How South Africa Risked Becoming a Criminal Enterprise Under Zuma

(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.

How South Africa Risked Becoming a Criminal Enterprise Under Zuma

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 100 billion rand ($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.

How South Africa Risked Becoming a Criminal Enterprise Under Zuma

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 800 billion-rand 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 6 billion rand 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 600-million rand 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.”

©2018 Bloomberg L.P.