South Africa

South Africa

Betrayal of the Promise: The Anatomy of State Capture

Betrayal of the Promise: The Anatomy of State Capture

South Africans have been bombarded with revelations of how the state has been hijacked to amass wealth for a connected power elite involving President Jacob Zuma and the Gupta family. An academic research partnership has consolidated all available information into a frightening compendium on state capture, mapping the deals, the key players and the modus operandi for commandeering control of state institutions and parastatals. Their report shows why it is necessary for a judicial inquiry and criminal prosecution for corruption, fraud, money laundering, racketeering and, possibly, treason. It also shows the danger of key enablers such as Zuma, Finance Minister Malusi Gigaba and Eskom CEO Brian Molefe remaining in their posts. By RANJENI MUNUSAMY. 

When President Jacob Zuma executed his most overt act of betrayal of the people and party who put him in power by firing Pravin Gordhan and Mcebisi Jonas as minister and deputy of finance, he probably did not foresee that this would turn an entire society against him. Opposition parties, the ANC’s alliance partners Cosatu and the South African Communist Party, civil society, business, veterans and stalwarts, religious leaders and now academics are standing up to oppose and expose the Zuma-Gupta contagion.

Last week, the South African Council of Churches (SACC) released a report of an Unburdening Panel comprising evidence of whistle-blowers who approached church leaders about their experiences of state capture. On Thursday, the State Capacity Research Project, a team of leading academics from four universities, released a 72-page report detailing what they call a “silent coup” by an organised criminal network.

Betrayal Of The Promise: How South Africa Is Being Stolen is a report that sought to respond to Gordhan’s challenge to “connect the dots” around all the allegations of state capture and why he and Jonas were fired.

“While corruption is widespread at all levels and is undermining development, state capture is a far greater, systemic threat. It is akin to a silent coup and must, therefore, be understood as a political project that is given a cover of legitimacy by the vision of radical economic transformation. The March 2017 Cabinet reshuffle was confirmation of this silent coup; it was the first Cabinet reshuffle that took place without the full prior support of the governing party.

“This moves the symbiotic relationship between the constitutional state and the shadow state that emerged after the African National Conference (ANC) Polokwane conference in 2007 into a new phase. The reappointment of Brian Molefe as Eskom’s chief executive officer (CEO) a few weeks later in defiance of the ANC confirms this trend,” the report states. 

Speaking at the launch of the report, one of the lead researchers, Professor Mark Swilling, said that by the time Zuma was elected as president, the Guptas had already established ties with him and his family. The report explains the evolution of the relationship to the point where the family now owns the president and has control over his decision-making.

“Their privileged access to Zuma after he was elected was a form of political capital that they successfully transformed into a vast and powerful network that effectively brokered the process of state capture and the repurposing of a range of state institutions. They were useful for Zuma because they were dependent on him, and they could, therefore, be trusted to manage the shadow state transactions that Zuma required. They were loyal to him, not to any ANC faction or established business interest. They were essentially brokers and fixers who could make things happen for the Zuma-centred power elite with maximum deniability and limited culpability.”

The pivotal point in the state capture project was the appointment of Malusi Gigaba as Minister of Public Enterprises, initiating the “repurposing” of State-Owned Enterprises (SOEs) as vehicles for looting.

“The appointment of Gigaba on 1 November 2010 as Minister of Public Enterprises marked the start of a systematic process of reconfiguring the boards of SOEs to ensure compliance, starting with his attempt to get little known DTI official and known Gupta associate Iqbal Sharma appointed as Transnet Board Chairperson in 2011 and the successful appointment of Brian Molefe as Transnet CEO in the same year.

“Throughout his tenure until 2014 as Minister of Public Enterprises, Gigaba was engaged in the restructuring of SOE boards. This, however, was only the first step in the repurposing of the SOEs. The second was to exploit the loophole in the Public Finance Management Act that made it possible to use the procurement procedures of SOEs to benefit selected contractors who had been sanctioned by the Gupta network,” states the report.

Gigaba features as one of the key players in the shadow state network to set up the system of command and control over how the resources are accessed, moved and distributed. The report breaks down the network as follows:

  • The controllers: These, also known as patrons of resources (e.g. Zuma and the Guptas), sit at the apex and are usually the strongmen directly responsible for predation and exploitation. Their function is to secure access and maintain control over resources. A patron or controller typically favours one group over another (or others), resulting in the exclusion of those out of favour and the inclusion of those within favour. This sets up a competitive set of nodes with the network around the patron or controller, which has the ultimate effect of rendering elites (the next layer down) unable to co-operate effectively as they fear being ousted by their partners, or falling out of favour with the patrons.
  • The elites: The elites (e.g. Ace Magashule, Faith Muthambi, Malusi Gigaba, Brian Molefe, Mosebenzi Zwane and Anoj Singh) are responsible for establishing and maintaining patronage networks, which facilitate the distribution of benefits.
  • The entrepreneurs: These are also known as brokers (e.g., Iqbal Sharma, Eric Wood, Salim Essa and Ashok Narayan). Broker networks consist of middlemen who facilitate the movement of funds, information and/or goods both domestically and across transnational networks, and make use of “recruitment networks, lending networks, remittance networks and smuggling networks” to do so.
  • The dealers: Groups that are able to move the money transnationally (e.g. the professional money laundering syndicates in Hong Kong, the United Arab Emirates and elsewhere)

The report warns that the March Cabinet reshuffle opened another phase of the state capture project.

“With the takeover of the National Treasury now made possible by the appointment of Malusi Gigaba as Minister of Finance, centralisation of rent seeking to consolidate the symbiosis between the constitutional and shadow state has moved into a new implementation phase. The increased confidence and brazenness of the Gupta networks on SOE boards and in senior management since the reshuffle confirms this.”

The report explains that Zuma tends to govern via a set of “kitchen cabinets”, comprising selected groups from different networks. Kitchen cabinets are small informal reference groups that are convened on an as-needed basis. They can also be shell structures that are activated when needed and have been known to be drawn from the state security establishment, Gupta networks, SOE sector, sub-groups of Cabinet ministers and deputy ministers, family networks, international networks (e.g. Angola, Russian intelligence), key black business groups, the ANC (in particular the Premier League and Magashule), and selected loyalists in the public service (usually loyal director-generals).

One of the project researchers, Professor Ivor Chipkin, said part of the process of state capture involved controlling and eliminating investigative capacity in the state through the removal of credible figures in the security establishment. The politicisation of the Hawks, for example, ensures that cases of corruption are not investigated.

The academics said radical economic transformation was being used as ideological cover for the power elite to pursue their personal interests and use the state as a personal resource.

The report expands on this: “Radical economic transformation has increasingly come to be a fig leaf for the enrichment of a small power-elite, as well as the means through which this group finances its political operations. In this context, the Zuma-centred power elite has weakened the institutional fabric of the state and undermined its formal, rational-legal infrastructure.” 

Another dot being connected is the nuclear deal, which the report states is one of Zuma’s top priorities. The nuclear deal is the ultimate “big and shiny” capital intensive project that would benefit the cohort of rent-seeking corrupt insiders.

“The Guptas bought their uranium mine because they assumed the nuclear deal would be done, and there is evidence that Russian intelligence has a presence in the Presidency to guide the process.

“The nuclear deal is also central to the consolidation of a new framework for radical economic transformation. If the nuclear deal is implemented, this will signify the final consolidation of Zuma’s rent-seeking system as the glue that binds together the constitutional and shadow states.”

The research team says it would require “bold action by the banking sector and the Reserve Bank to expose and shut down the financial mechanisms that the shadow state uses”.

“The closing of the Oakbay accounts was a brave step, but does not go far enough. The Gupta-Zuma networks have rapidly reconfigured and found ways to circumvent these restrictions. The signing of the FICA (Financial Intelligence Centre Act) amendment bill, for example, grants false comfort because implementation could be thwarted because of the fractured and weak nature of the law enforcement agencies.”

One of the ways the Guptas are seeking to continue doing business in the country even though their bank accounts have been closed is through their associates buying the Habib Bank. The research team says the purchase of the Habib Bank must be prevented by the regulators concerned.

“Furthermore, every effort must be made to protect the information technology systems of the Independent Electoral Commission (IEC) from being taken over by a Gupta-Zuma linked company. If this happens as some suggest may be the case, the ANC elections in December and the General Elections in 2019 have very little chance of being truly free and fair.”

A member of the research team, Professor Mzukisi Qobo, said the institutional decay indicates that Zuma is a grave security threat to constitutional democracy and the economic security of South Africans. He said the available evidence showed that laws have been broken, breaches of the Executive Ethics Act, and that there are clear conflicts of interest. Qobo said the “systematic acts of lawbreaking” make the case for why people like Eskom board chairperson Ben Ngubane and CEO Brian Molefe “should go to jail”. 

Swilling said the report was the first of several to be released by the research team over the coming months, including case studies on state capture. But like the many media exposés that informed the research, the Public Protector’s State of Capture report and the SACC’s Unburdening Panel report, the question to be asked is does all this information have any impact in stopping the contagion? Does it matter that there is an avalanche of evidence of the state being stripped and public resources being drained?

Where does it all lead?

The betrayal of our nation is deep. There are no easy answers on how to rescue the state when the president and some members of his executive collude with and benefit from a criminal network, when the ANC is in a state of self-imposed paralysis, and the institutions that should be protecting our constitutional democracy are instead protecting the shadow state.

Political sentiment is no doubt swinging against the power elite and the ANC. But in order to break the stranglehold of the power elite, there needs to be a major shift in where power is currently vested. To do that will take more than shock and outrage over state capture. DM

Photo: Minister of Home Affairs Malusi Gigaba and President Jacob Zuma unveil E- Home Affairs at Gallagher Convention Centre in Midrand, Gauteng Province. South Africa. 07/04/2016. Siyabulela Duda


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