October 25, 2006 10:45 pm

Taking a cut acceptable, says African minister

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In an unusually frank admission about the mechanics of business in oil-rich West Africa, a top Equatorial ­Guinean official has said that companies owned by ministers often bid for ­government contracts with foreign groups and, if successful, receive “a percentage of the total contract the company gets”.

Teodorin Nguema Obiang, the 37-year-old son and likely successor of President Teodoro Obiang Nguema Mbasogo, made the statement in a sworn affidavit to Cape Town’s High Court, where his lawyers will today oppose the seizure of two luxury houses he owns in the city. Equatorial Guinea is sub-Saharan Africa’s third-largest oil producer.

A South African company seeking damages from Equatorial Guinea in connection with a commercial dispute in February secured an attachment order from Cape Town’s High Court for the properties, arguing that they were that country’s state property. Maseve Investments claims that Mr Obiang could not have afforded the houses, for which he paid about $7m in 2004, on his salary as minister of forestry in his father’s government. “We maintain that if his salary is $4,000 a month, where did he get the money?” Errol Elsdon, Maseve’s director, told the FT. “The only answer is that the government stole it from the people.”

Through his South African attorney, the younger Mr Obiang denied the allegations made by Maseve in the court case and by Mr Elsdon to the FT. “Our client has filed opposing papers in the current court application and our client stands by same,” Desigan Naidoo of Mchunu Koikanyang Attorneys told the FT.

An official at Equatorial Guinea’s embassy on Wednesday declined to comment on the allegations. In a note sent to South Africa’s ­foreign affairs ministry this year, the embassy said the properties had been bought legally and complained of “defamatory statements against [our] country before the international community”.

South Africa is a favoured spot for real estate purchases by officials from other African countries.

The dispute now in court arose from a claim against Equatorial Guinea by South Africa’s Engineering Design and Construction Company (EDC). The company’s owner, George Ehlers, alleges that it did not receive the full $7.8m agreed for a contract to build an airport on the island of Annobon, off Gabon.

Maseve, which acquired the debt from EDC, is also seeking to acquire a $700,000 debt Mr Obiang allegedly owes for the chartering of the yacht Tatoosh, owned by Paul Allen, Microsoft’s co-founder.

In an affidavit, Mr Obiang has denied using government money to buy the houses. He also asked the court to dismiss the claim as “based on unsubstantiated hearsay evidence and/or lies told to the Court”.

However, in an extraordinary admission in his affidavit, the president’s son ­testified that ministers and public servants in Equatorial Guinea were allowed to own companies bidding for ­government contracts with foreign groups which, if ­successful, would receive “a percentage of the total contract the company gets”.

This, he told the court, “means that a cabinet minister ends up with a sizeable part of the contract price in his bank account”.

Non-governmental groups campaigning against corruption in the oil industry have long contended that officials in Equatorial Guinea, Angola, Congo-Brazzaville, and other oil-rich West African states have made untold sums by profiting from foreign business contracts, often in contravention of local laws.

However, statements to that effect by African officials themselves are rare.

“His sworn statement appears to confirm widespread concerns about a rampant culture of corruption in Equatorial Guinea,” said Sarah Wykes, a campaigner with the London-based watchdog Global Witness. “Which US or other foreign companies in Equatorial Guinea are doing these kinds of deals?” she asked.

Such deals “would appear to contravene anti-bribery laws in OECD [Organisation for Economic Co-operation and Development] countries,” Ms Wykes said, including America’s Foreign Corrupt Practices Act, which prohibits US companies and citizens paying anything of value to foreign public officials to obtain business.

“The US government has just launched an initiative to combat kleptocracy and corruption,” she added.

“In the light of Mr Obiang Jr’s extraordinary admission, what action will the US be taking against the kleptocratic Ecuadorial Guinea government officials seeking entry to the US or having assets in the country?”

Chris Schoeman, a lawyer for Maseve, has written to all seven leading foreign oil companies with operations in Equatorial Guinea in connection with Mr Obiang’s testimony in the case.

In his affidavit, Mr Obiang stated that ownership by officials of companies tendering for government business was legal. The oil companies in ­question could not be reached for comment.

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