STATE CAPTURE
It highlights South Africa’s kleptocracy fears
CNN reports: A damning report into corruption allegations against South African President Jacob Zuma was published Wednesday as demonstrators, calling for him to quit, marched in the streets of the capital.
A statement released Tuesday by the Nelson Mandela Foundation, founded by South Africa’s late president, called for the ANC to take the steps necessary to ensure that the vehicle of state be protected and placed in safe and capable hands, saying that political meddling had weakened critical institutions.
“South African citizens across the land are speaking out and taking action to express their dissatisfaction,” it said. “The Nelson Mandela Foundation supports the demand to hold to account those responsible for compromising our democratic state and looting its resources.”
Hanging over all this is the virtual dissolution of the ANC leadership and its descent into squabbling factionalism, notes R.W. Johnson, author of How Long Will South Africa Survive? The myths and slogans of the liberation struggle are less and less able to hold the party together, he writes for Standpoint magazine:
Everyone is familiar with the life cycle of African nationalist parties. They enjoy mushrooming growth amid the euphoria of the successful anti-colonial struggle. In office they quickly become corrupt and their incompetence becomes increasingly visible. The party begins to atrophy and depends more and more on its control of patronage and the media. Electorally, it falls back into reliance on the chiefs in the countryside as urban dwellers become increasingly oppositional. Then if, as has so often occurred, a coup takes place the soldiers are welcomed by cheering crowds in the streets and the ruling party simply evaporates like a bad dream. Its life cycle is thus often quite short.
The really important thing, Johnson adds, is that despite ANC threats to make the cities they lost in recent elections ungovernable and a series of ANC-led illegal land invasions, the ANC seems habituated to the rules of electoral democracy and this gives one some — not complete, but some — confidence that it may one day accept the loss of national power in good part.
In 2010 the author of this diatribe saw the writing on the wall and warned of its dangers in the USA published book ‘Stepping Stones’.
Kleptocracy
Extract from ‘Stepping Stones’
by Bryan Britton
October 2010
‘It is regarded as one of the most corrupt countries in the world. In the past number of years, the leaders of this country have stolen more than two and a half trillion rand. The average citizen, on the other hand, today only receives about R100 in income per week.
Recently, administration has been making concerted efforts to tackle corruption. Ministers have been dismissed and the government is committed to change. The money is being ring-fenced to tackle poverty and this spending is very closely monitored. The government has committed that the money should go to the very poorest. The country, with the most dangerous slums in Africa, is seen as having the greatest natural resources on the continent. It is also the one with the highest potential for development.
One can be excused for thinking that we are talking here about South Africa.
The country in question is, of course, Nigeria. South Africa has yet to go through the quagmire that is Nigeria’s recent history; a history of untold shame, sorrow and suffering-all at the hands of the kleptocrats.
Kleptocracy derives from the Greek words kleptes, meaning ‘thief’, and kratos, meaning ‘rule’. It is a word used to describe a government widely engaged in corruption to extend the personal wealth and political power of individuals in the ruling class.
A corrupt and dishonest government, characterised by greed, is described as kleptocratic. Such a government is typically run by rulers who are thieves and who pillage public funds to the detriment of the poor, sometimes without the pretence of offering any form of honest public service. These kleptocrats then exploit a country’s natural resources for their own greedy benefit.
The money on which these evil managers of men prey is almost always funds earmarked for the building of public amenities, schools, hospitals, roads, parks and public facilities. Thus the ordinary citizen is prejudiced, inconvenienced and deprived by these selfish kleptocrats.
The term ‘kleptocrat’ was first used in the 1960s to describe the activities of the ruler of the independent Congo, Colonel Joseph Mobutu, who plundered the rich natural resources of that country for his personal benefit. However, the term could equally have applied to his colonial predecessor, King Leopold II of Belgium. It is said that the megacity of Brussels, a European Union bastion, was built with the kleptocratic proceeds of the resources of the Congo Basin The story of Africa is one of the Europeans plundering the natural resources of the continent and then, when caught with their hands in the cookie jar, hastily effecting a democratic handover to the most likely African kleptocrat.
This book has urged you young South Africans to develop your own sense of right and wrong, your own morality, your own ethics and your own zone of indifference. This is in the absence of a reliable schooling and education system. It is a ploy of all kleptocrats known to man, to restrain the emerging youth from education, thus guaranteeing for them a strata of humanity upon which to prey. Be warned. Be alert. Be careful. Be your own person and be democratic. It has taken Nigeria 40 years to learn this painful lesson.
Summary State Capture 2016
Haffajee is researching state capture with the assistance of the Public Affairs Research Institute
At many points in 2016, as I watched our crime-fighting institutions – including the Hawks and the National Prosecuting Authority – turn tail-gunners for capture, I felt that we were well on our way to becoming a Mafia state.
The year we countered capture
Well, that’s one view. Here’s another. Let’s consider for a moment all the efforts of the shadow state that were effectively thwarted in 2016. It’s quite a list:
- Finance Minister Pravin Gordhan may have seemed like a dead man walking, but he ends the year in a stronger position than he started it.
- The nuclear deal has been kicked into touch and postponed until it is needed for the national power grid. This is significant as the race for an expansive and potentially bankrupting nuclear deal has been the key to many of this year’s political crises.
- National Director of Public Prosecutions Shaun Abrahams dropped fraud charges against Gordhan. He faces a motion – put forward in writing to the General Council of the Bar – to disbar him as an advocate. The complaint was laid by Mathews Phosa, an ANC luminary. Civil society has repeatedly used the courts to uphold the line of institutional strength and the rule of law.
- The judgment on the power and effect of recommendations made by the Public Protector in relation to overspending at Nkandla was a resounding one on how far President Jacob Zuma had breached his oath and the Constitution. It set a high standard for public office, against which future leaders will be judged. Presidential impunity was dealt a death blow and Zuma paid back the money.
- Big business awoke from its slumber and took an active stand against the attacks on Treasury and the SA Revenue Service.
- The media brought it all to light through excellent investigative reporting, aided by brave whistle-blowers.
. Many institutions crumbled in the face of capture, but many showed their mettle. The Financial Intelligence Centre, the SA Reserve Bank and Treasury held the line and used all systems and laws to prevent rent-seekers taking root.
- A civil society movement, called #SaveSA, is a mass-based structure similar to the United Democratic Front, the major anti-apartheid coalition which enjoyed mass support in the 1980s. #SaveSA is geared at flexing the popular muscle against corruption.
- The DA and the Economic Freedom Fighters took numerous strategic anti-corruption fights to the floor of Parliament and to court, showing the importance of a thriving multiparty system.
South Africans fought back hard against capture in many places of influence in 2016. As I think back over the year, it feels like we end it in the balance: The nation is set against capture and corruption, but its forces are emboldened and empowered by the fortunes they have accumulated and will leverage those to get more.
While the nation is bent on fighting corruption, the crony networks are still very powerful. These extend far beyond the Gupta family alone. Auditor-General Kimi Makwetu this week revealed that our water supply is threatened by similar forms of capture in the department of water affairs and sanitation. He warned that delays in contracts and awards to companies based on considerations other than technical know-how could harm water security.
Our financial security is also essential for political stability, raising concerns about what is happening at the SA Revenue Service. There, the second in command, Jonas Makwakwa, has been suspended for stuffing untraceable cash into his private bank account via an ATM.
The work of an anti-corruption movement has just started, and a lot of it is defensive – rather than being on the offensive, which would be about strengthening the anti-corruption arsenal.
The Hawks, as a powerful anti-graft force, are largely gone. And the way in which fraud charges against Gordhan were dropped revealed how fragile the National Prosecuting Authority is as an institution.
The defence against corruption in 2016 has largely – but not solely – taken place from forces outside the state. The only long-term solution to ensuring that the state is not hollowed out by capture is to fix institutions set up by democratic practice.
That is a long-term job, requiring a new broom.
The seductive power of making a quick fortune in a single generation (or less) has created Mafias well beyond Saxonwold.
In 2017, South Africa will determine whether it will travel further into capture’s claws or it will continue along the important corruption-busting trajectory fashioned this year.
Standard Bank reveals: How Gupta family puts words into ANC politicians’ mouths.
By Dewald van Rensburg, City Presswhatsapp
An explosive affidavit by Johannesburg-listed Standard Bank has confirmed long-held suspicions that the immigrant Gupta family is in charge of political affairs – and not President Jacob Zuma or the ANC. Court documents reveal how the Guptas have political power to literally put words into politicians’ mouths. This state of affairs is truly appalling, with an elite group of business players and ‘captured’ politicians making decisions in the interests of a greedy clique. That ANC leaders have allowed this state of affairs to flourish at the expense of the millions of supporters who have kept them in power is mindboggling and makes a mockery of any talk that the ANC is a party of the masses, pro-democracy and a movement that acts in the best interests of the nation. The Gupta family has vowed to challenge allegations in court by Standard Bank. However, it is unprecedented for a commercial bank – and Standard Bank is the largest African bank by assets – to take swipe at the most powerful politicians; Standard Bank’s executives would not have taken the decision lightly to press ahead with their court action to stop political interference in their business activities. Standard Bank would have checked and tested the facts rigorously before taking such a bold and confrontational move towards the president. With the law-enforcement agencies and the public protector’s office so obviously under the control of Zuma, it seems unlikely the Gupta or Zuma families will be successfully prosecuted by the state any time soon. It is increasingly over to non-governmental organisations, opposition parties and commercial entities like banks to challenge the status quo. Let us all keep our fingers crossed, and pray, that the judiciary proves impossible to capture because the courts are increasingly looking like the last bastion between South Africa and #Zupta. – Jackie Cameron
Johannesburg – The extent of the Gupta family’s fight against the major South African banks, together with their friend, Mineral Resources Minister Mosebenzi Zwane, has been laid bare.
In a long and scathing affidavit this week, Standard Bank attacked what it called impermissible political interference”, aimed at reversing its decision to close the bank accounts of Gupta-owned companies.
It called the campaign by political allies of the Guptas unprecedented, saying it was unlike anything the banking group had ever experienced anywhere else in the world.
Echo chamber
A major observation in the affidavit, by Standard Bank group legal counsel Ian Sinton, is that the Guptas have the political power to literally put words into senior political figures’ mouths.
A set of accusations, framed in exactly the same way, first appeared in letters from Oakbay, and were then repeated by ANC leaders, followed by the controversial interministerial committee led by Zwane, said Sinton.
“The first illustration of Oakbay invoking direct political pressure was its request to the ANC that the party intervene for its benefit,” said Sinton.
This led to the bank’s CEO, Sim Tshabalala, meeting ANC secretary-general Gwede Mantashe, deputy secretary-general Jesse Duarte and economic transformation head Enoch Godongwana at Luthuli House on 21 April.
The ANC leaders asked Standard Bank to respond to the accusation that it is colluding with ‘monopoly capital’ to oppress black-owned business, reads the affidavit.
This was precisely the accusation that Oakbay had made earlier, in a letter it sent to an unnamed “international shareholder” in Standard Bank.
According to Sinton, the letter accused Standard Bank of collusion with the other South African banks, as well as of having racist motives in its closing of the Gupta companies’ accounts.
“The accusations were – and are – offensive, unlawful and unfounded,” said Sinton.
The fact that Oakbay could get the ANC to request this meeting and essentially put words in its leaders’ mouths “evidences the extent of Oakbay’s political influence and willingness to bring it to bear”, reads the affidavit.
The ANC heavyweights also asked Standard Bank to justify why it still had as its clients the construction companies that had been involved in the cartel which inflated the prices of soccer stadiums for the 2010 Soccer World Cup.
This trope was repeated later, when Standard Bank met the so-called interministerial committee (IMC).
Mosebenzi Zwane, South Africa’s mineral resources minister
“In short, the nature and tone of the ministers’ queries was substantially the same as those contained in Oakbay’s letter to the shareholder and those posed on behalf of the ANC,” said Sinton.
Common front
All four major banks in South Africa have cut their ties to the Gupta family’s businesses.
Absa led the pack by closing all accounts in December 2015. In the first week of April this year, the other three major banks followed suit.
The current court case stems from an application by Finance Minister Pravin Gordhan for a declaratory order that he cannot intervene in the banks’ dealings with their clients.
FirstRand, the owner of First National Bank (FNB), as well as Nedbank have also filed papers, while Absa says it will file “in due course”.
While all the banks support Gordhan, only Standard Bank gave extensive evidence.
Standard Bank is asking for a more muscular court order than the one Gordhan wanted.
It wants the court to declare that “no member of the national executive of government, including the president and all members of Cabinet, is empowered to intervene in any manner whatsoever in any decision taken by Standard Bank to terminate its banking relationship with Oakbay …”
None of the banks has pointed out specific transactions leading to their decision to close Gupta accounts.
They all point to the copious media reportage on Gupta influence on government leaders, but also to their obligations under local and international regulations to fight money laundering and bribery.
Nedbank’s letter, notifying the companies of the closure of their accounts on April 6, said banking them “may create material business risk and pose significant reputational risk”.
FNB’s CEO, Johan Burger, asserts that “since FNB was, in law, entitled to terminate its relationship, FNB’s reasons for doing so are irrelevant”.
Zwane and his committee
The bizarre behaviour of Zwane, and the supposed IMC he led, is the main target in the banks’ affidavits.
According to Zwane, the IMC – consisting of himself, Gordhan and Labour Minister Mildred Oliphant – was established at a Cabinet meeting on April 13.
Gordhan refused to be part of the supposed IMC and never attended its meetings with banks or other financial service providers.
Among the letters Standard Bank attached to its court papers is one from Gordhan to Zwane, dated April 22.
In it Gordhan contradicts Zwane, saying that in reality, “no IMC was established” at the April 13 Cabinet meeting and that the three ministers were “nominated” to look into the bank account issue, without one of them becoming the convener.
Zwane has nevertheless called himself the chair of the IMC.
On September 1, Zwane issued an infamous statement in the name of the IMC, claiming Cabinet had now resolved that a judicial inquiry into the banks was needed and that core pieces of regulation might have to be revised.
Following an outcry, Cabinet distanced itself from this statement the following day, saying it was issued by Zwane in his capacity as chair of the IMC, which, evidently, did not actually exist.
The meetings the IMC held with the banks are also detailed in court papers.
Standard Bank met the IMC, with Zwane and Oliphant in attendance, on May 5.
Nedbank met the IMC on May 6.
According to Nedbank CEO Mike Brown, in reality, the only member of the IMC who was present was Zwane.
The IMC apparently tried to cover up the absence of the other ministers. There were “various other attendees unknown to me”, said Brown.
This emerged when Nedbank afterwards requested a list of the attendees, and it included Oliphant.
Brown said this was a lie – she was never there.
He said his “overall impression” was that Zwane and his unknown colleagues wanted to know mainly if the banks had coordinated their actions, and whether Nedbank would want to become the Guptas’ main banker in its competitors’ place.
In his affidavit FirstRand’s Burger says he refused to meet the IMC because it could not guarantee that all three ministers would attend; neither could it produce, in writing, the actual allegations against the bank.
President Jacob Zuma
Standard Bank’s affidavit this week attacks President Jacob Zuma and his Cabinet for not having “positively repudiated” the serious threats that Zwane had made.
The real possibility remains that these recommendations could, “in one form or the other, be carried out and given effect”, said Sinton.
As recently as November 23, Zuma said in Parliament that the decision to close the accounts was taken “willy-nilly”. He also asserted that there had been collusion.
“It is clear that government seeks to further intervene,” said Sinton.
One remedy
By Stefanie de Saude
Stefanie de Saude is an Immigration and Citizenship Law Specialist of De Saude Attorneys Inc. The firm specializes in South African immigration and nationality law and Lithuanian citizenship law.
There are several practical steps the Department of Home Affairs might take against the family. Section 20 of our Constitution protects the right to citizenship status. Once you become a citizen, you are entitled to this right irrespective of the basis of acquisition. However, Section 8 of the Citizenship Act sets out how the Minister may deprive a person (including those who were naturalized as a citizen) of their citizenship.
The law is clear on the criteria that would enable the Minister to revoke the Gupta family’s citizenship. Section 8 (1) of the South African Citizenship Act states that “the Minister may by order deprive any South African citizen by naturalization of his or her South African citizenship if he or she is satisfied that (a) the certificate of naturalization was obtained by means of fraud, false representation or the concealment of a material fact. The Minister may also deprive them of their South
African citizenship if ‘the Minister is satisfied that it is in the public interest that such citizen shall cease to be a South African citizen (Section 8 (2)(b)).’
It is now up to the Minister to apply the law and diminish the influence the Gupta family seemingly holds over state affairs.