This week the Sunday Times reported in its business section on how companies with close links to Industrial Development Corporation chairman, Wendy Luhabe, had benefitted from loans from the IDC as well as a BEE deal. The article, headed "Lolly rolls in for Luhabe," reported that according to the IDC's 2008 annual report the parastatal had approved two R50m loans to the Women's Private Equity Fund - which Luhabe had founded.

Another company in which Luhabe had an interest, Wiphold, had also apparently benefitted when "IDS subsidiary, Hans Merensky Holdings," effectively handed over 26% of its wood business to black empowerment partners last year.

Luhabe denied any conflict of interest, telling the newspaper that "When there is a transaction from Wiphold or the Women's Fund, management will bring that to my attention. The IDC board has a procedure that makes sure that directors who may be involved in a transaction that has to be decided by the board do not get the paperwork for that transaction and they do not participate in the decision- making on that transaction."

In its response to the Sunday Times report COSATU stated that "It is simply not good enough for [Luhabe] to say that she had recused herself from board meetings that made decisions involving her companies. It should be illegal for anyone who has a position in a Development Finance Institution - or any company in which they have a interest - to receive any contracts, tenders or any other form of financial benefit from that body. No-one must be allowed to be on a board that allocates money to their own companies." (See here).

The SACP also expressed its outrage: "People who serve in public institutions" it noted in a statement, "must not behave like parasites on the resources that are supposed to benefit the ordinary workers and the poor of our country... These Luhabe transactions are a further expression of the extent to which BEE has been captured by narrow parasitic elite, using the state for its own self-enrichment." (See here)

There is a saying that a man who wants to beat a dog will always find a stick. And clearly Luhabe has made herself a target by backing her husband, former Gauteng Premier Mbhazima Shilowa, and his efforts to get an ANC breakaway movement off the ground. This story seems to be a slightly more robust stick than that initially picked up by the ANC Youth League several days ago but the motive is similar (see here).

What is rather curious though is that the IDC's involvement with the WPEF has been known for a rather long time. The Fund was launched in mid February 2003. The Sunday Times even reported on it in the Business Times under the heading "Sisters are knuckling down and doing it for themselves." Almost all the facts now causing controversy were reported on then.

The article (February 16 2003) stated that the "Women's Private Equity Fund 1" was the "the brainchild of entrepreneur Wendy Luhabe" and that R85m of its starting capital of R105m came from the IDC (R50m) and the Development Bank of South Africa (R35m). According to other press reports the "Wendy Luhabe Consortium" owned 55% of the venture, while the balance was in the hands of Glenhove Fund Managers.

The fact that Luhabe happened to be chairman of the IDC at the time seemed to attract no critical comment at all. Subsequent annual reports of the IDC all make reference to an R50m apparently interest free loan to the WPEF and note that Luhabe is "Chairman of the Fund [and] 33% shareholder in the management company of the fund." The 2008 report however makes reference to two such loans.

Quite what the financing arrangement was between the IDC and the Fund is unclear, as is the extent to which Luhabe benefitted personally. The question this article is concerned with is why an arrangement which generated little concern for five-and-a-half years - though it was well known- is now regarded as being worthy of critical scrutiny and reporting.

Setting aside the self-serving nature of some of the political attacks on Luhabe, it points to an interesting aspect of human nature, and one which should be of some concern to the wealthy political elite displaced from office at Polokwane.

In the Old Regime and the Revolution Alexis de Tocqueville observed that by the time of the French revolution the aristocracy played little role in the governance of the countryside, even as they were still able to enrich themselves by continuing to impose feudal dues, levies, and taxes on a land owning peasantry. It was this combination of being able to extract wealth while failing to serve any useful purpose which aroused such a fierce and violent hatred. As he noted:

"When the nobility possesses not only privilege but power, when it governs and administers, its special rights can be both greater and less noticed. In the feudal era, we looked at the nobility in more or less the same way as we regard government today; one bore the burdens it imposed in consideration of the guaranties that it offered. The nobles had offensive privileges, they possessed burdensome rights, but they assured public order, dispensed justice, executed the law, came to the help of the weak, and ran public affairs. To the extent that the nobility ceased to do these things, the weight of its privileges seemed heavier, and finally their very existence seemed incomprehensible."

In her commentary on this "great discovery" Hannah Arendt wrote that the French people hated an aristocracy which had lost its "power more than it had ever hated them before, precisely because their rapid loss of real power was not accompanied by any considerable decline in their fortunes. As long as the aristocracy held vast powers of jurisdiction, they were not only tolerated but respected."

Yet when noblemen lost their power, their enduring privileges become intolerable. "The people felt them to be parasites, without any real function in the rule of the country. In other words, neither oppression nor exploitation as such is ever the main cause for resentment; wealth without visible function is much more intolerable because nobody can understand why it should be tolerated."

Over the past decade or so many members of the governing elite in South Africa used their proximity to political power to help seriously enrich themselves. These rapidly acquired fortunes provoked much less opposition than one might expect precisely because they were seen as being married to real power.

Yet now that this elite has been ejected from government its position becomes far more vulnerable - for its enduring wealth is no longer combined with any ‘visible function.' In the Sunday Times report one can perhaps see the early signs of a growing intolerance as a result.

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