��һ�Թ���

Why corruption killed dreams of a better South Africa

19 September 2019 - William Gumede

25 years ago, citizens hoped a post-apartheid SA would be a fresh start. Today, political and business leaders stand accused of money laundering and bribery.

When Nelson Mandela was elected the first black president of South Africa in 1994, many hoped that the new South Africa—which had overcome apartheid with unprecedented global support—would become a moral beacon to the world. But allegations of systemic corruption by sections of the ��һ�Թ��� National Congress (ANC)—the party that has governed the country since the end of apartheid— has since dashed this hope.

Former South ��һ�Թ��� president Jacob Zuma, who came to power in 2009, was forced to resign on February 14, 2018, following public outrage about perceived runaway corruption under his presidency. ANC leadership decided to push Zuma out with an eye to keeping its long-suffering supporters onside for the 2019 national election in May. The party went on to win this election under the new leadership of Cyril Ramaphosa—albeit with its smallest majority since the party had been in power (just over 57 percent of the vote, a share that had been declining since the party’s all-time high of nearly 70 percent in 2004). The ANC has a long climb ahead of it to rehabilitate the battered image of South Africa—both in the eyes of the world and in the eyes of the citizens it has led for twenty-five years.

In the fall of 2017, former anti-apartheid activist and current British politician Peter Hain criticized HSBC in the British House of Lords for “possible criminal complicity” in South ��һ�Թ��� money laundering after the bank allegedly ignored internal warnings about suspicious transactions. In Canada, the federal export credit agency, Export Development Canada, has also been tainted by association with the Gupta family, an influential trio of businessmen brothers who arrived in South Africa in the 1990s from India, and South ��һ�Թ��� corruption, leading it, in late 2017, to cancel a $41 million loan to the family. The country has perhaps come to be seen by states around the world as a place to avoid spending money. And, domestically, it’s easy to see how corruption could have contributed to pushing millions of South ��һ�Թ���s into poverty between 2011 and 2015.

Although the scandals have mostly come to a head in recent years, Zuma’s long history of allegations of corruption and shady dealings started back in the late 1990s, when he was deputy president, with the Strategic Defence Procurement Package, a multi-billion-dollar military acquisition program signed in 1999 between the government and a number of foreign arms companies. The deal was mired in corruption and bribery allegations and heavily opposed by civil groups, sections of the ANC, and opposition parties. Zuma was faced with charges, including corruption and fraud, related to 783 incidents of wrongdoing, in 2005. Those charges were dropped in 2009, shortly before he became president.

In 2014, a report by the country’s public protector—an independent oversight office set up in the post-apartheid era to “support and strengthen constitutional democracy”—found Zuma to have spent more than $20 million (US) of public funds renovating his private residence. Zuma, defended by senior ANC members, insisted that there was nothing wrong with spending public money on his own home. South Africa’s constitutional court—the top court in the country—ruled in 2016 that Zuma had failed to uphold the constitution by refusing to pay some of the government funds he used for the renovation. The court also ruled that Parliament had erred by not keeping the president in check.

Zuma has also been accused of rewarding public officials who awarded lucrative contracts from state-owned companies—such as energy utility Eskom, the public South ��һ�Թ��� Broadcasting Corporation (SABC), and arms manufacturer Denel—to companies owned by his close friends in the Gupta family who were in business with his son, Duduzane. A cache of leaked emails, released in 2017, between the Guptas, the former president, Duduzane Zuma, and key ANC public figures has shown their dealings to have been underhanded. In South Africa, the Gupta affair has been labelled “state capture”—a term describing a situation where private interests have undue influence over a country’s affairs.

Among the revelations in the leaked emails are discussions of an incident in 2013 when the Gupta family diverted millions from a fund designed to help poor farmers to pay for a family wedding. Another, from 2015, detail how Eskom, in 2015, awarded a five-year coal-supply contract (later extended to ten years) to a company owned by the Guptas and Duduzane, despite the fact that the company was supplying subpar coal—a move that jeopardized South Africa’s energy supply. Eskom gave another mine, Optimum, a coal-supply contract after the Guptas forced Optimum owner Glencore to sell the operation. The mining minister at the time refused to approve the deal, alleging that Eskom executives had intimidated Glencore. Zuma then replaced him with Mosebenzi Zwane, a provincial politician with close links to the Guptas—a move some link to the minister’s refusal to approve the deal.

Former deputy finance minister Mcebisi Jonas swore in court papers that one of the Gupta brothers offered him the position of finance minister and roughly $52 million in today’s dollars if he channelled government contracts his way and removed certain finance officials. And several businesses, including Liebherr, Shanghai Zhenhua, and South China Rail, were allegedly made to pay facilitation money to Gupta-owned offshore front companies in order to gain contracts from the state logistics company Transnet.

Zuma allegedly packed the police, security, and prosecuting authorities with his allies to sabotage investigations into his dealings, effectively stalling and closing many of the cases against him. The head of crime intelligence, Richard Mdluli, a close ally of Zuma’s, was appointed despite later facing charges of fraud, assault, kidnapping, murder, and attempted murder, as well as pillaging the Crime Intelligence Fund.

Zuma also appointed his ally Shaun Abrahams the head of the National Prosecuting Authority (NPA), which civil society, the media, and opposition groups accused of not investigating obvious corruption by Zuma and key political allies, business partners, and family members. In 2018, the country’s top court ruled his appointment unconstitutional.

South Africa’s public broadcaster, the SABC, has been accused of censorship and of not airing stories about protests. Civil groups and opposition parties have accused Zuma of appointing pliant board members and executives to the SABC to ensure news blackouts of corruption activities by Zuma, his family, and his allies, as well as coverage of antigovernment public protests.

Similarly, government-tender committees are often handpicked to ensure favourite companies gain inside information and are awarded contracts over more competent firms. Although tenders are publicly advertised and overseen by government-tender committees, and firms are shortlisted in accordance with government guidelines, the rules are manipulated to award government contracts to preferred companies.

In December 2017, one of South Africa’s largest companies, Steinhoff, revealed “accounting irregularities” that helped wipe out about 85 percent of its market valuation, causing massive losses to South ��һ�Թ��� pension funds.

South Africa’s Companies and Intellectual Property Commission (CIPC) has accused the South ��һ�Թ��� arm of McKinsey, the US management consulting firm, of contravening the Companies Act by lying to Eskom by claiming that a Gupta-aligned company, Trillian Capital Partners, was acting as a black-owned subcontractor for McKinsey in a government project when this was not the case. McKinsey admitted it made several “errors of judgment” while working with Eskom and pledged to review its practices in the country.

Medical, legal, and auditing professions don’t seem immune to the spreading corruption. Some auditing companies have been accused of passing over, hiding, or cleaning up corrupt activity in their reports. The CIPC has accused KPMG, an auditing company, of failing its own risk-management and quality controls when compiling a report for the South ��һ�Թ��� Revenue Service, making legal conclusions that went beyond its mandate and expertise. KPMG, has also been implicated in the Gupta scandal—the firm helped the family write off a lavish wedding financed with state funds as a business expense. In September 2016, eight executives from the South Africa office resigned.

Audit firm PwC was cited in an Independent Regulatory Board for Auditors (IRBA) investigation for its failure to disclose irregularities in the procurement practices of its client, the state-owned airline South ��һ�Թ��� Airways.

Deloitte South Africa is also being investigated by the IRBA for “accounting irregularities” at Steinhoff, the global furniture and durable-goods retail company, after Deloitte issued a clean opinion of the 2014, 2015, and 2016 Steinhoff financial statements.

Although corruption now seems endemic, journalists, the judiciary, and ordinary people have pushed back. Marches, petitions, online discussions, whistle-blowing, and other forms of protest have reached numbers not seen since apartheid. Persistence by the media in pursuing corruption stories has amplified protests and civil court actions, uncovering truths the ruling powers have denied and attempted to bury—such as Zuma’s home renovation and ties with the Guptas.

When corrupt police and prosecutors have been reluctant to probe corruption by politically connected officials, ordinary citizens and civil groups have taken them to court. The Black Sash, South Africa’s famous liberal civil society organization that fought human rights abuses during apartheid, along with civil-society group Freedom Under Law, sued social development minister Bathabile Dlamini for failing to protect the social grants system (the case was decided in favour of the Black Sash last year).

In 2016, the General Council of the Bar took deputy national director of public prosecutions Nomgcobo Jiba and NPA’s commercial crime unit head Lawrence Mrwebi to court, based on cases brought by Freedom Under Law in 2013 and 2014, for squashing corruption investigations, manipulating law enforcement agencies, and targeting officials investigating Zuma. The High Court in Pretoria found both Jiba and Mrwebi not “fit and proper” to hold office, striking them from the roll of advocates, although that decision has since been overturned by the Supreme Court of Appeal. Based on the findings of another, more recent inquiry, Ramaphosa removed them from office.

Lately, citizens and civil-society groups have been exploring the idea of private prosecutions, which can only take place if the NPA has formally decided not to prosecute a case.

Civil-society group AfriForum, for example, threatened to launch a bid to prosecute Duduzane Zuma, the former president’s playboy son, for the death of Phumzile Dube, who died after Duduzane’s car crashed into a minibus taxi in 2014. The magistrate in the inquest ruled that Duduzane’s negligent actions lead to the death, but the NPA declined to prosecute at that time. After AfriForum’s threat, the NPA reinstated the charges in 2017. In July, the Randburg Magistrates’ Court cleared Duduzane of culpable homicide charges from the 2014 crash.

Some South ��һ�Թ��� corporations have also supported citizens and civil groups fighting corruption. In 2017, Business Leadership South Africa, the umbrella body for business leaders at large corporations, suspended the membership of state-owned companies Eskom and Transnet for “extensive allegations of corrupt behavior over a long period.”

The South ��һ�Թ��� judiciary has become more activist as it tries to hold the line against attacks on democratic institutions, a lack of accountability, and corrupt activity by public officials. Chief Justice Mogoeng Mogoeng has regularly criticized corruption, mismanagement, and lack of accountability by public and elected representatives. The current auditor general, Thembekile Makwetu, and the previous one, Terence Nombembe, have exposed mismanagement and what some have called corruption, and former public protector Thulisile Madonsela actively led investigations in the face of powerful opposition—Madonsela was attacked by ANC members when she launched investigations into Zuma’s use of public funds for his private compound, and the ANC majority in Parliament tried to block the investigations (a move reversed by the courts).

The citizen, civil-society, and media protests against corruption have also compelled the government to appoint a number of inquiries into corruption at specific institutions, such as the South ��һ�Թ��� Revenue Service (SARS) and the Public Investment Corporation, the state-owned asset manager.

Recently, members of parliamentary committees, including several MPs from the ANC, have been critical of allegedly corrupt executives, launching public hearings to bring issues to light. Independent regulators of oversight professions have also stepped up to salvage their professions’ reputations, including the South ��һ�Թ��� Institute of Chartered Accountants and South Africa’s Independent Regulatory Board for Auditors (IRBA), which have launched investigations into accountants involved in the KPMG, corruption saga.

Non-governmental entities have played an important role in battling South ��һ�Թ��� corruption as well, resulting in a string of small victories. For example, following media exposure and public pressure, global consultancy McKinsey agreed to pay back the equivalent of roughly $86 million in interest and fees it unlawfully took from state-owned power utility Eskom.

Public pressure and a complaint by the opposition Democratic Alliance party got UK public-relations company Bell Pottinger, which did work for the Zuma and Gupta families, expelled from the local public relations association, a move that eventually led to the firm’s closure.

William Gumede is Associate Professor in the Wits School of Governance. This  was originally published in the Canadian publication, The Walrus.