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HARD-BOILED: The relationship between Sol and former Bophuthatswana president Lucas Mangope may never be completely unravelled (above).
The Sun King gets a licence to gild his ... Gold plummets as Switzerland jumps ship... Stals comes out smelling of rose... Stealing the show with icons of the mode... British investors give SA airship compan... |
The Mangope Connection - exclusive extracts from Greenblo's "Kerzner Unauthorised."In this extract from his book 'Kerzner Unauthorised', writer Allan Greenblo looks at the extraordinary relationship between casino king Sol Kerzner and former Bophuthatswana president Lucas Mangope.
BOPHUTHATSWANA, where Sol got his start in big-time gambling, is a mess. It will take aeons to unravel the goings-on in this former homeland where Mangope was the Czar.
Bophuthatswana was Mangope, platinum, tourism and gambling. Mangope relied on multibillion rand handouts from Pretoria. Platinum relied for exploitation on Anglo/JCI's Rustenburg, Gencor's Impala and Lonrho's Western mines. Tourism and gambling relied on Sol, Sol and Sol. Mangope was hot on two things: protocol, insisting that he was the sovereign head of a sovereign nation; and payments, ensuring that there'd be a generation of wealth sometimes confused between his country's and his own. To this day there's a quaint colloquialism nervously chuckled in Mmabatho, about "the president's 10 percent". Perhaps the president wasn't too confused, aren't sovereign rulers due their tithes? Despite the financial reliance of Bop on Pretoria, Mangope was quite capable of biting the hand that fed him. For instance, facing objections from the Nederduitse Gereformeerde Kerk in 1984 then South African state president P W Botha appealed to Mangope to "suspend the introduction of the casino" in the proposed Sun resort at Thaba 'Nchu, near the conservative Free State capital of Bloemfontein, because "I would not like a casino to upset the harmonious relations which have existed there for so many years". Mangope had no compunction in telling him where to get off: "Over the last two years we have sounded out opinion in the Orange Free State concerning the matter you have raised and we have been informed that there is no more concern about a casino at Thaba 'Nchu than there is about a racecourse at Bloemfontein." Given the choice between heeding Botha and backing Sol, Mangope knew which side of his bread promised more butter. The casino at Thaba 'Nchu opened in 1985. Sol treated Mangope and his family members to the red carpet of royalty, and there was a standing instruction at Sun International that personal matters relating to the Mangope family be referred directly to him. The environment in which Sol had to function was unsavoury, to say the least, for the most virtuous of men. You operated on Mangope's terms or you didn't operate at all. What were Mangope's terms for the rights extended to Sol? Did Sol have to offer Mangope more than charm and advice for the casino licences, the generous tax treatment, the personal intervention that got Sol back into Sun Bop? Rumour abounds. It's far easier to suspect that Mangope accumulated wealth in overseas bank accounts than to prove it. The smell of undercover payment for casino exclusivity in Transkei lets off a stench of misgivings about Bophuthatswana, which was far more significant in the Sun scheme of things. But it cannot be substantiated. It is perfectly conceivable that Sun enjoyed its Bop status on the straightforward trade-off of monopoly rights as the prerequisite for investment; no monopoly, no investment, no job creation. What raises scepticism is the secrecy of agreements between Mangope, Bop and Sun - and the interpretation of those agreements when they are exposed. There was an awful lot of confidentiality, inexplicable except to the extent that confidentiality invites corruption. And in Bop there was certainly corruption. This is evident from recent reports of the Heath, De Meyer and Skweyiya commissions of inquiry which respectively investigated tender board procedures, farm and real-estate transactions and maladministration during the period of the Bophuthatswana government. It would appear conclusive from the three reports that Mangope, Sol's bosom ally, set the tone for rampant nepotism and unbridled venality. His fortunes were inextricably bound up with Sol's, yet to date Sol escapes allegations of complicity in the crimes for which Mangope stands accused. Is this because Sol managed to avoid graft, or because it cannot be uncovered, or because nobody's got around to looking? Whichever it is, Sol's close association with Bop and Mangope bears scrutiny. Potential conflicts of interest are the least of it.
Leslie Young, the Bophuthatswana minister of finance at all critical times, was on the Sun International payroll. In addition, he was a Bop government representative on the Sun Bop board. A time-honoured tradition was that Young's government salary be topped up by private-sector companies operating in Bop. A British chartered accountant, he'd come to South Africa in 1981 for a job at Union Corporation, which merged with General Mining to form Gencor (owner of Impala Platinum). It was arranged that Young be "seconded" to the Bop ministry of finance from January 1982. The arrangement continued for five years, but clearly Young was unhappy about not getting enough. Mangope wrote to Sol in April 1987: "Leslie Young has had his salary augmented by Union Corporation until 31st March 1987 and they have offered to extend this at the present rate until 1990. Since the present rate was established in October 1985 this means that a five-year period of standstill will have occurred during which no adjustment has been made for inflation. If you are able to augment his salary in regard to this inflation aspect for the next three years I would appreciate yet another contribution you would be making to Bophuthatswana. I do not believe that the figures involved exceed R20 000 per annum." Ian Heron, then the Sun deputy chairman, responded on behalf of Sol, who was travelling overseas: "We would certainly be prepared to contribute towards the augmentation of Mr Leslie Young's salary for the next three years. Upon receipt of the advice of the amount required each year and the desired manner of payment we will make the necessary arrangements. We are pleased to be able to assist with regard to this matter." So it was done. Young received both a salary "augmentation" from Sun International and, incidentally, director's fees from Sun Bop. In his capacity as Bop minister of finance, on Mangope's behalf he was central to negotiations with Sol on Sun's conditions for casino licences, tax concessions and management contracts. There were curious arrangements on salaries. The agenda for a Sun Bop directors' meeting, held in August 1990, notes a resolution passed three mont's previously: "Opening of accounts styled "Sun International (Bophuthatswana) Limited, t/a Tlhabane Sun - general, general salaries, confidential salaries, casino imprest and slots salaries at the Phokeng branch of The Standard Bank of Bophuthatswana Limited." It is not recorded why there was a need for "confidential salaries", what they represented, to whom they were paid and in what amounts. However, the same agenda records the terms of the agreement with Gary Player for the use of his name and "various services of a promotional nature" in connection with the golf facilities at Sun City. It provides an illustration of the sums, in hard cash, for the expression of Sol's marketing flair. From September 1989 to August 1996 Sun Bop paid Player an annual fee of R200 000 in the first year, escalating at 10 percent compound each year thereafter, as well as one-third of the green fees and seven percent of the retail price of branded merchandise sold in the Country Club shops. In addition, "on terms to be agreed", he was granted the contract for the design of the new Lost City golf course. The marketing value in the mere use of Player's name, aside from the golf course design, would have cost Sun Bop more than R2-million over seven years.
The gaming levies payable by Sun Bop to the Bop government have been treated as confidential. Moreover, the financial statements of Sun Bop did not separate casino revenues from other income. In other words, there was not a hope in hell for outsiders to gauge the contribution from casino operations, much less the financial benefits to accrue from them to Bop.
Due to its ambitious building programme cushioned by abundant incentives, Sun Bop has paid taxes that are phenomenally low in relation to the profits generated. At no stage has it paid full tax. Taking the 10 years to 1994, its effective tax rate has varied from zero and a minuscule 2,1 percent to a high of 34,1 percent. In 1994, when the Lost City was fully operational, Sun Bop's effective tax rate was 12 percent on pre-tax profits of R268,4-million. On this basis, to take the standard South African corporate tax rate of 40 percent, it means that Sun Bop paid tax of R32,2-million instead of R107,4-million. In other words, for this year alone Sun Bop was subsidised by taxpayers to the tune of R75,2-million. Over the years, by virtue of the write-offs permitted, Sun Bop has received hundreds of millions of rands from taxpayers. Just on the Lost City, the tax break in the five years after its completion amounted to roughly R1,2-billion. Since casino operations subsidised the resorts Sol developed, it's not obvious why they required tax breaks too.
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