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Paul Hoffman | Why are SOEs not recouping the loot of state capture?

Matthew Chaskalson SC, an evidence leader at the State Capture Inquiry, gave an interview to Cape Talk on 27 May 2021. During the interview the willingness of McKinsey to refund its loot of state capture came under discussion. Almost as a parting shot, Chaskalson let it be known that there are 17 other companies in a similar position to McKinsey which are not in the process of disgorging their loot. He did not identify these miscreants of the corporate world.

At much the same time, over in parliament, the cuts to the justice budget were being bewailed by the members of the justice portfolio committee. The NPA and the Hawks are among the institutions to suffer cuts. How this can make sense at a time when so much loot is awaiting collection is difficult to fathom. Veteran ACDP member, Steve Swart MP, pointed out that these institutions can pay for themselves and more, if they are functioning as they should. Therein lies the rub. They are not operating optimally. Leaders in both the NPA and the Hawks complain of the compromised and “hollowed out” status of the anti-corruption machinery of the state. Vacancies, lack of resources and lack of capacity to mount the complex work required to hold the corrupt to account and to recover the considerable loot of state capture bedevil the functioning of the criminal justice administration. As the estimates of the extent of the looting are in the R1 to R1.5 trillion range, it is plain that there is a great deal of stolen money in the hands of looters and their friends which needs to be, and should be, collected urgently.

In the executive branch, Minister of Finance, Tito Mboweni, has let it be known that the weary taxpayer will be called upon to bail out state owned companies in the near (2022 to 2025) future and in years ahead. He is reported to say that:

The level of operational and financial underperformance, as well as weak balance sheets of most SOEs, suggest that SOEs may struggle to meet their maturing obligations as and when they become due and (pay them) solely from internally generated resources, based on historic trends. As such, current indications suggest that SOEs may have to rely on fiscal support or have their debts rolled over or refinanced.’

The “internally generated resources” obviously do not include the recovery of loot by SOEs that have been pillaged during the Zuma era state capture project. Indeed, very little loot has been recovered. Gupta assets frozen in the UK and USA are left to rot instead of being followed up by the state and recovered for repatriation and refund to the SOEs looted by the Guptas.

There is an astonishing lack of political will in government to do the basic and simple work required to put in hand the raking back of the loot. It is understandable that some low ranking civil servants are afraid of the consequences of taking steps against the looters, many of whom remain politically well-connected. For this reason, it is appropriate for the department of public enterprises to give consideration to the establishment of a special purpose vehicle to take cession of claims for loot. The SPV could be populated with experienced debt collectors who have no reservations about taking on crooked comrades to get back the proceeds of state capture.

There is a ray of hope in all the darkness; on 4 August 2020 the NEC of the ANC announced that it has instructed the national cabinet urgently to establish a permanent stand-alone, specialised and independent body that is able to “deal with corruption” using a multi-disciplinary approach. This instruction accords with the criteria established by the Constitutional Court in the Glenister litigation, criteria currently conspicuously absent from the criminal justice administration due to the efforts of the Zuma administration to neutralise those working as corruption-busters.

The urgency of the situation, as stressed by the NEC, is apparently and unfortunately lost on cabinet. During the SONA in February 2021, and without referring to the resolution of the NEC, the President announced that it is envisaged that a body somewhat like that required by the NEC would be established after a two year long lead in period during which a still to be formed Advisory Council would deliberate on it. The cabinet has in mind a statutory body that answers to parliament, not the executive branch of government. While the latter feature is a step in the right direction, the formation of a new statutory body leaves SA no better off than it was before the Scorpions were dissolved. Clearly the NEC demand for a permanent body has to be met if we are serious about countering the corrupt who infest SA.

It is worrying that cabinet envisages kicking the can down the road for two years via the advisory council, an unnecessary step given that the court has been explicit in the criteria it requires. These criteria are not “nice to haves” they are obligatory, as is required by the rule of law. They have become known as the STIRS criteria, a useful acronym that is obviously familiar to the NEC of the ANC. An elite and dedicat body of Specialists who are Trained properly to function Independently and are Resourced in guaranteed fashion is required. Unlike the Scorpions, the new body should enjoy Secure tenure of office. Vusi Pikoli, a former NDPP, has even gone so far as to suggest that executive interference with the corruption busters should be made a criminal offence.

The vital security of tenure of the corruption busters is best achieved by establishing a Chapter Nine body to do the work of preventing, combating, investigating and prosecuting grand corruption in all of its manifestations in SA. Careful appointment mechanisms must be devised and all recruits should be subjected to the type of integrity testing that the SIU has had in place for about ten years.

The second ray of hope is that the DA is putting the finishing touches on draft bills to enable the new body and to amend the Constitution to accommodate it. It is now up to civil society organisations that expect the state to respect, protect, promote and fulfil human rights to do what they can to generate the necessary political will to effect the reform so urgently needed. The creation of the SPV for recouping loot does not require any legislation, but it does presuppose that there are people in government who would like to see as much as possible of the loot returned to all looted entities so as to remove the burden of replacing it from the shoulders of the taxpayers of SA.

Paul Hoffman SC is a director of Accountability Now. His new book Countering the Corrupt is available for free on the homepage of www.accountabilitynow.org.za

27 May 2021.

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