South Africa’s Public Protector finds “state capture” by the president’s pals
The Economist
This article appeared in the Middle East and Africa section of the print edition under the headline Friends with benefits A clock has been started that could lead to Jacob Zuma’s removal
On the day that Jacob Zuma, South Africa’s president, was due to meet his Zimbabwean counterpart in Harare, an anti-corruption ombudsman back home released a report that may make his continued rule every bit as precarious as that of the ailing Robert Mugabe. The report into “State Capture”, compiled by the former Public Protector, Thuli Madonsela, details a disturbing web of influence exerted over parts of the South African state by a powerful family of Mr Zuma’s chums.
The report does not provide proof of criminal wrongdoing by Mr Zuma. But it presents more than enough evidence to suggest that his wealthy benefactors—the brothers Atul, Ajay and Rajesh Gupta—were involved in the firing and appointment of government ministers and the award of large contracts by Eskom, the large state-owned electricity utility.
Mr Zuma’s dwindling band of supporters will, no doubt, argue that the report exonerates him of any wrongdoing. But that would be to misread the nature of Ms Madonsela’s findings; for this is but a first salvo in a legal barrage that may see Mr Zuma out of office before the end of 2017. All that Ms Madonsela had to do in this report was show that there was enough apparent evidence of wrongdoing to justify her binding order that the government establish a judicial commission of inquiry that, in turn, must now investigate alleged influence-peddling by the president more fully.
Take the details in her report of testimony by the deputy finance minister, Mcebisi Jonas, who said that he had been offered 600m rand ($44m) by Ajay Gupta. All he had to do in return was agree to be appointed finance minister and then to replace key executives in the National Treasury, which was a “stumbling block” to the Gupta family’s business ambitions. When Mr Jonas declined the offer Mr Gupta upped it, asking if he had a bag big enough to hold 600,000 rand in cash that he could take with him right away. A few months later the finance minister, Nhlanhla Nene, was abruptly fired and replaced by an unknown backbencher who appears to have spent more time with his friends the Guptas than he did in his ministerial office.
The call for a judicial commission is worrying in that it would seem to suggest that Ms Madonsela had little faith in the independence of her successor, Busisiwe Mkhwebane. But it is also tactically astute. Throughout her report Ms Madonsela complains of how her investigation was hamstrung by a shortage of money and obstruction by the president. Her order (which Mr Zuma may now try to block) that the government appoint a commission that is “adequately resourced” and run by a judge chosen solely by the Chief Justice ought to lead to a robust probe into the relationship between Mr Zuma and his friends. Ms Madonsela has ordered that the commission report back in no more than 180 days after its appointment—starting the ticking of a clock that may count down Mr Zuma’s last days in office.
Patrick McLaughlin: FICA may trigger end-game for Zuma
Jan 30 2017
Who is pulling President Jacob Zuma’s strings? That’s the question as Zuma drags his heels on signing the Financial Intelligence Centre Act legislation.
The law is aimed at giving the Centre huge powers to initiate investigations. It already has the right to investigate individuals based on suspicions by banks that its clients are laundering money, however it will also be able to widen its probes to bring more people into the net and undertake lifestyle audits.
Individuals close to Zuma have fiercely resisted attempts by Parliamentarians to have this law passed. Many of Zuma’s friends are known, with specific names repeatedly emerging in the public domain connection with state capture. But these friends appear unfazed by the allegations and, so far, no action has been taken in connection with claims of bribes amounting to hundreds of millions of rands – nor is action likely soon.
The Hawks investigative squad appears to be in Zuma’s pocket as does the National Prosecuting Authority.
So if the Guptas and others are untouchable, why worry about the FICA law? Zuma’s paper shuffle with the FICA documents suggests that there might be others who have not yet been identified, have a lot to lose and who need to hide. Who are these people? – Jackie Cameron
By Patrick McLaughlin*
The extraordinary circumstances under which Parliament closed before Christmas, mainly caused by an increasingly obdurate President clearly acting in his own interests on such issues as the long-delayed FICA legislation and party succession matters, will hopefully not be repeated in the forthcoming session for 2017.
The change may happen because the parliamentary melee, including most of the portfolio committee chairpersons, might have realised that President Zuma cares not one iota about parliamentary procedure and merely sees the Constitution as a refuge of appeal to buy time.
The same seems to go for many “prominent persons” who would obviously be corralled in by a process such as envisaged by the FICA Bill and would obviously prefer not to have the uncomfortable gaze of a portfolio committee peering into their money movements.
Finance first
One particularly busy area of the 2017 Parliament will be the Standing Committee on Finance under Yunus Carrim who is responding in hearings to legal opinion in submissions on the Financial Intelligence Centre and its search powers.
This will be in response to the return of the Bill unsigned by President Zuma. His claim is that those in search of facts to support money laundering by prominent persons may abuse the constitutional rights of those they visit with a warrantless search, using the weapon of surprise if necessary.
The Standing Committee has decided to return the FICA Bill to the President’s office with indisputable legal evidence that the Bill is constitutionally sound in an attempt to box the President in and obtain his signature.
So far, in hearings, attempts have been made to stop the Bill but in the end, between advice from legal counsel and those who followed the rules set down for the hearings, a common understanding seems to have been secured.
How much of this parliamentary stalling exercise is being orchestrated by players in the state capture camp and to what extent this confrontation is President Zuma’s own fight with the banking institutions, we leave to those in the know, the Hawks and the courts.
Meanwhile, in Paris.
When the FICA Bill is finally signed into law, and if the President decides not to waste more time of the Constitutional Court, then National Treasury can write to the Organization for Economic Cooperation and Development and ask them to tell their Financial Task Team (in practice the international money laundering police) to get off our backs and inform them that South Africa has agreed to what was promised.
When this is done, if it is done, then Carrim can sort out the Insurance Bill combining prudential factors on long and short term insurances, delayed by the FICA Bill fracas. After this, his Committee must host representations from the public sector on sugar tax. Busy times.
High profile
We have also seen for ourselves over the last few weeks how busy the public enterprises committee has been in dealing with SABC mis-management. Further meetings on what the SABC board did wrong will keep chair Vincent Smith busy and occupied for a few weeks and more. Although this hardly affects the business front, to the extent only of what business persons read and hear, the findings so far by Parliament on what has happened in this State utility beggars belief.
Energy
To have a very busy time also will be Fikile Majola, Chairperson of the Energy Portfolio Committee, who had some bruising meetings with Eskom last year and must deal with the issue of the sale of strategic stocks of oil and finalise oversight on the awful R14.5bn write off by PetroSA.
His list of “must get dones” is extensive, not the least of which is to find out more about the nuclear deal for on line energy delivery in 2030, a deal that clearly has been entered into by somebody who wishes to stay mum.
Then Majola must deal with the legitimate requests of the Independent Power Producers in their relationships with Eskom on renewables and sort out politics from scientific truths to get the Integrated Resources Plan re-mapped. He will be under much pressure in his attempts to get the right storytellers to come forward and extract the truth on the “formula for electricity costs” put forward by Eskom’s acting CEO Koko.
Trade and Industry
If one adds to this that Minister Rob Davies has now shot back from Davos and will de-brief all; get stuck into poultry issues and answer the complaint from the World Bank that SA is not offering enough in the way of tax incentives to new investors, it will buy times for DTI. Already DTI DG, Lionel October, has said he is unhappy from an investment point of view about the delay with FICA. If October says it, Davies feels it.
Davies did well last year in that DTI received a “highly recommended” in audit terms and for targets reached but it looks like another rough ride for 2017.
But what is interesting in all this, is that by mentioning those members as chairpersons of particularly active Portfolio Committees, the chairperson in each case is a senior member of the South African Communist Party.
From this observation, one can reasonably assume that the SACP takes Parliament seriously and is using it. Probably only half the Cabinet attend Parliament on a regular basis.
It was therefore satisfying to see the 2016 Parliament bare its teeth; that there is still a strong movement to maintain parliamentary oversight on financial issues and not follow the example of a wayward President.