Big business and state capture: Step up and own up

Big business came in for scathing criticism from Lord Peter Hain for being asleep on the job during the state capture that allowed former president Jacob Zuma and the Gupta family to bring the country to its knees. These include local and international banks, auditing firms and big-buck consultancies. South Africa needs accountability now if it is to move forward, he said.

Lord Hain was speaking during the Summer School Extension Lecture Series at the University of Cape Town (UCT) on 11 March, his talk titled “Zuptas, Bain, global complicity and Zondo”.

“It’s high time that the business community owned up and we ostracise anybody still playing that game,” he added. Because of their complicity, corrupt politicians and their officials were aided in their looting and massive corruption.”

An exiled former anti-apartheid leader and United Kingdom cabinet minister, Hain talked about his half century of campaigning against apartheid and corruption and what the country needs to rebuild.

‘Never again’

While blame for the infamous Zuma State Capture decade is focused mainly on a corrupt president and his cronies, South African and global business were culpable too, Hain said.

“Without that, Zuma and the Guptas would not have been able to accomplish what they did. Nor could the Guptas’ money laundering billions [of rands] out of the country without global banks like HSBC and the Bank of Baroda enabling them to do so. And this sorry story continues to this day with ministers and local councillors still wanting backhanders to dispense procurement contracts.”

“Every business should say, ‘Never again’.”

While frustration levels are high, given President Cyril Ramaphosa’s lack of decisiveness, prosecutors are under-resourced and disabled and there is rampant police corruption …  [this is] no excuse for business failing to step up.

“They will not help a successful economy, kickstart growth or attract foreign investment until businesses do so. Every business should say, ‘Never again’.”

Hain also called on South Africans to stand up and insist their country is put back on track, “with all business, politicians and all civil society and institutions mobilising together in support of a programme of empowerment, transformation, developments and integrity in accordance with the Constitution and the rule of law”.

“Otherwise, South Africa will not emerge from its past and current morass of corruption, dysfunctional public services, cronyism, crime, poverty, negative economic growth, and unemployment.”

Learn from struggle history

To do this, South Africans should learn from the country’s struggle history.

“A pariah under apartheid, South Africa is now cold-shouldered internationally, principally because of state capture … I urge you all to cooperate and fight to make South Africa once again a shining light to the world, as it was under Nelson Mandela. Today, tragically, the many thousands of freedom struggle activists have been betrayed by the ANC politicians who have looted and brought the country nearly to its knees.”

“Learn from the struggle giants. Nelson Mandela and all of the others didn’t defeat apartheid on their own.”

His message to those who believe the task is too onerous is: “Learn from the struggle giants. Nelson Mandela and all of the others didn’t defeat apartheid on their own. They were leaders of a mass movement [and] many tens and thousands of ordinary people in the most oppressive conditions resisted, and risked their own lives and themselves by becoming activists.”

“They all did something that contributed to one of the most successful movements for change in modern history … They defeated a powerful police state. They refused to be subjugated by an economic system or feeding profitably at the trough of racism. And they defeated the most institutionalised and micromanaged system of racism the world has ever known.”

Support Zondo Commission’s recommendation

Hain suggested South Africa change the game radically – and soon. History had taught that big change doesn’t normally come from the top.

“It never did under apartheid. It never has anywhere else.”

Implementing the Zondo Commission’s 2002 report is the task not only for the president and his cabinet and the law enforcement agencies, but also of the South African business community.

The recommendations of the Chief Justice of South Africa, Raymond Zondo, were many and varied, including an independent public procurement, an anti-corruption agency, a permanent anti-state capture and corruption commission, improved and extended whistle-blower protection, enhanced and improved parliamentary oversight, amendments to the electoral system, and end to cadre deployment.

“These are constitutionally based as a countervailing force against state corruption at all levels,” Hain noted. “But whether these reforms will be fully implemented remains to be seen.”

Mafia state

In the meanwhile, crime and corruption continued unabated, he said, citing South Africa’s general degeneration into a mafia state. This includes illegal mining, sabotage at Eskom and Transnet, continued assassinations, organised criminal activity in the public and private sectors, extensive procurement corruption, organised disruption in the transport industry, insurrectionary outbreaks and threats, attacks on the Constitution and attacks on independent journalists by leading politicians in the ANC and the EFF.

“While the government of the day and state institutions bear primary responsibility for the restoration of a corruption-free, and functioning state, I don’t believe it’s only up to them. Their committed and energetic involvement of the private sector is essential, both to acknowledge its complicity in state capture, and to prevent any reoccurrences or new outbreaks.

Hain said professional actors, including firms of auditors, lawyers, and management consultants, assisted and enabled state capture. And whistle-blowers were neither encouraged nor protected but hounded and even murdered.

“Cooperation with law enforcement agencies was largely absent,” he added. “Banks failed abysmally in their duty to prevent, detect and report financial irregularities and suspected financial crime, which was going on at a massive scale, including money laundering on a vast scale. This that saw billions of looted runs flow through their digital pipelines to their international branches, especially in Dubai, Hong Kong, and London.”

“South Africa, including the private sector, even where it was not directly involved in state capture, slept through those years.”

Big business failed to accept responsibility.

“It’s no exaggeration to say that South Africa, including the private sector, even where it was not directly involved in state capture, slept through those years, and in some cases, is still doing so.”

But more than passive obedience to the law is now required of the private sector if the continuing decline of South Africa, its infrastructure and the fabric of its society is to be reversed, Hain said.

Positive measures needed

Hain suggested South Africa adopt a programme of seven positive measures. First, a universal and uncompromising refusal to pay backhanders for public procurement contracts. Second, education within businesses and related institutions as to what constitutes corruption, how to identify corruption, and what steps to take if it’s encountered.

Third, dedicated executives or divisions within entities to ensure lawful and ethical compliance in all dealings. Fourth, encouragement and protection of whistle-blowers, such as Cape town’s Athol Williams, a former Bain and Company global partner, who Hain said, “had been outrageously treated, hounded out of the country, in fear of his life”.

Fifth, there should be an active alertness to new patterns of crime and corruption and cooperation with investigation and law enforcement agencies. Sixth, an end to silence where the state is failing or threatening to fail, including calling state functionaries to account.

Seventh, the refusal by consultants or legal firms to sanctify wrongdoing and state-owned enterprises or government with whitewashing reports, or establishing shell companies [and] front companies, hiding the true beneficial owners, as they did for the Guptas, and enable them to siphon off their billions and lose them through the financial system.

“All of this is essential to re-establish international investor confidence that was high under the Mandela and Mbeki regimes, and it will not happen otherwise,” Hain noted.

He said that foreign direct investment is vital to the country’s future economic success, its growth and prosperity, as well as to eradicating poverty and unemployment.

“Yet it is currently way below the minimum level required for economic recovery and decent levels of growth. In short, there must be a universally adopted strategy to restore legal and ethical practice in the South African economy, with the business sector providing the kind of strong lead it has palpably and sadly so far failed to do.”

To conclude, Hain said, “I urge you all to cooperate and fight to make South Africa once again a shining light to the world, as it was under Nelson Mandela.”