Follow the money: Exposing the "Developmental State"

24 February 2014

On 12 February, the nation watched in shock and dismay as Jacob Zuma's State of the Nation address became the backdrop to a chilling and meticulous display of premeditated state brutality waged against any critical voice, inside and outside Parliament.

In all the drama, very few people paid any attention to what Zuma was actually saying (when he stopped giggling) during the State of the Nation Address (SONA). It will probably be news to readers of this newsletter to know that the President actually announced a 9-point plan to guide his administration till the end of his second term in 2019.

In theory that plan looks quite good. But all South Africans know by now that, while the ANC's plans are supposed to work in theory, in practice they don't.

That is because the ANC says one thing and does another. The best example is the much vaunted National Development Plan that emanated from the President's office - as a draft in November 2011, and adopted in December 2012. Since then the government's policies and actions have primarily served to undermine it.

One does not have to be a clairvoyant to predict the same fate for SONA's nine-point plan. What President Zuma actually presented was a nine-point fig-leaf to disguise his real intentions: a plan to enrich and entrench the ANC and his network of loyal cadres. It is an insider enrichment scheme disguised beneath the mantle of the so-called "developmental state", a word which in ANC-speak, means precisely the opposite of what the English language intended it to.

No-one has described the ANC's "developmental state" better than struggle stalwart, Reverend Frank Chikane, former Director General of the Presidency under Thabo Mbeki, who said: "Every tender and contract under an ANC government is designed to make someone in the ANC rich."

And this is the key to understanding President Zuma's 9-point plan. The first of the nine points reads: "Resolving the energy crisis". Sounds good. That's what South Africa needs. But let's measure that fine-sounding phrase against what the ANC is actually doing.

Firstly, they have just withdrawn the Independent System and Market Operator (ISMO) Bill from Parliament. This Bill would have seen Eskom replaced by an independent state-owned entity as South Africa's electricity system operator in order to encourage competition. They canned the Bill in order to protect Eskom from proper competition in the generation, transmission and reticulation of electricity. If Zuma was serious about "resolving the energy crisis," real competition for Eskom would be his first order of business. It would improve the cost and the service to the consumer.

But the electricity consumer is the last person on Jacob Zuma's mind. Competition for Eskom would threaten the cadre enrichment schemes that lie at the heart of the massive building programmes at the power-plants, Medupi and Kusile. Proper competition for Eskom would undermine the investments of the ANC's front company, Chancellor House, that creamed off hundreds of millions through its shares in Hitachi, that provided the boilers for the mega-plants.

And of course, large-scale independent power producers might reduce the need for the trillion Rand Russian nuclear deal, which has the potential for cadre enrichment that will make the arms deal corruption look tame, and Nkandla seem like a minor fringe benefit.

And just when most serious energy analysts predict that the exploration for sources of natural gas off our coastline could help relieve our energy crisis, the Zuma administration moved quickly to preserve the Eskom monopoly by preventing private companies from embarking on exploration by tabling the disastrous Mineral and Petroleum Resources Development Amendment Bill. This Bill will kill gas exploration, and reinforce the need for the Russian nuclear deal that Zuma and his pal, Putin, are determined to consummate.

One common denominator in the 9-point plan list is the number of crucial functions assigned to "state-owned companies". Under the mantra of the "developmental state" are opportunities for cadre enrichment as we have never seen before (which will inevitably result in failed - and more expensive - service delivery for the "masses" whose interests the ANC claims to champion).

Take Broadband.

In his SONA speech, President Zuma announced that Telkom had been "designated as the lead agency to assist with government's broadband rollout."

Translated into ordinary English this means: Telkom (a company in which the government owns 40% direct and 13% indirect shareholding) has been given the monopoly to roll out Broadband across the county.

Telkom did not win this lucrative contract through an open tender as required in clause 217 (1) of the constitution which reads:

"When an organ of state in the national, provincial or local sphere of government or any other institution identified in national legislation contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective."

The story of how Telkom "won the bid" is so brazen that it demonstrates just how complacent the Zuma administration is about placing itself above the constitution and the law.

The Telkom deal is yet another example of how so many "connected cadres" win government contracts. They were given an inside track, sheltered from competition, and had a clear run to a guaranteed outcome, so that a lot of ANC-insiders could made a lot of money in the process.

And this is how it happened: Sipho Maseko, the CEO of Telkom and a Zuma crony (and a man whose skeleton closet already includes number plate fraud, signing off irregular interest-free loans and handing out a R90m contract without tender) got an exclusive invitation to attend a Forum of South African Directors-General (FOSAD) meeting in January.

Here he was given the sole right to lobby the Directors-General from all government Departments as well as the provinces, motivating for the Broadband tender to be given to Telkom. Shortly afterwards, at the Cabinet Lekgotla, attended by the full Cabinet and Provincial Premiers, Telkom's monopoly was announced as a fait accompli.

This had, of course been on the cards for a long time - long enough those in the know to buy Telkom shares at R12 each and see them surge to a five year high of R78,39 per share last week. As usual, those on the inside track would have seen their investments soar more than six times in value. It is easy to make a killing when you decide how to allocate government tenders while eliminating any competition in the name of the "developmental state".

And, as with Eskom, SANRAL and SAA, the people will pay for weak service and high prices, and bail out inefficient enterprises with their tax money year after year. The reason is simple: there is no incentive for state owned enterprises to succeed, and no accountability if they fail. There is a bottomless pit of public money to tap.

The experience of rolling out broadband in the Western Cape is instructive. We did it in accordance with Section 217 (1) of the Constitution, which I have quoted above.  The only thing that the "developmental state" at national level contributed was to get in our way, by delaying the process by at least two years because of the requirement that we work through the State Information Technology Agency (SITA).

It is interesting to recall that Telkom tendered for the Western Cape Broadband, and did not come anywhere near being competitive in value-for-money. Another company won the bid and is making excellent progress with delivery.

Telkom lost out in a fair competition, which they clearly are not used to facing. This is why they were spared any competition at all when the national Department of Telecommunications lumped them together with other underperforming State Owned Enterprises and gave them the monopoly of broadband roll-out in South Africa.

Expect to hear a lot more blather about a "developmental state" as the ANC moves to cement these monopolies, in the interests of making connected cadres rich, and creaming off millions for the ANC's election campaigns.

Before we have a developmental state, we have to have a capable state.

A state that is used by a President as an employment bureau to bind in reward his political allies - and bind in his political enemies - can never serve the developmental needs of our nation, whether it be electricity, broadband or domestic flights.

But Zuma's plan is to stay in power to stay out of jail. Using the state as a safe refuge for the people who can protect him is his top priority. The 9-point plan is just a decoy.

So expect that, in five years' time, a new President will have to come back to Parliament in 2019 and explain to us why broadband has not been rolled out across South Africa. We'll hear a host of "unfortunate" stories about delays, cost creep and organisational challenges, Jan van Riebeek, and Western conspiracies. And we'll be asked for our patience and understanding as the poor suffer most through lack of broadband access, because the "digital divide" resembles the Grand Canyon.

That will be the inheritance of Zuma's "developmental state".

Again, we'll be told, "There is no crisis. We have a solution". Is it too much to hope that by then, the voters will have seen through the ANC's get-rich-schemes masquerading as solutions.

If the voters do, they will provide the only solution that is needed: getting rid of a corrupt ruling party through the ballot box.

This article by Helen Zille first appeared in SA Today, the weekly online newsletter of the leader of the Democratic Alliance.

Click here to sign up to receive our free daily headline email newsletter