Corruption in South Africa

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Corruption in South Africa includes the private use of public resources, bribery, and improper favoritism.[1] The 2017 Transparency International Corruption Perceptions Index assigned South Africa an index of 43 out of 100, ranking South Africa 71 out of 180 countries.[2] This ranking represents a downward direction change with a drop of two points down from 45 (2016 CPI).[3] Countries with scores below 50 are believed to have a serious corruption problems.[4] Recent scandals surfacing since 2016 involving former South African President Jacob Zuma have drawn attention to corruption in South Africa. Cyril Ramaphosa, the newly elected South African entrepreneur, has vowed to root out existing corruption and further the development of anti-corruption initiatives.[5]

South Africa has a robust anti-corruption framework, but laws are inadequately enforced and accountability in public sectors such as healthcare remain low.[6] In addition, negative sanctions have been put in place to discourage whistle blowers from reporting corrupt activities in both the public and private sectors. A recent scandal involving the Gupta family and former South African President Jacob Zuma, has pushed Zuma out of office while resurfacing a long list corruption complaints against the former president.[7] Complaints against Zuma range from the former leader’s lavish spending of state funds to the delegation of contracts to businesses with familial connections or close ties.[8]

Perception of Corruption in South Africa[edit]

In 2013, the Afrobarometer report shows a substantial increase in the public perception of corruption since 2008.[9] While a little over half of all people on the continent of Africa (56%) believe that their country could be doing more to curb corruption, 66% of South Africans believe that the government could be taking more steps to restrict corrupt activity.[10] South Africa ranks among the lowest countries where citizens have experienced on a first-hand basis. Only 15% of South Africans admit to having paid a bribe in the past year. The average percentage of Africans paying bribes in the prior year falls around 30%.[11]

Between 2011 and 2015, approval of Former President Zuma was halved to 36% due to reports of corruption and inadequate leadership.[12] The majority of South Africans believe that different branches of government should oversee other branches' work. Around a quarter of South Africans feel as if they should be responsible for holding elected representatives and leaders accountable.[13]

Apartheid and Corruption[edit]

Apartheid, the system of discrimination and segregation on racial grounds, dominated the ideology and political system in pre-1994 South Africa. This system, which intentionally excluded non-Afrikaners from civil service jobs, government positions, and politics altogether, came to an end in 1994 when the African National Congress headed by Nelson Mandela conducted negotiations with the South African government at the time.[14] Before the abolition of Apartheid, civil service was a pervasive medium for rent-seeking and the preferential treatment of Afrikaners.[15] Policies favoring Afrikaner cultural and educational systems, the awarding of government contracts to Afrikaner businesses, and the funding of parastatal Afrikaner organizations was a common phenomenon during the era of Apartheid. The building of rural homeland states in the 1980s created ideal projects for rent-seeking with many homeland leaders presiding over massive patronage networks.[16]

Around the same time, the ANC was receiving funds from foreign donors in order to build up stronger opposition parties to protest the South Africa's National Party and Apartheid.[17] These leaders were given large sums of money without formal book-keeping. Even though there is no evidence of corruption or rent-seeking, the informal habits and the notion of ANC leaders being above accounting remained with the party which rose to power after the transition.[18] The ANC's tradition of loyalty to the organization was shaped in the Apartheid era, with clear implications in modern-day ANC politics. In the years leading up to the inevitable transition of power, corruption was rampant in most government departments, intelligence agencies, the police, and the military.

There is much ongoing debate regarding the origin of corruption and the definition of corruption in South Africa. The inherited bureaucracy and political culture originating in the Apartheid era renders corruption issues hard to trace and tackle.[19] The creation of a new economic elite consisting of ANC members or associates following 1994, created a context where corruption flourished under the new regime.[20] Both the new and old political order created their own types of corruption, benefitting those in their inner circles. Although forms of endemic corruption were passed on to the new order, since 1994, new forms of corruption have persisted and layered themselves on top.

Types of Corruption in South Africa[edit]

Although South Africa is subject to various types of corruption, two prevalent forms are tenderpreneurism and BEE fronting. Recent scandals involving South African politicians and the Gupta family have brought both types of corruption into the public spotlight. Petty Corruption is another relevant issue affecting public services and day-to-day life in South Africa.

Tenderpreneurism[edit]

A tenderpreneur is an individual who enriches themselves through corrupting the awarding of government tender contracts, mostly based on personal connections and corrupt relationships - although outright bribery might also take place - and sometimes involving an elected or politically appointed official (or his or her family members) holding simultaneous business interests.[21] This is often accompanied by overcharging and shoddy workmanship. The previous case involving the Gupta family and their close ties to the Zuma regime can be classified as tenderpreneurism.

BEE Fronting[edit]

BEE-fronting is an abuse of the rules governing Black Economic Empowerment (BEE), where qualifying persons are given a seat on the Board of Directors of a company while having no decision-making power in the company, in order to qualify the company for government contracts in terms of BEE.[22] In June 2017, Netcare, a company which operates the largest private hospital network in South Africa, was accused of BEE fronting.[23] Since then, 17 other complaints have been filed against various South African companies regarding BEE-fronting.[24] Related to this is Cadre deployment and employment, which is an official ANC policy.[25]

Petty Corruption[edit]

Petty corruption is a prevalent issue in South Africa's public service sphere. A survey conducted by the ISS National Victims of Crime tested the extent and nature of petty corruption in South Africa.[26] One of the main issues highlighted by this survey is South Africans lack of information regarding how to report corrupt acts.[27] The fear of facing repercussions for whistleblowing and the pervasive belief that reporting corruption will not cause change are two other concerns revealed by the 2011 survey.[28] Respondents of the survey were most likely to pay bribes to traffic officials, followed by police officers and officials in employment offices.[29] These findings support the notion that the perception of corruption in local government departments such as traffic and municipal policing is high.[30] The frequency of bribes involving police officers is concerning due to their role in tackling corruption and illicit behavior. Only 5.6% of South Africans reported experiencing forms of petty corruption involving either money, favors, and gifts.[31] Even though the percentage of experienced corruption is low, the high perception of corruption has led respondents to prioritize corruption as the second most prevalent crime in the country.[32]

Corruption Scandals[edit]

President Zuma and Corruption[edit]

In 2018, South Africa’s highest court found Mr. Zuma guilty of violating the constitution in regard to lavish spending of 246m Rand of state funds towards Zuma’s homestead in Nkandla.[33] After a home invasion and the subsequent rape of one of Zuma’s four wives, Zuma undertook the means to upgrade security measures.[34] A report by South Africa’s public protector in 2014 found Zuma had inappropriately allocated state funds to finance additional home improvements such as the addition of a swimming pool, amphitheater, visitor center, and cattle enclosure to his property.[35] Zuma’s time in office has been marked by controversy and outside accusations of corruption. Zuma’s close relationship with the Gupta family has been highlighted in the former South African Public Protector’s report on State Capture.[36] Zuma’s resignation on February 14 comes after months of pressure from the ANC.[37]

In a recent turn of events, Former President Jacob Zuma will be prosecuted on 12 counts of fraud, one of racketeering, two of corruption and one of money laundering. Zuma will face corruption charges involving the 2.5 billion dollar South African Arms Deal.[38]

Gupta Family Scandal[edit]

The State of Capture report released by the Public Protector in 2016 reports on the dangers of state capture in the case of South Africa.[39] The 355 page document reports Mr. Zuma’s preferential treatment of the Gupta family and the involvement of Jacob Zuma’s son and the Gupta family.[40] The allegations reported on include the Gupta Family's involvement in the appointments and removals of members of the South African cabinet, the unlawful awarding of state contracts to Gupta linked companies or persons, the banks’ preferential treatment of Gupta owned companies, and Zuma’s conflict of interest concerning his position and business dealings.[41] The Gupta brothers, who have been major players in South African business for over a decade, began growing their relationship with former President Jacob Zuma in 2003 as he occupied the office of deputy president. Since 2003, both parties have benefited from an understanding in which the Gupta family financed the Zuma family while President Zuma appointed friendly officials and awarded lucrative state contracts to the Gupta empire.[42] South African authorities are seeking to recover up to 4.07 billion USD lost to Gupta’s deals.[43] Jacob Zuma’s son, Duduzane, and Gloria Ngeme Zuma, one of Mr. Zuma’s wives, received large transfers and monthly salaries for positions held at one of the Gupta firms.

The Gupta family has engaged in a wealth of suspicious transactions with a series of shell companies and state-owned enterprises.[44] The OCCRP has reported on Transnet’s contract with South China rail and subcontracts with Gupta run organizations. State controlled companies like Eskom and Transnet were in the center of illicit deals with Gupta companies.[45] Eskom, the state electricity provider, has deposited over R1.8 billion into various Gupta accounts. Eskom paid Trillion, a Gupta-controlled enterprise, over R466 million for managerial help at a time when Trillion had a few employees. Other companies sub-contracted by Eskom reveal dealings with Tegeta, another Gupta-run company. Eskom spent double the average amount purchasing coal from Tegeta, becoming the most expensive supply contract in Eskom history.

An arrest warrant for Ajay Gupta has been issued in February 2018.[46] The Gupta family mansion was raided in the same month, leaving all three brothers on the run.

Bank of Baroda Scandal[edit]

The Bank of Baroda, an Indian state-owned bank, has played a crucial role in the Gupta family’s business deals.[47] According to a report by the Organized Crime and Corruption Reporting Project (OCCRP), the Bank of Baroda allowed the Gupta family to move millions of dollars in alleged corrupt business transactions to offshore accounts.[48] Although the Bank of Baroda denies the illicit behavior, the documents report that the bank’s South African branch issued unapproved loan guarantees, ignored internal compliance efforts, and averted regulators from learning about suspicious transactions in a way that benefited the Guptas’ network.[49] Around 4.5m Rand have circulated around a handful of Gupta-associated companies between 2007 and 2017.[50] Due to the volume of Gupta owned accounts, the majority of the bank’s transactions in Johannesburg involved Gupta family funds.[51]

Reports reveal that inter-company loans provided an untraceable and inexplicable technique used by the Gupta brothers to transfer money from the Bank to various Gupta-owned companies like Trillion Financial Advisory and Centaur Mining. The suspicious activity reports (SARs) filed by workers at the Bank of Baroda related to Gupta transactions were often voided by managers and higher-level bank officials.[52] Most SARs failed to reach the South African Financial Intelligence Centre as a result.

The Arms Deal Scandal[edit]

The arms deal, formally known as the Strategic Defence Package, was a multibillion-dollar deal involving arms acquisitions from countries such as Germany and France.[53] This arms deal set a precedent for cases of large-scale corruption and high levels of bribery and embezzlement in the African National Congress. This arms deal came at a time when the AIDS epidemic was rampant throughout Africa and poverty and inequality in the region still remained among the highest in the world. Taxpayers protested the arms deal through a public interest lawsuit claiming that the deal was unconstitutional and irrational.[54] Various South African and international evidence teams have been investigating the arms deal since the early 2000s.[55] Rumors of embezzlement, bribes, and kick-backs sent the way of the ANC, have also prompted further investigations. In 2011, Former President Zuma organized a commission of enquiry headed by Judge Seriti.[56] The Seriti Commission is currently playing a part in the ongoing investigation of allegations of impropriety, fraud, and corruption around the 1998 Arms Deal.[57]

As of March 2018, Jacob Zuma was on trial facing 16 charges of corruption, racketeering, and fraud involving the 1998 Arms Deal.[58] In total Zuma has been accused of accepting 783 illegal payments, including receiving bribes from a French Arms firm via his financial advisor.[59] In April 2018, two months after resigning from office, Zuma has been charged with graft by a national jury.[60]

Anti-Corruption Initiatives[edit]

Government initiatives against corruption are coordinated by the Department of Public Service and Administration.[61] The Public Protector also plays a role in fighting corruption. A disbanded independent anti-corruption unit named the Scorpions was replaced by the Hawks.[62] The Hawks are South Africa's Directorate for Priority Crime Investigation (DPCI) designed to target organized crime, economic crime, and corruption.[63] The group was established by the Zuma administration in 2008.[64] South Africa has well-developed framework and legislation outlining corruption initiatives. The Prevention and Combating of Corruption Act (PCCA) criminalizes corruption in public and private sectors and codifies specific offences, making it easier for courts to use the legislation.[65] This act especially condemns bribery, extortion, abuse of power, and money laundering while obliging public officials to report corruption offences.[66] Like many corruption regulation in South Africa, the PCCA is poorly implemented and the act does not include any protectionary measures for whistleblowers.[67]

The National Anti-Corruption Forum provides an online guide to the Prevention and Combating of Corruption Act (PCCA).[68] Other acts like the Promotion of Access to Information Act calls for an increased access to public information.[69] The Public Finance Management Act examines government expenditures and the Code of Conduct for Assembly and Permanent Council members calls for the full disclosure of members to report gifts.[70] Enforcement mechanisms remain weak for many of these preventative acts, allowing for corrupt actions to go unreported. South Africa has ratified the United Nations Convention against Corruption, the African Union Convention on Preventing and Combating Corruption and the OECD Anti-Bribery Convention.[71]

Past Notable Incidents of Corruption[edit]

  • Tony Yengeni, the ANC's chief parliamentary whip, was found guilty of fraud in 2005 after Yengeni received a large discount on a luxury car from a firm bidding for a government contract.[72]
  • Former President Jacob Zuma's financial advisor, Schabir Shaik, was sentenced to 15 years in 2005 for soliciting a bribe from a French arms company named Thales. The bribe was solicited on the behalf of President Zuma.[73]
  • In 2005, the Travelgate scandal exposed forty Members of Parliament who were found to have illegally used parliamentary travel vouchers worth R18,000,000 for personal use.[74]
  • Former South African President Thabo Mbeki and Sepp Blatter agreed to a $10m deal in 2007, which US prosecutors say was a "bribe" to secure the 2010 World Cup.[75]
  • The Goodwood police station commander, Siphiwu Hewana, was found guilty of attempting to defeat the ends of justice by tampering with the docket for convicted fraudster Tony Yengeni's arrest for driving under the influence in 2007.[76]
  • Former National Police Commissioner and ex-President of Interpol, Jackie Selebi, was charged with graft in July 2010, for receiving (at least) R120,000 from alleged crime-syndicate boss, Glenn Agliotti.[77]

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