US scrutiny spells trouble for MTN and South Africa

As relations between Pretoria and Washington continue to sour, South Africa’s ties to Iran are coming under increasing scrutiny. And the heat is being turned up on South African telecoms company MTN, previously chaired by President Cyril Ramaphosa. It’s now chaired by Mcebisi Jonas, South Africa’s special envoy to the United States (US), who has apparently been barred from travelling there.

Having fought bribery allegations in the South African courts for almost 20 years from losing bidder Turkish company Turkcell for the lucrative Iranian cellphone market, MTN now faces two new legal headaches from the US. If the cases are proven, the consequences are dire.

First, US prosecutors are involved in grand jury proceedings investigating MTN’s Iran dealings. The MTN Group acquired a 49% stake in Irancell in 2005, with partners strongly linked to the Iranian government holding the majority shares. It’s alleged that this was a crooked deal, beginning under Ramaphosa’s watch. If proven, it will demonstrate that state capture wasn’t rife only during Jacob Zuma’s presidency.

Former US diplomat and writer J Brooks Spector said, “There are new investigations and possible indictments against MTN and its officers claiming the telecommunications firm’s corrupt involvement with Iran that may be pursued in the American judicial system. Given Mcebisi Jonas’s dual role as MTN board chairperson and South Africa’s special envoy for trade and tariff negotiations with the US, this may have rendered the latter appointment less than fortunate at this sensitive time in South Africa-US relations. Jonas has, in fact, apparently been unable to secure a diplomatic visa to the US and thus has, so far, been unable to pursue direct discussions and negotiations with the Trump administration in Washington.”

Second, as Spector explained, “There are already several civil damages cases under the Anti-Terrorism Act being pursued by families of American military personnel who were killed or wounded in Afghanistan and Iraq. The charges are being made against MTN that its funds were paid to Iran’s Islamic Revolutionary Guard Corps that, in turn, financed the attacks on those American personnel.

“It is important to note that so far, no indictments have been filed against MTN in the US over its connections to Iran. At this point, the charges are still in the hands of prosecutors and a grand jury, rather than in a courtroom trial. The grand jury is convened to determine whether or not charges prepared by prosecutors are sufficient to be an indictment in order to pursue charges in a court. A grand jury can subpoena witnesses and phone records, and its deliberations and decisions carry real weight with prosecutors. Grand jury deliberations are generally not held in public.”

Professor Hussein Solomon from the University of the Free State and an expert on terrorism said, “The MTN cases are serious, because a sitting president was chairperson of MTN at the time. South Africa is becoming a mafia state, riddled with corruption. Mcebisi Jonas has come out saying this is a dirty tricks campaign, yet he cannot even enter the country to which he is supposed to be a special envoy.”

Solomon noted that South Africa has been greylisted by the Financial Action Task Force for non-compliance with anti-money laundering rules. “We have Islamic State franchises getting their funding from South Africa. It’s extremely problematic. Washington sees us siding with Iran, Russia, and China, or at least that’s its perception.”

“Can you imagine what happens if this case is proved?” he asked. “South Africa will be declared a state sponsor of terrorism and removed from the SWIFT international payments system, with terrible repercussions, not just from the US but many other countries. And in my view, the African National Congress is completely oblivious to all of this. South Africa has protected Iran diplomatically, for example in the United Nations and International Atomic Energy Agency, and got it into BRICS [the organisation comprising Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran, and the United Arab Emirates].”

Benji Shulman, the director of the Middle East Africa Research Institute said, “South Africa’s relations with Iran really start to ramp up in about 2012 as a result of this deal with MTN.” As the Americans focus more on South Africa-Iran ties, “this particular transaction and this particular relationship comes more into the spotlight”, potentially implicating both Ramaphosa and Jonas.

Shulman said the relationship between the two states didn’t make sense from a political, economic, or shared-values perspective. “As a country, we share none of Iran’s values in terms of freedom of speech; political association; and freedom of religion. And yet we spend an enormous amount of political capital on this.”

In 2012, two Reuters reports contended that MTN had used bribes to land this deal in Iran and channelled sensitive dual-use US technology to Tehran, circumventing sanctions. The Hawks also investigated these dodgy dealings after revelations of thousands of internal documents by a whistleblower who used to work for MTN. They allegedly detail how the company sought to outmanoeuvre Turkcell, but the case collapsed when an accused South African diplomat died during the investigations.

Michael Walsh, Affiliate of the Africa Program at the Georgetown School of Foreign Service said, “In Washington, some are now wondering whether the appointment [of Jonas as special envoy to the US by Ramaphosa] was simply an attempt to extend diplomatic immunity to Jonas in order to provide a partial shield against legal exposure in US courts.”

Walsh added, “One of the most interesting aspects of the Anti-Terrorism Act (ATA) cases is that they have led to repeated accusations that MTN Group misled its shareholders in official communications. Earlier this year, Professor Jeffrey Breinholt of George Washington University suggested that MTN Group may have committed securities fraud in its characterisation of the risks associated with the ATA cases. Now, the amended complaints allege that MTN Group committed fraudulent concealment of its alignment with the Iranian regime. These sorts of allegations raise important questions about the oversight of MTN Group by entities such as the Bank of New York Mellon, Johannesburg Stock Exchange, and the government of South Africa.”

The Trump administration clearly has South Africa in its sights, and Pretoria’s close relations with Tehran aren’t going to make things easier. The MTN cases could have disastrous consequences for the company and the country. MTN has denied any malfeasance or wrongdoing.