Is the net about to close on Zuma and his Gupta patronage network?

Cyril Ramaphosa, the deputy president of South Africa and new president of the governing ANC, faces a dilemma in rooting out corruption.
Reuters/Siphiwe Sibeko

It all started with a wedding. A 200 plus entourage of friends and family landed their private aircraft at the Waterkloof Air Force Base in April 2013.

What South African’s didn’t know was that the country had already entered a new era of corruption that was to have a myriad negative consequences. Now, after years of legal obfuscation, political manipulation of ‘captured’ state institutions and prosecutorial agencies, Cyril Ramaphosa’s victory to succeed Jacob Zuma as president of the ruling African National Congress has opened up the possibility that an age of impunity will be replaced with a new era of public accountability.

Since the Gupta’s extravagant family wedding at Sun City a slew of revelations have come out. These range from the “State of Capture report” of the former Public Protector Thuli Madonsela, to the damning Gupta-leaks uncovered by investigative journalists AmaBhungane. All helped South Africans come to understand the shocking extent of the systemic corruption inextricably linked to the Gupta name.

Despite all these revelations, the country’s prosecutorial bodies have remained silent. So when the Asset Forfeiture Unit of the National Prosecuting Authority (NPA) confirmed its intention to serve summons on members of the Gupta family and their cronies on January 15 this year ordering them to preserve assets to the tune of R1.6 billion, the first question that sprung to mind was “why now”?

The answer lies with Ramaphosa’s election on a “change” and “reform” ticket. His victory in December has shifted the balance of power against the Zuma faction.

A second factor is that the ANC is concerned about its electoral future, with the 2019 national election on the horizon. Zuma has cost the ANC almost 16% of its electoral majority – some 3 million votes. With opposition parties scrambling to form coalitions, and voting trends suggesting a further decline in the ANC’s share of the vote, there is now a very real prospect of the ANC being voted out of power in 2019. An ANC majority is no longer a foregone conclusion – unthinkable until recently.

It seems denial in the ANC has been replaced by a sense of fear. The party is trying to show the voting public that it can clear up the mess that it has made.

Chickens come home to roost

The NPA’s announcement suggests that the chickens seem finally to be on their way home to roost on the Gupta empire. The NPA’s Asset Forfeiture Unit has applied to the High Court for an order that the Gupta’s must “preserve” R1.6 billion worth of assets. This power is granted under Section 38 of the Prevention of Organised Crime Act. The provision empowers the NPA to make an ex parte application to the High Court to

prohibit any person… from dealing in any manner with any property.

The court must grant the order if there are reasonable grounds to believe that property is the “instrumentality of an offence” or “is the proceeds of unlawful activities”. This must be read in light of the rest of the Act which allows the state to confiscate property that is the proceeds of unlawful activities.

The rationale of the preservation order is, therefore, to prevent such a person or suspect from disposing of assets that are proceeds from unlawful activities which would render a confiscation order fruitless.

An analysis of the act makes it clear that, if a preservation order is requested, the intention of the NPA must be to arrest and charge the Guptas and their associates. A preservation order could only be made if a confiscation order is ultimately envisaged. In turn, a confiscation order can only be made after a criminal conviction.

The logical conclusion is that the NPA, assuming that they are acting in good faith, are intent on arresting and prosecuting the Guptas.

Dilemma facing Ramaphosa and the ANC

The problem for the ANC is this: if its intention is to make the Guptas the sole-scapegoats in the state-capture saga, they will be in a good deal of trouble. Of the published Gupta scandals, the evidence strongly suggests that they were not acting alone. The Guptas themselves may represent only the tip of the iceberg.

Top government officials are reported to have been involved in almost all instances.

For example, Mining Minister Mosebenzi Zwane, is heavily implicated in the Sun City wedding affair, while whistle-blowers Mcebisi Jonas and Vytjie Mentor implicate Zuma as a participant in the Guptas offering them (for undue reward) the positions of ministerial positions.

Zuma’s son, Duduzane, is also heavily implicated in corrupt activities related to the state power utility Eskom, as well as the finance minister debacle.

The NPA will struggle to prove its case against the Guptas, at least the full extent of it, without implicating those that drove or condoned their misdemeanours. It seems clear therefore that the ANC cannot restore its reputation while letting its leaders who looted the country’s resources drift off into the wilderness.

This presents Ramaphosa with an acute political dilemma given that he’s pledged to rebuild unity in the ANC.

Hence, we are likely to see a very high level and multifaceted blame game. But any attempt to restore its credibility will probably prove counter productive unless the party accepts that some of its biggest fish must be prosecuted too.

And it goes without saying that private sector players such as Trillian and KPMG who were willing enablers of the abuse of state procurement processes must also be held to account. If necessary they must pay the ultimate price of corporate collapse as Bell Pottinger did.

Just the beginning

The NPA’s announcement represents no more than a good start after years of prosecutorial negligence and incompetence – or dishonesty – and costly inaction.

In terms of accountability it’s indeed time to catch up and restore the legitimacy of important institutions. But the stakes are very high – for the implicated politicians and their business cronies, for Ramaphosa and the ANC’s electoral future, and for the credibility of South Africa as a trustworthy destination for much needed investment.

Richard Calland, Associate Professor in Public Law, University of Cape Town and Mike Law, Senior legal researcher in Public Law, University of Cape Town

This article was originally published on The Conversation.

Ramaphosa takes on ANC leadership role with alacrity: and clarity of intent

ANC President Cyril Ramaphosa celebrates the party’s 106th anniversary with its deputy general secretary Jesse Duarte and president of South Africa Jacob Zuma.
Reuters/Siphiwe Sibeko

Cyril Ramaphosa, the newly elected President of South Africa’s governing African National Congress, made his position clear when he delivered a much anticipated speech to mark the ANC’s 106th birthday over the weekend.

The statement has historically set the tone for government and informed the annual state of the nation address delivered by the president of the country at the opening of parliament in February. It also outlines the five-year mandate of the ANC’s decision making body, the National Executive Committee.

Ramaphosa’s speech had particular significance because even though he’s been elected as the new president of the ANC he won’t take over the reins of state until 2019 when President Jacob Zuma is due to step down after the next round of national elections. That’s if the normal pattern of succession unfolds. Rumours are rife that Zuma will be forced to step down before then.

Given the controversies swirling around Zuma and the legacy of his presidency, South Africans wanted to gauge, among other things, what the ANC considers to be the main challenges facing the country. And how it plans to face them.

Ramaphosa didn’t disappoint. It was clear – as well as remarkable – that the ANC’s members and its leaders have begun to unite behind a man they now affectionately call Silili - a derivative of the name Cyril. This was clear from the welcome he was given by ordinary people as he did a walkabout in the Eastern Cape town of East London as well as the reception he got from the tens of thousands of ANC supporters who came to hear him in the stadium. The hostility Zuma elicited from the crowd stood out in sharp contrast.

In addition, Ramaphosa is looking comfortable in his new role. It was evident from the speech he delivered that he feels confident enough to speak his mind on some of the big issues facing the country. Take this comment on state owned enterprises and corruption.

We need to act with urgency and purpose to restore state owned enterprises (SOEs) as drivers of economic growth and development. Several key SOEs are in financial distress, threatening not only their own operations, but the national fiscus. Many of these enterprises have experienced serious governance lapses and poor delivery of their mandate. These challenges have been exacerbated by state capture, through which billions of rands have been illegally diverted to individuals.

But there’s no gainsaying that Ramaphosa faces a tough year ahead as he navigates what is essentially a transitional period for the ANC, and for the country.

Ramaphosa’s trademark

Ramaphosa clearly meant to get off to a strong start. As he began his speech, he sounded like a disciplinarian busy extolling the virtues of starting on time. He pointed out that both the gala dinner the evening before and his speech ran to schedule. This was no mean feat – it’s not uncommon for ANC events to start hours later than scheduled.

There was another sign of the kind of leadership he intends to impose on the ANC: he regularly went off script to emphasise a rules-based approach to transforming the economy. So the dismantling of monopolies and oligopolies in the private sector will be done through the expanded mandate of the Competition Commission to create a more competitive economy.

Ramaphosa also appeared to be able to straddle difficult discussions with ease. He addressed hot topics, staying true to the policy decisions taken by the ANC conference.

Take the issue of the Reserve Bank and a decision by the ANC conference that its ownership structure should be changed from private to public ownership. Ramaphosa affirmed the independence of the bank but also called on government to ensure its full public ownership.

But it isn’t going to be an easy five years. These policy decisions, as well as others, will be difficult to implement. It will be interesting to see how Ramaphosa and his national executive committee navigate these waters.

Room for manoeuvre

The difficult work begins now.

Ramaphosa’s rules-based logic is likely to provide him with political mileage. In particular, it’s likely to earn him the confidence of a divided national executive committee.

The other thing that’s likely to give him room for manoeuvre is his emphasis on unity and party cohesion. This should help him counter perceptions that he’s cut from money rather than from the ANC’s culture and traditions given his cosy relationship with South Africa’s captains of industry as a result of his long stint in the private sector.

The time between now and the 2019 national elections is, in effect, a transitional period that needs to be characterised by strong backroom negotiations on a range of difficult issues. These include the removal of Zuma, as well as some of his problematic cabinet members, and the recapitalisation of state owned institutions.

There is a lot of confidence-building that the ANC leadership has to do. Zuma has weakened the ANC – as well as the government. And the South African economy has been haemorrhaging for the past 10 years. Confidence has been hit by the weakening of state owned enterprises such as South African Airways and the country’s energy utility Eskom, downgrades by international rating agencies, corruption in the private and public sectors, investigations into state capture and widespread incidences of racism.

If Ramaphosa fails to hold the party together while simultaneously digging the country out of the hole that it’s in, a big question mark will continue to loom over the ANC’s elective fortunes in 2019.

Thapelo Tselapedi, Politics lecturer, Rhodes University

This article was originally published on The Conversation.

Nationalising South Africa's central bank isn't bad per se: just what's done with it

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South Africa’s governing party, the African National Congress (ANC), recently adopted a resolution to nationalise the country’s central bank. The move comes on the back of calls for government to rein in the South African Reserve Bank, causing concerns that the bank’s independence will be lost. Sibonelo Radebe asked Jannie Rossouw to consider what’s at stake.

What do you make of the ANC’s resolution?

The ANC’s thinking around this resolution is a bit ambiguous and confusing. The resolution itself and subsequent comments by the new ANC President, Cyril Ramaphosa, say that the resolution should not affect the independence of the bank.

While upholding the resolution to nationalise, Ramaphosa added this qualification:

The Reserve Bank plays a critical role in the life of any nation with regard to monetary policy and safeguarding and promoting the value of its currency. The ANC once more reaffirms the role, mandate and independence of the Reserve Bank.

He clearly wants to protect the central bank from political interference. This should be welcomed because political interference would have an impact on the constitutional mandate of the central bank.

But those pushing for nationalisation are against it remaining independent from political interference. They want its independence curtailed. This view is aired by those on the left in the ANC, such as the Congress of South African Trade Unions and the South African Communist Party. They believe that the Reserve Bank is misguided on focusing on keeping inflation under control and that this compromises economic growth. Prominent ANC leaders have also backed this view.

On its own, a change of the bank’s ownership from private shareholders to the South African government wouldn’t affect the constitutional mandate of the central bank. Government ownership doesn’t automatically imply government control. This is evident in countries like the UK, Sweden and Denmark, where government ownership of central banks doesn’t affect their unwavering commitment to keep inflation under control.

How does this resolution fit into global trends?

Nationalisation would align the South African Reserve Bank’s ownership structure with the majority of central banks across the world. Other than in South Africa, central banks with private shareholders can be found in seven other countries. These are Belgium, Greece, Italy, Japan, San Marino, Switzerland and Turkey.

The number of central banks with private shareholders have declined over the years since the nationalisation of the Reserve Bank of Zealand. Many more countries followed. The most recent was the National Bank of Austria in 2010.

What influence and benefits do the shareholders of the bank have?

The South African Reserve Bank has 2 million issued shares, held by the general public, which includes individuals and juristic persons. No group of shareholders (referred to as associates) can hold more than 10 000 shares. This ensures that no shareholder can exercise undue influence over the activities of the bank.

Shareholders in the Reserve Bank have very limited powers. And being a shareholder isn’t very lucrative. They are entitled by law to annual dividends not exceeding 10c per share per annum, which amounts to 8c per share after tax.

Shareholders also have the right to attend the bank’s ordinary annual general meeting where they are able to approve the appointment of the external auditors of the bank and set their remuneration. They also elect six of the 13 board members. The other board members, including the Governor and the deputy governors, are appointed by the president of the country.

The board plays an oversight role on the governance of the bank – including being responsible for the bank’s annual financial statements. But its mandate does not extend to monetary policy decisions.

This structure of general meetings adds an additional layer of transparency to the activities of the central bank and improves its accountability. At general meetings (which are also attended by journalists), the Governor answers questions on the bank’s activities and on its financial performance. The whole process adds to the transparency and general understanding of the role and activities of the central bank.

What needs to happen to give effect to the ANC resolution?

The nationalisation of the bank will require an amendment to the South African Reserve Bank Act which stipulates the private shareholding. Amendments require a simple majority in parliament.

Nationalisation could therefore happen as soon as legislation is prepared and a bill is passed in parliament.

But the process could become far more complex if nationalisation trampled on some international interests that are anchored in international treaties. At the moment it’s not clear whether or not this is the case.

The other challenge might be around determining the buyout value of the bank’s shares. This is because the South African Reserve Bank Act makes provision for the liquidation of the central bank, but not for its nationalisation.

In the event of liquidation, the legislation prescribes that shareholders should be reimbursed for their shares in terms of a formula based on the trading value of these shares. The shares are traded on an over the counter share trading platform. The last traded price per share was R9,60.

A different approach could be to use the share price confirmed by the High Court in dealing with delinquent shareholders. The central bank had to approach the High Court to deal with shareholders who failed to adhere to legal prescriptions in respect of maximum of 10 000 shares held by associated shareholders. In this instance the High Court confirmed a price of R1,55 per share which was calculated by consultant firm KPMG on behalf of the central bank.

These two examples highlight the fact that valuation won’t be a simple matter. Adding to the complexity is the fact that parliament could decide on a completely different value of the shares.

Jannie Rossouw, Head of School of Economic & Business Sciences, University of the Witwatersrand

This article was originally published on The Conversation.

Is South Africa's ANC bent on radical policies? Here's why the answer is no

Delegates attending the 54th National Conference of the ruling African National Congress in South Africa.
Reuters/Siphiwe Sibeko

When media cover a political party conference decision, it is best to report on the entire resolution, not just the exciting bits. This may reduce the audience but will improve accuracy.

The point seems to have been forgotten in reporting on a resolution on land expropriation passed at the December conference of South Africa’s governing party, the African National Congress.

Media announced that the party endorsed changing the constitution to allow the government to expropriate land without compensation. This, with a resolution calling for the “nationalisation” of the South African Reserve Bank, and one urging the government to speedily implement an announcement by President Jacob Zuma that children of poor families would receive free higher education, were widely quoted as evidence that the ANC had embraced economic radicalism.

But a closer look at the details of land resolution and the context of the other two shows that the most radical decision adopted by the conference were not these but one that has been largely ignored – a proposal which would give greater power over land to rural people, not traditional leaders.

Caveats on land expropriation

Reporting on the land expropriation decision mentions only half the resolution. The ANC has endorsed the change, but, according to the chair of its economic transformation committee, Enoch Godongwana, only if two conditions are met. It must not threaten food security or impact on the rest of the economy.

This almost certainly means that the resolution means the opposite of what is reported– in effect, it rejected changing the constitution to allow expropriation without compensation.

Whether changing the constitution would damage food security is a matter of opinion. But, since there is no shortage of voices insisting that it would, the condition provides a handy escape hatch for a government which does not want to make the change.

The second condition is the clincher. It is impossible to allow for land expropriation without compensation without affecting the rest of the economy. A measure which alters property rights in one sector sends a message that others may be due for the same fate. Even if only some investors came to this conclusion – and the chances are that just about all will – the economy will be affected. So, to say the change will only be introduced if the economy is unaffected is to say it won’t happen.

Political realities explain why the resolution was phrased in this way. One ANC faction wanted the constitutional change, the other did not. But the sceptics knew of widespread anger inside the ANC (and outside it) at the slow pace of land reform. Insisting that there was no need for a change would not have been credible – it would mean being seen to agree that whites should hold on to most productive land.

The only way out for the opponents was to agree on the principle but to hedge it with conditions which can’t be seen to endorse white privilege. The fact that they succeeded in including the conditions suggests that they are strong enough to prevent the change.

Reserve Bank changes unlikely any time soon

Similar realities shaped the decision to endorse “nationalising” the central bank. This would not affect its mandate or independence. It would simply end a quirk – that South Africa’s central bank is owned by private shareholders. The change would be entirely symbolic.

In a climate in which there is widespread unhappiness with continued black economic exclusion, agreeing to a change which would change nothing was an obvious response. This is particularly so since the change is unlikely any time soon.

In private discussions, ANC economic policymakers note that the money needed to buy out the private shareholders of the South African Reserve Bank is not available. And so this may be one of many governing party resolutions – in all democracies – which are never implemented because they pose practical difficulties.

Free higher education

The tertiary education change may be implemented, at least for a year. It has proved hugely controversial and may create headaches for universities and colleges because it has not been carefully costed and planned. But it is no change to ANC or government policy.

Zuma’s announcement is repeatedly described as an agreement to free higher education but it isn’t. It doesn’t apply to all students – only to those who are “poor and working class” - anyone whose household income is below R350 000 a year.

That students who cannot afford higher education should not pay for it is already government and ANC policy, which is why the conference did not see a need to endorse the announcement – it simply urged that it be implemented quickly. It is also accepted by just about everyone concerned about fairness in education. It is very different to the demand that all higher education be free since those who can afford to pay will still be charged fees.

It is not clear whether practicalities will allow Zuma’s announcement to be implemented in full. But, even if it is, this is no shift to the left.

So the ANC has not emerged from the conference as a more “radical” party. Its economic policy resolutions remain within the framework which has governed its thinking for years.

This does not mean it will leave the economy untouched: there is agreement across the factions that change which includes more people is essential. But it does mean that change will be negotiated and will respect perceived realities in the marketplace.

A real radical resolution

What of the change virtually no-one noticed? Media coverage and debate remains dominated by the middle class and so the concerns of people at the grassroots are almost always ignored. This explains why a proposed change that would limit the power of traditional leaders over land passed largely unnoticed.

According to an ANC briefing at the conference, it decided that control over land should rest with communities, not chiefs. In principle, this should enable rural people to stop traditional leaders using land for their own purposes at their expense, which has brought “state capture"to the countryside and has triggered conflict.

The resolution may prove hard to implement because it may be difficult for rural people to hold traditional leaders to account. And, like all conference resolutions, it may never become law because traditional leaders may lobby against it.

But, if it did become law, it may make far more difference to far more people than the "radical” resolutions which have hogged print and broadcast headlines.

Steven Friedman, Professor of Political Studies, University of Johannesburg

This article was originally published on The Conversation.

Who is Cyril Ramaphosa? A profile of the new leader of South Africa's ANC

New ANC President Cyril Ramaphosa moments before winning.
EPA-EFE/Cornell Tukiri

South Africa’s governing party, the African National Congress (ANC), has a new president – Cyril Ramaphosa. But who is he?

Ramaphosa cuts a fitting figure to take over government, stabilise the economy, and secure the constitutional architecture that he helped create at the end of apartheid.

But to expect more would be expecting too much. He is unlikely to veer far from the traditional economic path chosen by the ANC.

There are some important features we can draw on to make some conjectures about the man.

The early days

Ramaphosa was born in Johannesburg, the industrial heartland of South Africa, on November 17, 1952. The second of three children, his father was a policeman. He grew up in Soweto where he attended primary and high school. He later went to Mphaphuli High School in Sibasa, Limpopo, were he was elected head of the Student Christian Movement soon after his arrival, attesting to his Christian beliefs.

He studied law at the then University of the North (Turfloop), where he became active in the South African Students Organisation, which was aligned to black consciousness ideology espoused by Steve Biko. He became active in the University Student Christian Movement, which was steeped in the liberation black theology of the black consciousness movement.

After graduating with a degree in law, Ramaphosa continued his political activism through the Black People’s Convention, for which he was jailed for six months. He went on to serve articles and joined the Council of Trade Unions of South Africa which was to form the National Union of Mineworkers (NUM) with Ramaphosa as its first secretary general. He helped built the NUM into the largest trade union in the country, serving as its secretary general for just over 10 years.

Business and politics

His prominence and public stature grew even more when he was elected secretary general of the ANC in 1991. He went on to play a key role during South Africa’s transition, becoming one of the key architects of the country’s constitutional democracy.

Under the auspices of the Convention for a Democratic South Africa (Codesa), he became the ANC’s lead negotiator during negotiations on a post-apartheid arrangement.

Following this, he led the ANC team in drawing up a new constitution for the country. It is now considered one of the most progressive constitutions in the world.

In 1994 Ramaphosa lost the contest to become President Nelson Mandela’s deputy. Having Thabo Mbeki appointed instead was a blow, but persuaded by Mandela, Ramaphosa went into business.

For the next two decades Ramaphosa put his energies into building a large investment holding company Shanduka with interests in sectors ranging from mining to fast foods. The success of the group confirmed his reputation as a skilled dealmaker and negotiator.

During this 20-year period in business, Ramaphosa established deep links in the private sector in South Africa.

This set him at odds with sections of the ANC which believe that the post-apartheid arrangements delivered political power, but not economic freedom. These voices have become louder under President Jacob Zuma’s presidency with calls for radical economic transformation and action to tackle white monopoly capital.

Ramaphosa will have his work cut out for him as he tries to accommodate these demands by driving a more inclusive social compact in the country while simultaneously trying to manage rampant corruption in the private and public sectors.

Road to presidency

Even during his years in business Ramaphosa remained close to the ANC, serving as a member of the national disciplinary committee.

But he made his major comeback onto the political scene at the ANC’s 2012 elective conference in Mangaung, Bloemfontein where he was elected deputy president of the ANC, and later of the country.

Two years prior to this Ramaphosa became deputy chairman of the state-run National Planning Commission. He presided over its diagnostic report, which set out the problems facing the country in clear terms. A plan was drawn up to provide answers to the challenges identified in report. Known as the National Development Plan, it was tabled as a blue print for the type of society South Africa could become.

The plan showed Ramaphosa’s strengths as an architect of social compacts.

Since its tabling the plan has been left to gather dust. But it remains a point of reference, and serves as a counterpoint to calls for radical economic transformation.

Ramaphosa is likely to emphasise stability – in government and the ANC. Given his history he is likely to want to stabilise the economy rather than to pursue radical interventions.

Ramaphosa has a personal interest to secure a stabilising social compact akin to the one he negotiated in 1994 given developments that have left the country economically and socially weaker. These have included allegations that parts of the state have been taken over by corrupt civil servants and some private sector interests, high levels of unemployment and increasingly fractious public debates.

Not surprisingly during his campaign trail he moulded his image on the sanctity of the rule of law and on the dictum that social stability hinges on respect of the rule of law.

The big question mark over Ramaphosa is how effective he will be. Although he’s been the deputy president of the ANC and of the country for five years, some believe that his influence has been minimal and that he has not been able to imprint his leadership on the party – or the country.

Will he be able to impose his will on those he now leads? Ramaphosa will be presiding over officials who have big personalities and have enjoyed long periods of political power. They are used to leading, not following.

Thapelo Tselapedi, Politics lecturer, Rhodes University

This article was originally published on The Conversation.