Defend Truth


State Capture: Things are a lot worse than we thought, but will get better


Hilan Berger is Head of Institutional Business Development at 10X Investments.

The turning point in the State Capture debacle in South Africa was lower than we previously thought but it is clear that the recovery is already under way.

Heavyweight speakers at Business Maverick’s inaugural Business Against Corruption event – the likes of Pravin Gordhan, Edward Kieswetter and Shamila Batohi – were brutal in their honesty about how bad the state of corruption and capture was in South Africa. Yet it was the presence of these very heavyweights that reassured the audience of 500-plus business leaders at the event in Hyde Park, Johannesburg, on 27 June that the downward spiral had been halted and the recovery and rebuilding was under way.

There was a sense at the event at Summer Place that South Africa had dodged a bullet and that this event, co-sponsored by the disruptive asset manager, 10X Investments, had come not a moment too soon. The MC, talk show host Bongani Bingwa, described the moment thus: “There comes a time when you run out of your lives, you run out of second chances.”

Bingwa had opened the day’s proceedings with a well-chosen anecdote from a conversation he had with a fellow attendee over coffee that morning. That delegate, he said, had told him that “for every 100 taken there’s a 100 given”, referring to what he later described as the “unholy alliance” of the corrupt in positions of leadership in South Africa and the private sector.

This brought to mind 10X Investments CEO Steven Nathan’s comments when he announced that 10X would sponsor Business Maverick’s event. Nathan, who is also the founder of 10X, said that the Government and State-owned Enterprises, which had been called out for corruption, hadn’t been doing business with themselves, but rather with the business sector.

This “unholy alliance” was to come under fierce scrutiny all day, starting with Pravin Gordhan’s opening address. The Minister of State Enterprises, who has long been a champion in the fight against corruption in the public service, said: “In business, self-interest has become the dominant factor.”

Gordhan made it clear that if South Africans were serious about winning the war against corruption, the battles could not be limited to wrongdoings committed in the public sphere, but must be extended to the private sector too.

Noting that some private companies had been “very complicit” in the so-called capture of SARS, Gordhan also pointed to Judge Nugent’s report about Bain and KPMG and their “lack of contrition”. Opening a topic that was to be revisited many times during the day, Gordhan complained that all that these companies had offered by way of reparations was “a hurried apology and repayment of fees”.

He added: “Is that all we want from these entities, as South Africans, considering the damage they have done?

It’s not about righting the image of the firms involved,” he said, “South Africans deserve more.”

Gordhan set a standard of open soul searching and criticism that was maintained through the day. It was refreshing that not one on the long list of panellists, which reads like a who’s who of South Africa’s most respected change-makers, pulled their punches on the day – from Gordhan’s opening to Advocate Shamila Batohi’s closing address, where the new head of the National Prosecuting Authority described the NPA she found on her return to South Africa from the International Criminal Court in the Hague as “a house on fire”.

The extent of the damage, the severity of the situation, the advancement of the rot in what has been known until now as State Capture got a full airing on the day. Don’t be surprised if that term is expanded to include company capture soon too.

Thankfully, though, another common thread in the day’s discussions was that the problems were not insurmountable and that the situation was already being turned around.

One panel discussion that showcased the calibre of the firepower in place to solve the problems was the mid-morning discussion titled: The effect of corruption on business and the responsibility of business to speak up against corruption in both private and public sector.

10X Investments’ Business Development Manager, Mabetha Cedrick Pila, joined Professor Wiseman Nkuhlu, Chairman of KPMG; Freeman Nomvalo, chief executive of the South African Institute of Chartered Accountants, and Athol Williams, partner at Bain & Co, on this panel that was clearly not for the faint-hearted.

Pila had earlier called on business to put its economic muscle behind President Cyril Ramaphosa’s bid to clean up SA.

It’s time government and business joined forces,” he said.

His sentiments were echoed by his fellow panellists, who to varying degrees have put their personal reputations on the line to remain at the helm of sometimes discredited organisations and be part of the solution.

The panel’s moderator, Stephen Grootes, asked a question that was on everyone’s lips when he ask Prof Nkuhlu if he thought it could all happen again.

The professor, who must have one of SA’s least popular jobs right now, said that was why we need to make sure there are appropriate consequences.

It is important that people go to jail, lose their estate,” he said.

He decried the state of the profession, where pleasing the client has become the be all and end all, adding that “auditing should be about moral courage”. He said auditors should be prepared to leave money on the table if in there was any doubt about what was being asked of them.

Nkuhlu was not alone in expressing robust calls for the industry to return to its core values and insisting that a clean-up was possible. To be frank, though, the audience was left wondering what the road to restitution would be for this profession that seems to have been so central to State Capture.

Despite the difficulty of the situation he found himself in, Nkuhlu managed to strike a more hopeful note in his closing when he said: “Let’s not give up on dreams of establishing a society founded on ethics.”

It was almost a pity that this panel was not combined with the discussion featuring Edward Kieswetter, the new SARS Commissioner, who went far to outline possible routes to forgiveness for organisations that had been complicit in the so-called capture of SARS.

When asked what KPMG and Bain should do, Kieswetter said he had a single test, which he had already shared with KPMG: “You must plead guilty, that is the test. Even if you lose all your business in SA.”

If called to account, he said, they should decide their plea based on whether their case should be won rather than if it could be won. Kieswetter added that they should have a “state witness mindset”, rather than becoming tactical and defensive.

The SARS Commissioner said he wasn’t merely theorising in giving this advice and referred to his time as chief executive at Alexander Forbes during the Lifecare matter in 2010.

He said he went to the Alexander Forbes board and said, “What happened here was unconscionable.” He said at the time the legal counsel, who was sitting next to him, said, “We disagree, we think we have a winnable case.”

This attitude underlined the very point he was trying to make at the Business Against Corruption event, he said, it should not be a question of whether or not one can win a case, but rather whether or not one should win a case. Referring to Bain, he said: “If we do pursue a case against Bain you will show your true colours.”

This made for uncomfortable listening at times, but it was also reassuring to listen to Kieswetter’s clarity and singularity of purpose, especially as SA prepared to enter tax-filing season. Much like Advocate Batohi did, the new SARS Commissioner left many in the audience feeling that South Africa’s key institutions had been devastated by State Capture. There was also somehow the sense that they are in the hands of leaders who understand the severity of what has happened and what needs to be done, and can affect the turnaround.

Business Against Corruption delivered on its mission to kickstart the discussion around corporate complicity in South Africa. It also delivered on its promise to get business leaders to throw their weight behind President Cyril Ramaphosa’s efforts to rid SA of the scourge of corruption.

It was sobering to hear many of the panellists and speakers referring to the fact that it was indeed five to midnight in terms of halting the downward spiral of corruption in SA, and there was not a moment to waste before Corporate SA got on board and rolled up its sleeves.

Corruption is not new, how quickly we forget

As a little aside, an interesting point made by Hennie van Vuuren, Director of Open Secrets, on the day reminded us that corruption was not new in South Africa. He pointed out that the country has long had a culture of impunity. Just look at apartheid, he said.

There was systemic corruption during apartheid, apartheid was a corrupt system.”

He added that it was ironic that the Business Against Corruption event was being held at Summer Place, a building that is so representative of another corrupt and rotten time in South Africa’s history.

Summer Place was built by Marino Chiavelli, South Africa’s so-called oil baron, who earned many millions of dollars for brokering a sanctions-busting oil deal in 1980.

Van Vuuren dug a little deeper to provide more context, mentioning that the wheels of Chiavelli’s immigration application were greased by one FW de Klerk, a young up-and-coming politician of the time. Van Vuuren described De Klerk, who went on to become apartheid South Africa’s last president, as the Malusi Gigaba of his time.

Van Vuuren made the point not just to amuse the audience and remind them of South Africa’s fairly recent past. He said: “If we are serious about tackling corruption we need to ensure we don’t forget what happened before.” DM


Please peer review 3 community comments before your comment can be posted

MavericKids vol 3

How can a child learn to read if they don't have a book?

81% of South African children aged 10 can't read for meaning. You can help by pre-ordering a copy of MavericKids.

For every copy sold we will donate a copy to Gift of The Givers for children in need of reading support.