other newspapers – information which was already in the public domain; ·         the media release did not deal with the questions the newspaper asked (specifically not with the question whether or not Glencore had been under pressure to sell its Optimum Mine) – “Tellingly, Glencore declined to answer questions, as we reflected in the story”; and ·         Howa sidestepped the questions (about the statements that Glencore had been improperly pressured into closing the transaction) by referring the newspaper to the media release, and he (at the time, and tellingly) did not indicate that the statements were untrue. That was his choice – “Our duty was to give him an opportunity to respond. What he did with that opportunity was up to him”.

Deetlefs replies that the Guptas have been subjected to “fishing expeditions” by reporters who often fail in the basics of reporting – which is why they expressly stated that their intention was not to answer each and every allegation (some of which had the potential to harm their reputation).

He also denies that the complaint lodged with this office was an attempt to make up for Howa’s “failure” to respond properly.

He adds the Guptas went to great lengths to point out to the reporter that it was untrue that Glencore had been forced into selling the Optimum Mine. Howa referred the journalist to the media release, in which this allegation had been refuted. “It is evident from the … statement that Tegeta presented the most compelling option.”

No proper verification

The Guptas complain that the newspaper did not properly verify its information with the parties involved (which led to inaccurate, unfair reporting), and emphasise that Howa urged Shoba to do so in his response to the journalist’s questions. In later correspondence, Deetlefs said the onus was on the reporter to verify and substantiate allegations “because a reasonable possibility exist (sic) that the comments obtained from unnamed sources could be considered malicious or untrue”.

Smuts replies that, in addition to its attempts to garner proper comment from Howa, the newspaper also spoke to other prominent people who were not mentioned in the article.

Not enough time to respond

Deetlefs says that Howa received a request by the newspaper to respond at 18:41 on January 29.  The time afforded him to respond properly, they complain, was unreasonably short.

Smuts responds that the complainants had adequate time to respond to the questions, “which were simple and did not require much, if any, research”. She also points out that Howa did not seek more time to respond to the enquiry, or express any difficulty with accessing any information sought. While it might have been more convenient to them to have more time to contemplate their answers, seeking comment from them on the Friday was adequate and did not prejudice the Guptas in any way. She also points out that the newspaper was not in a position to seek comment earlier, as much of the information requiring comment had been obtained during an interview with Dlamini on that same Friday.

Deetlefs insists, “The time afforded to our client to answer the questions was inadequate taking into consideration the nature and seriousness thereof.”

He says that, given the above, it was unreasonable to expect Howa to respond in the time period afforded. “To do so will have the potential to cause more harm. The newspaper’s claim that it received information only on a Friday still placed our client in an invidious and unfair situation… The fact that the reporter was not in a position to obtain comments earlier is none of [the Guptas’] concern. The article could have been published in a later edition… Instead they opted to rush into publication.”

Analysis

Glencore ‘strong-armed’; misusing political connections

The gist of the complaint is that the article unfairly prejudiced the Gupta family by wrongly stating or implying that they had used their alleged political connections to strong-arm Glencore into selling its mine to Tegeta.

It is (partly) true, as Smuts argues, that the story was based mainly on Dlamini’s version, as well as on that of a Glencore executive – and that the article portrayed their views as their opinion, and not as fact.

That part of the reportage, in itself, is not in question, as the sources had a right to their opinion and similarly, the newspaper had a right to report those views as their opinions (which is exactly what the article did) – especially as the matter was overwhelmingly in the public interest.

On the other hand, the article was also based on some other matters that were indeed stated as fact. Consider the following excerpts from the article:

“Zuma’s closest political allies this week broke ranks with the president over his close ties to the influential Guptas, in a move that has isolated Zuma and laid bare growing hostility in ANC circles to the family…” “The latest development follows a visit to Zurich in December by … Zwane, who met the CEO of the Glencore mining conglomerate in the Swiss city, apparently to help facilitate a deal for a Gupta-linked company to buy the distressed Optimum…” “A week later, the sale of Optimum coal mine to the Gupta family was announced…” “The Sunday Times can reveal that Zwane’s three-day itinerary consisted entirely of meetings and dinners with Glencore CEO … at the luxurious Dolder Grand hotel, where he stayed.” “Zwane arrived in Zurich on an Emirates flight, via Dubai, on November 30 last year. A Bombardier ZS OAK, a plane owned by the Guptas, is known to have been in Zurich at the same time. Zwane and the Gupta delegation left Zurich, separately, on the same day, December 2, headed for Dubai.” “It has been learnt that, after being received at the airport by South African diplomats as per protocol, Zwane refused further assistance from the embassy and was not accompanied by ambassador Claudinah Ramosepele – as is the norm when a minister is on a working visit in a foreign country.” “Eskom had … refused to renegotiate Glencore’s R150-a-ton contract, which contributed to the company’s decision to sell its mine.”

I do not think it requires any argument that the article did indeed portray Zwane’s behaviour as suspicious – and that this had been connected in some way to the Guptas (and Glencore).

 

Perhaps this is the reason for Smuts responding materially to this part of the complaint, saying that Eskom’s refusal to renegotiate the coal price put Optimum mine under financial strain. According to her, after Tegeta made an offer which Glencore refused, the latter was issued with Section 24 health and safety compliance notices, and inspectors threatened to close down the mines. It was only after these threats that Glencore entertained Tegeta’s offer, she stated.

The question now is whether the reportage on this issue was justified or, as Deetlefs argues, substantially untrue. Did the article unfairly prejudice the Gupta family by wrongly stating or implying that they had used their alleged political connections to strong-arm Glencore into selling its mine to Tegeta?

The gist of the excerpts, quoted above, is that a government official (Zwane) met the CEO of Glencore in connection with a deal concerning Tegeta (partly Gupta-owned) to buy Optimum mine. These statements are clear, and so is the implication.

On that basis, I conclude that the story indeed did imply that the Guptas had used a political connection to help facilitate a deal and in that process had improperly pressurized Glencore into the deal (or at least attempted to do so). The statements of fact (not opinion), as cited above, speak for themselves; the newspaper’s arguments to the contrary are not sufficient to convince me otherwise.

On this specific point, the newspaper protested too much.

Be that as it may, the real question now arises – but what if the reportage on this point was true? In other words: How justified was the newspaper in, after (rightly, and correctly) using sources’ opinions to plant the seed, going on to imply (if not to state) that these views (expressed by Dlamini and others) were indeed grounded in fact?

This issue now begs for an answer, in one way or another. In the meantime, I note that the Guptas did not specifically complain about the excerpts that I have highlighted above.

Unfair, despite proper information

The question is whether Howa properly informed the journalist (as stated by Deetlefs, and denied by Smuts) – if not, the newspaper can be forgiven for making mistakes (if it did).

In adjudicating this aspect, I need to take a proper look at the:

·         questions posed by Shoba to Howa;

·         response to those questions by Howa;

·         media release referred to above; and

·         Business Day articles to which the spokesman referred the journalist.

The journalist’s questions were: ·         What is your reaction to the claims made by Dlamini that: o   the Gupta family had been trying to force Exxaro out of business by using their friend, Eskom CEO Brian Molefe; o   this was a trick to “move in and buy the Mpumalanga mine”; and o   Eskom wanted Exxaro to sell its coal at a lower price, which would result in the company making little or no profit until it shuts down? ·         Is Tegeta or any of the Gupta family businesses interested in acquiring Exxaro’s Mpumalanga mine? ·         Last year Tegeta signed a deal with Glencore taking over Optimum Colliery.  Dlamini claims that Eskom did Tegeta’s bidding by forcing Glencore to sell, achieved by Eskom’s refusal to renegotiate the coal deal. Can you respond to that statement? ·         It has been confirmed that Zwane did travel to Switzerland at the same time as Tegeta directors, and had met Glencore CEO Ivan Glasenberg there. Did the minister take the same flight as Tegeta officials? What was his role in the meeting? ·         What was the relationship between the Gupta family and Molefe? and ·         At the recent ANC NEC lekgotla, the Gupta family was mentioned as being among private business people who had undue influence with government ministers. What is your reaction to this?   In summary, Howa responded to Shoba as follows: ·         The short timeframe given to respond is not in keeping with the Press Code; ·         The questions seem to be built on statements made by individuals without any corroboration by any other party. These allegations are serious and damaging to the Gupta parties’ reputations – so corroborate, and verify them by obtaining facts from the parties mentioned in the questions before rushing into publication. Surely, these relevant authorities are easily contactable. Hopefully they would provide you with some perspective and balance; ·         He feels the reporter is obliging him to respond so as to justify the publication of the allegations, which are unfounded; ·         On Exxaro, their knowledge of the issues concerning the ending of the contract is based on what they have read in newspapers. “Eskom is much better placed to answer your questions [in this regard].” ·         He cannot assume that the quite unspecific questions on Exxaro in fact referred to the Arnot coal mine. He nevertheless refers the journalist to a story in Business Day Live, in which it was stated that the Guptas did not tender. From this article, it would seem that Eskom had been paying over R900 a ton for coal to Exxaro, while Glencore was getting R150 a ton supplied to Hendrina. “This is a contract we – as a small black-owned operator – will have to honour with Eskom should our transaction with Glencore successfully close.” He adds he hopes that Shoba would recognize the Guptas’ right “to apply in fair competition with others for tenders”; ·         With reference to Arnot, he refers Shoba to another story in BD. “I hope you will receive these suggestions in the spirit in which they are offered. Eskom, however, remains the best resource to get the facts as the ending of the contract was their decision. We know only what we have read in the media around these issues…”; ·         The rest of the questions are best addressed by the media release from Business Rescue Practitioners who, in announcing the deal, has confirmed that Tegeta would have to honour Optimum’s Eskom contract at the current rates until the contract expires and that Tegeta would take over the liability for the penalty levied by Eskom on Optimum. From this media release it is clear that the Optimum deal was one between a willing seller and a willing buyer and that Eskom did not give the Guptas special treatment in any way. “Please feel free though to provide any evidence of a special relationship for our response…”; and ·         Regarding the NEC, it would seem that the comments made were not as one-sided as reported by the media. Please obtain evidence from any individual of any unfair benefit the Guptas have received in any business transaction. “It is difficult otherwise for us to respond to broad sweeping statements repeated by various media without any fact-checking.”

The media release mentioned above was headlined, Disposal of assets of Optimum Coal Holdings to Tegeta Exploration and Resources as part of business rescue plan of Optimum Coal Holdings. In summary, it was announced that Optimum has concluded a conditional transaction with Tegeta in terms of which the latter would acquire all the assets of Optimum Holdings. It was expected that Optimum would continue to operate normally. “The business rescue proceedings were commenced by the boards of Optimum Holdings and Optimum Mine on 4 August 2015, due to the financial distress being suffered by Optimum Mine… [Optimum is] of the view that the current offer from Tegeta presents the most compelling option for all stakeholders of Optimum Holdings.” Tegeta would pay approximately R2.15-billion for Optimum’s assets, which would partly be used to settle its existing bank debt of approximately R2.55-billion. Glencore has agreed to advance approximately R400-million to Optimum Holdings to settle the balance of the debt so that the transaction could be implemented. “The Transaction will ensure that the operations of Optimum Mine will continue under the ownership of Tegeta as a going concern. Importantly, the Transaction will preserve approximately 500 permanent jobs at Optimum Mine and secure the coal supply to Eskom’s Hendrina Power Station… Tegeta has undertaken to honour the existing Coal Supply Agreement with Eskom.” The transaction, which was due to come into effect on 1 January 2016, was subject to formal approval by Eskom, the Department of Mineral Resources and the competition authorities, as well as the final adoption of a business rescue plan for Optimum Holdings. Optimum commented, “We believe this transaction provides the most optimal outcome for stakeholders and importantly preserves the livelihoods of thousands of the mines (sic) employees and dependants as well as the uninterrupted coal supply to two of Eskom’s thirteen power stations.”

 

The articles in Business Day read as follows (unedited):

 

Eskom ends Exxaro’s coal contract for Arnot power station ESKOM said on Tuesday it was seeking coal bids for its 2,100MW Arnot plant, after it notified Exxaro that it would not automatically renew a 40-year-supply contract that ends in December. Cash-strapped Eskom is cracking down on its contracts with coal suppliers, saying previous agreements where the utility paid for the running costs of mines for guaranteed supply of coal at a predetermined price were no longer sustainable. “We have been in discussion with Exxaro since 2013. They have not been able to supply us with the number of tonnes we had agreed to, yet they continued to charge high prices,” Eskom spokesman Khulu Phasiwe said. Exxaro could bid for the new contract but Eskom, which is facing a funding shortfall of R200bn, said it could no longer afford to pay R900 a tonne for coal, which it was currently paying the company. The Arnot power station, about 50km from Middelburg in Mpumalanga, has been fed directly from Exxaro’s Arnot coal mine on a cost-plus agreement. “Our plan is to exit from all our cost-plus mines contracts and move to a buyer of coal and not a mine owner,” Mr Phasiwe said. Exxaro said it would issue a response later. Eskom and Glencore’s South African unit, Optimum, are also embroiled in a dispute over the price of coal with the utility refusing to pay more than R150 tonne. Optimum has said this rate is less than the cost of production.   Eskom to name Arnot power station coal supplier ‘before end of quarter’ ESKOM said on Friday that it would announce the winning bid to supply coal to its Arnot power station before the end of this quarter, after raising concerns over Exxaro’s performance and rising cost of coal. Exxaro’s Arnot Mine has been supplying coal to the power station as part of the long-term coal contracts that Eskom entered into with coal miners decades ago. Eskom has, however, recently expressed displeasure with the coal contracts, citing lack of performance and rising costs of the coal. Exxaro’s contract with Eskom to supply coal to the Arnot power station in Mpumalanga expired on December 31. “In anticipation of this contract coming to an end, Eskom then issued a request for proposals (RFPs) in August last year, inviting all interested bidders, including Exxaro, to put forward their proposals for the supply of coal to the Arnot power station,” said Eskom spokesperson Khulu Phasiwe. The closing date for the RFPs was the end of October. Eskom is now evaluating the RFPs, “a process which is expected to be finalised soon”. The winning bidder or bidders will be announced before the end of this quarter,” Mr Phasiwe said. He said the Arnot power station was currently operating as usual, despite the lapse of the coal contract. This was because the Arnot mine was not the biggest supplier of coal to the power station. He said that for the past 10 years the power station has been receiving more than 80% of its coal supplies from other suppliers. “We have been getting more coal from the other players,” Mr Phasiwe said. The Arnot mine needs approximately 4-million tonnes of coal a year. Mr Phasiwe said it was too early to tell if Eskom would get the required coal from a single supplier or multiple suppliers. “We will get an indication from the RFP process,” he said. Exxaro and Eskom have been in negotiations about the coal supply contract since 2013. In a statement, dated November 30 2015, Exxaro confirmed that Eskom had given it a notice to terminate the contract. Exxaro further said it was a mining right holder “and Eskom owns the Arnot Mine movable and immovable assets and therefore Eskom will ultimately be liable to defray all costs related and incidental to the closure of the Arnot Mine”.

Firstly, I note that Shoba asked the right questions with regard to what he planned to publish. For example, he asked Howa’s comments on Glencore having been “forced” to sell and about Zwane’s trip to Switzerland at the same time as those of Tegeta directors. Also, he touched on the issue of the Guptas being mentioned at the ANC NEC lekgotla as being among private business people who had undue influence with government ministers.

The question now is whether Howa has adequately addressed the issue of the possibly improper use of the Guptas’ political connections.

Having had a close look at Howa’s answers as well as the documentation to which he referred Shoba (the media release and the two BD articles), I need to agree with the Sunday Times that the spokesman did not address the specific issues which form the basis of the complaint.

Deetlefs’s argument that it was clear from the media release that Glencore had not been under undue pressure is not strong enough within the context of this complaint – the specific issue (that the Guptas may have exerted pressure on Glencore via their political connections) was not addressed. Even if it may be true that the media statement portrayed the fact that Tegeta had presented “the most compelling option” (Deetlefs’s words), the fact still remains that Howa did not address the specific issue that is on the table.

Deetlefs’s statement that Howa’s response was not intended to deal with each and every allegation, but to place on record that the allegations were serious and damaging to the reputations of those involved, also does not hold water. Had that been the case, and even if the Guptas had been subjected to “fishing expeditions”, Howa should have told the journalist so, or asked him for more time to respond.

I also take into account that Sunday Times published Howa’s full response online, and mentioned this fact in print.

In the end, I conclude that Howa did not make proper use of the opportunity to address the central issue (the Guptas’ alleged use of political influence regarding the Glencore sale) and that he provided no proper grounds for deciding that the reporting was false – which leaves me with no grounds to blame the newspaper for its reportage on this issue.

No proper verification

I have no reason to disbelieve Smuts’s statement that the Sunday Times dealt with various sources; also, Shoba did the right thing to try and get comment from the Guptas’ spokesman (Howa).

In that, the newspaper has fulfilled its duty in this regard.

Not enough time to respond

The question of whether or not a publication has given a subject ample or reasonable time to respond adequately to an enquiry, rests on a combination of the following issues:

·         What was the nature of the questions (read: how sensitive were they, and how much time would it have taken to do proper research, if any was needed)?; and

·         How much time was afforded?

Howa was given approximately 24 hours to respond to Shoba’s questions (give or take a few hours, depending on the deadlines at the time).

The questions were of such a nature that I would not have blamed Howa if he asked Shoba for more time to respond. I also take into account that he did protest that the short timeframe was not in keeping with the Press Code.

If Howa stuck to that response, or if he explained to Shoba that he would do his best to respond within the short timeframe given to him, it would have been a different matter. However, he did not do either of these things.

Given these considerations, I believe that the Guptas do not have enough grounds to complain about this issue in the aftermath of their spokesman’s response.

Finding

The complaint is dismissed.

Appeal

Our Complaints Procedures lay down that within seven working days of receipt of this decision, either party may apply for leave to appeal to the Chairperson of the SA Press Appeals Panel, Judge Bernard Ngoepe, fully setting out the grounds of appeal. He can be contacted at [email protected].

Johan Retief

Press Ombudsman