How SA is being captured - read the shocking report

The decomposition of South African state institutions has been blamed on corruption, but we must now recognise that the problem goes well beyond this. While corruption is widespread at all levels and is undermining development, state capture is a far greater, systemic threat. It is akin to a silent coup. The March 2017 Cabinet reshuffle was confirmation of this silent coup; it was the first Cabinet reshuffle that took place without the full prior support of the governing party. This is according to a just published report from the State Capacity Research Project entitled: Betrayal of the Promise: How South Africa is being Stolen.

It is now clear that while the ideological focus of the ANC is ‘radical economic transformation’, in practice Jacob Zuma’s presidency is aimed at repurposing state institutions to consolidate the Zuma-centred power elite. Whereas the former appears to be a legitimate long-term vision to structurally transform South Africa’s economy to eradicate poverty and reduce inequality and unemployment, the latter – popularly referred to as ‘state capture’ – threatens the viability of the state institutions that need to deliver on this longterm vision.

Until recently, the decomposition of South African state institutions has been blamed on corruption, but we must now recognise that the problem goes well beyond this. Corruption normally refers to a condition where public officials pursue private ends using public means. While corruption is widespread at all levels and is undermining development, state capture is a far greater, systemic threat. It is akin to a silent coup and must, therefore, be understood as a political project that is given a cover of legitimacy by the vision of radical economic transformation.

The March 2017 Cabinet reshuffle was confirmation of this silent coup; it was the first Cabinet reshuffle that took place without the full prior support of the governing party. This moves the symbiotic relationship between the constitutional state and the shadow state that emerged after the African National Conference (ANC) Polokwane conference in 2007 into a new phase. The reappointment of Brian Molefe as Eskom’s chief executive officer (CEO) a few weeks later in defiance of the ANC confirms this trend.

While it is obvious that the highly unequal South African economy needs to be thoroughly transformed, the task now is to expose and analyse how a Zuma-centred power elite has managed to capture key state institutions to repurpose them in ways that subvert the constitutional and legal framework established after 1994. As will be argued in this report, it is now clear that the nThe then Public Protector Thuli Madonsela’s State of Capture report,4 existing and growing empirical evidence (much of it referred to in this report), declarations by senior ANC members of bribery attempts, well-known sophisticated forms of bribery via ‘donations’ by businesses to the ANC, the perversion of corporate governance norms in SOEs, the resultant slow collapse of the Tripartite Alliance (the ANC, the Congress of South African Trade Unions (COSATU) and the South African Communist Party) and much else, have all made it clear that the 2012 National Development Plan’s recommendation that “South Africa needs to focus relentlessly on building a professional public service and a capable state”5 has been usurped.

Instead of the plan’s vision of a “professional public service and a capable state”, a symbiotic relationship has emerged between a constitutional state with clear rules and laws, and a shadow state comprising well-organised clientelistic and patronage networks that facilitate corruption and enrichment of a small power elite. The latter feeds off the former in ways that sap vitality from formal institutions and leave them empty shells incapable of executing their responsibilities.ature of the state that is emerging – a blending of constitutional and shadow forms – will be incapable of driving genuine development programmes. By its very nature this mode of governance is counter development. The need for radical economic transformation must be rescued from a political project that uses it to mask the narrow ambitions of a power elite that is only really interested in controlling access to rents and retaining political power.

The dawn of democracy in 1994 delivered a promise that united South Africa. Nelson Mandela’s inauguration on 10 May 1994 expressed this promise in the clearest terms. Speaking on behalf of the democratically elected ANC-led government, he promised:

…to liberate all our people from the continuing bondage of poverty, deprivation, suffering, gender and other discrimination … [to] build [a] society in which all South Africans, both black and white, will be able to walk tall, without any fear in their hearts, assured of their inalienable right to human dignity – a rainbow nation at peace with itself and the world.

To deliver on this founding promise, the ANC needed to use the state institutions it inherited from the apartheid era. These institutions included national, provincial and local-level government administrations, state-owned enterprises (SOEs), the judiciary, parliament and the executive.

Unsurprisingly, transforming the core administrations and SOEs into vehicles for service delivery and development became a major challenge. Undertaking deep institutional reforms is a daunting exercise that requires extraordinary levels of dedication, technical capacity and a well-defined governance programme aimed at systematically overcoming the complex legacy of apartheid. Although significant progress was made, there is now widespread dissatisfaction across society and within the ANC itself with the performance of these institutions. Whereas the promise of 1994 was to build a state that would serve the public good, the evidence suggests that our state institutions are being repurposed to serve the private accumulation interests of a small powerful elite. The deepening of the corrosive culture of corruption within the state, and the opening of spaces for grafting a shadow state onto the existing constitutional state, has brought the transformation programme to a halt, and refocused energies on private accumulation.

The then Public Protector Thuli Madonsela’s State of Capture report,4 existing and growing empirical evidence (much of it referred to in this report), declarations by senior ANC members of bribery attempts, well-known sophisticated forms of bribery via ‘donations’ by businesses to the ANC, the perversion of corporate governance norms in SOEs, the resultant slow collapse of the Tripartite Alliance (the ANC, the Congress of South African Trade Unions (COSATU) and the South African Communist Party) and much else, have all made it clear that the 2012 National Development Plan’s recommendation that “South Africa needs to focus relentlessly on building a professional public service and a capable state”5 has been usurped.

Instead of the plan’s vision of a “professional public service and a capable state”, a symbiotic relationship has emerged between a constitutional state with clear rules and laws, and a shadow state comprising well-organised clientelistic and patronage networks that facilitate corruption and enrichment of a small power elite. The latter feeds off the former in ways that sap vitality from formal institutions and leave them empty shells incapable of executing their responsibilities.

What this power elite cannot achieve via the constitutional state, it achieves via the shadow state and vice versa. Some senior officials and politicians have participated unwittingly in this hegemonic project because they are insufficiently aware of how their specific actions contribute to the wider process of systemic betrayal that has up until now remained opaque.

This detailed report will provide the evidence that the nation needs to realise that the time has come to defend the founding promise of democracy and development by doing all that is necessary to stop the systemic and institutionalised process of betrayal that is now in its final stage of execution. It is not too late. The 1994 democratic promise remains an achievable goal.

An analysis is required that proceeds on two levels:

1. Firstly, we must understand what the Zuma-centred power elite has attempted to achieve on its own terms, and why Zuma continues to enjoy the support of a political coalition that ensures he remains in power as the lead exponent of radical economic transformation.

2. Secondly, it is necessary to demonstrate empirically (based on public reports) how state institutions have been captured and repurposed, and why this will make radical economic transformation unrealisable if the Zuma-centred power elite remains in place.

Key terms

Corruption and state capture: Corruption tends to be an individual action that occurs in exceptional cases, facilitated by a loose network of corrupt players. It is somewhat informally organised, fragmented and opportunistic. State capture is systemic and well-organised by people with established relations. It involves repeated transactions, often on an increasing scale. The focus is not on small-scale looting, but on accessing and redirecting rents away from their intended targets into private hands. To succeed, this needs high-level political protection, including from law enforcement agencies, intense loyalty and a climate of fear; and competitors need to be eliminated. The aim is not to bypass rules to get away with corrupt behaviour. That is, the term corruption obscures the politics that frequently informs these processes, treating it as a moral or cultural pathology. Yet, corruption, as is often the case in South Africa, is frequently the result of a political conviction that the formal ‘rules of the game’ are rigged against specific constituencies and that it is therefore legitimate to break them.

The aim of state capture is to change the formal and informal rules of the game, legitimise them and select the players allowed to play.  

Repurposing: Repurposing state institutions refers to the organised process of reconfiguring the way in which a given state institution is structured, governed, managed and funded so that it serves a purpose different to its formal mandate.

Understanding state capture purely as a vehicle for looting does not explain the full extent of the political project that enables it.

Institutions are captured for a purpose beyond looting. They are repurposed for looting as well as for consolidating political power to ensure longer-term survival, the maintenance of a political coalition, and its validation by an ideology that masks private enrichment by reference to public benefit.  

Rents and rent seeking: Development is a process that is consciously instigated when states adopt policies to directly and/or indirectly reallocate resources to redress the wrongs of the past and to create modern transformed industrialised economies that can support the wellbeing of society. To achieve this, state institutions must be used to allocate resources from one group to another, or to support one group to overcome the disadvantages of the past. These allocations are what can be called beneficial rents. Once measures are taken, however, that result in a flow of potentially beneficial rents to specific economic actors (whether these are businesses, households or public institutions), there is competition to access these flows and this creates the conditions for rent seeking.

There is legal, ethical rent seeking, such as lobbying or legal interventions to benefit certain groups. Rent seeking can also be corrupt, however, and lead to state capture and repurposing. Corrupt rent-seeking behaviour can undermine the development agenda by diverting resources into the hands of unproductive elites.

It follows that if beneficial rents are necessary for realising development, a system is needed to counteract the inevitable competition to access them from being corrupted by those who gain leverage via political access, passing of bribes, promises of future returns, etc.

The literature on neopatrimonialism clearly provides examples of countries that did manage to accelerate development by effectively deploying beneficial rents to boost specific economic actors.

Limiting corruption was a key part of these programmes. The most successful ones tended to be guided by a long-term developmental vision and tended to centralise control of rents to limit overly competitive destructive rent seeking. They never eliminated corruption, but they prevented it from corroding the development process. Centralised rent management can, of course, also be corrupted by power elites who use centralisation to eliminate lower-level competitors to further enrich themselves and entrench their power positions. 

Read more here.