tag:theconversation.com,2011:/id/topics/guptagate-40969/articlesGuptagate – The Conversation2017-09-19T17:57:29Ztag:theconversation.com,2011:article/842792017-09-19T17:57:29Z2017-09-19T17:57:29ZWhat KPMG’s Gupta imbroglio says about corruption in South Africa<figure><img src="https://images.theconversation.com/files/186581/original/file-20170919-25319-1uqvawo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>As far as corporate accountability goes, the recent announcement that the CEO and seven senior executives at auditing and consultancy firm KMPG in South Africa <a href="http://www.fin24.com/Companies/Financial-Services/kpmg-sa-ceo-7-others-quit-on-guptaleaks-fallout-20170915">have resigned</a> is a welcome development.</p>
<p>By resigning, the KPMG executives reinforced the principle of executive responsibility. This is a matter not taken seriously in South African culture, particularly when it comes to the public sector. The usual pattern when misdemeanours are uncovered is for government ministers and other senior executives to blame their staff – or someone else – when things go wrong. </p>
<p>At this level the action of the KPMG executives is to be respected. The hope must be that this behaviour becomes an example for others.</p>
<p>KPMG executives have set a new South African benchmark: executives assuming responsibility for wrongdoing in their organisations. South Africans should thank the firm for setting a new standard with this decisive action. Its executives have taken oversight responsibility for the action of others.</p>
<p>The role that companies such as KPMG plays is particularly crucial because auditor firms and consultancies are meant to hold companies and state entities to account by ensuring transparency and honesty. The fact that a firm of KPMG’s standing should be embroiled in a matter as murky as compiling false reports to serve the political ends of particular politicians highlights the degree of corruption that has taken hold in South Africa.</p>
<p>In light of this, are KPMG’s actions enough? I believe not. To pull South Africa back from the brink, the auditing firm should opt for full disclosure of all its involvement with the Gupta family as well as the companies they own. This should, inter alia, include all working papers, correspondence and audit findings. This would allow public scrutiny of the work it claims to have done under the banner of professionalism and provide the opportunity for a deeper understanding of the Gupta network. Nothing short of this will clear KPMG’s name. </p>
<h2>From state capture to country capture</h2>
<p>There is no doubt that KPMG’s report on a rogue unit completed for the South African Revenue Service has <a href="https://www.iol.co.za/news/politics/kpmg-report-on-rogue-unit-has-tarnished-sars-future-sa-11241403">damaged South Africa’s image</a>. But it has done more than that and raises the question whether South Africa suffers only state capture, or whether the rot is growing into economic capture of the whole country, what I term “country capture”.</p>
<p>The basis for asking this question is that the South African economy – and as a result its citizens – are paying a heavy cost for the mismanagement of the country’s resources. This has been through a combination of bad and neglectful management and out-and-out corruption. All this for the account of South African taxpayers.</p>
<p>South Africa’s fiscal position is precarious, with a revenue shortfall of more than <a href="https://www.businesslive.co.za/bd/economy/2017-08-21-downgrade-alarm-as-revenue-shortfall-could-hit-r50bn/">R50 billion</a> expected in the fiscal year to 31 March 2018. This growing shortfall is driven by subdued economic performance and will continue until the domestic economic growth recovers.</p>
<p>The shortfall is directly linked to low economic growth and recessionary conditions. These in turn have been caused by state capture. The private sector is reluctant to invest in the midst of corruption. This means that there is no new economic activity being started, a particularly bad situation given that industries such as mining are shrinking. This week Implats <a href="http://www.fin24.com/Companies/Mining/">announced</a> it was in negotiations with unions to lay off 2 500 workers. <a href="https://theconversation.com/the-lesser-known-and-scarier-facts-about-unemployment-in-south-africa-83055">Unemployment</a> is already at 27.7%.</p>
<p>Individual South African taxpayers are therefore being forced to bail out the government as it faces fiscal difficulties, placing the country on the slippery slope of country capture. This is reflected in the fact that government’s final consumption <a href="https://data.worldbank.org/indicator/NE.CON.GOVT.ZS?locations=ZA">expenditure</a> as percentage of GDP currently exceeds 20%. </p>
<h2>What next?</h2>
<p>Having ended up in this precarious position, it’s necessary to consider the way forward for KPMG and for South Africa. </p>
<p>KPMG clearly wants to save itself as a company and South Africa wants to rid itself of state/country capture. In redeeming itself, the firm can render a great service to South Africa in the quest to break the stranglehold. KPMG should disclose all dealings, findings, work papers, interactions and the like with the Gupta family businesses. This would achieve two objectives.</p>
<p>Firstly, it would show who is implicated and who is not. KPMG stated that there was no wrongdoing on its side in <a href="https://www.timeslive.co.za/news/south-africa/2017-09-14-kpmg-denies-any-dodgy-dealings-in-controversial-gupta-coal-deal/">audits it did on companies owned by the Guptas</a>. But this can only be settled through full disclosure.</p>
<p>Secondly, such a disclosure would help to reveal the full scope of state/country capture in South Africa. </p>
<p>Naturally KPMG’s dealings with the Gupta companies and Gupta family are subject to client confidentiality agreements. KPMG should therefore inform the Gupta family of its intention to publish within seven days. If the Guptas object in writing KPMG should approach the courts with a request to issue a clarification order to authorise disclosure.</p>
<p>This is the only way in which KPMG can salvage what’s left of its reputation in South Africa. KPMG should stand for: “Keep Pushing Mighty Guptas”.</p>
<p>At the same time South Africans would be able to use the disclosures as the basis for beginning to understand the full extent of state/country capture and the remedial steps necessary to turn this around.</p>
<p>Here is a small opportunity to make progress towards some light at the end of a very long and dark tunnel. The opportunity rests in the hands of KPMG. South Africa waits.</p><img src="https://counter.theconversation.com/content/84279/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jannie Rossouw is a C3 NRF-rated researcher and receives grant funding from the NRF. </span></em></p>KPMG South Africa executives have set a new benchmark for the country assuming responsibility for wrongdoing in their organisation.Jannie Rossouw, Head of School of Economic & Business Sciences, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/822442017-08-08T23:17:18Z2017-08-08T23:17:18ZNo confidence vote: a victory for Zuma, but a defeat for the ANC<figure><img src="https://images.theconversation.com/files/181472/original/file-20170808-26039-17fxqav.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's President Jacob Zuma celebrates with his supporters after surviving a no-confidence motion in parliament</span> <span class="attribution"><span class="source">Reuters/Mike Hutchings</span></span></figcaption></figure><p>Jacob Zuma is a natural born political survivor. Yesterday South Africa’s president <a href="https://www.theguardian.com/world/2017/aug/08/jacob-zuma-survives-no-confidence-vote-south-african-president">overcame</a> an eighth no confidence vote, despite the mountain of evidence of corrupt conduct that has emerged in recent months. </p>
<p>But it may prove to be a Pyrrhic victory – for him and most certainly for his party, the African National Congress (ANC). <a href="https://www.businesslive.co.za/bd/national/2017-08-08-zuma-supporters-celebrate-his-win-outa-considers-legal-action/">“Hollow”</a> was the word that one opposition leader, Bantu Holomisa, used afterwards, while the Economic Freedom Fighter’s leader Julius Malema employed a well-known Africa proverb: “When you want to eat an elephant you do it bit by bit”. </p>
<p>Zuma’s political death is proving to be a protracted affair. There was an air of expectation yesterday that recent allegations of “state capture” – attested to by a welter of evidence from the so-called <a href="http://www.huffingtonpost.co.za/2017/06/01/the-new-gupta-emails-are-a-lot-heres-what-they-say-in-5-quick_a_22120706/">#guptaleaks</a> – would be enough to persuade a sufficient number of the members of the ruling ANC to support an opposition-sponsored no confidence vote. </p>
<p>In the event, after a fractious two-hour debate scarred by ugly banter across the floor of the National Assembly, the motion fell short of the 201 votes required to remove Zuma and his cabinet. But yesterday was remarkably different. On the previous seven occasions that the opposition have tabled no confidence votes since Zuma’s power began in 2009, the ANC has remained steadfast in its support for its beleaguered president. Yesterday’s vote was a watershed for the liberation movement that brought an end to apartheid in 1994: around 30 of the 223 ANC MPs who voted yesterday sided with the opposition.</p>
<p>As the ANC’s chief whip, Jackson Mthembu, ruefully observed afterwards, this is true pause for reflection for the ruling party. Never before has such a significant number of the parliamentary caucus rebelled and defied the party whip. </p>
<p>Zuma’s streetwise political skills are well-known. So too is his adeptness at using executive patronage to secure the loyalty of party members as has been made clear in the revelations <a href="http://www.bbc.com/news/world-africa-22513410">arising from his links to the Gupta family</a>. </p>
<h2>The secret ballot saga</h2>
<p>But the back story to the unprecedented rebellion within his own party was the method of voting as much as Zuma’s political skullduggery. For the first time, parliament was compelled to allow MPs <a href="https://www.businesslive.co.za/bd/national/2017-08-07-mbete-allows-secret-ballot/">to vote in secret</a>. This followed a <a href="http://www.702.co.za/articles/251722/bantu-holomisa-explains-parly-rules-on-secret-ballot">legal challenge</a> to the rules by Holomisa’s United Democratic Movement. </p>
<p>In its 22 June <a href="https://www.timeslive.co.za/politics/2017-06-22-read-in-full-concourt-ruling-on-secret-ballot/">judgment</a>, the Constitutional Court – an institutional beacon of excellence and integrity in the context of the “capture” of other state bodies – had held that the speaker of the National Assembly had the discretion to order a secret ballot in exceptional circumstances. </p>
<p>Since the ruling, a number of ANC MPs have gone public with testimony of intimidation and even <a href="http://ewn.co.za/2017/07/12/makhosi-khoza-s-daughter-receives-death-threats">death threats</a> in the case of Makhosi Khoza. In turn, the ANC shot itself in the foot when one region of Zuma’s home province, KwaZulu-Natal, demanded that disciplinary proceedings be brought against Khoza after she had called for Zuma to go. The intervention served to underline the need to depart from the generally established principle of open voting. </p>
<p>Accordingly, speaker Baleka Mbete had little legal choice but to opt for a secret ballot, even though it would encourage dissenting voices among the ranks of the ANC caucus. Politically, she had probably done the political mathematics and, as the national chairperson of the ANC, was confident that regardless of the shield that she said was necessary to protect ANC MPs so that they could vote with their conscience, the numbers would still work out in Zuma’s favour.</p>
<p>And so it proved: 177 MPs voted for the motion, and 198 against (with 9 abstentions). Since the opposition has 151 MPs, at least three of whom were absent through illness, it means that that at least 29 and possibly as many as 35 ANC MPs jumped ship. </p>
<h2>Win-win for the opposition</h2>
<p>But it was a win-win situation for the opposition. Afterwards, in the unseasonably balmy winter’s evening outside the parliament in Cape Town, one after another of the leaders of the opposition spoke cheerfully about the political future and of the health of South Africa’s democracy. </p>
<p>They may have lost the battle, but they feel confident that they will win the war. After all, it is clear that Zuma is now their greatest electoral asset, with <a href="http://www.biznews.com/leadership/2017/05/31/ipsos-poll-zuma-unpopular/">several polls </a>(including the respected <a href="https://www.dailymaverick.co.za/article/2016-05-19-afrobarometer-trio-of-polls-show-shifting-attitudes-but-voters-would-still-opt-for-anc/#.WYo8na17Gi4">Afrobarometer</a>), showing that across race and class, trust in Zuma has collapsed since he was returned to power for a second term in 2014. </p>
<p>Last year, the ANC suffered its first major electoral setbacks since the advent of democracy in 1994 when it <a href="https://theconversation.com/the-revolt-of-south-africas-metropoles-a-revolution-of-rising-expectations-64617">lost control</a> of three major city governments in Pretoria, Johannesburg and Port Elizabeth. Now, its political management skills appear to be in disarray as factionalism and deep, painful divisions dominate internal party politics. This is all unfolding in the run-up to what is likely to be a bloody five-yearly <a href="http://www.anc.org.za/content/venue-anc-54th-national-conference">national elective conference</a> in December, at which the ANC will elect a new President of the party to succeed Zuma. </p>
<p>That may or may not mark the start of a new era of renewal for the ANC. But Zuma’s term as President of the country is only due to end in 2019. A lot more damage could be done to the country’s economy and its prospects for growth. </p>
<p>The consequence of that, however, is that the ANC will face the prospect of losing its majority at the national polls for the first time since Nelson Mandela’s historic victory in 1994. </p>
<p>Yesterday may have been a victory for Zuma. But in the longer term it is likely to come to be seen as a major defeat for the ANC.</p><img src="https://counter.theconversation.com/content/82244/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Calland is a founding partner of the political consultancy, The Paternoster Group, serves as a member of the executive committee and advisory council of the Council for the Advancement of the South African Constitution, and is a member of the Board of the Open Democracy Advice Centre. </span></em></p>The political death of President Jacob Zuma is proving to be a protracted affair. Though he lives to fight another day, the ANC faces the prospect of losing its majority at the polls next year.Richard Calland, Associate Professor in Public Law, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/811122017-07-27T03:03:36Z2017-07-27T03:03:36ZPolitical irrationality is ruining South Africa, but can still be stopped<figure><img src="https://images.theconversation.com/files/179020/original/file-20170720-23992-83iazg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">President Jacob Zuma was slammed as being irrational for the recent cabinet reshuffle.</span> <span class="attribution"><span class="source">GCIS</span></span></figcaption></figure><p>In popular conceptions of what it means to be human is the universal notion that our species - <em>homo sapiens</em> - is essentially rational. It’s commonly believed that as rational beings, our thoughts and actions are informed by reason and logic that precludes the influence of emotions. On the other hand, irrationality is associated with defective reasoning, perverse thinking, being excessively emotional, or at worst, crazy.</p>
<p>Democracy, and by extension good governance, presupposes the capacity of political leadership to engage in reasoned debate, informed decision making and measured judgements. In the South African context, it’s assumed that this will all happen within the framework of the <a href="http://www.gov.za/documents/constitution-republic-south-africa-1996">Constitution</a>.</p>
<p>In this way democratic governance is premised on rationality. It appears to be unthinkable without it. But is this true?</p>
<p>No. And certainly not in South Africa now. Irrationality is the term frequently used to describe the country’s political landscape. This is clear from the coverage of the embattled government of President Jacob Zuma, and its leadership. </p>
<p>The growing anxiety and uncertainty in the country is aptly articulated by the <a href="https://www.dailymaverick.co.za/opinionista/2017-04-02-power-and-principle-has-zuma-checked-reason-and-rationality-at-the-door/">news headline</a>:</p>
<blockquote>
<p>Has Zuma checked reason and rationality at the door? </p>
</blockquote>
<p>In the unfolding drama of the far-reaching political scandal that threatens South Africa’s nascent democracy, known as “<a href="http://www.enca.com/south-africa/anc-calls-on-government-to-probe-gupta-email-allegations">Guptagate</a>”, political leadership has been repeatedly called out for its irrational behaviour. In response to Zuma’s most <a href="https://theconversation.com/stakes-for-south-africas-democracy-are-high-as-zuma-plunges-the-knife-75550">recent cabinet reshuffle</a> where he replaced finance minister Pravin Gordhan, Bonang Mohale, deputy chairperson of Business Leadership South Africa, <a href="http://www.capetalk.co.za/articles/251139/zuma-responsible-for-turmoil-recklessness-and-irrationality-blsa">said</a>: </p>
<blockquote>
<p>We have the President [Zuma] to thank for all this turmoil, irrationality and absolute recklessness… </p>
</blockquote>
<p>For its part, the opposition Democratic Alliance went to court to have the president’s decision set aside on the grounds that it was <a href="http://ewn.co.za/2017/06/02/zuma-granted-leave-to-appeal-ruling-to-hand-over-cabinet-reshuffle-records">irrational and unconstitutional</a>. </p>
<p>More recently the South African Reserve Bank, known for its conservative stance, openly accused the Public Protector of being reckless and irrational in her attempts to <a href="https://www.timeslive.co.za/news/south-africa/2017-06-27-reserve-bank-challenges-public-protector-report-in-court/">amend the Constitution</a>. Her recommendations in a <a href="https://www.dailymaverick.co.za/article/2017-07-06-hands-off-sarb-public-protector-meddling-a-great-threat-to-an-economy-crippled-by-serious-problems/">report</a> on a bank bailout, has been widely viewed as beyond the mandate of her office and a threat to the stability of the economy.</p>
<p>The use of the word “irrational” in South Africa’s political debates begs interrogation. Increasing accounts of political irrationality naturally raise concerns about the effectiveness of democratic governance – and its legitimacy.</p>
<h2>Dispelling the ‘myth’ of rationality</h2>
<p>Irrationality as a ubiquitous descriptor of political machinations is not peculiar to South Africa. It is well documented across climes and cultures. US President Donald Trump immediately comes to mind. As a world leader he has elicited both censure and derision as grossly irresponsible and fundamentally <a href="http://www.chicagotribune.com/news/opinion/commentary/ct-donald-trump-hate-media-immigrants-20170501-story.html">irrational</a>.</p>
<p>The fact is humans are not rational by default. The <a href="http://danariely.com/2009/04/20/irrationality-is-the-real-invisible-hand/">“invisible hand”</a> that drives human behaviour is in fact, irrationality. Nobel laureate, psychologist <a href="http://bigthink.com/videos/daniel-kahneman-on-controling-irrational-tendencies">Daniel Kahneman</a> together with Amos Tversky and others have pioneered research in this field. </p>
<p>Wired by evolution, cognitive limits restrict how we select, compute, store and adapt to information. Research shows that we employ a range of heuristics (mental shortcuts) that lead to cognitive biases and distorted perceptions. Most of these we’re not even aware of. As behavioural economist <a href="https://www.amazon.de/Predictably-Irrational-Hidden-Forces-Decisions-ebook/dp/B002RI9QJE">Dan Ariely</a>, author of “Predictably Irrational: The Hidden Forces That Shape Our Decisions” asserts:</p>
<blockquote>
<p>Our irrational behaviours are neither random nor senseless – they are systematic.</p>
</blockquote>
<p>For example, humans have the tendency to select information (selection bias) that confirms preexisting beliefs (confirmation bias) while avoiding contradictory information that disturbs their preferred worldview. This <a href="https://theconversation.com/confirmation-bias-a-psychological-phenomenon-that-helps-explain-why-pundits-got-it-wrong-68781">well-researched bias</a> is at work when politicians choose to present skewed, biased evidence that makes them look credible with the public to achieve desired outcomes.</p>
<p>There’s also a self-interested bias where people are prone to distorted thinking because it benefits them in some way. <a href="http://rintintin.colorado.edu/%7Evancecd/phil3600/Huemer1.pdf">Rational irrationality</a> explains how:</p>
<blockquote>
<p>(people) choose - rationally - to adopt irrational beliefs because the costs of rational beliefs exceed their benefit. </p>
</blockquote>
<p>This goes some way in explaining the reckless actions of politicians like Zuma and Trump who devise irresponsible strategies in the interests of their “rational” endgame.</p>
<p><a href="http://www.cep.ucsb.edu/McDermott/papers/rationality2004.pdf">Neuroscience</a> shows that when it comes to decision making, humans are wired to favour emotions over intellect. This means emotions have an impact on our decisions in various ways. For example, in the face of deep uncertainty – a persistent feature of our age – unconscious emotions and perceptions render us prone to cognitive biases and errors.</p>
<p>This refutes the ideal of the stoic “rational man”, a description that persistently devalues women and castes them as the “weaker” sex. This stereotype – of women as emotionally volatile and incapable of rational thought – has served to exclude them from the corridors of power. </p>
<h2>Political irrationality has dire consequences</h2>
<p>Because irrationality is inherently human, it’s been a persistent part of politics throughout history. There’s substantial evidence that entrenched and unchecked irrationality has devastating consequences. This has happened when political leaders eschew reason and logic. In South Africa’s case this is clear from the country’s <a href="https://www.theguardian.com/world/2017/apr/04/south-africa-credit-rating-junk-status-sends-rand-tumbling">crippled economy</a> and rising <a href="https://www.dailymaverick.co.za/article/2017-05-23-op-ed-the-descent-of-jacob-zuma-in-31-steps-and-counting/">discontent</a>. </p>
<p>But this doesn’t mean that irrationality has to prevail. South African civil society and democratic institutions have come to the party. They are increasingly challenging the irrational, unconstitutional actions of the ANC-led government and its leadership. What’s patently evident is that a free, independent press, the rule of law as enshrined in the Constitution and an independent judiciary are the bulwarks of a democracy under assault.</p><img src="https://counter.theconversation.com/content/81112/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lyn Snodgrass does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Democracy and good governance require politicians to engage in reasoned debate, informed decision making and measured judgements. This presupposes rationality. Is this always true?Lyn Snodgrass, Associate Professor and Head of Department of Political and Conflict Studies, Nelson Mandela UniversityLicensed as Creative Commons – attribution, no derivatives.