Meanwhile government debt balloons to R4.3trn and 6.5m South Africans go hungry every day. From Moneyweb.
State capture has generated acres of news columns over the last five years but not a single rand has been recovered by the National Prosecuting Authority (NPA) from the criminal acts of those involved in the looting.
It’s sobering to put some macroeconomic context to state capture, as Open Secrets has done in its latest report, ‘Wanted: The State Capture Conspirators‘.
While state-owned enterprises (SOEs) were being plundered, SA’s debt ballooned to R4.3 trillion, 94% of contracts investigated at Passenger Rail Agency of SA (Prasa) were found to be irregular or corrupt, R50 billion was fire-hosed to keep SAA aloft since 2008 – most of this under the disastrous tenure of former chairperson Dudu Myeni – and the losses at Denel between 2017 and 2020 totalled R4.6 billion.
Meanwhile, 64% of South Africans aged 15 to 24 are unemployed and 6.5 million go hungry every day.
What is the total cost of state capture? Anywhere between R50 billion, according to state capture investigator Paul Holden, and R500 billion, according to President Cyril Ramaphosa. That’s a wide field to traverse and it really depends on how you measure it.
If opportunity cost is the real measure, which it should be, then the figure is probably larger than even Ramaphosa’s R500 billion estimate.
The state capture loot made a few thousand immensely wealthy, but snuffed out jobs and opportunities that could have lifted millions out of poverty. It’s a crime of staggering scale and audacity.
The Zondo Commission has filed its damning evidence of corruption and, to the disappointment of many, recommends law enforcement do more work to bring prosecutions. The institutional apathy at the NPA and Hawks does not augur well for what most South Africans would like to see: a line of orange jump suits for the enablers and thieves who cloaked themselves in the language of liberation and freedom while helping themselves to state money and contracts.
Corruption Watch demands accountability and action following release of initial Zondo Commission Report
The looting of Eskom, Transnet and SAA by the Gupta media enterprise
The Zondo Report on SAA, SAAT and SA Express
Where was the ANC when the Guptas took control of Transnet, Eskom and Denel?
At the centre of this tragedy lie the Guptas, appearing seemingly out of nowhere but already sufficiently powerful in 2013 to commandeer a government military base for a family wedding. Within a few years they were summoning sitting ministers to their compound in Saxonwold, Johannesburg, making cabinet selections and infiltrating their men into key positions in SOEs and government.
After years of investigation, the Guptas are at last facing justice for profiteering from the supply of worthless coal from their Optimum Coal Mine. The NPA has filed preservation orders against Gupta-owned businesses, and former Trillian boss Eric Wood has been arrested, alongside former Transnet CEO Siyabonga Gama, for corruption at the state agency. It’s a small, tentative start.
Rajesh and Atul Gupta were arrested in Dubai in June 2022 in what Open Secrets says is a massive leap of progress for state capture cases.
“These advancements by law enforcement agencies are glimmers of hope in an otherwise stark story of unaccountability that has stained South Africa’s democracy,” it comments.
There have been some minor victories along the way – notably former President Jacob Zuma’s failed effort to remove Billy Downer as prosecutor in the arms deal case, which dates back to the late 1990s.
Despite being implicated in the arms scandal, Zuma was still put forward as the ANC’s presidential candidate during its 2007 conference — a clear indication that in the ruling party, corruption scandals are not an obstacle to political ambitions.
The ANC’s lack of vigour in pursuing party members implicated in corruption is at times breathtaking and always self-serving. For example, former health minister Zweli Mkhize is in the running to be the party’s next president, yet is implicated in the Digital Vibes scandal, where a multi-million rand communications contracts was awarded to some of his associates.
Ramaphosa is not without his own controversies, having been accused by Arthur Fraser, the former head of the South African State Security Agency, of kidnapping, bribery, money laundering, and concealing a crime in relation to the alleged theft of $4 million from his Phala Phala Farm. Ramaphosa confirmed a robbery at the farm, but denied any wrongdoing.
Given the tower of evidence of corruption against Prasa, Denel, SAA and SA Revenue Service (Sars), it beggars belief that law enforcement agencies have made such timorous progress in holding the leaders accountable, unless one also understands that institutions such as the Hawks and NPA have been gutted and neutered to prevent just such an outcome.
Armageddon of corruption
At Prasa, billions of rands were funnelled into the pockets of former CEO Lucky Montana, and other executives and businessmen, in what the Special Investigating Unit described in a parliamentary committee briefing in 2021 as an ‘armageddon of corruption’.
This was done through Vossloh España, a Spanish subsidiary of Germany’s Vossloh AG, and Swifambo Rail Leasing, a front company working with Vossloh.
Where did the money end up? It went to ANC fundraisers, to attorneys linked to the Zumas, and then into trusts, private accounts, property and even a suspected helicopter. We know this because of the 2017 Horwath Forensics report commissioned by the Hawks.
The excess on display is sometimes staggering.
Auswell Mashaba was the businessman behind Swifambo Rail Leasing, a front company with no actual business operations or employees. Swifambo was irregularly awarded the R3.5 billion tender by Prasa for the supply of diesel-electric locomotives in 2013, and Open Secrets argues he should be charged by the Hawks for his role in orchestrating the deal, which was set aside by the Gauteng High Court, as well as for violations of several acts. Mashaba, who allegedly expended R500 million from the contract, refused to testify at the Zondo Commission.
Open Secrets suggests the Hawks and NPA should also go after Makhensa Mabunda for his alleged role in setting up the corrupt Prasa contracts, as well as Luyanda Gantsho, former chief procurement officer at Prasa.
When it comes to SAA, former chair Myeni, a Zuma acolyte, presided over massive taxpayer bailouts during her tenure at the airline, and interfered in the awarding of multiple contracts, some of which she directly benefitted from.
The Zondo Commission recommended the Hawks and NPA investigate several irregular contracts at SAA with a view to prosecuting both Myeni and former SAA board member Yakhe Kwinana for fraud and corruption.
Two PwC auditors should also face charges of turning a blind eye to reportable irregularities at SAA and ‘recklessly expressing an opinion on the financial statements that was false in a material respect,’ according to the Open Secrets report. Audit firms PwC and Nkonki should also be held accountable.
For the failures at Denel, Open Secrets wants former Minister of Public Enterprises Lynne Brown in the dock for bypassing normal processes to appoint a Gupta-friendly board.
Former chairperson Daniel Mantsha and the board under him were found by the Zondo Commission to have failed in their fiduciary duties in getting rid of executives who stood in the way of state capture. Former Denel CEO Zwelakhe Ntshepe should also be charged for deviating from approved supply chain management policies, and assisting the Guptas in acquiring VR Laser, a company that won a substantial contract with Denel.
The whole 2015 Denel board should be in the dock for the destruction they brought on the company, says Open Secrets.
For the destruction wrought at Sars, Open Secrets says charges should be brought against Vittorio Massone, consulting firm Bain’s man in Africa, who made one short appearance at the Nugent Commission, never to be seen again under SA skies.
The commission found that “indeed, the evidence of Massone, both the evidence he gave before us, and his evidence in a subsequent affidavit, is littered with perjury, both in what he said and in what he didn’t say.”
Open Secrets wants him charged for violating the Public Finance Management Act (PFMA). “As head of Bain South Africa, he colluded with state officials and politically connected individuals to secure Bain’s contract with Sars, indicating potential violations of the PFMA.”
The Nugent Commission says what occurred at Sars “can fairly be described as a premeditated offensive against the revenue service … Mr [Tom] Moyane’s (former Sars Commissioner) interest was to take control of Sars. Bain’s interest was to make money”.
Bain implemented changes at Sars that would effectively gut its capacity to track, trace, and tax the very wealthy and the very corrupt.
Bain and Company should also be charged for exerting undue influence to obtain its contract with Sars, as well as Moyane, and Zuma – found by Zondo to have played a key role in the destruction of the revenue service, according to Open Secrets.
The central role played by the Guptas in destabilising the country cannot be under-stated. From their redoubt in Dubai, their devastation at the southern tip of Africa is still acutely felt, funded, as always, by South African taxpayers.