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Show Xi the money – the Chinese maths of State Capture 2.0

Show Xi the money – the Chinese maths of State Capture 2.0
President Xi Jinping of China during a state visit at the Union Buildings on 22 August 2023 in Pretoria, South Africa. (Photo: Gallo Images / Beeld / Deaan Vivier) | Unsplash / Jason Jarrach | Muhammad Owsama

This new State Capture variant is all about walking the legal tightrope to extract legal rents while handing over sovereignty to China.

South Africa has a large construction sector that is globally competitive, with many successful projects abroad. But, mysteriously, it is not good enough for the government roads agency, Sanral, which has bent the rules to give two major road-building projects to China-related bidders.

According to an article in Daily Maverick, “two of South Africa’s largest road and bridge construction projects were ultimately granted to Chinese companies despite the bidders being disqualified early in the bidding process”.

Between them, these two projects would have injected just over R8-billion into the local economy via local construction companies using local suppliers and labour, but Sanral was having none of it.

According to the article, getting the contracts awarded to the Chinese bidders required regulatory gymnastics which included overruling their disqualification to bid.

In the case of the construction of the Mtentu Bridge (R4.05bn), neither the Chinese bidders Stefstocks G-LTA Mtentu Joint Venture (JV) or the China Communications Construction Company Mecsa JV met the eligibility requirements for the tender process – but won the bidding process after an instruction by Sanral chairman, Themba Mhambi, that they be considered qualified.

Looking at the rendering of the bridge, it is a little disconcerting to know that it will be constructed by a company that was disqualified in the first round of bidding.

An artist’s rendering of the Mtentu Bridge. (Image: Dissing Weitling Architecture)

In the case of the EB Cloete Interchange (R4.1-billion) outside Durban, the appointed contractors, Base Major, together with China State Construction Engineering Company, did not make it through the first round. 

The project was readvertised and, deus ex machina, something called the Base Major-China State joint venture got the tender.

This all sounds eerily familiar. 

The report of the Zondo Commission describes many such instances where a political appointee overrules regulatory decision-making to benefit a particular actor which has access to power at the highest level.

Under State Capture 1.0, concocted by former president Jacob Zuma and his knuckleheads, things were a little cruder. His people were placed in executive and board positions to direct a torrent of state money at his family and his cronies, particularly the Guptas. 

However, as enumerated in the Zondo Commission’s report on State Capture 1.0, there were occasions on which genuflection to China was necessary. One such instance so closely resembles Sanral’s latest dodgy decision-making pattern that you would think it had actually studied the report for tips on State Capture.

When Transnet was to spend just under R4-billion on locomotives, one of the bidders was the Chinese company CSR. 

According to Zondo, “The RFP provided that a failure to furnish all returnable documents could lead to disqualification. On the closing date, CSR was not registered as a company in South Africa and thus could not and did not submit: i) valid South African VAT and company registration certificates; ii) a BBBEE accreditation certificate; and iii) a valid South African tax clearance certificate. 

“Its bid was accordingly non-responsive and should have been disqualified. 

“Instead of proceeding with the evaluation of the three bidders that achieved the minimum threshold in stage 1, Transnet (seemingly with the intention of avoiding the disqualification of CSR) introduced what it referred to as ‘Option 2’, which simply removed the BBBEE requirement as one of the scoring criteria.” 

Thanks to the shameless “Option 2”, the billions flowed to China and there were big grins at the next BRICS Summit. Deus ex machina, again.

There are many other such instances in the Zondo Report, the core recommendations of which have been all but ignored by the present government, which is still bending the rules to favour its friends.

As Zondo observed in the case of SAA, where Zuma’s close friend, Dudu Myeni, presided: “State Capture thrived in these entities because they were eventually being run, not in the interests of the people of South Africa for whom they were established, but in the interests of a select few who wielded power inside and outside of the entities.

“When this type of decision-making takes place in a few instances within an SOE, it may be possible to view them as isolated criminal acts. However, when this type of decision-making predominates, and fraud and corruption become the order of the day, something else is at play. 

“It was then that State Capture had taken hold of the entity because it had now been transformed into an entity that benefited the few rather than one that served the people.”

While there is no evidence that Mhambi, other than via his inflated salary, has financially benefited, this is not how State Capture 2.0 works. 

This new variant is all about walking the legal tightrope to extract legal rents while handing over sovereignty to China and to “Xi Who Must be Obeyed”, to borrow a phrase quoted by columnist, Andrew Donaldson. 

In this new variety of State Capture, China (with Russia wringing its hands in the wings) has become the fulcrum of government decision-making, and when China State Construction applies for a bid, it must be awarded to keep Xi delighted and the mythology of South-South collaboration intact.

South Africa’s political economy – the impact of politics on economic decisions – is one of insiders and outsiders. 

Under apartheid, your standing in this economy – and your life chances – were largely determined by race; now it is determined by an equally pernicious combination of educational opportunities and outcomes, race, geography (rural versus urban) and, critically, the relationship you enjoy with the ruling party. 

The larger picture is clear. There can be no gainsaying that South Africa is now firmly in the diplomatic orbit of China. The recent BRICS Summit in Sandton, Johannesburg, clearly illustrated this. 

Xi was met at the airport by President Cyril Ramaphosa and given a full state visit, while India’s Prime Minister Modi was given second-class treatment, leading to a fiasco at the airport as the Indian leader sulked. 

This is despite the fact that South Africa and India share much, including geographical proximity, governance that purports to be democratic, colonial history and understanding, and language.

Welcoming Xi, Ramaphosa said: “At a time when the world faces many geopolitical, social, economic, environmental and other challenges, it is up to us to deepen our cooperation and turn challenge into opportunity as we build a shared future.

“As friends and BRICS partners, we stand together in our shared quest for a better, more egalitarian world that frees the potential of all peoples.”

A “joint statement” issued by China and South Africa summed it up: “South Africa pledged continuous support for China on issues concerning its core interests and major concerns. South Africa reaffirmed its commitment to the one-China policy.”

This seems, however, to be less about geopolitics and strategic policy alignment than a more grubby, primeval relationship which includes showing Xi the money. 

Perhaps “continuous support” dictates that Chinese companies must be preferred even when they don’t qualify. 

Such are the dictates of State Capture 2.0. DM

Ray Hartley and Greg Mills are with The Brenthurst Foundation.


Comments - Please in order to comment.

  • Denise Smit says:

    Under Zuma it was India and the Guptas, under Ramaphosa it is China and his take over of Africa under Xhi. Denise Smit

  • Brian Cotter says:

    Perhaps “continuous support” dictates that Chinese companies must be preferred even when they don’t qualify. Such are the dictates of State Capture 2.0
    This one emanates from the top once again with Cyril equaling Zuma and his Russian nuclear power stations.
    Everyone was blindsided by the fact that the Chinese slipped in on the “fabricated” retender.
    My “pièce de résistance” moment was when Cyril on TV, a few days before the award, announced that the impasse with the corrupt Transnet Locomotive Contract had been resolved, and a sigh of relief was heard minimizing the longstanding negative sentiments against the Chinese, our partner at BRICS, who had been killing us financially. Anyway we are still waiting for the Rail Spares deal to be finalised so all I can say is – Nice one Cyril, give us another one of those big smiles to say GOT YOU.

  • Fanie Rajesh Ngabiso says:

    South African governance: a toxic cocktail of narcissism, sociopathy, stupidity and ignorance.

    The hangover is not going to be pretty. For anyone.

  • Beyond Fedup says:

    This is so typical of the putrid, duplicitous and treacherous anc. Cyril the spineless serves 3 masters – Xi, the evil and mass-murderer Putin monster and his rotten-to-the-core anc. Party and self-interest rule supreme whilst SA and its people are continuously betrayed, exploited and devastated. When O when will the masses of this country wake up and see for once and for all what this abominable, criminal and corrupt party and government are all about. Vacuous slogans such as “we are for the poor and our people need jobs etc.” are just that – empty promises and lies. Those two companies that were unsuccessful should legally challenge such a decision and have it set aside as it was awarded under the most dubious circumstances. SANRAL is an SOE – it belongs to the people of SA and not the vile anc.

  • Michele Rivarola says:

    We have a judicial system which still works and has not been captured yet, complaints ought to have been made at the time, it is way too late now. It is a malaise in the construction industry everyone complains yet hardly anyone is prepared to do anything to support their complaints. There are a multitude of avenues available PAJ Act, PAI Act etc. we either make use of them or shut up ex post facto as all it shows is a lack of any backbone.

  • Trisan Reddy says:

    It’s concerning that the Daily Maverick is just publishing opinions from the Brenthurst Foundation without any analysis, in the past they would have investigated them. There’s nothing here to suggest ‘state capture’ (just typical political machinations to appease a foreign power), however, the Brenthurst Foundation pushes a narrative that I assume supports their benefactors/clients. And the deflection that we should be closer to India than China is laughable, India is moving to the far right and I’m not sure that they’re any better than China now.

  • George (Mike) Berger says:

    I agree with the gist of this article – that regulations are being arbitrarily ignored or bent to suit intertwined personal or political agendas within the ANC. This rot has infected the whole of SA society which is the main reason for the urgency of political change. What I don’t like is the cheap journalistic language ( “Jacob Zuma and his knuckleheads”) used by commentators representing the Brenthurst Foundation and, more importantly, their readiness to gloss over issues like the inclusion of BBBEE criteria in the first instance in the bidding process. Such criteria lie at the heart of the rot at the heart of present governance (as similar discriminatory legislation did in the Apartheid era) and need to be named and rejected despite temporary expediency for polemical purposes. This is not nit-picking over wording only. We must avoid tying the urgent need in South Africa for a fresh political dispensation to the geopolitical machinations of major powers, whether they be China or some elements in the West who instrumentalise ideological differences for personal and political gain

  • Alley Cat says:

    Am I missing something? I cannot see how kowtowing to China is benefitting SA in any way? The article details WHAT we are doing but not WHY we are favouring them?

  • Bob Marsden says:

    Could it be that
    1 Initial disqualification was on the grounds that Chinese aren’t black.
    2 Awarding the contract was on the grounds that the Chinese in this matter are judged competent and not corrupt.

    Ray Hartley and Greg Mills are Brenthurst apologists for Atlanticist political orthodoxy with rich rhetorical overlay which many commentators uncomprehendingly echo. Perhaps they might read “A Global Community of Shared Future: China’s Proposals and Actions” to be found at english . scio . gov .cn whitepapers 2023-09/26/content 116710660 which offers an alternative to Western global belligerence. [This site doesn’t allow me to give you the URL]

    • Alley Cat says:

      Thank you. I shall read it, always good to read another point of view. As an alternate view, I am almost finished reading an excellent book called “Party of one The Rise of Xi Jinping and the Superpower Future of China” by Chun Han Wong of the Wall Street Journal. A deep insight into Xi which has reinforced my belief that China’s ambitions are to ultimately rule the world. Be afraid!

    • Michael Thomlinson says:

      The big question is why our government did NOT award the tender to a local contrctor? As far as I see it, this is not a political move but instead one that involves money. There are surely enough competent contractors at this level to build roads and bridges in SA. It all HAD to be done, locally, in the days of apartheid so why not now? The answer lies in who is being paid what. You can bet your bottom dollar that the ANC is receiveing a much needed kickback from the Chinese contractors, much like the kickbacks on the locamotive deal. I think that the Guptas got around R50 million for brokering the contract and who knows what the ANC got? Other tendtrepreneurs also benefited hugely while supplying and doing nothing while perfectly competent local engineering works stood idol. And the ANC constantly beats the drum about unemployment – go figure.

  • Consultgws says:

    Cyril’s sidekick across the Limpopo River has created an opaque sovereign fund managing the affairs of a motley of SOEs. One of the overarching powers of this Mutapa Fund is procurement which is not subject to existing legal law in public finance management and oversight. It is Zimbabwe’s own form of State Capture 2.0 under Mnangagwa

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