Dr Iraj Abedian
Chief Economist at Pan-African Investment & Research Services

(First published in Daily Maverick, 15 Aug 2022)

Rebuilding South Africa’s governance institutions and reviving growth are prerequisites for the sustainability of our constitutional democratic order. And a national reparations campaign against all local and international businesses implicated in State Capture is needed.

President Cyril Ramaphosa receives the fifth and final Zondo Commission report at the Union Buildings in Pretoria on 22 June 2022. (Photo: Gallo Images / Alet Pretorius)


Seldom do democratic governments institute full public investigations into their own complicity in maladministration, malfeasance, corruption and abuse of office while in power. Typically, such investigations are political tools by ruling parties to discredit their rivals.

In South Africa, however, former president Jacob Zuma was forced by a court order to institute the Zondo Commission back in August 2018 in what can only be construed as a landmark ruling for a country once celebrated as unique among emerging and established democracies.

The result of nearly four years of public judicial inquiry into South Africa’s “State Capture” was an authoritative 5,500-page report into the systematic looting of state resources on a scale unimaginable by most South Africans.

Most infuriating and disappointing was the fact that the State Capture scheme was led from the very heart of Cabinet, driven by a few ministers and executed by an army of bureaucrats who were “ANC deployees” in government departments and large state-owned enterprises such as Eskom, Transnet, Denel and South African Airways.


Grand-scale robbery

Ironically, these deployees were appointed into executive positions to supposedly further the ANC’s false abstraction of a National Democratic Revolution. In a clear act of betrayal, their shenanigans amounted to nothing less than daylight robbery on such a grand scale that its exposure by the Zondo Commission has left Africa’s oldest liberation movement in tatters.

Beyond the ANC, the Zondo Commission process has considerable ramifications for the legitimacy of political leaders across the board, public trust in them and people’s faith in the democratic process to bring about social change that positively impacts daily lived realities.

While the political impact of State Capture is currently a work in progress — the outcome of which few can predict with certainty — there are lacunas in public engagement around the findings of the report that can and must be highlighted and taken forward.

Chiefly, these relate to the economic, business and financial shenanigans of deals in the State Capture project that have been largely overshadowed by political noise.

Understandably, and due to their admittedly genial collaboration with former president Zuma, the Gupta family and their business enterprises have become synonymous with State Capture. While they certainly have much to account for, it would be a travesty of justice if the other business enterprises were not called to account.

Hidden in the political cacophony is an equally bruising fact: State Capture was facilitated by a number of local and international corporations including, but not limited to, global banks, major audit firms such as KPMG and PWC, global consulting firms such as McKinsey, Bain, the German IT company SAP, Japan’s Hitachi, the US’s General Electric, mining companies such as Glencore, a number of law firms and other business enterprises.

Dealing with these financial behemoths is, in my view, a national strategic imperative for at least two reasons. First and foremost, the SA business sector, broadly defined, is at present infected by the impact of State Capture and the role of the private sector.


Integrity reboot

Unless South Africa finds a solution for rebooting its macroeconomic integrity and investor confidence, no amount of political and ideological posturing has any chance of success. This is irrespective of the political party in charge of government. Dealing with the prerequisites of macroeconomic and fiscal sustainability is of a primary and urgent nature.

It would certainly be naïve to assume that the mere acknowledgement of malfeasance and expression of regret by Bain, SAP, McKinsey and others are sufficient to expunge the cancer cells of corruption and misconduct from the SA business sector and the global corporations active in the country.

While it is beyond the scope of this article to explore the details, it suffices to say that none of these culprits has taken legal actions against “bad apples” in their own stables.  Neither has business SA stopped doing business with these corrupting and corrupt entities. In effect, it has been business as usual.

The McKinseys and Bains of the world have gone so far as to “whitewash” their “mistakes” with the full support of private sector corporations in SA and the failure of public sector regulatory bodies to perform their duties.

A case in point is KPMG, which parted ways with its executives implicated in the Zondo Commission report by offering them “golden handshakes”. None accounted for their criminal conduct, nor did KPMG (as a global corporation) offer any compensation for its scandalous corporate misconduct. A notional donation of a few million rands by KPMG was more of an insult to the injury caused.

The SA audit regulatory body also did close to nothing. Likewise, Bain SA’s managing partner’s apology to the country — published recently in a national newspaper — typified the crocodile tears of colonial apologias. It is hubris disguised as golden handshakes.

Similarly, McKinsey used every trick in the book to cover up the role it played in bringing Eskom to its knees. In effect, these businesses violated every code of good corporate governance by engaging in illegal and unethical conduct — with impunity.


Democracy at risk

Second, and related to the first, is the emerging reality that SA’s constitutional democracy is at serious risk due to the consequences of State Capture. What can only be described as grand larceny through the looting of public resources and hollowing out of the state has set the country back by at least a generation.

Symptomatic of this regression is the decline in South Africa’s sovereign credit rating since 2012 to below investment grade (ie junk status), the sharp fall in national investment levels, the collapse of GDP growth and the deterioration of the national fiscal position to that of a “fragile state”.

The combined impact is heightened sociopolitical tensions and growing fiscal stress.

Without ignoring the financial crises globally and other exogenous factors during this period, the fact of the matter is that the parlous state of the country’s fiscal and governance institutions has left SA unable to unlock its growth potential and has, therefore, robbed it of at least a de jure chance of dealing with the triple challenges of poverty, unemployment and inequality.

The country is now wrestling with a vicious circle of low growth, sagging business and citizen confidence, the bottoming out of human skills, faltering development prospects, further impoverishment and the spectre of hopelessness.

This is at a time when the country still has considerable growth potential and above average natural resources and investment opportunities to turn the tide and improve the lived realities of the majority of the population.

However, in economics and the social dynamics of life, positive turnarounds are seldom, if ever, automatic. They require intentional and appropriate actions.



To this end, one key and critical strategic intervention is the immediate implementation of an international reparations case against all locally and internationally implicated business entities.

Such a reparations project has to be structured with a view to achieving a fair and transparent outcome so as to deal with three interrelated outputs:

  1.     Disclose the nature of their involvement and the full extent of public resources looted. This will provide necessary information to estimate the role each player had in the material damage to the overall macroeconomic-fiscal position. In turn, this measure will be a key indicator for the scale of reparations needed to compensate the country and its citizens for damages suffered;
  2.     Disclose the details of political and public sector collaborators, partners and co-criminals; and
  3.   Draft a new Ethical Charter for business codes of conduct to be signed by each implicated entity, and others, so as to avoid any future repetition of such acts of explicit or implicit malfeasance. Unlike the King Codes of Corporate Governance, such an Ethical Charter would have punitive financial and non-financial penalties for firms and their implicated executives and boards of directors. It is apt to note that South Africa is not the only developing country in which some of these international companies have enabled corruption with impunity to the extent that it is seen as their business model. However, without any financial consequences and accountability for their boards, there is no incentive for them to change their behaviours at all.

It is stating the obvious that rebuilding SA’s governance institutions and reviving growth in an inclusive manner are prerequisites for the sustainability of the country’s constitutional democratic order. Effectively tackling the triple evils facing the country is not possible without the active and sustained participation of the business sector.

But a corrupt and ethically compromised business sector cannot be a reliable partner in turning around the grave circumstances we face in South Africa. Not only do the government and governance institutions need to regain the trust of citizens, but the business sector, especially corporate entities, requires the confidence of the nation as good corporate citizens.


National campaign

I want to suggest that a national reparations campaign is now needed to establish credible and capable structures to give effect to the technical and sociopolitical requirements of reparations calculations. The Zondo Commission has already generated the vast body of data needed for such an ambitious endeavour.

But the oversight of such a reparations campaign and its technical calculations need to be entrusted to nonpartisan personalities with established credentials and unquestionable integrity, supported by the government and the judiciary.

The overarching objective of the initiative has to be grounded in the restoration of social justice and salvaging the country’s fragile democratic order, not (as is currently the case) establishing new evidence for embarrassing one political party over another.

As a corollary, a tangible improvement in the lives of the poor and the marginalised in the short to medium term is the ultimate goal.

To this end, such a campaign has to be a short-term project, not a protracted process of legal argumentations, international diplomatic or ideological brinkmanship. It has to be apolitical.

Fortunately, the culprits have mostly acknowledged their complicity in crimes of malfeasance, the promotion of corruption and even what Ismail Momoniat, acting director-general of the National Treasury, regards as “treason” in the case of Bain.

The noble task before us falls on the calculation of fair and meaningful reparations.