Frankfurt prosecutor's office investigating T-Systems for State Capture and Gupta links

Researcher Paul Edward Holden testifies before the Zondo Commission on 3 December 2020 in Johannesburg. (Photo: Gallo Images / Fani Mahuntsi)

By Tim Cohen

4 Sep 2022

The German press is reporting that the public prosecutor’s office in Frankfurt is investigating allegations against T-Systems, a subsidiary of the partly state-owned Deutsche Telekom, in connection with Gupta-linked State Capture allegations.

According to a weekend press report in Welt am Sonntag, the Frankfurt prosecutor’s office confirmed that it is conducting an investigation into T-Systems following a criminal complaint made by Paul Holden, co-head of Shadow World Investigations, which made detailed submissions to the Zondo Commission.

The announcement of the investigation will be a major embarrassment not only to T-Systems itself, which always claimed it was cooperating with the state-capture investigation, but also the German government, which is part-owner of T-System’s parent, Deutsche Telekom.

If the allegations are substantiated, this will be the second time a company part owned by foreign government has found itself caught up in State Capture in SA after the partly Chinese-government owned Chinese Railway Rolling Stock Corporation was found by Sars to have overstated the price of its locomotives sold to Transnet as part of its involvement in State Capture.

zondo holden Researcher Paul Edward Holden testifies before the Zondo Commission on 3 December 2020 in Johannesburg. (Photo: Gallo Images / Fani Mahuntsi)

Holden said at the weekend he was pleased by the announcement, especially because T-Systems was the second-largest beneficiary of tainted funds associated with State Capture. In his report to the commission on the flow of funds, Holden found that a total of R12.3-billion had been paid to T-Systems during the State Capture period.

T-Systems said in response to enquiries by Welt am Sonntag, one of Germany’s largest newspapers, that the company did not yet have any knowledge of the investigations, and that it did not tolerate violations of the law. The company said it had cooperated with the State Capture investigators, and that “certain business relationships have been terminated and reversed and that the subsidiary in South Africa was sold in 2020”. T-Systems was in fact sold to Gijima in 2020 for an undisclosed price.

These are all oblique references to a series of events which formed part of the testimony before the Zondo Commission, the most curious of which was the 2015 report that T-Systems did on its potential risk in the hiring of Gupta-linked businessman Salim Essa as a sales consultant.

The report found that hiring Essa would be a “significant violation” of prescribed approval procedures for consultancy contracts, and would be “not acceptable”. But the report also found that no evidence of corruption or other illegal conduct was found.

Despite this problem, T-Systems continued to have an “informal” relationship with Essa, and on his advice, began doing business with two companies associated with the Gupta network: Zestilor and Sechaba. Zestilor was owned by Zeenat Osmany, Salim Essa’s wife, while Sechaba was the Gupta Enterprises supplier development partner.

Despite being formally notified that Transnet intended terminating its business with T-Systems, the contracts were repeatedly extended. Subsequently, the entire system, in which T-Systems got large contracts while Zestilor and Sechaba were granted subcontracts and retainers by T-Systems, was repeated and intensified at Eskom.

T-Systems said in its response to Welt am Sonntag that the Zondo Commission contained no recommendation to prosecute employees of T-Systems or the company. This is not quite true: although the commission did not specifically say that T-Systems should be investigated, submissions to the commission, including those by Holden, certainly did make that suggestion. Welt am Sonntag also reported that a manager who held a key position at T-Systems in South Africa from 2010 to 2014 was promoted to a managerial position for the company’s global operations in April 2021. BM/DM

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