BETRAYAL OF THE PROMISE: HOW SOUTH AFRICA IS BEING STOLEN

May 2017

State Capacity Research Project Convenor

Authors

Professor Haroon Bhorat (Development Policy Research Unit, University of Cape Town),

Dr. Mbongiseni Buthelezi (Public Affairs Research Institute (PARI), University of the Witwatersrand), Professor Ivor Chipkin (Public Affairs Research Institute (PARI), University of the Witwatersrand), Sikhulekile Duma (Centre for Complex Systems in Transition, Stellenbosch University), Lumkile Mondi (Department of Economics, University of the Witwatersrand), Dr. Camaren Peter (Centre for Complex Systems in Transition, Stellenbosch University), Professor Mzukisi Qobo (member of South African research Chair programme on African Diplomacy and Foreign Policy, University of Johannesburg), Professor Mark Swilling (Centre for Complex Systems in Transition, Stellenbosch University), Hannah Friedenstein (independent journalist - pseudonym)

Executive Summary

This report suggests South Africa has experienced a silent coup that has removed the ANC from its place as the primary force for transformation in society. Four public moments define this new era: the Marikana Massacre on 16 August 2012; the landing of the Gupta plane at Waterkloof Air Base in April 2013; the attempted bribing of former Deputy Minister of Finance Mcebisi Jonas to sell the National Treasury to the shadow state in late 2015; and the Cabinet reshuffle in March 2017. Resistance and capture is what South African politics is about today.

Commentators, opposition groups and ordinary South Africans underestimate Jacob Zuma, not simply because he is more brazen, wily and brutal than they expect, but because they reduce him to caricature. They conceive of Zuma and his allies as a criminal network that has captured the state. This approach, which is unfortunately dominant, obscures the existence of a political project at work to repurpose state institutions to suit a constellation of rent-seeking networks that have been constructed and now span the symbiotic relationship between the constitutional and shadow state. This is akin to a silent coup.

This report documents how the Zuma-centred power elite has built and consolidated this symbiotic relationship between the constitutional state and the shadow state in order to execute the silent coup.

At the nexus of this symbiosis are a handful of the same individuals and companies connected in one way or another to the Gupta- Zuma family network. The way that this is strategically coordinated constitutes the shadow state. Well-placed individuals located in the most significant centres of state power (in government, SOEs and the bureaucracy) make decisions about what happens within the constitutional state. Those, like Jonas, Vytjie Mentor, Pravin Gordhan and Themba Maseko who resist this agenda in one way or another are systematically removed, redeployed to other lucrative positions to silence them, placed under tremendous pressure, or hounded out by trumped up internal and/or external charges and dubious intelligence reports. This is a world where deniability is valued, culpability is distributed (though indispensability is not taken for granted) and where trust is maintained through mutually binding fear. Unsurprisingly, therefore, the shadow state is not only the space for extra-legal action facilitated by criminal networks, but also where key security and intelligence actions are coordinated.

It has been argued in this report that from about 2012 onwards the Zuma-centred power elite has sought to centralise the control of rents to eliminate lower-order, rent-seeking competitors.

The ultimate prize was control of the National Treasury to gain control of the Financial Intelligence Centre (which monitors illicit flows of finance), the Chief Procurement Office (which regulates procurement and activates legal action against corrupt practices), the Public Investment Corporation (the second largest shareholder on the Johannesburg Securities Exchange), the boards of key development finance institutions, and the guarantee system (which is not only essential for making the nuclear deal work, but with a guarantee state entities can borrow from private lenders/banks without parliamentary oversight). The cabinet reshuffle in March 2017 has made possible this final control of the National Treasury.

The capture of the National Treasury, however, followed five other processes that consolidated power and centralised control of rents:

- The ballooning of the public service to create a compliant politically-dependent, bureaucratic class.

- The sacking of the ‘good cops’ from the police and intelligence services and their replacement with loyalists prepared to cover up illegal rent seeking (with some forced reversals, for example, Robert McBride)

- Redirection of the procurement-spend of the SOEs to favour those prepared to deal with the Gupta-Zuma network of brokers (those who are not, do not get contracts, even if they have better BEE credentials and offer lower prices).

- Subversion of Executive Authority that has resulted in the hollowing out of the Cabinet as South Africa’s pre-eminent decision-making body and in its place the establishment of a set of ‘kitchen cabinets’ of informally constituted elites who compete for favour with Zuma in an unstable crisis-prone complex network;

- The consolidation of the Premier League as a network of party bosses, to ensure that the National Executive Committee of the ANC remains loyal.

At the epicentre of the political project mounted by the Zuma- centred power elite is a rhetorical commitment to radical economic transformation. Unsurprisingly, although the ANC’s official policy documents on radical economic transformation encompass a broad range of interventions that take the National Development Plan as a point of departure, the Zuma-centred power elite emphasises the role of the SOEs, particularly their procurement spend. Eskom and Transnet, in turn, are the primary vehicles for managing state capture, large-scale looting of state resources and the consolidation of a transnationally managed financial resource base, which in turn creates a continuous source of self-enrichment and funding for the power elite and their patronage network.

In short, instead of becoming a new economic policy consensus, radical economic transformation has been turned into an ideological football kicked around by factional political players within the ANC and the Alliance in general who use the term to mean very different things.

The alternative is a new economic consensus. Since 1994 there has never been an economic policy framework that has enjoyed the full support of all stakeholders. A new economic consensus would be a detailed programme of radical economic transformation achieved within the constitutional, legislative and governance framework. The focus must be a wide range of employment- and livelihood-creating investments rather than a few ‘big and shiny’ capital-intensive infrastructure projects that reinforce the mineral-energy-complex.

For this to happen, an atmosphere of trust conducive for innovation- oriented partnerships between business, government, knowledge institutions and social enterprises is urgently required. None of this is achievable, however, until the shadow state is dismantled and the key perpetrators of state capture brought to justice.

The full report can be accessed here - PDF.