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Opportunity presents itself in among a state in disaster

The private sector is going to have a lot of useful spare capacity during the coronavirus crisis

18 March 2020 – 18:27 Paul Hoffman

Innovation and entrepreneurial guru Nic Haralambous has summed up the outlook for SA in terms that are difficult to dispute:

“Rolling blackouts across the country; we have officially entered another economic recession; water shortages and droughts in many cities; veld fires sweeping through Cape Town and other regions; Covid-19 destroying tourism and restricting standard levels of spending that maintain our dire economy; political unrest and a failing ruling party; corrupt and bankrupt state-owned enterprises; and rampant crime and corruption throughout the nation”

Significantly corruption features in most of his points.

Shawn Hagedorn, an independent strategy adviser, writing on economic stagnation becoming a crisis, has a different take:

“Covid-19 has devastated already lacklustre global growth prospects. Policy pivots are urgently required yet preparedness remains hindered by warped perceptions of both the status quo and what is possible.”

He adds: “The country’s vulnerability is further heightened as none of our leaders can produce a credible growth plan. We can make this far easier by objectively identifying and scrutinising the most economically disabling false beliefs.” 

What will surface, he says, are insights along the following lines:

  • Corruption is not the cause of our economic malaise; rather it is a symptom of broad political dysfunction.
  • Framing SA’s economic challenges in terms of inequality, rather than poverty and unemployment, dodges accountability while precluding workable solutions.
  • Unemployment and poverty will remain at politically combustible levels unless value-added exports surge.
  • SA’s most globally relevant workers are unemployed, poor and poorly educated.
  • Corruption and incompetence across government and SOEs are symptoms, as is inequality.
  • The country’s stagnation amid high poverty and extreme unemployment rates traces directly to policy failures — yet those failures are tolerated by the majority of the electorate, which is poor.”

State of disaster

The SA government is so short of available cash that the Development Bank of Southern Africa had to give a big loan to SAA and take a guarantee of repayment from the government. That is how dire the situation was before a state of disaster due to the coronavirus was declared.

The situation is now far worse. The economy, the engine of taxes, will inevitably slow down during the crisis and the ways of addressing this “cash crunch” need urgent attention.

One way of pro-actively getting the negativity of the current recession reversed is to become more engaged and active on the question of raking back the proceeds of the looting involved in state capture. There has been some unnecessary reticence on this front that needs to be abandoned in favour of a muscular effort by the state and the state-owned enterprises to get back from the corrupt that which has been stolen from the poor.

Happily, in a way, the private sector is going to have a lot of useful spare capacity during the coronavirus crisis. Lawyers, accountants, forensic experts and certified fraud examiners are going to be at a loose end due to the crisis.

If the government can awaken the necessary political will to recover the proceeds of the looting, a great deal of cash can be brought back into the legitimate system.

To achieve this happy outcome, a little “thuma mina” is required, as the president has suggested when he announced the state of disaster. The lawyers, accountants and others, those who feel underemployed during the crisis, should be inspanned to recover the loot wherever it is in the world.

The Legal Practice Council, the Law Societies, the General Council of the Bar, the similar bodies for accountants and certified fraud examiners can all be asked to devise a suitable tariff for the collection of the loot of state capture and the various victims of state capture can call for tenders to recover the public funds that have been stolen from the poor.

It may be possible to incentivise participation via a percentage commission system in which an agreed portion of the loot is used to pay those who recover it using their professional expertise in a manner that would, given the economic slowdown of the crisis, otherwise go to waste.

The civil recovery of the loot anywhere in the world is easier to prove than the oft-threatened corruption prosecutions, which require proof beyond a reasonable doubt. The civil standard is no more than proof on a balance of probabilities. Indeed, a freezing order is available if prima facie proof is available.

The success of recovery of loot could, however, pave the way towards following up with criminal prosecutions of those who have been relieved of their loot. The time frame for a civil freezing order is measured in months, not years. The experience is that a civil freezing order is often followed by the surrender of the looter and by the recovery of the loot that can be found due to the systems available in the international banking system.

The court-ordered surrender of the loot renders looters vulnerable to the type of criminal prosecution that we are told could otherwise take six to nine years to bring to court.

A good example is the case of the dismissal of the former national director of public prosecutions Mxolisi Nxasana by former president Jacob Zuma. The civil case reversing this abomination is completed; the prosecution of Zuma for his corrupt activity would take a few days if the state could build up the courage to charge him. The punishment is a minimum of 15 years in jail.

The prosecution cannot expect more than the 783-count current prosecution on Shaik-related charges that will take years and a small fortune to prove. The National Prosecuting Authority needs to box smarter. The institutional victims of state capture need to use the talent available in the private sector to get the looters to pay back the money.

The political will to make this happen is all that is missing.

• Hoffman is a director of Accountability Now

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