The Russian Connection

Vladimir Putin’s crowd conjured up a plan to build a R300bn ‘aerotropolis’ in Maritzburg. There was cash to be harvested and Jacob Zuma was on board, but the madcap extravaganza came crashing down one drunken night. 

Just five days after President Jacob Zuma signed a memorandum of understanding with President Vladimir Putin over Russia’s intended “cooperation” in South Africa’s planned R1-trillion nuclear-build programme, a motley bunch of Eastern European investors arrived in Durban for a meeting with Zuma.

The delegation was led by a little-known Czech non-profit organisation called the Open Doors of Europe Fund, headed by its president, a Mrs Stanislava Rousova. The main purpose of the fund is purportedly to channel buckets of Russian money for special international projects.

On 14 July 2015 Zuma received the group at John Dube House, the KwaZulu-Natal presidential home,  to be briefed about the fund’s grand plan to build a massive US$21-billion (approximately R300bn at the time) “aerotropolis” outside Pietermaritzburg, KZN’s modest capital city.

President Jacob Zuma meets (from left) KZN businessman and local fixer Nhlanhla Gcwabaza, Russian businessman Alexander Tokmurzin, Czech funder Stanislava Rousova, Russian rocket designer Oleg Vasiliev, German consultant Michael Will and South African consultant Mathanda Mathenjwa

The proposed project – which clearly had no commercial prospects – was nicknamed “Project Jacob”; the Russian partners had suggested that, when completed, it would be called the JG Zuma Aviation Centre. It was to include an aviation factory, building Russian planes known as A-7s and A-19s; an aerodrome complex; an aviation services complex; a university-style campus; a town; a 500MW coal-powered power plant; a railroad; factories; quarries; and an inland coal terminal.

It was also expected to have a “special customs zone” to provide a safe “aviation highway to move VIP, business, securities, precious metals and gold”.

The airport was to have a 4km runway, long enough to land international passenger aircraft.

Just two days after meeting Zuma at Dube House a South African company called Avrora SA (Pty) Ltd was registered to act as a so-called SPV (special purpose vehicle) to drive the project. Avrora is a name that has special significance in Russian history: it was the name of the Bolshevik-commandeered battle cruiser docked in St Petersburg which, on 25 October 1917, fired the shots that marked the beginning of the October Revolution and Soviet communism.

Design drawings, annotated in Russian, were commissioned from Dublin-based South African architect Igmar Ferreira. Confidential documents including costings and progress reports were circulated. Meetings were scheduled and held with South African financiers, dealmakers, lawyers and bureaucrats. The funding, backed by Russian businesses and lenders, was said to be ready and the Russians were keen to start building.

Much of what Noseweek knows about these events is derived from a series of leaked documents, several interviews and a search of publicly available documents in Russia and the Czech Republic.

The airport never happened, for many reasons: there was infighting between the South African partners and between the Russian and Czech partners, culminating in the cancellation of a key meeting at the Riverside Hotel, Durban – largely because everyone got too drunk the night before. But possibly the biggest reason was that then-Finance Minister Nhlanhla Nene bravely refused to sign any guarantees or sureties for the project.

(When Nene was sacked as Finance Minister in December 2015, The EFF said he’d been fired because he refused to take “illegal instructions” made by Zuma and his friends in both business and state-owned enterprises.)

Even Edward Zuma, son of the president, was contacted to intervene and help escalate approval for the project,  but failed to sway Nene. This was despite the project’s having been endorsed by both presidents Putin and Zuma, according to various sources and documents seen by Noseweek.

The ostensible “funders”, the Open Doors of Europe Fund (Odef) was established in 2008 and by 2010 had become involved in only a few small projects – inter alia, according to its records – providing  “humanitarian aid: medical and rehabilitation aids” to South Africa.  

Only in 2014 did the fund become seriously active, when it began sourcing business funding from Russia. Its apparent lack of activity is mirrored by the notable absence of annual reports filed with the Czech authorities. A Czech source told Noseweek the country is extremely bureaucratic and requires filings for all non-profits annually. 

In its only available annual report – for 2014/15 – it is stated that “the fund is interested in developing trade and cultural relations between the Czech Republic, Kazakhstan, Kyrgyzstan, China, as well as other democratic countries” (including, apparently, South Africa).

Rousova was also a director of the South African special purpose vehicle for the aerotropolis project, Avrora SA.

The Russian company expected to build the aeroplanes and do everything else aeronautical was Moscow-based FPK Ekotransenergomash-ATA (Etem-Ata) – loosely translated as The Eco Transport Machine Financial and Industrial Company. It appears to have links to the Russian government’s military complex.

While the plane body was to be assembled in South Africa, the avionics were to be built in St Petersburg and the engines, in Voronezh. Both cities are home to military manufacturing plants that specialise in these fields.

Despite its long and imposing name and suggested top-level military-industrial connections, Etem-Ata’s registered address is a flat on Kakhovka Street in Moscow. It was created specifically for the proposed South African project. It has three directors: Alexander Tokmurzin, Ivanovich Mikulin and Oleg Vasiliev.

Noseweek could not identify the first two names, however Vasiliev is an engineering hero from the Soviet-era. He was involved in the development of the first Buran, the then-USSR’s version of the Nasa space shuttle. He also developed an intercontinental rocket for the Soviet state.

According to Russia’s register of companies, Etem-Ata’s main business was “scientific research and development in the field of natural and technical sciences”, while its secondary economic activities include the “manufacture of air and spacecraft”, mining, fishing and growing of “fruit and nut trees”. Noseweek was informed that in order to work in the aviation industry the company would have to have the backing of the Russian state.

Vasiliev and Tokmurzin were also board members of Avrora SA, the South African special purpose company established for the project.

The Odef had also enlisted the services of Global Union Consulting, a firm based in Bad Homburg, Germany. Its representative on Avrora SA’s board was Michael Will. The consultancy firm’s task was to pull everything together and “make the deal happen”.

The South African partners were hustlers and government insiders. One was colourful Eastern Cape businessman Dr Austin Bene who, according to the Zimbabwean government mouthpiece The Herald, was at one stage “wanted by Interpol” because of his involvement in a doctors’ union that Mugabe did not approve of. Bene studied medicine in Russia, is fluent in the language and has maintained close ties with that country. He became the CEO of Avrora SA.

The other local director of Avrora SA was KZN businessman Nhlanhla Gcwabaza, who represented the BEE partner called MCG Investments (Pty) Ltd. (Also on the MCG board at the time was Siyabonga Mchunu who Noseweek was told is “not a direct relation” of former KZN ANC leader Senzo Mchunu.)

Avrora SA’s registered address is a house in a township just outside Pietermaritzburg.

Bene also enlisted the help of another consultant, Mathanda Mathenjwa, representing Afrisat Investments, a Mauritian-based consultancy located there for tax purposes, while all the members work and live in South Africa.

So why did it all fall apart? “Eventually greed got in the way,” said a government insider.

According to a document headed “Executive Status Summary Report and Key Relationships” circulated by Avrora SA in February 2016, “Project Jacob” was to have been funded by Odef to the tune of US$21,372,000,000 ($21,3 billion) on a 10-year term, at “1-2% per annum”. The interest would have been approximately US$2,364,000,000 ($2,3bn).

The deal finally fell apart at about the time of the change of premiership in KZN – after Senzo Mchunu was replaced as provincial ANC chairperson by incumbent Sihle Zikalala in November 2015. Arguments arose – by most accounts, between all the partners in Avrora. A key element of the deal was that Odef wanted a guaranteed return on their investment underwritten by the state. This was clearly not going to materialise.

An intriguing feature of this extraordinary development plan is that no-one is sure who initiated it – or at any rate no one is telling. One character simply points a finger at another. However there is evidence that it was either the South African or the KZN provincial government who brought the investors into the country.

Just weeks before meeting Zuma, on 24 June 2015, a memorandum of understanding was signed between the South African and Russian governments, Etem-Ata, the KZN government and Odef.

“The guys were brought to South Africa and they wanted us to be a part of the deal,” said Gcwabaza.

“Mr Bene came with the Russians to KZN. He knew me from before. We were the BEE partner and were required to sort out local licences and land purchases. The Russians were the funders and brought the technical support. Our task was to present to the relative provincial government structures. It had the blessing of the president’s office.”

He listed several reasons for the deal’s falling apart. “One was because we needed more information. At that stage much of it was a gentleman’s agreement. The Odef was going to finance the project. We stopped on our side as we needed boxes to be ticked and they weren’t. I don’t think the money was dirty but no assurances had been provided of its source.”

Gcwabaza said there was also a fallout between the Open Door fund people and Etem-Ata, starting when Odef wanted complete control of the project, from making appointments to handling the cash. Bene, he said, also tried to push MCG Investments out. 

“The project fell apart when Bene tried to go it alone and edge us out. Etem-Ata pulled out when I told them Bene can’t be CEO of Avrora because he was wanted by Interpol.”

Gcwabaza claimed that the shake-up in KZN politics which saw then- premier Mchunu replaced as leader of the ANC in the province and his subsequent sacking played a negligible role as the project had been stalling long before the change of leadership. He insisted there was no political involvement in the project.

Bene had a different story to tell: “We got the impression we had to use MCG Investments as a BEE partner because that was what the KZN provincial government required. Our worry was red tape, so having a partner with the right access to meet the right people made MCG a good choice.”  

He said another reason for the stalling was because there were middlemen asking for “donations”. “This eventually was one of the reasons our relationship broke down with MCG. Odef and the Russians were adamant they wanted everything to be above board but we had the impression we had to pay for access,” said Bene. He maintained that presidents Zuma and Putin and the Russian Government played no role – but then refused to answer any further questions, saying he was bound by confidentiality agreements.

The Russians however confirmed that the project was driven by the two governments. Asked why it had failed, Etem-Ata replied: “We initially stated that we need not only ‘brains’, but also money unfortunately” – in reference to Avrora SA’s failure to obtain guarantees from the National Treasury.

Michael Will from Global Union, who was a technical consultant, said that Zuma told them he supported  the project but in reality they never  got any real support.

“We needed guarantees. It appeared as if the locals thought we would just hand them the money.  Austin [Bene] came up with the airport idea. He said he could help and organise but he spoke too much and the project failed. People get side-tracked with projects like this where so much money is involved. He also brought in another investment partner, Afrisat. There were too many people involved.

“There was no government influence, otherwise the project would have happened,” said Will.

Global Union Consulting’s owner Mario Grothe, who spoke for Odef, told Noseweek “Russia was ready, the money was ready, the local guys weren’t”; the local partners were “fighting over ownership”.

“We spoke with various people in government and eventually we, as Germans, and Odef said ‘let’s stop’. There was no clear partner in the deal in SA that we could trust. We also had a different view to Etem-Ata’s on the project. There is no time for playing.

 “It was clear the government did not have the power to get the project. We know the president was involved. We had evidence. We met his son Edward. He was also involved,” said Grothe.

Grothe said MCG Investments was sold to them as a company that “represents the KZN government” and would be the [national] government’s vehicle to “handle the guarantees”.

“We don’t give money to someone else in other countries. We manage the projects. The main contractor would have been Sineko International. When we use a local contractor the money disappears,” said Grothe who denied any knowledge that Sineko and Odef were in fact one and the same.

Sineko International is based in Brno, Czech Republic. It, like Odef, was run by Rousova, her husband and their daughter. When Odef holds an AGM, the minutes reflect the attendance of her husband and daughter. Sineko International is also a member of Odef’s board.

And that is not all. Noseweek is in possession of documents that reveal that this grand airport strategy was closely linked to the Russian-South African nuclear deal. But you’ll need to see next month’s Noseweek to find out more about that.

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Submitted by : Mortis on 2017-12-28 20:56:48
R300 Billion would've been a great injection into an ailing KZN / Maritzburg economy - even if we weren't able to use the airport the spend by the Russians would've given the local economy a boost. Pity that the "local partners" were trying to milk the cow even before it got into the shed. But Jacob promised Putin much and they need a private port of entry to facilitate the nuclear build so I don't think we've seen the end of this story.

Editor's Note
Russians weren't proposing to pour billions into SA; they were wanting guarantees from the SA government for such an investment in a project which was certain to run at a huge loss.


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