South Africa is a beautiful country but it is governed horribly. Unfortunately the President, similar to other President’s for life, seem to think the government’s money is their money. In South Africa, the President is Jacob Zuma and for whatever reasons he allowed the Gupta family as business partners, often inserting the Gupta family company in between the government to collect fees. The companies do not add any value, they are meant to collect fees, take a percentage from the collection and pass the rest to the government – the term is state capture. To do this, while individuals can do it and in some countries (in one countries in South east Asia, the family was called 10% – whatever your revenues in the country are 10% go to the governing family), but more often the consulting companies are involved. The consulting companies are the blue chip names such as KPMG, McKinsey and others who should have known better or refused the business.

In South Africa, which has many scandals, McKinsey inserted the Gupta family company in the state owned electricity company Eskom and without making the electricity company better (by any sense of the word) it was designed to take fees from electricity bills and send it to the Gupta brothers company and the consulting company. McKinsey will payback about $100 million, no word on whether the Gupta’s pay anything back or keep collecting. However when one partners of the company is the President’s son, perhaps the President is very slow to react.

Linking to dividend paying stocks, while every company would love to be involved in these types of deals, collecting fees for doing nothing particularly utility companies, they are illegal. In business, companies are offered deals and sometimes what is more important is what do your turn down, rather that accept? As a profitable company does it go after the short term fees or the long term? As an small investor you are hoping the long term fees, but companies are run by people who sometimes do stupid things.

There are more questions than answers, till the next time – to raising questions.