South Africa

AGE OF ACCOUNTABILITY OP-ED

The Zondo Report has clearly fingered the enablers of State Capture — now it’s time for reparations

The Zondo Report has clearly fingered the enablers of State Capture — now it’s time for reparations
President Cyril Ramaphosa receives the fifth and final Zondo Commission report at the Union Buildings in Pretoria on 22 June 2022. (Photo: Gallo Images / Alet Pretorius)

Rebuilding South Africa’s governance institutions and reviving growth are prerequisites for the sustainability of our constitutional democratic order. And a national reparations campaign against all local and international businesses implicated in State Capture is needed.

Seldom do democratic governments institute full public investigations into their own complicity in maladministration, malfeasance, corruption and abuse of office while in power. Typically, such investigations are political tools by ruling parties to discredit their rivals.

In South Africa, however, former president Jacob Zuma was forced by a court order to institute the Zondo Commission back in August 2018 in what can only be construed as a landmark ruling for a country once celebrated as unique among emerging and established democracies.

The result of nearly four years of public judicial inquiry into South Africa’s “State Capture” was an authoritative 5,500-page report into the systematic looting of state resources on a scale unimaginable by most South Africans.

Most infuriating and disappointing was the fact that the State Capture scheme was led from the very heart of Cabinet, driven by a few ministers and executed by an army of bureaucrats who were “ANC deployees” in government departments and large state-owned enterprises such as Eskom, Transnet, Denel and South African Airways.

Grand-scale robbery

Ironically, these deployees were appointed into executive positions to supposedly further the ANC’s false abstraction of a National Democratic Revolution. In a clear act of betrayal, their shenanigans amounted to nothing less than daylight robbery on such a grand scale that its exposure by the Zondo Commission has left Africa’s oldest liberation movement in tatters.

Beyond the ANC, the Zondo Commission process has considerable ramifications for the legitimacy of political leaders across the board, public trust in them and people’s faith in the democratic process to bring about social change that positively impacts daily lived realities.

While the political impact of State Capture is currently a work in progress — the outcome of which few can predict with certainty — there are lacunas in public engagement around the findings of the report that can and must be highlighted and taken forward.

Chiefly, these relate to the economic, business and financial shenanigans of deals in the State Capture project that have been largely overshadowed by political noise.

Understandably, and due to their admittedly genial collaboration with former president Zuma, the Gupta family and their business enterprises have become synonymous with State Capture. While they certainly have much to account for, it would be a travesty of justice if the other business enterprises were not called to account.

Hidden in the political cacophony is an equally bruising fact: State Capture was facilitated by a number of local and international corporations including, but not limited to, global banks, major audit firms such as KPMG and PWC, global consulting firms such as McKinsey, Bain, the German IT company SAP, Japan’s Hitachi, the US’s General Electric, mining companies such as Glencore, a number of law firms and other business enterprises.

Dealing with these financial behemoths is, in my view, a national strategic imperative for at least two reasons. First and foremost, the SA business sector, broadly defined, is at present infected by the impact of State Capture and the role of the private sector.

Integrity reboot

Unless South Africa finds a solution for rebooting its macroeconomic integrity and investor confidence, no amount of political and ideological posturing has any chance of success. This is irrespective of the political party in charge of government. Dealing with the prerequisites of macroeconomic and fiscal sustainability is of a primary and urgent nature.

It would certainly be naïve to assume that the mere acknowledgement of malfeasance and expression of regret by Bain, SAP, McKinsey and others are sufficient to expunge the cancer cells of corruption and misconduct from the SA business sector and the global corporations active in the country.

While it is beyond the scope of this article to explore the details, it suffices to say that none of these culprits has taken legal actions against “bad apples” in their own stables.  Neither has business SA stopped doing business with these corrupting and corrupt entities. In effect, it has been business as usual.

The McKinseys and Bains of the world have gone so far as to “whitewash” their “mistakes” with the full support of private sector corporations in SA and the failure of public sector regulatory bodies to perform their duties.

A case in point is KPMG, which parted ways with its executives implicated in the Zondo Commission report by offering them “golden handshakes”. None accounted for their criminal conduct, nor did KPMG (as a global corporation) offer any compensation for its scandalous corporate misconduct. A notional donation of a few million rands by KPMG was more of an insult to the injury caused.

The SA audit regulatory body also did close to nothing. Likewise, Bain SA’s managing partner’s apology to the country — published recently in a national newspaper — typified the crocodile tears of colonial apologias. It is hubris disguised as golden handshakes.

Similarly, McKinsey used every trick in the book to cover up the role it played in bringing Eskom to its knees. In effect, these businesses violated every code of good corporate governance by engaging in illegal and unethical conduct — with impunity.

Democracy at risk

Second, and related to the first, is the emerging reality that SA’s constitutional democracy is at serious risk due to the consequences of State Capture. What can only be described as grand larceny through the looting of public resources and hollowing out of the state has set the country back by at least a generation.

Symptomatic of this regression is the decline in South Africa’s sovereign credit rating since 2012 to below investment grade (ie junk status), the sharp fall in national investment levels, the collapse of GDP growth and the deterioration of the national fiscal position to that of a “fragile state”.

The combined impact is heightened sociopolitical tensions and growing fiscal stress.


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Without ignoring the financial crises globally and other exogenous factors during this period, the fact of the matter is that the parlous state of the country’s fiscal and governance institutions has left SA unable to unlock its growth potential and has, therefore, robbed it of at least a de jure chance of dealing with the triple challenges of poverty, unemployment and inequality.

The country is now wrestling with a vicious circle of low growth, sagging business and citizen confidence, the bottoming out of human skills, faltering development prospects, further impoverishment and the spectre of hopelessness.

This is at a time when the country still has considerable growth potential and above average natural resources and investment opportunities to turn the tide and improve the lived realities of the majority of the population.

However, in economics and the social dynamics of life, positive turnarounds are seldom, if ever, automatic. They require intentional and appropriate actions.

Reparations

To this end, one key and critical strategic intervention is the immediate implementation of an international reparations case against all locally and internationally implicated business entities.

Such a reparations project has to be structured with a view to achieving a fair and transparent outcome so as to deal with three interrelated outputs:

  1.     Disclose the nature of their involvement and the full extent of public resources looted. This will provide necessary information to estimate the role each player had in the material damage to the overall macroeconomic-fiscal position. In turn, this measure will be a key indicator for the scale of reparations needed to compensate the country and its citizens for damages suffered;
  2.     Disclose the details of political and public sector collaborators, partners and co-criminals; and
  3.   Draft a new Ethical Charter for business codes of conduct to be signed by each implicated entity, and others, so as to avoid any future repetition of such acts of explicit or implicit malfeasance. Unlike the King Codes of Corporate Governance, such an Ethical Charter would have punitive financial and non-financial penalties for firms and their implicated executives and boards of directors. It is apt to note that South Africa is not the only developing country in which some of these international companies have enabled corruption with impunity to the extent that it is seen as their business model. However, without any financial consequences and accountability for their boards, there is no incentive for them to change their behaviours at all.

It is stating the obvious that rebuilding SA’s governance institutions and reviving growth in an inclusive manner are prerequisites for the sustainability of the country’s constitutional democratic order. Effectively tackling the triple evils facing the country is not possible without the active and sustained participation of the business sector.

But a corrupt and ethically compromised business sector cannot be a reliable partner in turning around the grave circumstances we face in South Africa. Not only do the government and governance institutions need to regain the trust of citizens, but the business sector, especially corporate entities, requires the confidence of the nation as good corporate citizens.

National campaign

I want to suggest that a national reparations campaign is now needed to establish credible and capable structures to give effect to the technical and sociopolitical requirements of reparations calculations. The Zondo Commission has already generated the vast body of data needed for such an ambitious endeavour.

But the oversight of such a reparations campaign and its technical calculations need to be entrusted to nonpartisan personalities with established credentials and unquestionable integrity, supported by the government and the judiciary.

The overarching objective of the initiative has to be grounded in the restoration of social justice and salvaging the country’s fragile democratic order, not (as is currently the case) establishing new evidence for embarrassing one political party over another.

As a corollary, a tangible improvement in the lives of the poor and the marginalised in the short to medium term is the ultimate goal.

To this end, such a campaign has to be a short-term project, not a protracted process of legal argumentations, international diplomatic or ideological brinkmanship. It has to be apolitical.

Fortunately, the culprits have mostly acknowledged their complicity in crimes of malfeasance, the promotion of corruption and even what Ismail Momoniat, acting director-general of the National Treasury, regards as “treason” in the case of Bain.

The noble task before us falls on the calculation of fair and meaningful reparations. DM

Dr Iraj Abedian is Chief Economist at Pan-African Investment & Research Services.

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Comments - Please in order to comment.

  • Cedric de Beer says:

    A sound case for reparations: There are two important “next steps”.
    1. A decision as to what the funds raised should be used for in order to benefit those who have suffered most from the economic damage. many people would be very sceptical of just channelling those funds back into the fiscus for the predators to get their hands on it
    2. Apartheid reparations. State capture reparations are the low hanging fruit and should be plucked first. Then the process and structures could be put to good use to gather up some hundreds of billions of rands in reparations for corporate and personal fortunes created on the back of, inequalities imposed by the Apartheid state, and sometimes in direct collaboration. Again the important question arises as to how to make best use of such reparations to benefit those who suffered the worst consequences.

    • jeyezed says:

      Conflating apartheid with state capture is a false equivalence.

      • Cedric de Beer says:

        Firstly I agree and have frequently said that it is incorrect to compare state capture to Apartheid. The one is a deeply corrupt criminal enterprise within the state and the private sector, and the other is a crime against humanity.
        Secondly recognising that distinction does not mean that business that built fortunes on the back of the crime against humanity should not be required to make reparations.

      • Hermann Funk says:

        Why??/ Both allowed enrichment at the expense of the underprivileged.

  • Jeremy Stephenson says:

    I see no evidence, with the exception of McKinsey, that the “culprits have mostly acknowledged their complicity”. The idea that a swift campaign could lead to juicy reparations doesn’t take into account the efforts that multi national corporations will go to to defend their global reputations.

    In any case, important though the money is, it’s not, in my opinion, the actual point. State Capture occurred through the widespread failure of parliamentary portfolio and oversight committees, which are the engines of government, to perform their mandated function of control. This is the scene of the crime, where people betrayed their oaths of office, turned the transformational imperative into a sick joke, and sold the nation’s trust for a few trinkets. And you just know it’s still happening today.

  • jeyezed says:

    Before we get all excited about claiming damages from these commercial entities, we first need to show that we understand what we are talking about by hitting hard the political perpetrators of State Capture, without whom the commercial entities would never have had any opportunity to do what they did. Remember, businesses’ main job is to generate profit. If the political powers that be create mechanisms whereby this can be achieved, why should businesses quibble? The writer has a point in attacking the ethical basis of the behaviour of the “financial behemoths” that he refers to, but weren’t they actually just doing what they do? Only when the perpetrators are behind bars can there be any serious action against the organisations the writer lists.

  • Christopher Lang says:

    TREASON
    Noun: treason
    A crime that undermines the offender’s government
    = high treason, lese majesty

    Disloyalty by virtue of subversive behaviour
    = subversiveness, traitorousness

    An act of deliberate betrayal
    = betrayal, perfidy, treachery.

    This is a word we never see mentioned or used to describein all the duplicitous and criminal behaviour of our elected government “cadres”!
    The blame is placed on the companies and/or organisations that benefit from the crimes, which is perfectly right.
    But, what of the civil servants who mastermind and
    perpetrate these acts of treason? In years past such a person would face a death penalty, because quite simply, the nefarious actions of a few rogues effects hundreds of thousands if not millions of normal obedient citizens lives adversely! How does our society put up with this miscarriage of justice?!

  • Scorched Earth says:

    National reparations for the devastation caused by these financial behemoths is a necessary imperative. Trite apologies and paying back the ill-gotten gains is not enough for the devastation these organisations and their officials caused the people of South Africa. Ismail Momoniat, acting director-general of the National Treasury, is correct to call it “treason” in the case of Bain, but they were not alone.
    Lest we forget that when JZ immediately recalled Minister Gordhan from an investor roadshow, the stock market collapsed by 1,7%, government bonds by 3%. Again when JZ axed Minister Nhlanhla Nene for not cooperating and was replaced by Des van Rooyen, the JSE market capitalisation The market capitalisation of the JSE went down 1.49 percent to a loss of R169.6 billion. The financial horror of 3 Finance Ministers in 5 days made many South Africans who holds their long-term savings in retirement and long-term insurance funds, poorer by R378 billion. Compounding this direct loss, the cost of higher lending rates due to the sovereign ratings which will continue for the foreseeable future. If the German Government and German business that benefited from the atrocities at the Nazi Concentration Camps and made good to some degree to the Jewish victims, these businesses must be held to account and make adequate reparations starting with the R378 billion JSE Market Capitalisation Losses, higher lending rates, etc. through the misdeeds of the State Capture Enablers

  • Gordon Bentley says:

    I strongly suggest that Apartheid Crimes Reparations go back too many years and will be difficult to prove or to gather meaningful evidence. Many of the perpertrators are either dead or dying at this stage and will certainly have concealed their bad deeds carefully by now.
    I agree with Dr Iraj Abedian that a Reparations Hearing, with appropriate Penalties to those found guilty and with Reparations made as aresult of these processes is the way to go. Similar to our historical Truth and Reconciliation Hearings, for which South Africa was lauded and given alot of credibility. We can then put this whole unsavoury State Capture episode behaind us and continue building a South Africa which many of us can only dream about at this stage.

    • Cedric de Beer says:

      This is actually an interesting discussion. I am not talking about individuals “doing bad deed.” although of course there those – colluding with the state in sanctions busting, getting rich of forced prison labour or implementing the systems that enforced Apartheid. These would not be difficult to demonstrate.
      There are discussions about reparations for slavery in the United Sates and for colonialism which destroyed local cultures and economies and committed acts of genocide around the world.
      The mining and allied industries were built on the back of land seizures, forced migration, inhuman hostel conditions union busting, and near slave labour; wine farmers paid their workers in alcohol, and many other egregious practices were integral to the “economic success” of the Apartheid economy. There has never been a TRC type accounting for this – and some form of reparations to make good the economic damage suffered is a reasonable thing to put on the table.
      Unlike one of the other commentators on this page, I do not believe that business is there to exploit any opportunity to make a profit and therefore its fine to make money off state corruption or a crime against humanity.

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