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State capture in South Africa: how the rot set in and how the project was rumbled

A wearing a jacket an open neck shirt laughs at a press conference while another, to his left, has his right hand on his chest to make a point.
Ajay Gupta, left, and Atul Gupta, the masterminds behind state capture in South Africa. Muntu Vilakazi/City Press

It seems the time of reckoning for the massive corruption that has hobbled South Africa’s economy is nigh. Two parts of the three-part report by the judicial commission investigating allegations of state capture under former President Jacob Zuma have now been published. The third is due at the end of February.

“State capture” has become the South African term for what is elsewhere called kleptocracy.

Here I reflect on Part 2 of the report.

Ideally, a review of the complex Zondo Commission Report Part 2 requires a team of three co-authors: a chartered accountant, a political scientist, and a jurist specialising in company law. This review cannot do justice to a summary of a report when part 2 alone exceeds 640 pages. Instead, I will focus on some thoughts and analysis.

These opening observations are drawn from my knowledge of politics, informed by what’s in the report.

Firstly, the Gupta family – friends of former President Jacob Zuma’s who, the commission says, orchestrated massive corruption and the capture of the South African state with Zuma’s help – were rumbled by events that caught them off-guard.

They had not, for example, anticipated that their actions in South Africa would result in a media uproar and political backlash. The media’s role in the ultimate demise is recognised in this latest report. The commission praises Shadow World Investigation (Zondo,pp.19, 229); AmaBhungane (Zondo, p.260); Mail and Guardian ; and Open Secrets, (Zondo,p.261); for investigative exposés of state capture.

These exposes eventually saw the Gupta’s fleeing to the United Arab Emirates in 2016.

They also never anticipated that South African banks would close down all their corporate and personal accounts. This ultimately pressured the South African branch of India’s Bank of Baroda – their original home base – to reluctantly follow suit.

These developments indicate that South Africa’s institutional safeguards, civil society NGOs, and democratic culture are more robust than those of some other countries.

The Guptas were also rumbled because they failed to take note of the fact that the most successful parasites never harm their hosts. That’s so they enjoy a lifelong nurturing host environment. The scale of their rapaciousness meant that, within just a few years, the institutions they leeched were in a state of collapse. These included Transnet, the transport parastatal, South African Airways, the national carrier, Eskom, the power utility, Denel, the state defence, security and related technology company.

Aspects of the report show how this happened.

Zondo Commission report part 2

The specifics of this part of the Zondo report are that procurement and related crimes cost Transnet, R41 billion (equivalent to US$2,7 billion), which amounts to 72% of all contracts tainted by corruption (p.19).

These losses mounted following successive decisions that were driven by avarice and corruption. One example was the decision over a new chief executive for Transnet. When Barbara Hogan, then a cabinet minister in charge of the state transport company, resisted Zuma’s demands on who to appoint as chief executives, he fired her from the cabinet, and sought to redeploy her as ambassador to Finland.

A man wearing a tie and jacket holds a COVID-19 mask he is preparing to put on.
Former Transnet CEO Siyabonga Gama testified at the State Capture Inquiry in April 2021. Photo: Luba Lesolle/Gallo Images via Getty Images

The commission found that the man Zuma preferred, Siyabonga Gama, should be prosecuted for transactions involving the Guptas, amounting to billions.

There were other attempts at resistance too. Take the actions of Denel CEO Riaz Saloojee. He refused to take bribes. But his efforts came to nought. The Guptas, through Zuma’s new appointment Lynn Brown to the portfolio of running state enterprises, simply suspended him and appointed a new board of directors that was more pliable to the Guptas.

Beyond detailing how appointments were made, the report focuses a great deal of analysis about highly technical banking techniques and financial transactions. These show how in every case the lowest bid tender, or the most cost-effective solution, was rejected, so as to provide openings for middlemen, Gupta-controlled companies, to profit.

The fight back

In the immortal words of one of Nigeria’s heroes against corruption, its former finance minister and current World Trade Organisation president, Ngozi Okonjo-Iweala:

when you fight corruption, corruption fights back.

Corruption is indeed fighting back.

As a result, it has become one major dimension of the factionalism now wracking the ruling African National Congress (ANC). It is evidenced by pseudo-populist attacks on “white monopoly capital”, the “Stellenbosch mafia”, and on President Cyril Ramaphosa.

In US slang, this is not grassroots rhetoric, but an Astroturf campaign, referring to a campaign pretending to be populist, but actually waged by a business clique of tenderers and their political clients.

They richly deserve the South African Communist Party witticism denouncing “tenderpreneurs” – ‘businesspeople’ who enrich themselves through government tenders, often dubiously.

Recommendations

The Zondo Commission makes useful recommendations.

One is that in future, Cabinet ministers should not have unlimited power to appoint their cronies as chairs or board members to parastatals. Instead, all candidates for board members of state-owned enterprises should be subject to the background checks and procedures akin to those of the Judicial Service Commission, which advises the government on any matters relating to the judiciary or administration of justice and adjudicates complaints brought against judges.

In turn the board members, not the minister, should elect their chairs and CEOs.

Zondo also points out that it is not yet a crime in itself to abuse public power for a politician’s private interest. This should be criminalised across the board, from the President down to the lowest official.

Finally, the success or failure of the Zondo Commission Report will be what consequences will result from it for the criminals and corrupt, such as prosecutions, and reclaiming illegal and illicit profits from tenderers.

South Africa has witnessed a decade of unimplemented recommendations of commission reports, from the Khayelitsha Commission, appointed in December 2012 to investigate police inefficiency, to the Farlam Commission into the 2012 Marikana massacre.

It’s not known if the Zondo Commission reports will fare any better.

What’s clear, however, is that the number of successful prosecutions, and the amount of plundered funds retrieved, will be a key deterrence to future instances of corruption. Crucial here will be to what extent Treasury will increase the budget allotted to the National Prosecution Authority, the Special Investigative Unit, and the Assets Forfeiture Unit.

The country now awaits the third part of the Zondo Commission report, due at the end of February.

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