DM168

EXPLAINER

What happens to the money lost to corruption after the state claws it back?

What happens to the money lost to corruption after the state claws it back?

Recent news that Eskom had recovered the R30-million it unlawfully paid out to its former CEO, Brian Molefe, provided a glimmer of light amid the darkness. How does the state generally go about recovering money lost to corruption – and what happens to that money once recouped?

Are you telling me that the government sometimes gets its stolen money back?

Indeed it does! This is the major purpose of the Asset Forfeiture Unit (AFU), but money is also recovered through the Special Investigating Unit (SIU) and through litigation instituted by individual government departments.

How does it work?

Let’s start with the AFU, which gets money back through a legal instrument called the Prevention of Organised Crime Act (Poca) – as explained to DM168, in more technical language, by the NPA’s Bulelwa Makeke.

Imagine that Mr X has just been found guilty by a court of stealing money from the government. Once he has been convicted, the AFU can apply to the court to determine exactly how much money they should demand back from Mr X. The court decides on a figure after an investigation, and grants the AFU the power to confiscate that amount from Mr X.

In order to make sure that Mr X doesn’t suddenly get rid of all his luxury goods and houses, and empty his bank accounts, the court can grant a “restraint” – meaning that none of that stuff can be touched until the money has been paid back.

Is a “restraint” the same as a “freezing order”?

Yes. If you read that Mr X’s assets have been frozen, that’s what that means. Yet another term for the same thing: “preservation order”.

Then there’s also a way that the AFU can grab Mr X’s loot without his having been found guilty by a court. This, Makeke explained, is called “non-conviction-based forfeiture”, or “civil forfeiture”, and it specifically targets Mr X’s assets. There has to be a direct link between Mr X’s criminality and the assets, however – so the AFU must be able to prove that Mr X used the money he stole from the government to buy the house or car they want to nab.

The SIU recoups money for the state through civil litigation. In other words, it would in effect sue Mr X for the money he pilfered.

Can you give me a real example?

Here’s one from August 2022. The SIU announced that it had obtained a preservation order “to freeze five luxury properties in gated estates, and pension benefits valued at approximately R1.8-million, linked to Transnet executives and their spouses”. That freezing order prohibited four named people from “selling, leasing, donating or transferring title [of] their luxury properties in Rosebank and Dainfern”.

In translation, the SIU presented evidence to the court to show that these houses were bought with plundered Transnet money. When the civil legal proceedings wrap up, those houses will be sold and the money returned to the state, where it forms part of a pot known as “recoveries”.

How big can the freezing orders get?

Enormous. In March 2022, the AFU obtained a freezing order valued at R2.4-billion related to the Optimum coal mine and its assets, bought with the proceeds of crime by the Gupta-owned Tegeta company. The AFU’s Priya Biseswar later wrote in Daily Maverick that this was the largest freezing order in the AFU’s history, and that its value was expected to rise to over R8-billion when the value of the mine itself was thrown in.


Visit Daily Maverick’s home page for more news, analysis and investigations


I’m assuming the state is mostly seizing smaller assets than mines?

Yes. Luxury cars and properties seem to be most common. 

Apparently, the loss of these can hit criminals harder than a prison sentence. Biseswar wrote that many criminals consider jail simply as an occupational hazard, rendered bearable by the thought of all the luxuries awaiting them upon release: “Prosecutors reference several cases where a crime boss smiled when he received a 20-year sentence but literally burst into tears when his favourite Rolls-Royce was seized.”

Now there’s a satisfying thought to cheer up a gloomy day.

Okay. So, the AFU seizes houses and cars. Then what?

Then, mostly, they sell them to the public via regular auction houses. So, if you’ve bought an ostentatious motor vehicle or swanky pad at an auction in the past few years, it may have originally belonged to a State Capturer.

Slightly disappointingly, they do not advertise the auctions as selling off criminal loot. (DM168 was sternly warned by the AFU against “sensationalising” this process, when we asked as much.)  

And what happens to the money the AFU makes off the auctions or seizes from a criminal’s bank account?

This is the bit you may be surprised by. The money recovered by the AFU does not go back to the government department it was originally stolen from, as one might assume. Instead, it goes into a fund known as CARA: the Criminal Assets Recovery Account. 

Dare I ask who has the PIN to that account?

The Department of Justice. A committee makes recommendations on what the CARA cash should be spent on, and then Cabinet has to approve those. 

In general, however, the CARA money goes to projects aimed at enhancing law enforcement or helping victims of crime. 

The Department of Justice sent DM168 a list of projects that the CARA has funded since 2017. They included R12-million spent on appointing court interpreters, R16-million for the Thuthuzela Care Centres (which provide support to survivors of gender-based violence) and R18-million towards specialised Sexual Offences Courts.

Nobody could quibble with that use of money, could they?

Surely not? But unfortunately there are some other CARA beneficiaries that the public might feel less enthused about. 

R50-million went to the State Security Agency, for instance, which we know from the Zondo Commission was in effect used as a slush fund for various allegedly corrupt officials in recent years. R5.8-million went to the “ethics training of government officials”, for which some might argue we deserve a refund.

What about the money the SIU recovers? Does that also go to the CARA?

No. Those funds go back to the state institutions whence they were pilfered, SIU spokesperson Kaizer Kganyago told DM168.

Enough beating around the bush: show me the money!

According to figures provided to DM168 by Makeke, the AFU recovered R281-million between 1 April 2021 and 31 March 2022. This financial year, it had recovered R80.6-million as of the end of August.

The SIU’s Kganyago said they cannot give details on the last financial year until the unit’s annual report has been tabled in Parliament, but it recovered R14.7-million in this financial year’s first quarter.

Finally, the Department of Justice says the CARA has R530-million in it as of 31 July 2022. (Try not to spread that information around, for safety’s sake.)

How impressive is this?

Experts asked by DM168 agreed that it’s hard to say, because the recovered money doesn’t only reflect the proceeds of corruption – it could also be money from other forms of criminality, like drug sales. The truth is that a lot of the money the state would love to claw back is simply no longer in South Africa. 

“Much of the State Capture loot left our shores long ago,” investigator Heinrich Böhmke told DM168, and will already have been disposed of in places like Dubai or Hong Kong. “Many of the stolen assets end up in jurisdictions that rely on hot money and thus their law enforcement bodies move very slowly on requests for assistance. Some of the stolen assets also end up in secrecy jurisdictions.”

Rather than focus on the negative, however, let’s all visualise again the criminal sobbing while his Rolls-Royce is towed off to auction. DM168 

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25. 

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Comments - Please in order to comment.

  • Dragan KostaKostic says:

    Cancel Eskom’s odious debt to the World Bank

    SAFTU reiterates its demand that Eskom’s high-carbon debt – e.g. on Medupi and Kusile coal-fired power stations – must be declared as an Odious Debt because the greatest beneficiaries of it were capitalist corporations such as Hitachi and the cronies in the ANC through corruption successfully prosecuted even in the United States in 2015. The World Bank, bilateral lenders and commercial banks must cancel this debt.

  • virginia crawford says:

    Time to audit CARA. No arm of government is corruption free and since this money has been stolen from tax payers and customers, we deserve to know where it goes. Sobbing criminals? It means nothing to me – I want them off the street and if the assets are seized, they should emerge poor. Not sure that they do. Steal R20m, spend five years in jails, R4m a year, hmmm not bad.

  • Johan Buys says:

    You’d think SARS can do a recon of what assets a guy should have based on his tax returns. Any assets over that should be automatically forfeit.

  • Patrick Devine says:

    Once the government gets its stolen money back, the cadres get a second (and 3rd, 4th, 5th etc) chance to steal it again.

  • Malcolm McManus says:

    Y blame Mr X when we all know mr Z stole it all.

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