Wednesday, July 14, 2010

Zuma's nephew receives backing of DRC officials

By Wiseman Khuzwayo and Bloomberg

The sale of two disputed oil blocks in eastern Democratic Republic of Congo (DRC) to firms owned by Khulubuse Zuma, a nephew of President Jacob Zuma, was done in the best interest of the country, a DRC government spokesman said yesterday.

The DRC awarded blocks 1 and 2 in Lake Albert to Caprikat and Foxwhelp by a presidential decree published in Congo Journal Officiel on June 22. Both companies were recently incorporated in the British Virgin Islands.

The DRC had previously signed contracts with two other companies to develop the blocks, including Tullow Oil in 2006. After the contracts were awarded to the two new firms, Tullow said that a "legitimate" oil company would work with either Caprikat or Foxwhelp to explore the two sites.

"There's always acrimony on the part of those who lost the bid and the first accusation they make about others is that they aren't well-known," Lambert Mende, a DRC government spokesman and former oil minister, said yesterday.

The oil blocks are located in Albertine Graben in the western Rift Valley of east Africa on the border with Uganda, where an estimated 2 billion barrels of reserves have already been discovered. The DRC wants exploration to begin soon.

"The fact that a company isn't well-known means little when it comes to exploring a zone like this," said Mende. "Congo needs to work with unknown companies who dare to work in new frontiers where there's not 100 percent certitude of finding interesting prospects."

Tullow never received a presidential decree to begin exploration of its blocks and is considering legal action.

Divine Inspiration Group (DIG), a South African company, signed a competing contract for block 1 in 2008. DIG spent more than $4 million (R30.2m) in signing bonuses and fees to secure the block, said Andrea Brown, the executive director of DIG.

"The developments with respect to the block 1 contract are not in line with principles of transparency and due process, which are key elements of an investor-friendly business environment," Brown said. "We will appeal for compensation and we look forward to constructive engagement with the government on this matter."

The president's nephew is a director of the embattled Aurora Empowerment Systems together with Zondwa Mandela, a grandson of Nelson Mandela.

The grandson of the former president refused to acknowledge if he was also a director of Caprikat and Foxwhelp.