Cablegate: The Royal Bafokeng: Tribe, Community, And

VZCZCXRO9004
RR RUEHDU RUEHJO RUEHMR
DE RUEHSA #1809/01 2471449
ZNR UUUUU ZZH
R 041449Z SEP 09
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 9528
INFO RUEHOR/AMEMBASSY GABORONE 5543
RUEHMR/AMEMBASSY MASERU 2903
RUEHMB/AMEMBASSY MBABANE 4577
RUEHTN/AMCONSUL CAPE TOWN 7109
RUEHDU/AMCONSUL DURBAN 1202
RUEHJO/AMCONSUL JOHANNESBURG 9473

UNCLAS SECTION 01 OF 03 PRETORIA 001809

SIPDIS

E.O. 12958: N/A
TAGS: PREL PGOV PHUM SF EMIN EFIN SOCI
SUBJECT: THE ROYAL BAFOKENG: TRIBE, COMMUNITY, AND
CORPORATION

REF: 08 PRETORIA 1759

-------
Summary
-------

1. When Kgosi Leruo Molotlegi was crowned king of the Royal
Bafokeng Nation (RBN) cloaked in African leopardskin over a
Western business suit, his attire reflected his dual role as
both tribal chief and modern executive. The RBN he leads is
a traditional community, defined by cultural heritage and
blood ties, yet is also a $ 4.3 billion investment fund built
on platinum revenues. The king envisions the RBN as a world
model of "social capitalism," using portfolio profits to
underwrite the Bafokeng's socio-economic development. In
pursuing this vision the RBN navigates delicate relationships
with national and local government authorities. Above all,
the king depends on the precarious support of his
constituents for long-term developmental strategies beyond
the grasp of impoverished members who would more easily
understand direct payouts. End Summary.

------------------------------------
Traditional Tribe, in the Modern Era
------------------------------------

2. On September 1, RBN planning executive Dr. Susan Cook
gave a short talk on the Bafokeng's contemporary challenges.
(An American citizen, Professor Cook was once a Peace Corps
volunteer in Botswana, before pursuing an academic career in
linguistic anthropology at Yale, Brown, and U. Pretoria. She
joined RBN in 2008.) The RBN comprises about 300,000
members, on communal lands of roughly 400 square miles at
Phokeng, North West Province, where the tribe settled circa
1550. One of 750 such traditional communities remaining in
South Africa today, the RBN is led by a hereditary "kgosi"
(chief or king). The kgosi operates within the framework of
the national state (with certain protections specified in the
1994 Constitution), and RBN is neither autonomous nor
secessionist. The current kgosi, Leruo Molotlegi, is the
Nation's 36th king, crowned post-apartheid, 41 years old, a
professional architect and a hobby pilot. While public
debate on tribal affairs commonly dwells on conflicts between
customs and modernity (reftel), Cook presented RBN as an
"anomaly" of progressive management (wwww.bafokeng.com)
working to bridge such divides.

----------------------------------------
$4.3 Billion, Land to Platinum to Shares
----------------------------------------

3. The Bafokeng stand out among peer tribes for their
exceptional land and mineral wealth, deftly defended.
Beginning in 1868, the kgosi showed the foresight to purchase
tribal properties formally, as protection against Boer
incursions. Funds for land acquisition were raised by
sending male tribe members to work in diamond mines.
Platinum was discovered in Bafokeng territory in 1924, and a
1953 court ruling confirmed the RBN's ownership of
sub-surface mineral rights. Despite protracted wrangling
over those rights with the apartheid regime and with mine
operator Impala Platinum, the community has earned a steady
stream of platinum royalties since the 1960's. The RBN's
string of court victories, most recently in 1999 against
Impala, has earned it the nickname "tribe of lawyers."

4. Today, according to Cook, 85 percent of RBN income is
still from Impala dividends, although diversification from
platinum is its goal for future sustainability. In 2006, the
RBN converted its Impala royalties to equity as a tax shield,
since dividends are not taxed in South Africa. Non-platinum
Qsince dividends are not taxed in South Africa. Non-platinum
income is from other holdings like oil and gas, a Vodacom
stake, and interest on a cash balance of 5 billion rand ($650
million). Investment arm RB Holdings (RBH) manages RBN
assets, grown from 8.8 billion rand in 2005 to 44.5 billion
before the 2008 market crash, fallen to 22 billion at
year-end 2008, and now valued at 33 billion rand ($4.3
billion).

---------------------------------
RBN Vision of "Social Capitalism"
---------------------------------

5. Dr. Cook's talk focused on the RBN business model,
similar to a sovereign wealth fund in being group-owned by
all members of the Nation, with earnings channeled back to

PRETORIA 00001809 002 OF 003

the socio-economic development of the Bafokeng people. Under
the heading of "The Business of Being Bafokeng: the
Corporatization of a Tribal Authority in South Africa," she
explained how RBH ("the earn") and RBN ("the spend") are
partners, each dependent on the other's performance for its
own continued operation. On the spend side, the RBN's
subsidiaries invest in infrastructure, health, and social
services; education, skills development, culture, and arts;
sports teams and stadia; and entrepreneurship and job
creation. These benefits buy future support for RBH
financial management. Kgosi Molotlegi's vision, says Cook,
is for the RBN to be a leading exemplar of "social
capitalism" using free market mechanisms to benefit the
common good. Cook noted that RBN is active in liaison and
outreach work with other communities.

--------------------------
Balancing Act with the SAG
--------------------------

6. RBN walks a delicate line with the SAG -- enjoying
tax-free status while maximizing its income, and maintaining
its own tribal authority structures alongside those of the
municipality. The South African Revenue Service (SARS) has
long sought to convert RBN to a tax-liable corporate status
on grounds that RBH is a profit-seeking enterprise, but the
"tribe of lawyers" has prevailed as a nonprofit arguing that
it uses those profits to fulfill many social welfare
functions of the state, which does not tax itself. Relations
with the local Rustenberg government are a "tricky balance,"
says Cook, of the municipality's political power against the
RBN's economic muscle and social sway. Although fully under
state authority, the RBN has executive, legislative, and
judicial branches of tribal governance structures which exert
significant influence over its people. Relations can get
competitive, as during the 2009 Confederations Cup when
Rustenberg and Royal Bafokeng vied for branding primacy as
host city versus host stadium. (Cook: "We won that one.")
Privately to poloff, Cook commented that RBN was aiming to
install Bafokeng members in municipal councils, to achieve
better coordination between tribe and city.

-------------------------------------
Payouts Now, vs. Investment for Later
-------------------------------------

7. Realizing the kgosi's future vision for the Bafokeng
depends on the precarious endorsement of community members,
many who are desperately poor and wanting the RBN to pay its
members direct cash benefits. Allocation of community assets
is a topic of constant dispute, according to Cook, with many
members advocating for a simple sharing-out of RBN incomes
rather than investment in long-horizon development. Cook
contrasts the RBN approach with that of some Native American
tribes in the U.S., who distribute revenues in monthly
payouts. The RBN investment attitude is instead one of
long-term capacity and infrastructure building, business
development, and sustainable income creation to offset the
falloff in platinum reserves forecast in 50 years. With
average monthly income estimated at only 400-800 rand
($50-100) for families of four, however, and with most
investments being at a communal level (e.g. schools, roads,
sewers), the case for a developmental rather than
distributive approach is perpetually a difficult one to make.

------------------------------------------
On the People's Behalf (In Spite of Them?)
QOn the People's Behalf (In Spite of Them?)
------------------------------------------

8. Kgosi Molotlegi's leadership dilemma is that of acting
for the common good of future generations of his people, even
when his plans are beyond the grasp of most of his
constituents. For example, his plans specifically address
the RBN's carbon footprint, when few members have even heard
the term. With no understanding of commodity prices, capital
markets, or notions of long-term sustainability, the
community has difficulty comprehending fluctuations in the
value of its assets. Growth in the RBH portfolio had been
seen by the community as a blessing from heaven, yet Cook
described how post-crash losses were perceived "as if the
kgosi had stashed the money away in a suitcase." The result
is an extreme risk aversion. About 100 members conducted a
protest march on July 8, advocating that the kgosi withdraw
from financial affairs and confine himself to conventional
tribal issues. As an American and a female -- an outsider
twice over -- Dr. Cook is herself a subject of controversy,

PRETORIA 00001809 003 OF 003

in the inevitable debate over who may have a say in the
Nation's affairs. Cook says the kgosi's response in that
debate is characteristically broad-minded, inclusive of
anyone who works for the betterment of the Bafokeng.

GIPS

© Scoop Media