A decade of “state capture” has damaged South Africa’s institutions


Cyril Ramaphosa must reverse much of what Jacob Zuma did

Apr 25th 2019Print edition | Special report

AT A COFFEE shop on the outskirts of Pretoria, South Africa’s capital, an official from the Special Investigating Unit (SIU) walks in, checks whether he recognises anyone, sits down, and emits a long sigh. Last year he was appointed by President Ramaphosa to be one of his men inside the key criminal-justice institution, tasked with investigating serious cases of graft. What he found has shocked him. “I’m in the lion’s den,” he says, insisting on anonymity. “This country will take a long time to fix.”

Corruption in South Africa did not suddenly spring up in the Zuma era. Under apartheid there were networks of graft among the armed forces, businessmen and the ruling National Party. After the ANC won the election in 1994 it deployed its cadres throughout national and local government as part of a web of patronage. A corrupt arms deal finalised by South Africa in 1999, for which Mr Zuma still faces more than 700 criminal charges, is only the most high-profile case of dirty business from that era.

But it was Mr Zuma’s tenure that gave rise to “state capture”. The term, popularised by Thuli Madonsela, the former public protector, or legal ombudsman, refers to the wholesale takeover of public institutions by associates of the former president, often facilitated by shameless international firms. Estimated costs of the plundering amount to hundreds of billions of rand. Among those accused of being the worst offenders were the Gupta brothers, three Indian-born businessmen who were Mr Zuma’s patrons, and whose alliance with the former president’s allies led to a popular moniker, the “Zuptas”. They have denied wrongdoing.

The damage to South Africa’s international reputation has been equally grave. In 1996 Transparency International, a watchdog, rated it the least corrupt country of those it investigated in Africa. Today it is assessed as more corrupt than poorer states such as Rwanda, Namibia and Senegal. Last year five Western embassies wrote a memorandum warning that, unless Mr Ramaphosa rooted out corruption, his efforts to attract investment would falter.

Fortunately for South Africa some of its institutions remained strong. Dogged investigative journalists from outlets such as amaBhungane and the Daily Maverick exposed scandals. So, too, did brave whistleblowers and opposition politicians, especially those from the Democratic Alliance (DA). Prosecutors such as Ms Madonsela pursued their cases with bravery and vigour. Without these, South Africa would have been in a far worse state.

Not that it is in great shape now. Few state-owned enterprises (SOEs) or public departments escaped capture. Whether it was Transnet, a state-owned transport company, or South African Airways, the “Zuptas” have been accused of trying to take it over. But the case of Eskom, which provides 95% of the country’s electricity, shows how deep the rot went—and how hard it will be for the Ramaphosa government to clean up. “Eskom is our story,” says William Gumede of the University of Witwatersrand.

By the time Mr Zuma became president Eskom was already struggling. In 1994 its total capacity was 36,000MW, more than that of South Korea, which had 29,000MW. In that year most black people did not have electricity in their homes, so it would have been logical to expect a surge in demand. But poor planning and mismanagement meant that by 2014, Eskom’s capacity had crept up to just 44,000MW, whereas South Koreans had 85,000MW.

Worse was to follow. Of all the SOEs Eskom was particularly “ripe for looting”, notes Stephan Hofstatter in his book on the utility published in 2018. It spends 140bn rand ($10bn) per year on operating expenses, including 50bn rand on coal to fuel its power stations. That is a lot of cash for dodgy deals and kickbacks.

In perhaps the most infamous case of the state-capture era, Eskom’s boss allegedly joined with senior political figures to squeeze Glencore, a commodities firm, into selling a coal mine to an investment company owned by one of Mr Zuma’s sons and the Gupta brothers. To facilitate the deal Eskom reportedly agreed to buy what turned out to be poor-quality coal from the new owners at an above-market rate—and paid them upfront so that they had the money to buy Glencore’s assets in the first place.

Last year Mr Ramaphosa overhauled Eskom’s board. He appointed a new boss and brought back Pravin Gordhan, a former finance minister, to run the department in charge of SOEs. He then said the utility would be broken up to improve its performance.

Yet there is little sign of improvement. In the first months of 2019 South Africans have faced regular blackouts as part of a policy of “load-shedding”. Eskom is also putting extra pressure on the country’s strained public finances. It has roughly 420bn rand in debt, most of which is covered by state guarantees equivalent to 5% of GDP. In February, the treasury announced it would give Eskom a 69bn rand bailout so it could afford the debt payments. “Eskom is the biggest threat to the South African economy,” says Anton Eberhard, chair of the president’s advisory panel on the utility.

Though South Africa’s SOEs remain in trouble, Mr Ramaphosa has made progress repairing the institutions designed to curb wrongdoing. In December he appointed Shamila Batohi, a respected lawyer, to head the National Prosecuting Authority (NPA). That followed appointments of several new policemen to senior jobs in the South African Police Service. He has replaced Tom Moyane, who as head of the South African Revenue Service (SARS), allegedly tried to stop staff from making well-connected criminals pay tax. And in February the president pledged to reform the intelligence services, which Mr Zuma corrupted, and announced that the SIU would “fast track” the requisition of stolen assets.

These steps are indicative of Mr Ramaphosa’s way of working. Rather than push for arrests he has adhered to due process, while incrementally trying to place sound people in charge of institutions. That is probably wise, for now. But if elected in May he will come under increasing public pressure to ensure that those guilty of state capture are prosecuted, including those in his own party.

Such pressure is growing because of another tactic of Mr Ramaphosa’s: the reliance on inquiries to expose wrongdoing. These include inquiries into SARS, the Public Investment Corporation and the NPA. But the most wide-ranging is the Judicial Commission of Inquiry into Allegations of State Capture, otherwise known as the Zondo commission, after its presiding judge, Raymond Zondo.

It has offered jaw-dropping testimony. At multiple hearings in January and March, Angelo Agrizzi, the former chief operating officer of Bosasa, a logistics company, detailed how the firm won tenders. He said it would give 75m rand every year in bribes to ANC politicians and affiliated officials. In one alleged case cash was stuffed inside a Louis Vuitton handbag and given to an ally of Mr Zuma’s. Nomvula Mokonyane, the environment minister, was said to have received Christmas hampers, help with the cost of relatives’ funerals, and cars for her daughter. When the daughter kept crashing the cars Mr Agrizzi said he would pay for driving lessons.

The Zondo commission has also helped uncover that Bosasa paid Mr Ramaphosa’s son, Andile, 2m rand for “advisory” work, and its boss gave 500,000 rand to the president’s ANC campaign. Mr Ramaphosa has told allies that there are to be no “holy cows” in dealing with corruption. That commitment may soon be tested.

Ferial Haffajee, one of the many South African journalists to have helped chronicle state capture, describes the Zondo commission as a second Truth and Reconciliation Commission, in reference to the hearings in the 1990s that shed light on abuses committed under apartheid. Today the truth is again slowly coming out. Reconciliation will take longer, not least since so much of the corruption has been the work of the ruling party.

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