CAPE TOWN — It’s not like author and investigative journalist, Marianne Thamm lets sleeping dogs lie or lying dogs sleep – she’ll either kick them awake or expose them. And sometimes their own conspicuous lack of bark or bite exposes them. That’s her contention here. The former ace crime reporter who has morphed into one of South Africa’s most respected and feisty journalists, takes a hard-hitting front-page New York Times piece on our infamous Deputy President David Mabuza and puts its core contentions to the ANC, Mabuza and the Presidency. Silence. She pushes harder. More silence. In my book there are only two possible explanations; any engagement on the NYT exposé would leave the ruling party up the creek without a paddle – or its various communications people are either incompetent or too busy with party puffery. Actually, strike that; being too busy with party puffery and ignoring major reputation-harming events is incompetent. Unless of course, and here’s a likely third option; they’re under instructions to avoid the tar baby at all costs. Even the British Royal family learnt that silence is deadly. It took a media-savvy princess to wake them from their slumber. This story courtesy of the Daily Maverick. – Chris Bateman

By Marianne Thamm

Donald Trump might have fingered the New York Times as a purveyor of “fake news” but The Gray Lady (as the NYT is often referred to) has won 125 Pulitzer prizes and is widely regarded as the most influential daily newspaper in the world.

Which is why one would have imagined that ANC, President Ramaphosa, or his government at least, would have been roused to swift action in an attempt to mop up the considerable reputational damage not only to Mabuza, but the governing party, the ANC-led government and South Africa itself.

The New York Times investigation by Norimitsu Onishi, seasoned NYT Johannesburg bureau chief, and journalist Selam Gebrekidan, titled “South Africa Vows to End Corruption. Are Its New Leaders Part of the Problem?”, was published prominently on Saturday on page one and continued inside including a two-page spread of photographs.

It is a damning portrait of Mabuza, who is revealed as a power-hungry, corrupt man who bought loyalty and his leadership in the party. Mabuza declined to be interviewed for the piece, as did President Ramaphosa.

Mpumalanga province, said the NYT, had become known “as one of South Africa’s most dangerous. Nearly 20 politicians, most from inside the A.N.C., were assassinated in the past two decades, some after exposing graft in public works projects”.

By Monday evening, two days after publication of the devastating investigation, not a peep from the ANC, Mabuza’s office or anyone else.

It was as if the governing party, and the Presidency, and the Deputy Presidency, were hoping that it would all just blow over.

But not making metaphorical eye contact with the NYT and pretending that the investigation will not affect how South Africa is viewed by the international community will not be viewed positively. Even a simple “we have noted the claims and will investigate” might have held back the negative tide for a while.

Instead, over on Twitter, the governing party’s @MyANC account was posting pictures of President Ramaphosa’s breakfast with former President Mbeki and ANC national officials meeting with the executive committee of the Premier Soccer League Executive over at Luthuli house. The account also tweeted about Pule Mabe’s appearance on eNCA to “ unpack #ThumaMina following a successful countrywide rollout over the past weekend”.

Daily Maverick’s emails and WhatsApp messages to Deputy President Mabuza’s office as well as ANC national spokesperson, Pule Mabe, with regard to whether the government or the ANC would be issuing a statement in reaction to the serious allegations in the NYT piece, were met with silence.

An attempt to contact ANC Secretary-General Ace Magashule also disappeared into a void.

The Hawks and the NPA too appear to be distracted (or not) elsewhere with the mounting pile of evidence of State Capture.

So what did Onishi and Bebrekidan find?

First up, the journalists claim that Mabuza, as Mpumalanga Premier, had siphoned off money “from schools and other public services to buy loyalty and amass enormous power, making him impossible to ignore on the national stage and putting him in position to shape South Africa for years to come”.

Under Mabuza’s leadership, wrote the journalists, millions earmarked for schools in Mabuza’s province “have been misspent year after year, according to the national government. His province routinely spent less on poor students than required, and school construction projects have been riddled with inflated costs, government records show”.

Funds had also “disappeared into a vortex of suspicious spending, shoddy public construction and brazen corruption to fuel his political ambitions, according to government records and officials in his party”.

“Nearly a quarter of the primary schools in Mr. Mabuza’s province still have only dilapidated pit toilets, despite ample government funds to fix them. And during his tenure, his province was caught fabricating the passing rates on the annual national exam, enabling him to claim big leaps forward that never happened.”

Over on Deputy President Mabuza’s Twitter timeline, in the meantime, are pics of the former premier, looking comfortable in orange overalls, flanked by Mpumalanga Provincial Government officials on 18 July, Mandela Day, showed him handing out “school uniforms to the needy, and sanitary towels to girl learners. This, we are doing to ensure their dignity.”

The NYT wrote that Mabuza’s political career in the small province flourished as he attracted “legions of new ANC members with government contracts, cash handouts and even KFC meals, according to current and former party officials”.

“His sweeping recruitment drive turned his relatively insignificant province into the ANC’s second-biggest voting bloc. Under the party’s delegate system, his territory became more influential than even Gauteng, the province that includes Johannesburg and Pretoria, with a population three times the size and an economy nearly five times as big.”

Mabuza’s tainted legacy, said the NYT, “casts doubt on the legitimacy of the new government and its bold assertions that the ANC is turning the page on corruption”.

The journalists quote Sandile Sukati, who recruited Mabuza, then a teacher, to build anti-apartheid networks inside South Africa after the 1976 uprisings.

It was only after the country’s first democratic elections that Mabuza “quickly ran into trouble “leading to the province’s first big scandal”. Three years after Mabuza had been appointed MEC of Education in the province schools began to perform badly.

“Mr. Mabuza was feeling the pressure, particularly as powerful ANC leaders returned from exile, often with military credentials that overshadowed his own, several current and former ANC officials said.”

But the following year “brought a stunning improvement. The passing rate inexplicably jumped to 72 percent — an incredible turnaround that catapulted Mpumalanga to No. 2 among the nation’s nine provinces.”

The journalists quote Mr Sukati, now a senior official in the education department, as saying he was suspicious of the sudden sterling performance in the province.

“A whistle-blower exposed the cheating a few weeks later. The real passing rate, the authorities announced, was under 53 percent. Moreover, the doctoring had taken place inside Mr. Mabuza’s residence, where he met with a small circle of bureaucrats, some of whom were later fired, current and former ANC officials said.”

The investigation was never completed and Mabuza “never admitted wrongdoing or suffered any significant consequences. Dropped as education minister, he was named head of housing instead”.

In 2009 Mabuza was appointed by President Jacob Zuma as Premier of Mpumalanga and at the ANC’s elective conference at Nasrec in December 2017 Mabuza pulled off the greatest double-cross, supporting Ramaphosa’s slate instead of that of Nkosazana Dlamini Zuma – primed to be Jacob Zuma’s successor as leader. It was Mabuza who delivered a hollowed-out and bought ANC to Cyril Ramaphosa.

Collen Sedibe, a former ANC leader who grew up with Mabuza and who worked with him, explained to the NYT how the premier concentrated power in his office, establishing a “Rapid Implementation Unit” and stripping authority from local officials.

“That’s how he managed to loot,” Sedibe told the journalists.

The report claims that Treasury officials in the province are investigating the irregular expenses incurred during Mabuza’s term as premier.

If there is a shadow that darkens Ramaphosa and the ANC’s “new dawn” it is individuals in the party like Mabuza who have “outsize’ influence over the governing party and its future, which is inexorably tied to that of South Africa.

In this instance, everybody’s silence speaks volumes. DM

LONDON — South Africa’s famous forensic investigator Paul O’Sullivan has joined thousands of “the good, honest cops” in celebrating today’s Constitutional Court judgement which ejected the tainted head of the country’s National Prosecuting Authority. He describes the ruling as a watershed in the fight against corruption and State Capture, explains where he will be focusing his attention (hint: wants Shaun The Sheep in jail), and shares his idea of who the best person would be to replace former president Jacob Zuma’s legal shield. – Alec Hogg

This is The Rational Perspective, I’m Alec Hogg. In this episode, SA’s Constitutional Court ejects Shaun ‘The Sheep.’ Well, just 3-years into a proposed 10-year term, SA today ridded itself of the deeply tainted Head of the National Prosecuting Authority (NPA). It ruled that NPA chief Shaun Abrahams, who was catapulted 4-levels from a legal version of the backbenchers to the top job, and should never have been appointed in the first place. His elevation came after former president, Jacob Zuma, paid off the previous NPA head with a R17m golden handshake. According to the Public Prosecutor Glynnis Breytenbach in her book, Rule of Law, the appointment of Abrahams was like taking a child, who’s learnt to ride a bicycle with training wheels and giving him a jumbo jet, and then expecting everything to be okay. Shortly after Abrahams took office, the NPA launched a series of unsuccessful actions against Breytenbach, former finance minister, Pravin Gordhan, and a number of other anti-corruption activists. Among those most affected by Abrahams was Paul O’Sullivan of Forensics for Justice. O’Sullivan describes the former NPA national director and his appointees as ‘criminals with gowns’ and he is determined to see them behind bars.

A watershed decision this morning, Paul.

Yes absolutely Alec, and I think I’ve said it a few weeks ago, it’s my turn now and this reinforces that. I think the tide has turned. Over the last 6-weeks we’ve had one good court decision after another. The Appeal Court ruled in favour of IPID, that these dirty cops in the North West could not continue to investigate IPID offices, and these counter investigations they were running. That effectively neutralises them. I think in the week following that the Director of Public Prosecutions in Gauteng South, which is Advocate Andrew Chauke, one of the few prosecutors that’s been nobbled by the Zuptoids. He made the decision to prosecute the NW team for various offences relating to kidnapping and torture. Now we’ve this momentous decision, which effectively sterilises the Zupta-controlled NPA, and should open the floodgates now for prosecutions against the Zuptoids that have been identified in the multiple dockets that have been opened by Forensics for Justice, and Corruption Watch, and OUTA and the other civil service organisations or civil organisations that have taken steps to expose corruption.

So the tide has absolutely turned. It’s only a year-and-a-half ago that Shaun Abrahams was as cocky as, I don’t know how best to describe him, but when he announced that they were going to prosecute Pravin Gordhan and then they had to recant a week or two later, and he blamed it all on Torie Pretorius. Well, Torie Pretorius should take some of the blame. I believe he should go with Shaun Abrahams. In fact, I sent Shaun Abrahams an email this morning and I said, “Listen, take your accomplices with you.” We know who they are and the NPA will now come under new leadership, and hopefully that new leadership will quickly identify who the accomplices of Shaun Abrahams were. If he needs any assistance in that regard, we’ve got stacks of evidence, and then we can get a cleaned up NPA. With a cleaned up NPA, and a cleaned-up Hawks, and a cleaned-up police, we should be able to start bringing these people into the criminal justice system, I’m talking about the Zuptoids, the Guptas, Lucky Montana, the Eskom thieves, the Transnet thieves, some of whom are common, and let’s see some really, good quality prosecutions.

Is it likely that these prosecutions could then be extended into the international arena, given that a number of multinationals were also involved?

Well, you’d be surprise to know, in fact, some of the crimes being committed in SA have a transnational element to them, and you’d be surprised to know that we’ve actually been actively engaging with authorities in different parts of the world in respect to the money laundering by those organisations. I’m really talking about mostly Gupta controlled organisations, so what we’ve done is we’ve gone out of our way to get the international community, in terms of law enforcement, to look at the money laundering of those entities. You would be surprised that even a little place like Gibraltar, they have a financial services entity there, which investigates money laundering. The same with Malta, and Dubai, so we’ve flagged all of these organisations and we’ve asked them to look at the money laundering that’s been going on because every time these crooks want to do something they have to move money from one part of the world to another. If that movement is the proceeds of crime, then it’s money laundering.

Just from a broader perspective, because South Africans have seen the crime rate escalating. They’ve seen cash-in-transit heists going through the roof as well. Is all of this related?

Well, the problem is, when you’ve got an owned and controlled NPA, police, and Hawks you end up with people sitting at the top that are more interested in protecting criminals than they are in seeing criminals being prosecuted. The time and energy they spend, for example, chasing me. You know that I was arrested on multiple charges and trumped up charges. My offices were raided so many times I just lost count of it, and of mine were kidnapped. Now, all the resources they put into trying to silence me, if those resources were utilised in uncovering and dealing with cash-in-transit robbers there would be a few more cash-in-transit robbers in prison and a few less cash-in-transit robberies. But the priorities of the Zuptoid regime were such that the energy was expended instead, on dealing with people like myself, Robert McBride, Pravin Gordhan, Anwar Dramat, Shadrack Sibiya and all those people that were being hounded. There were troops and troops of police officers and prosecutors following us all around, and persecuting us and dragging us into court on trumped up charges. All that has now come to a halt and the tide is now turning the other way.

But is there not a danger that the focus is going to be on those people i.e., putting the corrupt people behind bars rather than where it should be, as far as the general population is concerned, which is that the criminal element seems to be having a pretty free run at the moment. The question is, how do you get the balance between the two?

Well, you have to get a balance. I did an exercise the other day, and I sat down and I worked out, and I listened to all the suspects, and I’m talking about all the Zuptoid suspect and all the people connected to them. I listed all the offences that they’ve alleged to have committed, and some cases where prima facie evidence in that respect, and I came to the conclusion, having worked it out that if we had three separate teams of prosecutors and Hawks involved in bringing them all to justice, it would take 17-years. Now, if it’s going to take 17-years to bring them all to justice for everything they’ve done. My suggestion, which is going to be made to the new National Director of NPA, it’s going to go for the jugular, i.e., to select specimen charges, which are clean, and we can deal with each and every one of them, on one or two specimen charges, just to get them before the courts, and just to get them into prison.

A bit like Al Capone on taxes.

Well, yes, and that’s another area we could look at, is the revenue because these people didn’t only neutralise the Police Service and the NPA, they also neutralised the tax collector (revenue authority) by disposing of all the people that were investigating Zuma, and all of his cronies.

There’s an interesting statement that was issued this morning by Sipho Pityana, who’s been very strong in his activist role, the chairman of AngloGold, and he said that the process of appointing a new head of NPA or the new national director, to replace Shaun Abrahams, needs to be transparent and needs to be done in the open forum, which I suppose sends a signal that there is a worry that one political appointee, and it is a political appointment this role, might just be replaced by another one.

I must admit, I tend to agree. The level of trust that we had in Zuma, was shocking. The general public had no trust in him whatsoever, and when you hear people like Shaun Abrahams saying, ‘how disappointed he was.’ He’s lucky. He’s had 4-years of a very good run, an illegal appointment, and an illegal income – he’s lucky. We’ve failed to prosecute him, which we will be doing, whether it’s privately or through the new NDPP, he’s got to be prosecuted. But the bottom-line is when you’ve got political appointments you end up with a Zuma-fide Public Protector (PP), police, Hawks and NPA and I suppose the counter path is now true. That you will end up with a Ramaphosa styled PP, Hawks, police, and NPA. At the end of the day, I’d certainly prefer the Ramaphosa version than the Zuma version, but these are such important appointments and they’ve been so tainted by political appointments in the past that I think now the time is right to actually, bring around some sort of changes in law, to make sure that these appointments are indeed, transparent.

It was something that the ANC fought for very strongly at CODESA to give it the ability to appoint politically, the right person and surely, those are questions now that have shown that it hasn’t really worked that well. But Paul, if you were to have a vote on who should take over from Abrahams, who would it be?

If one goes from the existing pool of incumbents or the natural process is that a ND would be previously a director at PP. Out of all the directors of PP who are out there at the moment, I fancy Andrew Chauke. He’s not been shy to step forward. He’s made some fairly harsh decisions, which I’m sure has not gone down too well with Shaun Abrahams, but he’s been his own man and he’s done what he’s had to do. Hopefully, Cyril will at least appoint him as an acting-ND. Alternatively, to consider him for the permanent position. He’s senior enough. He’s been at the game long enough, and there’s no holy cows with him. I’ve heard people talking about appointing Glynnis Breytenbach. The problem is, although she’s a very good prosecutor, she’s now politically tainted because it’s obvious what her political leanings are. So I think that could be problematic to appoint someone like that. Somebody talked about appointing Vusi Pikoli well, a lot of water has gone under the bridge since then.

I think we need younger blood or fresh blood. I fancy someone like Andrew Chauke. There are numerous other, good quality prosecutors out there but most of the directors of PP have been got at, and that’s why in Gauteng North you’ve got an acting-director, also in the PCLU you’ve got an acting-director, which is Torie Pretorius. Now, when you’ve got acting-directors for several years it shows me that they’ve kept them as acting-directors because they want to control them. The best way to control them is to keep them as an acting-director, and the minute they don’t do things the way you want them to, you can get rid of them and appoint somebody else.

Paul, what about the honest cops? You’ve talked a lot about criminals with badges, i.e., the dirty cops. But what are the honest cops thinking after today’s Constitutional Court’s decision?

Well, they’re delighted. I’ve spoken to a few colonels on the phone this morning, despite the fact that I’m in the UK. They’ve called me and we’ve had a discussion and they’re delighted. Its demonstrated that the system might have looked broken, but it’s capable of being fixed and that’s what’s happening. People said to me last year, I could have packed my bags and left the country. With all these fake criminal charges against me and all the things they were doing to me, I decided to stay and fight it out and I’m adamant that SA is still the best place in the world, and when we fix these problems, which we are doing, it will, without doubt, be the best place in the world and we’ll feel it. It’ll be tangible.

Well, it was nice to see the Rand reacting very positively to the Constitutional Court judgement. It had got to R15.30 against the USD, and it’s horrible to think that when Ramaphosa, just after he was elected president, it was R11.80, so it’s really been caned and also, hurt by emerging markets. But in the wake of the Constitutional Court judgement, it’s come all the way back to R14.50 so you’re not the only one who sees this as a watershed development, Paul.

Yes, I think we’re going to see some more, positive news in the future as well. On that Ramaphosa front, I’ve been saying, since the beginning of the year, that it would have been a very simple process for Cyril to just suspend him, pending the outcome of an enquiry to consider his fitness to hold office. I’m just surprised that he didn’t go that route. I made the point in March 2018, that every day that man was in office was a day too long. That 6-months more we’ve had of that man in office, we just didn’t need him. So the damage that he’s done has been shocking and it’s going to take this country many years to recover from the damage that people like Shaun Abrahams, Torrie Pretorius, George Malloy, these dirty chief of police and head of Hawks. The damage they’ve done to our country is going to take years and I just hope that by the time we start repairing the country we can send them off to prison where they belong.

And your hitlist, is Jiba on there as well?

Absolutely, if you go back to our website you can see the docket there, if it’s not there we’ll put it up. We opened a docket against Jiba in 2012. It is now 2018, that was 6-years ago. We opened a docket against Jiba, Mrwebi, Mundlili, and a number of other officials in the Hawks and the NPA. Curiously, pretty much everybody we named, they’ve all come under attention since then. So, Jiba… I don’t think Jiba will survive, she’s got to undergo an enquiry to consider her fitness to hold office. It’s in my opinion, untenable that she can be the Deputy National Director of PP. She needs to be gone very quickly.

So she certainly isn’t somebody who would then automatically move up to the next level?

Good Lord no. She had an opportunity. She was acting-ND at one stage, and the damage that she did is just unbelievable. My concern is it’s not the people they decide to prosecute, although that is also a concern, when it concerns people like myself and Dramat, and McBride, and Gordhan. My concern is the people that they take decisions not to prosecute because they’re criminals, and when you’ve got criminals with gowns, and criminals with badges, making decisions not to prosecute people you’re actually saying that the rule of law doesn’t exist in SA. Well hopefully we get rid of this goo now and we can demonstrate to the world that there is a rule of law in SA.

Well, a watershed indeed it has been for SA and its fight against corruption. That was Forensics for Justice’s Paul O’Sullivan, and this has been The Rational Perspective. Until the next time, cheerio.

EDINBURGH — Intuition and anecdotal evidence tell us that corruption is bad for countries, encouraging tax evasion and the development of a grey economy. There is also a direct link between currency strength and a country’s corruption rating, says Sean Peche. The investment analyst has examined the volatility of emerging market currencies and compared these to a leading transparency index. The less corrupt a country is perceived to be, the more stable and strong its currency, finds Peche. The Ranmore Global Equity Fund manager also highlights the disadvantages of land expropriation, explaining how eroding property rights has a significant impact on investor sentiment and, in turn, currency values. – Jackie Cameron

By Sean Peche*

The 49% plunge in the Turkish Lira against the US Dollar over the past year may be all over the news, but it is far from alone. The Argentinian Peso has slumped 41%, the Brazilian Real 17%, the Russian Ruble 12% and the Venezuelan Bolivar has collapsed 100% as its Government slashed 5 zeros off its currency last month. In contrast, South African Rand investors have been relatively unscathed, falling only 8% over the same period.

These currencies are both significant and relevant – according to IMF’s 2017 World Economic Outlook Database, Brazil’s economy was nearly 6 times larger than South Africa’s, Turkey was 2.4x the size, Argentina 1.8x and only Venezuela was smaller but with a currency worth zero, that’s hardly comforting.

The Economist launched the Big Mac Index in 1986, which compares the price of a Big Mac globally in an informal attempt to measure the purchasing power parity of currencies. But these days you can get itemised, crowd sourced data on the cost of living in various cities/countries from the website, Numbeo, where you can see for example that rental prices in Istanbul are 43% lower than Pretoria or that restaurant prices in Ho Chi Minh City are 55% lower than in Cape Town.

These purchasing power parity methods are both interesting but I think it may be more useful to think of a currency as a country’s share price – share prices rise when the market feels confident that prospects are improving, and they fall when growth prospects are declining or the market loses faith in management. So too with currencies, only in place of “management” read “Government.”

If so, then the formula for value destruction for both share prices and currencies applies equally – if management/Government act in their own best interests and against those of shareholders/stakeholders (population & investors) then the share price/currency will fall. I think it’s that simple.

The US dollar is currently strong because economic conditions are good – the country has low unemployment and is enjoying strong GDP growth. Sterling on the other hand is weak because economic conditions are deteriorating – retail sales are weak, house prices are falling, there is uncertainty over Brexit and the market is losing faith in the Government.

Global investors today have a choice of approximately 70 countries that are ranked investment grade so unless Governments respect property rights and act in a way that protects investor interests, they will invest elsewhere. And the cost to the economy of them doing so is high – capital flight leads to currencies falling, driving higher inflation which causes Central Banks to raise interest rates and this higher cost of borrowing often results in a collapse in the local economy. Once currencies collapse, they rarely recover.

Venezuela has more barrels of oil reserves than Saudi Arabia, yet despite a $70 oil price, the country is bankrupt, arguably largely because in 2007 the Government disregarded property rights and tried to change the contract terms with large global oil majors. Exxon, ConocoPhillips and Petro-Canada walked away from their investments in the country, taking with them their oil extraction technologies necessary for extracting Venezuela’s heavy crude. This, together with alleged corruption at state oil firm PDVSA, the country’s only foreign currency generator, has left the supermarket shelves bare, the medicine cabinets empty and the population destitute.

Russia is a country with some of the smartest people on the planet, a rich history and extensive natural resources yet many foreign investors steer clear of it because of fears of corruption and concerns that the rule of law will not be upheld. In 2003, the Government undermined property rights by seizing Yukos’s key oilfields, and in 2014 its annexation of the Crimean peninsula for political gain, unleashed global sanctions and raised the cost of capital, to the financial detriment of its citizens. Today, Gazprom, the Russian oil giant, holds 17% of the world’s natural gas reserves and is expected to earn $17bn of net income this year, yet it has a market value of only $53bn, less than Activision, the US video game company that produces “Call of Duty” and which is expected to earn less than 10% of Gazprom’s earnings.

In Turkey, President Erdogan acted in his own self-interest on the 10^th of July by naming his son-in-law as the new finance minister causing the Turkish Lira to fall 11%. This simple act of nepotism increased the cost of borrowing for the entire nation with the 10 year Government bonds now yielding 19%.

And in Zimbabwe, the disregard of property rights over the years together, with the corruption that followed, has so destroyed the economy that one of its largest banks today, Barclays Zimbabwe, has shareholder equity of only $75m (Barclays UK has shareholder equity of $83bn).

Using Bloomberg data, I analysed the performance of the currencies of the G20 countries over the past 10 years and compared them to their Corruption Index scores compiled by Transparency International (www.transparency.org)  (0 = highly corrupt, 100 = very clean)

Ignoring the currencies pegged to the USD, what the chart below shows, is that the best performing currencies relative to the USD were generally those of the least corrupt countries (corruption Score of 70 or more) and the worst performing currencies were those of the most corrupt countries with a corruption score less than 50.

This may be no coincidence and in fact makes economic sense because corruption and mismanagement raise prices and higher prices dampen economic growth – if Eskom had not been mis-managed over the past 10 years by allegedly buying coal from related parties at inflated prices, electricity prices wouldn’t have tripled and consumers would have had more money left over at the end of each month to spend at restaurants and in shops, thereby driving economic growth. South Africa’s economic growth over the past 10 years has only averaged 1.6%, half the rate of the USA’s 3.2%.

For Governments, the economic lessons in this simple analysis are:

1. Be firm on corruption because corruption raises prices, leading to lower economic growth and a declining currency,
2. A weak currency for an oil importing & food exporting nation increases fuel and food prices, impoverishing the local population and dampening economic growth even further,
3. Treat international investors carefully ensuring that unlike: Russia, Venezuela and Zimbabwe, property rights are always protected. Investors have lots of choice these days.

Investors should always consider professional advice from their advisors before allocating their capital, but perhaps this analysis suggests that the safest way to preserve wealth is to ensure that the bulk of your investable assets are denominated in a basket of strong currencies in countries with low levels of mismanagement and alleged corruption.

• Sean Peche is the portfolio manager of the Ranmore Global Equity Fund. 

CAPE TOWN — As inevitable as the clickety-click of a train on its tracks the highly suspect top execs at Transnet are starting to be picked off, one by one by the perfect candidate for the clean-out job, Pravin Gordhan. He has that Zuptoid-lethal combination, the financial nous as former head of SARS and as the nation’s Finance Minister, and the very recent sting of being victimised by the Zuma State machine bent on gaining total control. Call it Karma, but Pravin Gordhan must be revelling in his new job. That’s entirely besides his own global reputation as a man of skill, experience and integrity. Those qualities alone qualified him for the job. But add a touch of passion and recent victimisation and suddenly you have a very sharp instrument indeed. You could ask why it’s taken so long to suspend these top Transnet execs when the massively inflated Chinese locomotive deal was so obviously crooked. But then you need to look around at other State-owned enterprises to see the board clean-outs and criminal probes – it’s a massive undertaking dealing with industrial-scale graft. – Chris Bateman

By Nkululeko Ncana

(Bloomberg) – Transnet SOC Ltd. moved to suspend Chief Executive Officer Siyabonga Gama and two other executives amid a probe into their roles in questionable procurement contracts entered into by South Africa’s state-owned port and freight-rail operator.

The decision comes amid a push by President Cyril Ramaphosa’s administration to clamp down on graft and address poor management at state-owned companies, which are cash-strapped and pose an increasing risk to the nation’s finances. Executives at state power utility Eskom Holdings SOC Ltd, and South African Airways are among those to have been replaced.

Transnet squandered billions of rand and broke a raft of regulations when it altered the terms of a deal to buy 1,064 new locomotives, an investigation by law firm Werksmans Attorneys found. A separate report commissioned by the National Treasury found Transnet paid R509 million ($35 million) more for 100 locomotives after switching a supply contract to a Chinese rail company from Mitsui & Co. of Japan.

Letters to place Gama and the two other executives on precautionary suspension have been served, Johannesburg-based Transnet said in a statement Thursday, confirming an announcement by Public Enterprises Minister Pravin Gordhan’s office the previous day. The trio – which includes Chief Procurement Officer Thamsanqa Jiyane and supply-chain manager Lindiwe Mdletshe – have until Monday to argue why they shouldn’t be put on leave.

There was an “absolute collapse of control of procurement,” Transnet Chairman Popo Molefe said in an interview on Johannesburg-based Talk Radio 702 Wednesday. One of the executives “claimed that she lost the main computer” that had information on R54 billion of procurement contracts, he said. “One cannot be more grossly negligent than that.”

Gama survived a board shake-up at Transnet in June, retaining his position as CEO while 14 people were appointed to the board. One of the allegations against him is that he obtained an MBA qualification with the help of a service provider to Transnet, the company said.

South African Airways fired its former chief executive officer and chief financial officer in June after finding them guilty of misconduct. Under their leadership, SAA failed to properly value assets or correctly record irregular or wasteful expenditure, according to an Auditor-General report released earlier this year.

CAPE TOWN — If simplicity and veracity are measures of credibility, then DA leader Mmusi Maimane must surely emerge smelling of roses. That’s not hard when the ruling party’s record and convoluted explanations for its behaviour turn the national garden into quagmire of almost impenetrable weed and thorns. Here he highlights the value of accountability in the body politic before graphically illustrating the complete lack of it in the ANC with example after example. All verifiable. The catch line for me is this; if us voters don’t hold parties to account for their actions or inaction, we must assume part responsibility for the outcomes. Ongoing blatant party reward for, or at the very least turning a blind eye to, ongoing corruption, cadre deployment and inefficiency is the pervasive ANC norm. Maimane is challenging voters, prodding their consciences about ongoing ANC support and loss of integrity during and beyond the past decade. The clear message is; beyond State Capture, how much more suffering will you endure before you say at the hustings; “enough is enough, let someone else do the job?” – Chris Bateman

By Mmusi Maimane*

Accountability is like baking powder. If you’ve got it in the mix, the cake is bound to rise. If you haven’t, that cake is staying down no matter how great the other ingredients.

In South Africa, we can have impunity, or we can have progress. We cannot have both. All living systems act on feedback, human beings included. If you steal from your country and get reappointed or promoted, you keep stealing from your country. If you do a bad job and get away with it, you keep doing a bad job.

It’s really that simple.

South Africa needs to build a culture of political accountability, meaning that if there is corruption in a department, or if the department performs poorly, the political principal, the minister, is held to account. Currently, the litmus test is if corruption can actually be pinned on the principal, through a lifestyle audit. This is not enough. That is why outrageous crimes such as Marikana and Esidimeni can be committed against South Africans, and not a single politician is held to account.

The Gauteng ANC Provincial Executive Committee’s message to Qedani Mahlangu and Brian Hlongwa is: it’s ok to kill people and steal from the public. Mahlangu was MEC for Health when 144 mentally ill patients died from neglect. Hlongwa was implicated by the Special Investigating Unit in corruption amounting to R1.2 billion, receiving kickbacks from companies contracted by the provincial health department during his tenure as MEC. Both were re-elected to the PEC this weekend.

Failure to hold wrongdoing to account shifts the blame to those whose responsibility it is to demand accountability. Gauteng Premier David Makhura recognized this when he promised: “There will be justice. I made a commitment to the affected families, that I will walk all the way with them to ensure that justice is served.” If Makhura’s PEC don’t hold Mahlangu and Hlongwa to account, then it falls to voters to hold the Gauteng ANC to account.

Accountability is the essential raising agent that will see South Africa rise out of its current slump. The ANC has time and again failed to hold its public representatives to account for gross misconduct. It claims to uphold women’s rights, yet retained Mduduzi Manana as Deputy Minister of Higher Education after he was convicted for assaulting three women. To add insult to injury, Bathabile Dlamini, was rewarded for the SASSA debacle by being appointed Minister of Women.

The ANC recently appointed convicted fraudster, Tony Yengeni, to chair its committee on crime and corruption. Arthur Fraser, was redeployed to head up Correctional Services having been justifiably accused of treason. In his January cabinet shuffle, President Ramaphosa appointed Bheki Cele as Minister of Police. Cele was dismissed as national police chief in 2012 on allegations of corruption involving inflated leases. Malusi Gigaba was made Minister of Home Affairs, having played an instrumental role in enabling state capture as Minister of Public Enterprises.

The ANC removed Zuma to save themselves ahead of the 2019 election, not to hold him accountable for grand corruption and state capture. They never told him or South Africa what he had done wrong. The official who allowed the Gupta plane to land at Waterkloof base was rewarded with an ambassador’s post.

In every instance, the message is clear: it’s ok to behave like this. And when voters keep voting for the ANC, they send leaders the same message: it’s ok to behave like this.

Even bureaucrats are not held accountable. The ANC’s policy of deploying its branch members into the bureaucracy and as accounting officers means there’s a cosy relationship between politicians and bureaucrats in which no one is ever held to account.

Accountability is not just about fighting corruption and gross misconduct. It is also an essential performance management tool. The standard to remove someone from their job cannot be ANC-level corruption. If a public servant is failing to serve the public with distinction, that must be reason enough to consider giving someone else the opportunity to do a better job.

Angie Motshekga was reappointed as Minister of Education, even as SA continues to rank lowest of the low for reading and maths. Aaron Motsoaledi has overseen the disintegration of our health services and is in no danger of losing his job as a result.

Our public education system is a crime against our children. Our public health system is an insult to the sick. We cannot afford to ignore or reward poor performance. If we want different outcomes, we have to do politics differently in this country. If we change our politics, we can change our nation.

The thing we South Africans need to grasp is: if voters don’t hold parties to account for their actions or inactions, we must assume part responsibility for the outcomes. In a democracy, accountability ultimately rests on the shoulders of the electorate.

The DA will continue to pursue accountability in the De Lille matter. Accountability is a core DA value. No-one can be above the rule of law. No individual’s interests can be above the collective interests of the residents of Cape Town.

This week, Zimbabweans go to the polls. This is a game-changing opportunity for them: a chance to rid themselves of a liberation movement party atrophied by corruption and patronage; a chance to usher in a new era of accountability; a chance for the people of Zimbabwe to reclaim their power and their freedom. It appears to be a close race and we can’t be sure what the outcome will be. But we can be sure that when accountability is a guiding principle, South Africa and Zimbabwe will rise.

• Mmusi Maimane, leader, Democratic Alliance. 

CAPE TOWN — When the IMF predicts South Africa’s budget deficit for this and next year at 0.6 percent higher than our own National Treasury estimate (i.e. IMF reckons 2.9% and 3.3%), then the task begins to look a bit like trying to turn a leaking super-tanker around. Not that President Cyril Ramaphosa’s crack investment drive team hasn’t secured hundreds of billions of rand in Middle Eastern and Chinese promises. It’s just that the SA super tanker is leaking almost as much through its debt-laden and dismally-managed state-owned companies. With international fiscal waters changing from glassy calm to stormy in a mere week or two, a State ship newly up to its gunnels with fresh cargo yet leaking will take a very long time to turn around. It might be that all President Ramaphosa and his highly capable team can do is stop it from sinking. That metaphor also relates to business confidence slipping every month since a two-year-high in January this year. Domestic growth, not foreign investment is the key. Racking up debt to foreign countries with ambitions of global economic domination cannot serve us, long-term. – Chris Bateman

By Ana Monteiro

(Bloomberg) – South African authorities should deepen the fight against corruption and change its labour and product markets as some of the nation’s post-apartheid achievements have “recently unwound” amid slow economic growth, the International Monetary Fund said.

IMF directors recommended “the forceful application of the Public Financial Management Act to increase deterrence against corruption,” the Washington-based lender said in a statement Monday. They called for the completion of pro-investment, job-creating measures in the telecommunications and mining industries, and said more progress is needed to contain fiscal risks from debt-laden state-owned companies.

IMF officials issued the statement after so-called Article IV consultations with local authorities.

Africa’s most-industrialised economy hasn’t grown at more than 2 percent since 2013. Bailouts for troubled state companies such as Eskom Holdings SOC Ltd. and South African Airways have raised risks that the National Treasury will breach its spending limits. Probes by the anti-graft ombudsman indicated that billions of rand was looted from state companies by businessmen and officials with close ties to former President Jacob Zuma. They all deny wrongdoing.

“The country has potential but the key challenge is to raise growth,” Montfort Mlachila, the lender’s senior resident representative in the country, said by phone. “Without increasing growth, you’re really just shuffling the chairs on the deck – you need to expand the size of the pie.”

Per-capita economic growth has turned negative, the jobless rate is near a 15-year high of 26.7 percent, and income inequality is among the highest globally, the IMF said. Business confidence has slipped every month since reaching a more than two-year high in January as industries await real reforms under the tenure of new President Cyril Ramaphosa.

Fiscal risks

“Significant vulnerabilities arise from fiscal risks related to weak and poorly managed state-owned enterprises,” the IMF said. The state’s guarantees of Eskom’s outstanding securities total about 7 percent of gross domestic product, Treasury data show.

The lender maintained its forecast for economic growth this year at 1.5 percent and left the 2019 estimate at 1.7 percent.

The current-account deficit will probably expand to 2.9 percent of GDP this year and 3.3 percent in 2019, it said. In its February budget, the National Treasury forecast a gap of 2.3 percent for this year and 2.7 percent in the following 12 months. The deficit was 2.5 percent of GDP in 2017.

“External risks include large gross external financing needs, and a current-account deficit financed by flows that are prone to sudden reversals in response to abrupt changes in global financial conditions and sovereign credit ratings,” the IMF said.

The government is committed to reducing the deficit and stabilizing debt, the National Treasury said in an emailed statement after the release of the report.

CAPE TOWN — On the one side of the cynicism continuum underlining the Zondo State Capture enquiry there’s deep suspicion of successive South African rulers having used commissions as political tools to outwit, outlast and outplay their opponents. On the other side there are those who say it is truly exceptional in post-colonial democracies to put State Capture on trial. Both are based on accurate history. Here, Ferial Haffajee, a journalist respected for her professional integrity, highlights an under-debated fact. The Zondo Commission has asked for – and got – two years to wrap up its probe and present findings. Longer, if the current powerful pro-Zuma traditionalist ANC lobby, gets its way by extending Zondo’s terms of reference to probe State Capture during the apartheid years. Nice bonus, but of dubious motives, given that its unlikely to resolve our treacle-slow service delivery and dysfunctional ruling impasse, driven in large part by the decade-long corruption legacy. Which brings us to the wider context; the ANC’s mid-term national general council is in 2020. That’s when Ramaphosa can be elbowed out – and the Zondo Commission findings could be too late to bolster his political tenure. When infestation-control depends on time lines, defeat can be snatched from the jaws of victory. Story courtesy of the Daily Maverick. – Chris Bateman

By Ferial Haffajee*

The State Capture commission, headed by deputy chief justice Raymond Zondo, has 180 days, which translates into roughly six months, to complete its work. On Monday, the commission held its first hearings – eight months after that first proclamation.

The first thing Zondo did as chairperson of the State Capture inquiry earlier in 2018 was to ask for more time: two years, which means his report is only likely to be delivered close to the end of 2020.

The commission is off to a lumbering start and with Ramaphosa facing a severe political onslaught in his party, it’s pertinent to ask: will Ramaphosa stay in power long enough to see Zondo Commission completed?

The ever astute Ramaphosa gave Zondo a short timeline as he needed to display real action on State Capture, both to shore up an ANC election victory in the 2019 election and to protect himself from the well-heeled forces of capture who have assembled a war chest to fight him.

With a razor-slim margin of 179 votes at December’s ANC presidential elective conference, Ramaphosa was always going to have to work hard to stay in office. Officials say that he faces a war of attrition on the ANC national executive committee where he is regularly warned that if he does not do the party’s bidding, he will face a recall motion at its mid-term national general council which happens midway between elective conferences – about 2020.

The losing faction, which is closely allied to former president Jacob Zuma, has faced an onslaught by Ramaphosa’s administration which has acted to cut off its resources in the provinces and in the state-owned enterprises where the network of interests had taken root.

But the Zuma-Gupta network is rich and it is using its funds to mobilise against Ramaphosa who needs to take it to the network and put some culprits in jail.

The commission may not be able to deliver in time.

The Guptas, Zuma and his son Duduzane Zuma, the arms dealer and Gupta family lieutenant Fana Hlongwane, as well as his former chief of staff Lakela Kaunda and the former Public Enterprises minister Lynne Brown, were all lawyered up with costly senior counsel this week, showing that they are ready to put up a big and long fight against the Zondo Commission.

By taking so long to get started and by interpreting its role in too legalistic a way, the Zondo Commission could fail Ramaphosa and find itself outliving the president which commissioned its work. The commission has taken months to set itself up. Its first big intervention was to have its term extended while its second was to look for a big budget boost.

Granted, the terms of reference of the commission demand a thorough excavation of State Capture to ensure that it is excised and that the past 10 years’ record of capture are not repeated. The inquiry’s head of the legal team, Paul Pretorius, said on Monday that his work was to answer whether State Capture existed and, if it did, how it had come about and how to ensure that it was not repeated in the future.

That is a huge mandate. To answer that question, investigators, lawyers and commissioners who make up the judicial commission of inquiry will have to investigate at least 20 pieces of law and a plethora of state institutions and state-owned enterprises to understand how networked State Capture operated. International evidence will be led by way of global experts in State Capture providing testimony of how the Zuma-Gupta network fitted into the intersection between politics and international criminal syndicates – what the author Misha Glenny has called a McMafia in his book of the same title.

The inner ring of evidence the commission will hear is what the role of the Gupta family and Zuma were in offering Cabinet positions to former deputy finance minister Mcebisi Jonas and former ANC MP Vytjie Mentor – in other words, how was the national executive compromised or involved in State Capture.

From there, the commission will fan out to consider whether the former president, any member of his national executive, or any public official or employee or board member of state-owned enterprises violated the ethics code or legislation by facilitating or awarding tenders to benefit the “Gupta family or any other family, individual or corporate entity doing business with government or any organ of state”.

The commission will look specifically at whether the New Age newspaper was favoured by government entities – two executives of the Government Communication Service (GCIS), Themba Maseko and Phumla Williams, are likely to give evidence about this.

The terms of reference of the commission can be added to, varied and amended at any time and there is a lobby to expand its remit to look at State Capture during the apartheid years.

If this succeeds and its ambit is expanded, then there is every chance that the commission, which is based on investigations, will exceed even the two years it now has in which to complete its work.

From the commission’s first day on Monday, there will also be inquiries within inquiries: each commissioner has been given an entity or state-owned enterprise to establish a line of questioning into.

A lot of the work has been done for the commission. In addition to former Public Protector Thuli Madonsela’s report into State Capture which undergirds the establishment of the commission, there are veritable libraries of inquiries and reports into State Capture, not only at national government level, but at enterprise and entity level too, much of which is vaulted in amaBhungane and Scorpio’s exposés and coverage of State Capture. If these reports are admitted into evidence, the process can be shortened.

The Zondo commission of inquiry is a remarkable symbol of accountability in action and of the triumph of the rule of law over the forces of capture in South Africa. As Pretorius said in his opening statement, South Africa is exceptional in post-colonial democracies for putting State Capture on trial.

He attributed this to South Africa’s strong civil society, its excellent Chapter 9 institutions (established by the corresponding chapter of the Constitution to protect the Bill of Rights) and the judiciary.

The Commission is likely to be an additional and scholarly process of deep legal introspection and one of fairness and process. But it will be long and lawyerly and complex. And it may very well outlast President Ramaphosa. DM

• Ferial Haffajee is Daily Maverick Associate Editor. In her long and storied career, she has been editor-in-chief of both City Press and Mail & Guardian.

CAPE TOWN — This reportage gives brilliant insight into what drove the debilitating changes at SARS and dovetails perfectly with the overall State Capture narrative. A few key Zuma acolytes were inserted and within months made drastic changes to the world class SARS operating model – not for efficiency’s sake as they will probably bluster to the Nugent Commission, but to concentrate decision making power in their hands with regard to those surrounding former President Zuma, ministers, judges and some high net worth individuals (read Guptas). That the smiling, ruthless former guerilla intelligence chief (Zuma) spread the ethic of fearful compliance far and wide is crystal clear. So far 44 SARS officials with ‘valuable information,’ have refused to give evidence before the commission, prompting Judge Nugent to comment that, “this place reeks of fear.” The fingerprints of former SARS boss Moyane’s and his henchman Jonas Makwakwa are everywhere. In camera hearings might help, but even more than anonymous ANC votes following a No Confidence debate, the identification of ‘traitors,’ won’t be hard. Read the subtle last line reporting the central question Nugent’s commission must answer – and find your own adjectives to reply, using your existing knowledge and its imminent expansion. Story courtesy of the Daily Maverick. – Chris Bateman

By Pauli van Wyk

SARS boss Tom Moyane’s flagship project of restructuring SARS’s operating model turned out to be a disaster helped by consulting firm Bain and Co.

Crucial units and functions were written out of the revenue service’s structure, reporting lines were fractured, SARS lost its ability to measure compliance and tax collection consequently tanked. To plug the holes, Moyane’s SARS withheld VAT refunds (seemingly to everyone except the Guptas), overstated compliance in its public documents and lied to Parliament.

Despite the lies and manipulation, Moyane’s SARS fell short of collecting its due over the last two years. The disaster had a direct influence in the recent VAT hike to 15%. All of this while the taxpayer paid Bain and Co. over R200 million, SARS confirmed in written answers to Scorpio. This is the evidence submitted on Tuesday to the Commission of Inquiry into SARS by two SARS officials, Dr Randall Carolissen and Dr Thabelo Malovhele.

Tom Moyane wanted to fix a non-existing problem.

The verb used repeatedly by SARS officials who consulted with the commission is “broke”, evidence leader Adv. Carol Steinberg said in the hearing.

The new operating model broke SARS, these officials argued. The revenue service was less effective than before Moyane was appointed and in many ways became a cripple whereas it was once a leading light to first world countries.

More disturbing yet is that there is a very real possibility that the public may never know the full extent of the criminality Moyane brought to and allowed inside SARS.

Retired judge Robert Nugent, chairing the commission, expressed his concern on Tuesday about witnesses’ “point-blank” refusal to testify before the commission.

“This place reeks of fear,” he said.

SARS officials with “valuable information” could not be moved to appear before the commission. It may result in the commission being forced to hold an increasing number of in camera hearings, or it will simply lose out on the benefit of specific evidence needed to fulfil its duties.

The teasing questions the Commission of Inquiry will sit with after Tuesday’s testimony are who drastically changed Bain and Co.’s suggested operating model and who instructed the consultancy firm to deviate from the existing blueprint that was SARS’ highly effective operating system. Bain and Co. drafted four operating models that in effect tweaked the existing model slightly.

This was shoved off the table when Moyane’s executive committee adopted the final model that would ultimately prove severely detrimental to SARS.

The fingerprints of Moyane’s henchman Jonas Makwakwa are all over this debacle. Makwakwa headed the steering committee tasked with restructuring SARS and liaised with Bain and Co. on the new operating model. Tuesday’s first witness Dr Randall Carolissen described his unease and utter surprise with how Bain and Co.’s final operating model adopted by SARS collected an inordinate amount of power under the head of Business and Individual Tax (BAIT) – a position occupied by Makwakwa.

With the new operating model, Makwakwa had the last say in all tax matters apart from customs and excise tax. This included the VIP unit servicing the president, ministers, judges and some high net worth individuals as well as what once was the backbone of SARS collecting capacity, the Large Business Centre. 

Makwakwa further ignored warnings from compliance officer Thabelo Malovhele about the crucial compliance function which has somehow “disappeared” from the SARS organogram. Malovhele, Tuesday’s second witness, said after several enquiries he was told a small part of his unit’s function would be absorbed by Makwakwa’s unit. The better part of his compliance unit’s function was not allocated to any unit and no person was assigned to the job. It was ultimately left by the wayside.

Simply put: Makwakwa helped design a SARS model that deviated so much from best and tried practice that it raised eyebrows. This model concentrated an inordinate amount of power under his position that included high profile and high net worth taxpayers – a move that allowed him to wield ultimate control over these taxpayers’ affairs.

Makwakwa further decimated SARS’ ability to monitor whether taxpayers were actually complying with their duties – a function that was the first indication of whether a taxpayer should be referred for audit or criminal investigation. During this time, he was paid an exorbitant amount of mysterious cash he refused to explain once he was caught out – Makwakwa stuffed hundreds of thousands of rand in untraceable cash into ATMs. His fortunes remarkably improved when Moyane was appointed. He refused to explain how he managed to live far beyond his means, spending up to three times per month more than he legitimately received per month from SARS.

Thanks to previous testimony – under oath – before the Nugent Commission, we do however know that Makwakwa was forever meddling in the business of units outside his jurisdiction, seemingly on behalf of high profile taxpayers. He also scrapped the position of an official from the SARS operating model for initiating disciplinary proceedings against his girlfriend, Kelly-Ann Elskie.

The Commission of inquiry has a few dots to connect. According to its terms of reference, the commission must provide president Cyril Ramaphosa with a preliminary report by September and a final report by November.

An important question the commission must answer in order to get to the root of many a tragedy in the once world-class SARS would be: Was Makwakwa reckless or deliberate in his decisions, and by what measure did Moyane as well as Bain and Co. assist him in his quest? DM

CAPE TOWN — If you’ve been too busy putting hard-won bread on your table to keep up with what’s happening at the State Capture Commission, relax – here it is in healthy bite-sized chunks. There’s probably a book on the political psychology of South Africa’s populace to explain how we managed to elect and re-elect a president whom a judge publicly labelled over 13 years ago as being in a “generally corrupt” relationship with his so-called financial adviser and ultimate fall-guy Schabir Shaik. For a measly R500,000 per year Shaik allegedly bribed Zuma to use his cabinet influence to lobby in favour of arms suppliers Thomson CSF. Shaik went to jail for it and now, 13 years later, Zuma has exhausted his side-steps, dummies and power plays and is facing the same music. But back to the Zondo Commission; the brazenness, depth and width of the corruption during the Zuma years makes the arms deal look like a kid’s tea party. The words of Mandela on the steps of Cape Town’s City Hall on the day he was released echo loudly in our new context; “Never again…”. Except that nobody of similar stature and leadership ability is saying them. – Chris Bateman

By Nkululeko Ncana and Mike Cohen

(Bloomberg) – For the past eight years, South Africa was heading down the road to being run as a criminal enterprise.

That’s the picture emerging from a judicial commission of inquiry into the alleged theft of public funds during former President Jacob Zuma’s tenure – a practice locally known as state capture. The first witnesses have implicated members of the Gupta family, who are Zuma’s friends and were in business with one of his sons, in plundering billions of rands from South Africa’s coffers with the tacit assent of the president and law-enforcement agencies.

While much of the information was already public, the testimony has highlighted how widespread the looting was and how deeply compromised state institutions became. Former Finance Minister Pravin Gordhan, who now looks after state companies, previously estimated that more than R100 billion ($6.7 billion) may have been stolen.

“What has emerged so far gives an indication of the brazenness with which Jacob Zuma betrayed his constitutional duties for petty personal interests,” said Mpumelelo Mkhabela, a political analyst at the Pretoria-based University of South Africa’s Department of Political Sciences. “We also got the indication that more is still to come. It provides confirmation of what many people expected.”

The ruling African National Congress forced Zuma, 76, to step down as president in February and replaced him with new party leader Cyril Ramaphosa, 65. Zuma and the three Gupta brothers, who have left the country, have denied wrongdoing. Their lawyers have yet to cross-examine witnesses, and it’s unclear whether they will testify.

Here’s some of what the inquiry, led by Deputy Chief Justice Raymond Zondo, has revealed so far:

• Government tender procedures were deliberately and regularly flouted, resulting in much of the state’s R800 billion annual procurement budget being squandered, according to Willie Mathebula, the Treasury’s acting chief procurement officer.
• Former Deputy Finance Minister Mcebisi Jonas said the Guptas offered him the top ministry post and a 600 million-rand bribe on condition that he fire four senior Treasury officials who were obstructing the family’s business interests. They threatened to kill him if he spoke of the offer, he said.
• Ajay Gupta, the eldest of the three brothers, boasted that the family had made R6 billion from its dealings with the state, controlled the National Prosecuting Authority, intelligence services and the police’s Hawks investigative unit, and that Zuma would do anything they told him to, Jonas said.
• The Hawks police unit told Jonas they intended to block a probe into the alleged bribe attempt and presented him with a pre-written statement about the incident, which he refused to sign.
• Former lawmaker Vytjie Mentor recounted how Ajay Gupta suggested she could become public enterprises minister on condition she agree to scrap South African Airways flights to India, which would enable the family to decide on an airline to run the route. She refused the offer.
• Themba Maseko, the former head of the government communication service, testified that Zuma asked him to help the Guptas, and they told him to direct the government’s R600 million advertising budget to the family’s newspaper and television channel. Maseko said he was fired on Zuma’s orders after he refused to comply.
• Phumla Williams, the acting head of the government communication service, revealed how procurement and appointment processes were flaunted on instruction from Zuma’s communications minister, Faith Muthambi, and other officials, and that the Guptas unfairly benefited as a result.

The commission expects to take two years to complete its work. Future testimony will focus on looting from power utility Eskom Holdings SOC Ltd. and other state companies, as well as how law-enforcement agencies were compromised. Public hearings are due to resume on Sept. 6, when a senior treasury official is scheduled to testify.

While the commission doesn’t have the power to prosecute anyone, it can recommend that law-enforcement agencies take action against those implicated in wrongdoing. Bart Henderson, the chief executive officer of the Africa Institute of Corporate Fraud Management, isn’t optimistic all those responsible for the plunder will face justice.

“The National Prosecuting Authority, in particular in the pursuit of illicit funds, has not exactly covered itself in glory,” Henderson said. “When it comes to getting stolen money back, I wouldn’t hold my breath.”

CAPE TOWN — If our law enforcement and prosecuting authorities showed one third of the application and drive exhibited by forensic crusader for justice, Paul O’Sullivan, we’d have a very different society. The problem is that the Zuptoid/State-Captured middle order and many high-ranking officers are still in place, their claws and beaks somewhat clipped by President Ramaphosa’s crackdown on corruption, but nevertheless omnipresent. O’Sullivan knows this and has teamed up with the formidable former top State prosecutor Gerrie Nel and AfriForum to bring them to book. If the incumbents, constitutionally obliged to uphold the rule-of-law, were doing their jobs, they’d fumigate their own houses and not leave it to outside civic-minded citizens. The legacy of political obedience is all-pervasive and the ANC reformist faction is seemingly not keen to risk a backlash. Perhaps we could say law enforcement and prosecution has moved from brazenly carrying out the political agenda of the Zuma-regime to withdrawing some of the more outrageous charges (including against O’Sullivan) and reluctantly turning on a few of their own. You could argue that it’s a barometer of President Ramaphosa’s real influence. Setting former Finance Minister Pravin Gordhan and a few straight cops on Zuptoid criminals is perhaps all our new president is able to do. Story courtesy of the Daily Maverick. – Chris Bateman

By Greg Nicolson*

Forensic investigator Paul O’Sullivan is on a mission to clean up the justice system after the National Prosecuting Authority (NPA) dropped charges of fraud and extortion against him in the Palm Ridge Magistrates Court on Wednesday. It brings an end to a string of criminal charges levelled against him, where he was found not guilty or the charges were withdrawn.

Speaking through Forensics for Justice, on Thursday O’Sullivan called on President Cyril Ramaphosa to root out dodgy operators from the justice system, which he accused of conspiring to lay trumped-up charges to intimidate opponents of former President Jacob Zuma’s administration and allies.

“It will take many years for the country to recover from the disease of state-sponsored looting and corruption that very nearly brought our country to its knees,” said O’Sullivan.

“The repair process cannot begin until the rule of law is returned. It is no point appointing a new head (of the Directorate for Priority Crime Investigation) when he is surrounded by hyenas, who daily seek to undermine his attempts to rid this country of the scourge of corruption.”

O’Sullivan’s first targets are from the NPA’s Priority Crime Investigation Litigation Unit (PCLU) and SAPS’s Directorate for Priority Crime Investigation Unit (DPCI), known as the Hawks.

Representing O’Sullivan, law firm Hurter Spies outlined his plans in a letter to PCLU Deputy Director Advocate Jabulani Mlotshwa on Thursday.

They said the unit was “working hand-in-glove with rogue members of the DPCI, as the ‘unit of choice’ to deal with politically motivated false allegations, against not only our client, but against the likes of Anwar Dramat, Robert McBride, Shadrack Sibiya, Johan Booysen, Glynnis Breytenbach, Julius Malema, Pravin Gordhan and the so-called ‘SARS Three’”.

“Multiple fake cases have been run against me, all of which have now failed,” said O’Sullivan.

In 2016, O’Sullivan was dragged off a plane by police and apprehended in front of his young daughters on a unique charge related to his multiple passports. He said his office had been unlawfully raided and he and his lawyer had been kidnapped.

He linked the multiple cases brought against him to charges he laid against high-ranking officials, including former acting SAPS commissioner Khomotso Phahlane, former Hawks boss Berning Ntlemeza, top NPA officials Nomgcobo Jiba and Lawrence Mrwebi, former SAA chair Dudu Myeni, and the former president’s relations Edward and Khulubuse Zuma.

O’Sullivan’s lawyers said the allegations against them included corruption, fraud and racketeering involving amounts over R10 billion, but not one case was opened. At the same time he accuses the NPA and Hawks of subjecting him to intimidation and harassment.

The forensic investigator now wants to get nolle prosequi certificates so he can lead private prosecutions against Mlotshwa and Warrant Officer Kobus Vlok, whom he accuses of working together to invent charges against him. He alleges they should be charged with unlawful arrest, perjury, defeating the ends of justice, torture and theft of a criminal docket.

O’Sullivan has been working in tandem with AfriForum, which in 2016 announced its intention to lead a number of private prosecutions.

“I know the full details of each and every one of the criminals responsible for this gross abuse of power and constitutional rights and will not rest until each and every one of them has been brought to justice,” he said.

“We shall give the state a further 30 days to institute proceedings against those we have identified and, if they refuse to do so, we shall start the process ourselves,” he said of the officials who he claims wronged him.

He also plans to issue a “substantial damages claim”, including constitutional damages, for his treatment by the authorities. He wants Mlotshwa, Vlok and others within the NPA and Hawks to be held personally liable for the costs.

Hawks spokesperson Brigadier Hangwani Mulaudzi said on Thursday that O’Sullivan is welcome to engage Hawks leader Godfrey Lebeya about his allegations, like any other citizen, but the unit cannot act until he details his claims.

NPA spokesperson Hurbetin Phindi Louw-Mjonondwane confirmed that the NPA dropped the Palm Ridge Magistrate’s Court matter against O’Sullivan, but she would not comment on the reasons why. She would not respond to O’Sullivan’s allegations that the various charges were aimed at harassing and intimidating him.

O’Sullivan recently made headlines after it was revealed he was paid R1.2 million by Vodacom in an out-of-court settlement after the company gave his personal information to the legal team of jailed former crime boss Radovan Krejcir in 2014. Krejcir had threatened O’Sullivan, who relentlessly investigated the criminal kingpin.

Recently he has targeted management consultants McKinsey and law firm Hogan Lovells, calling on them to reveal more information about their alleged role in Zuma-era corruption and be held accountable. DM

• Greg Nicolson left his hometown of Melbourne to move to Johannesburg, beset by fears Australia was going to the dogs. With a camera and a Mac in his bag, he ventures out to cover power and politics, the lives of those included and those excluded. He can be found at the tavern, searching for a good story or drowning a bad one.

EDINBURGH — Intuition and anecdotal evidence tell us that corruption is bad for countries, encouraging tax evasion and the development of a grey economy. There is also a direct link between currency strength and a country’s corruption rating, says Sean Peche. The investment analyst has examined the volatility of emerging market currencies and compared these to a leading transparency index. The less corrupt a country is perceived to be, the more stable and strong its currency, finds Peche. The Ranmore Global Equity Fund manager also highlights the disadvantages of land expropriation, explaining how eroding property rights has a significant impact on investor sentiment and, in turn, currency values. – Jackie Cameron

By Sean Peche*

The 49% plunge in the Turkish Lira against the US Dollar over the past year may be all over the news, but it is far from alone. The Argentinian Peso has slumped 41%, the Brazilian Real 17%, the Russian Ruble 12% and the Venezuelan Bolivar has collapsed 100% as its Government slashed 5 zeros off its currency last month. In contrast, South African Rand investors have been relatively unscathed, falling only 8% over the same period.

These currencies are both significant and relevant – according to IMF’s 2017 World Economic Outlook Database, Brazil’s economy was nearly 6 times larger than South Africa’s, Turkey was 2.4x the size, Argentina 1.8x and only Venezuela was smaller but with a currency worth zero, that’s hardly comforting.

The Economist launched the Big Mac Index in 1986, which compares the price of a Big Mac globally in an informal attempt to measure the purchasing power parity of currencies. But these days you can get itemised, crowd sourced data on the cost of living in various cities/countries from the website, Numbeo, where you can see for example that rental prices in Istanbul are 43% lower than Pretoria or that restaurant prices in Ho Chi Minh City are 55% lower than in Cape Town.

These purchasing power parity methods are both interesting but I think it may be more useful to think of a currency as a country’s share price – share prices rise when the market feels confident that prospects are improving, and they fall when growth prospects are declining or the market loses faith in management. So too with currencies, only in place of “management” read “Government.”

If so, then the formula for value destruction for both share prices and currencies applies equally – if management/Government act in their own best interests and against those of shareholders/stakeholders (population & investors) then the share price/currency will fall. I think it’s that simple.

The US dollar is currently strong because economic conditions are good – the country has low unemployment and is enjoying strong GDP growth. Sterling on the other hand is weak because economic conditions are deteriorating – retail sales are weak, house prices are falling, there is uncertainty over Brexit and the market is losing faith in the Government.

Global investors today have a choice of approximately 70 countries that are ranked investment grade so unless Governments respect property rights and act in a way that protects investor interests, they will invest elsewhere. And the cost to the economy of them doing so is high – capital flight leads to currencies falling, driving higher inflation which causes Central Banks to raise interest rates and this higher cost of borrowing often results in a collapse in the local economy. Once currencies collapse, they rarely recover.

Venezuela has more barrels of oil reserves than Saudi Arabia, yet despite a $70 oil price, the country is bankrupt, arguably largely because in 2007 the Government disregarded property rights and tried to change the contract terms with large global oil majors. Exxon, ConocoPhillips and Petro-Canada walked away from their investments in the country, taking with them their oil extraction technologies necessary for extracting Venezuela’s heavy crude. This, together with alleged corruption at state oil firm PDVSA, the country’s only foreign currency generator, has left the supermarket shelves bare, the medicine cabinets empty and the population destitute.

Russia is a country with some of the smartest people on the planet, a rich history and extensive natural resources yet many foreign investors steer clear of it because of fears of corruption and concerns that the rule of law will not be upheld. In 2003, the Government undermined property rights by seizing Yukos’s key oilfields, and in 2014 its annexation of the Crimean peninsula for political gain, unleashed global sanctions and raised the cost of capital, to the financial detriment of its citizens. Today, Gazprom, the Russian oil giant, holds 17% of the world’s natural gas reserves and is expected to earn $17bn of net income this year, yet it has a market value of only $53bn, less than Activision, the US video game company that produces “Call of Duty” and which is expected to earn less than 10% of Gazprom’s earnings.

In Turkey, President Erdogan acted in his own self-interest on the 10^th of July by naming his son-in-law as the new finance minister causing the Turkish Lira to fall 11%. This simple act of nepotism increased the cost of borrowing for the entire nation with the 10 year Government bonds now yielding 19%.

And in Zimbabwe, the disregard of property rights over the years together, with the corruption that followed, has so destroyed the economy that one of its largest banks today, Barclays Zimbabwe, has shareholder equity of only $75m (Barclays UK has shareholder equity of $83bn).

Using Bloomberg data, I analysed the performance of the currencies of the G20 countries over the past 10 years and compared them to their Corruption Index scores compiled by Transparency International (www.transparency.org)  (0 = highly corrupt, 100 = very clean)

Ignoring the currencies pegged to the USD, what the chart below shows, is that the best performing currencies relative to the USD were generally those of the least corrupt countries (corruption Score of 70 or more) and the worst performing currencies were those of the most corrupt countries with a corruption score less than 50.

This may be no coincidence and in fact makes economic sense because corruption and mismanagement raise prices and higher prices dampen economic growth – if Eskom had not been mis-managed over the past 10 years by allegedly buying coal from related parties at inflated prices, electricity prices wouldn’t have tripled and consumers would have had more money left over at the end of each month to spend at restaurants and in shops, thereby driving economic growth. South Africa’s economic growth over the past 10 years has only averaged 1.6%, half the rate of the USA’s 3.2%.

For Governments, the economic lessons in this simple analysis are:

1. Be firm on corruption because corruption raises prices, leading to lower economic growth and a declining currency,
2. A weak currency for an oil importing & food exporting nation increases fuel and food prices, impoverishing the local population and dampening economic growth even further,
3. Treat international investors carefully ensuring that unlike: Russia, Venezuela and Zimbabwe, property rights are always protected. Investors have lots of choice these days.

Investors should always consider professional advice from their advisors before allocating their capital, but perhaps this analysis suggests that the safest way to preserve wealth is to ensure that the bulk of your investable assets are denominated in a basket of strong currencies in countries with low levels of mismanagement and alleged corruption.

• Sean Peche is the portfolio manager of the Ranmore Global Equity Fund. 

CAPE TOWN — As inevitable as the clickety-click of a train on its tracks the highly suspect top execs at Transnet are starting to be picked off, one by one by the perfect candidate for the clean-out job, Pravin Gordhan. He has that Zuptoid-lethal combination, the financial nous as former head of SARS and as the nation’s Finance Minister, and the very recent sting of being victimised by the Zuma State machine bent on gaining total control. Call it Karma, but Pravin Gordhan must be revelling in his new job. That’s entirely besides his own global reputation as a man of skill, experience and integrity. Those qualities alone qualified him for the job. But add a touch of passion and recent victimisation and suddenly you have a very sharp instrument indeed. You could ask why it’s taken so long to suspend these top Transnet execs when the massively inflated Chinese locomotive deal was so obviously crooked. But then you need to look around at other State-owned enterprises to see the board clean-outs and criminal probes – it’s a massive undertaking dealing with industrial-scale graft. – Chris Bateman

By Nkululeko Ncana

(Bloomberg) – Transnet SOC Ltd. moved to suspend Chief Executive Officer Siyabonga Gama and two other executives amid a probe into their roles in questionable procurement contracts entered into by South Africa’s state-owned port and freight-rail operator.

The decision comes amid a push by President Cyril Ramaphosa’s administration to clamp down on graft and address poor management at state-owned companies, which are cash-strapped and pose an increasing risk to the nation’s finances. Executives at state power utility Eskom Holdings SOC Ltd, and South African Airways are among those to have been replaced.

Transnet squandered billions of rand and broke a raft of regulations when it altered the terms of a deal to buy 1,064 new locomotives, an investigation by law firm Werksmans Attorneys found. A separate report commissioned by the National Treasury found Transnet paid R509 million ($35 million) more for 100 locomotives after switching a supply contract to a Chinese rail company from Mitsui & Co. of Japan.

Letters to place Gama and the two other executives on precautionary suspension have been served, Johannesburg-based Transnet said in a statement Thursday, confirming an announcement by Public Enterprises Minister Pravin Gordhan’s office the previous day. The trio – which includes Chief Procurement Officer Thamsanqa Jiyane and supply-chain manager Lindiwe Mdletshe – have until Monday to argue why they shouldn’t be put on leave.

There was an “absolute collapse of control of procurement,” Transnet Chairman Popo Molefe said in an interview on Johannesburg-based Talk Radio 702 Wednesday. One of the executives “claimed that she lost the main computer” that had information on R54 billion of procurement contracts, he said. “One cannot be more grossly negligent than that.”

Gama survived a board shake-up at Transnet in June, retaining his position as CEO while 14 people were appointed to the board. One of the allegations against him is that he obtained an MBA qualification with the help of a service provider to Transnet, the company said.

South African Airways fired its former chief executive officer and chief financial officer in June after finding them guilty of misconduct. Under their leadership, SAA failed to properly value assets or correctly record irregular or wasteful expenditure, according to an Auditor-General report released earlier this year.

CAPE TOWN — On the one side of the cynicism continuum underlining the Zondo State Capture enquiry there’s deep suspicion of successive South African rulers having used commissions as political tools to outwit, outlast and outplay their opponents. On the other side there are those who say it is truly exceptional in post-colonial democracies to put State Capture on trial. Both are based on accurate history. Here, Ferial Haffajee, a journalist respected for her professional integrity, highlights an under-debated fact. The Zondo Commission has asked for – and got – two years to wrap up its probe and present findings. Longer, if the current powerful pro-Zuma traditionalist ANC lobby, gets its way by extending Zondo’s terms of reference to probe State Capture during the apartheid years. Nice bonus, but of dubious motives, given that its unlikely to resolve our treacle-slow service delivery and dysfunctional ruling impasse, driven in large part by the decade-long corruption legacy. Which brings us to the wider context; the ANC’s mid-term national general council is in 2020. That’s when Ramaphosa can be elbowed out – and the Zondo Commission findings could be too late to bolster his political tenure. When infestation-control depends on time lines, defeat can be snatched from the jaws of victory. Story courtesy of the Daily Maverick. – Chris Bateman

By Ferial Haffajee*

The State Capture commission, headed by deputy chief justice Raymond Zondo, has 180 days, which translates into roughly six months, to complete its work. On Monday, the commission held its first hearings – eight months after that first proclamation.

The first thing Zondo did as chairperson of the State Capture inquiry earlier in 2018 was to ask for more time: two years, which means his report is only likely to be delivered close to the end of 2020.

The commission is off to a lumbering start and with Ramaphosa facing a severe political onslaught in his party, it’s pertinent to ask: will Ramaphosa stay in power long enough to see Zondo Commission completed?

The ever astute Ramaphosa gave Zondo a short timeline as he needed to display real action on State Capture, both to shore up an ANC election victory in the 2019 election and to protect himself from the well-heeled forces of capture who have assembled a war chest to fight him.

With a razor-slim margin of 179 votes at December’s ANC presidential elective conference, Ramaphosa was always going to have to work hard to stay in office. Officials say that he faces a war of attrition on the ANC national executive committee where he is regularly warned that if he does not do the party’s bidding, he will face a recall motion at its mid-term national general council which happens midway between elective conferences – about 2020.

The losing faction, which is closely allied to former president Jacob Zuma, has faced an onslaught by Ramaphosa’s administration which has acted to cut off its resources in the provinces and in the state-owned enterprises where the network of interests had taken root.

But the Zuma-Gupta network is rich and it is using its funds to mobilise against Ramaphosa who needs to take it to the network and put some culprits in jail.

The commission may not be able to deliver in time.

The Guptas, Zuma and his son Duduzane Zuma, the arms dealer and Gupta family lieutenant Fana Hlongwane, as well as his former chief of staff Lakela Kaunda and the former Public Enterprises minister Lynne Brown, were all lawyered up with costly senior counsel this week, showing that they are ready to put up a big and long fight against the Zondo Commission.

By taking so long to get started and by interpreting its role in too legalistic a way, the Zondo Commission could fail Ramaphosa and find itself outliving the president which commissioned its work. The commission has taken months to set itself up. Its first big intervention was to have its term extended while its second was to look for a big budget boost.

Granted, the terms of reference of the commission demand a thorough excavation of State Capture to ensure that it is excised and that the past 10 years’ record of capture are not repeated. The inquiry’s head of the legal team, Paul Pretorius, said on Monday that his work was to answer whether State Capture existed and, if it did, how it had come about and how to ensure that it was not repeated in the future.

That is a huge mandate. To answer that question, investigators, lawyers and commissioners who make up the judicial commission of inquiry will have to investigate at least 20 pieces of law and a plethora of state institutions and state-owned enterprises to understand how networked State Capture operated. International evidence will be led by way of global experts in State Capture providing testimony of how the Zuma-Gupta network fitted into the intersection between politics and international criminal syndicates – what the author Misha Glenny has called a McMafia in his book of the same title.

The inner ring of evidence the commission will hear is what the role of the Gupta family and Zuma were in offering Cabinet positions to former deputy finance minister Mcebisi Jonas and former ANC MP Vytjie Mentor – in other words, how was the national executive compromised or involved in State Capture.

From there, the commission will fan out to consider whether the former president, any member of his national executive, or any public official or employee or board member of state-owned enterprises violated the ethics code or legislation by facilitating or awarding tenders to benefit the “Gupta family or any other family, individual or corporate entity doing business with government or any organ of state”.

The commission will look specifically at whether the New Age newspaper was favoured by government entities – two executives of the Government Communication Service (GCIS), Themba Maseko and Phumla Williams, are likely to give evidence about this.

The terms of reference of the commission can be added to, varied and amended at any time and there is a lobby to expand its remit to look at State Capture during the apartheid years.

If this succeeds and its ambit is expanded, then there is every chance that the commission, which is based on investigations, will exceed even the two years it now has in which to complete its work.

From the commission’s first day on Monday, there will also be inquiries within inquiries: each commissioner has been given an entity or state-owned enterprise to establish a line of questioning into.

A lot of the work has been done for the commission. In addition to former Public Protector Thuli Madonsela’s report into State Capture which undergirds the establishment of the commission, there are veritable libraries of inquiries and reports into State Capture, not only at national government level, but at enterprise and entity level too, much of which is vaulted in amaBhungane and Scorpio’s exposés and coverage of State Capture. If these reports are admitted into evidence, the process can be shortened.

The Zondo commission of inquiry is a remarkable symbol of accountability in action and of the triumph of the rule of law over the forces of capture in South Africa. As Pretorius said in his opening statement, South Africa is exceptional in post-colonial democracies for putting State Capture on trial.

He attributed this to South Africa’s strong civil society, its excellent Chapter 9 institutions (established by the corresponding chapter of the Constitution to protect the Bill of Rights) and the judiciary.

The Commission is likely to be an additional and scholarly process of deep legal introspection and one of fairness and process. But it will be long and lawyerly and complex. And it may very well outlast President Ramaphosa. DM

• Ferial Haffajee is Daily Maverick Associate Editor. In her long and storied career, she has been editor-in-chief of both City Press and Mail & Guardian.