The Zondo state capture commission produced two categories of recommendations: first, those recommending action against individual perpetrators of state capture; and second, policy recommendations designed to ensure the opportunities used to give effect to state capture are foreclosed. I will try to distil the modus operandi and processes of state capture, the better to put in place the red flags signalling another attempt at state capture.
State capture describes the relationship in which a private entity controls the decision-making function of a public entity. These decision-making functions may be of a regulatory nature or they may refer to the purchasing decisions of the captured public entity; they may relate to the appointment of management personnel. In brief, the decision-making functions of the public entity are corrupted to meet the business interests of the private participant and the political interests of the public participant.
In the case of vanilla corruption, even grand corruption, the incentive is monetary gratification for the firm and those of its employees who participate in the corrupt deal and, of course, for the public sector participants who have traded the public interest for their private pecuniary gratification. However, state capture looks beyond the individual, lucrative corrupt deal. Its objective is rather to put in place the mechanism that will enable the reproduction of corruption without the necessity for, and the risk of, building new public/private syndicates to effect serial corrupt transactions.
While there is monetary gratification aplenty in state capture, the returns and harm it generates far exceed those of grand corruption. State capture rewards large corporate players built on a corrupt business model, it discriminates against legitimate corporate interests, it corruptly reproduces political power — in short, it institutionalises corrupt dealing at the heart of corporate and public sector life.
The primary state capture syndicate comprised the Gupta and Zuma families. South Africans know the Gupta family as comprising three brothers, the scions of a moderately wealthy family of spice traders based in the fly-blown city of Saharanpur in the Indian state of Uttar Pradesh. In the 1990s their obviously canny father sent his sons out into the world to seek business opportunities. In particular, he sent them to societies in transition. They tried a number of countries, including China, without success. In SA they struck gold.
On arrival in SA the Guptas lost no time inveigling their way into the political establishment. Through their political connections they won a few state contracts, but their prospects took a dramatic turn for the better when they met Jacob Zuma. At the time, Zuma was a mere MEC in KwaZulu-Natal. But he had prospects — the MEC position in effect entrusted him with the important task of pacifying the troublesome province and winning it for the ANC.
Zuma’s power in the ANC was confirmed when in 1999 he was elevated to the position of Thabo Mbeki’s deputy president. And it was bedded down when, after a titanic battle with Mbeki, in the course of which Mbeki removed Zuma from his position as deputy president, Zuma ultimately triumphed, winning the presidency of the ANC in 2007 and shortly thereafter the presidency of the country.
Zuma’s vulnerability to capture was enhanced by his large number of dependants and concomitant need for money, which he managed exceptionally badly. Moreover, he had already demonstrated a comfort with the dark side. Indeed, he had been fired by Mbeki because of his alleged involvement in corruption in the infamous arms deal. The Guptas’ first move was to employ Zuma’s young son Duduzane and his twin sister, Duduzile, in the family’s rapidly expanding business empire.
The Guptas chose the state capture targets. These were the large state-owned enterprises (SOEs) — particularly Eskom, Transnet, Denel and SAA — targeted because of their enormous procurement spend. Where the Guptas were unable to deliver goods and services from companies they owned, they interposed “consultants” between private sector suppliers and SOE decision-makers in exchange for exorbitant “facilitation fees”.
They also targeted the mining sector, particularly those mining companies from which their targeted SOEs purchased inputs — hence their interest in coal mining and Eskom’s huge procurement of coal. The scale of their ambition is revealed in their purchase of a mothballed uranium mine, because they believed Zuma would engineer a nuclear energy deal in which the Guptas would supply the uranium.
And how did Zuma earn his place in the “Zupta” syndicate? Largely by deploying (to coin a phrase!) his unusual powers of appointment in pursuit of the Guptas’ commercial aims. He used his influence over the appointment of SOE executives and boards. He even appointed cabinet ministers (it seems on the instructions of the Guptas) whose only virtue was to promote the interests of the syndicate — think of the hapless Lynne Brown as public enterprises minister and the dodgy Mosebenzi Zwane as mineral resources & energy minister. As I said: SOEs and mines were the Guptas’ targets.
Critically, Zuma also used his unfettered powers of appointment to ensure the virtual demise of the National Prosecuting Authority and the Hawks, the better to protect the syndicate from scrutiny. And he gutted the SA Revenue Service by appointing his crony, Tom Moyane, to head the vital institution.
But Zuma remained vulnerable. To counter adverse media reports, the syndicate set up its own media house, replete with a newspaper and a television channel. They ensured the appointment of “their” people to the board and executive suite of the SABC. And they commissioned a notorious UK public relations firm, Bell Pottinger, to design a narrative to counter the state capture narrative.
Above all, the syndicate had to ensure Zuma was protected from the vagaries of ANC elections and recall. So he had to destroy the internal democracy of the party. This required ceding lucrative sources of patronage to provincial chairs, who, thanks to the ANC opposition to “two centres of power” and to the premiers’ consequent dual role as provincial party leaders and provincial premiers, had access to the provinces’ vast health, education and infrastructure budgets.
It seems that the large provincial state capture syndicates — remember the “premier league”? — were “franchised” offshoots of the Gupta/Zuma syndicates, which is to say the provincial leaders of the ANC, and simultaneously the provincial governments, were in effect granted a “charter” to loot their provinces.
In return the Gupta/Zuma syndicates retained their monopoly over their chosen national sources of corruption, Zuma received the political support of the provinces, and a tithe was levied on the proceeds of the franchised syndicates, as in the generous financial support provided by Bosasa to the ANC. (Bosasa enjoyed a lucrative franchise over the department of correctional services’ budget.)
The Gupta/Zuma syndicate also required lots of cash to buy off ANC branch chairs. The syndicates’ “business” activities, and those of their franchisees, supplied this.
The capture and ultimate trashing of the once proud liberation movement is a story for another day. Suffice for now to say that by its failure to respect the separation of party and state the ANC may well turn out to be the terminal victim of state capture.
• Lewis, a former trade unionist, academic, policymaker, regulator and company board member, was a co-founder and director of Corruption Watch.
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