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Diamonds and dirty dealings: Alexkor whistleblower testifies

The story of how a dormant shelf company with no licence to market and sell diamonds won a tender to do just that, receiving its first tranche of multi-million rand rough stones in the first month.
When the whistleblowing diamond diver started querying the prices received for rough diamonds, his contract was cancelled and his access to the site blocked. Image: Shutterstock

Gavin Craythorne, a marine diamond diver operating along the north-west coast of South Africa from Alexander Bay to Port Nolloth, testified at the Zondo Commission of Inquiry into state capture on February 8 and 11.

Evidence leader Carol Sibiya said Craythorne had approached the commission with allegations of state capture and corruption within Alexkor, the state-owned diamond miner.

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She thanked him for doing so, saying: “It takes a brave person to do that and we thank you for that.”

Marine diamond miners

All marine diamond mining related to Alexkor is carried out under contract with the Pooling and Sharing Joint Venture (PSJV), which is 49% owned by the Richtersveld Community and 51% by Alexkor. The PSJV was formed under the Alexander Deed of Settlement after a successful claim by the Richtersveld Community in terms of the Restitution of Land Rights Act.

Alexkor owns the marine rights, and the Richtersveld Community owns the land rights.

Marine diamond divers extract diamond-bearing gravel from the shallow seabed. The area to be mined by a diver is registered, they can only dive in very specific calm weather conditions, and 50 tons of gravel might only produce a few grams of rough diamonds.

The gravel mined is handed over to the PSJV at the Alexander Bay Harbour.

Each miner’s gravel is kept separate as it goes through the various stages of sorting, after which the rough diamonds are stored in the PSJV’s safe custody for which the contractor is given a receipt.

A receipt is however meaningless at this stage as the rough diamonds have not been sorted in terms of size, shape, quality, and colour; in other words, there is no indication of the value of the diamonds.

Scarlett Sky Investments (SSI)

The appointment of SSI was covered by Moneyweb on Monday (January 11) in ‘Zondo Commission has Alexkor in the cross hairs‘.

Before transporting the rough diamonds to SSI, an Alexkor employee ‘values’ the stones.

According to Craythorne the employee “makes a very inaccurate assessment of what the value is” for “insurance purposes”.

The valuation is based on the carat weight (ignoring the shape, quality and colour).

SSI stores the diamonds in a secure area called the Knox Vault in Johannesburg where SSI director Daniel Nathan has his premises.

According to Craythorne the vault “is below the place [where businessman] Kuben Moodley has his safety deposit box”.

SSI prepares the rough diamonds for viewing by the State Diamond Trader, during which the latter selects its 10% representative sample.

SSI selects 5% for beneficiation (cutting and polishing), and the remaining 85% goes on auction at SSI’s premises.

Valuing diamonds a la SSI

Craythorne explained that the price of a rough diamond is ascertained through “price discovery”, where there is competitive bidding as at an auction: “…but the auction has to be an honest auction”.

He elaborated: “If you have collusion then you are not going to have price discovery. So if it is an auction that is designed to allow for sharing of critical price information, then you defeat the whole price discovery mechanism.”

Craythorne said that at Alexkor “contractors have never been allowed to critically analyse the value of their diamonds”.

He explained that in the case of SSI: “ … the company that is conducting the auction is also the company that is doing the valuations, so if there is collusion taking place during auctions and the prices achieved on auction are extremely low, there are no safety measures in place to prevent the sale of the diamonds … ”

The reserve price is set by SSI.

When Craythorne started querying the prices received for rough diamonds, his contract was cancelled and his access to the mine was blocked for the period November 7, 2017 to March 19, 2019.

Is Scarlett Sky an instrument of state capture?

Craythorne commenced his own research and investigations, discovering that Kuben Moodley was a director of SSI: “He featured as a close lieutenant of the Gupta family.”

Further, SSI had no track record until Nathan, who had 20 years’ experience within the diamond industry, was appointed as a director of the company in 2014.

Commission chair Deputy Chief Justice Raymond Zondo noted: “The fact that at some stage an individual got involved in the company who had 20 years’ experience does not give the company 20 years’ experience track record.”

According to Craythorne the selection panel that appointed SSI as the sole marketing agent of the Alexkor rough diamonds comprised Rafique Bagus (independent non-executive chair, appointed 2012), Duncan Korabie (an attorney who represented the Richtersveld Community and the Alexander Deed of Settlement) and Dr Roger Paul (Alexkor non-executive director).

Korabie awarded SSI a 100% score despite the fact that it had no track record and no licence to market and sell diamonds.

Craythorne testified in his affidavit that: “Having won the tender, SSI went from being a dormant shelf company to suddenly appearing on the local diamond trading scene as the PSJV’s new marketing and sales service provider, taking delivery of its first tranche of multi-million rand rough diamonds on March 15, 2015.”

‘Well-known individuals’ in the state capture project

Craythorne: “When you look at the individuals that are involved with the outcome of SSI being inserted in Alexkor’s diamond value chain, they are very well-known individuals in the public discourse around state capture … Malusi Gigaba, Mosebenzi Zwane, Rafique Bagus, Mervyn Carstens, Kuben Moodley, Percy Khoza, Zarina Kellerman, Hantsi Matseke, Daniel Nathan, Selwyn Nathan, Marc Chipkin and Salim Essa.”

Evidence leader Carol Sibiya noted that “the tender was awarded in March 2015″ and that Gigaba “was no longer a minister [in] the Department of Public Enterprises at that time”.

Craythorne replied: “The state capture project [related to Alexkor] actually began with the appointment of Malusi Gigaba and him gaining influence over the strategic future of Alexkor … in my mind he was involved … not directly … but he was certainly laying the groundwork for what was to come later.…”

Read: Alexkor, another broken SOE

Craythorne confirmed that Alexkor chair Hantsi Matseke was also chair of the PSJV from August 2015 to October 2018, and was at the same time chair of the Free State Development Corporation.

Craythorne referred to the “Melrose Arch centre of gravity” when it comes to state capture, saying it “seemed like there was a constellation of satellite entities revolving around Salim Essa’s office in Melrose Arch, even Scarlet Sky’s offices at the time that the tender was placed was right next door to Salim Essa.…”

Craythorne has been subjected to a number of ‘Slapp’ (strategic litigation against public participation) suits. These are legal suits brought against an activist to silence their public criticism.

Craythorne continues to make his voice heard.

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Here we go again. Why am i not surprised with the gupta name popping up again. Smacks of something from a CIA movie.

Bravo Mr Craythorne! If only there were more people like you in the public sector, we may not have devolved into the failed state in which we now find ourselves.

And carry on with your investigative work Ms Curson – but from occasionally listening to the Zondo Commission, I despair at us ever becoming an ethical state, defined by principles and morals.

I agree with your comments about Mr Craythorne and Ms Curson.
Some interesting questions come to mind. I am stunned that Korabie, a lawyer ostensibly representing the Richtersveld Community and the Alexander Deed of Settlement, allegedly awarded SSI with a 100% score despite the fact that the company was a ghost (shelf company), without a track record or a licence to market and trade in diamonds, and that the committee approved the appointment. This stinks from all angles and I would love to know how they got away with it. Is this another bunch of delinquent directors?
The second, is that it is well known that the diamond trade has always been a bit dodgy from its earliest days – why else is it so controlled, secretive and accessible to only a select few? If Craythorne is more than just a nuisance and causing damage to PSJV then sue him, but harassing him through numerous Slapp suits as alleged in the article is an indication that the applicants are the problem and not the activist. I would far rather believe Craythorne’s version of events than theirs, based purely on the names he mentions – all seemingly tainted by state capture.

Its not what u know, but who u know.

End of comments.

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