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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 
 
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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