State capture's not a new thing

The writer argues that Johann Rupert's business empire has companies in 35 countries and does not depend on South African government tenders which some smash-and-grab business models thrive on yet it shows some degree of commitment to the country. Picture: Leon Lestrade

The writer argues that Johann Rupert's business empire has companies in 35 countries and does not depend on South African government tenders which some smash-and-grab business models thrive on yet it shows some degree of commitment to the country. Picture: Leon Lestrade

Published Apr 13, 2016

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SA needs an effective Treasury and to tackle parasitism of Guptas and those of their ilk, writes Jeremy Cronin

On the day after the landmark Constitutional Court Nkandla judgment one remark in particular caught my eye. According to Collen Garrow, an economist at Lefika Securities: “What might be learnt from the experience was that markets would make decisions for policy makers, punish them where they got it wrong, but also reward them when they got it right, as was the case”, (Business Report, April 1).

Garrow was, of course, referring to the momentary surge in the rand’s exchange value following the Concourt judgment. But there, in a nutshell, the problematic relationship between capitalism and a constitutional democracy stands exposed. For its sheer hubris this boast that markets will (and should) make decisions for elected policy makers, or perhaps guide Constitutional Court judges, runs the danger of making any allegation of corporate capture against the Guptas seem trivial.

Why worry about the Guptas, some might be inclined to argue, when the “markets” have got things sewn up already? For let’s be clear, the markets are not an idyllic interplay of millions of global citizens influencing outcomes through democratically exercising their sovereign individual market choices. The one-person one-vote democratic principle doesn’t apply in the marketplace. Market sentiment is dominated by the profit maximising interests of exceedingly powerful corporate monopolies and their adjuncts, among them the ratings agencies.

I am not arguing that a democratically elected government can simply run its head up against the brick wall of these harsh, unjust realities. But how do we defend and consolidate our national sovereignty and democratic mandate against the acquisitive agenda of the global one-percenters? How, in the face of exceedingly powerful monopolies, does the public sector boldly advance not private, but public interest, defined by our Constitution (the very one now selectively upheld by all and sundry) as including “the nation’s commitment to land reform, and to reforms to bring about equitable access to all South Africa’s natural resources?”

Garrow’s markets are not going to reward us in that endeavour.

Over the past weeks, the Nkandla matter and corporate capture have become intertwined. Unfortunately, much of the recent public discussion on the dangers of corporate capture has been superficial, and often simply factional.

First, it’s important to remember corporate capture is typically more insidious than the recklessly brazen attempts of the Gupta family, and it is certainly not a reality confined to South Africa. The US political system is possibly the most corporately captured in the world. Nearly half of all retiring US Congress members return to the institution as lobbyists for major corporations. US academic Robert W McChesney notes that “the corruption in Congress and across the government today is only rarely of the traditional bribery kind. It is instead a far more structural dependence upon corporate money built into the DNA of the political system – traditional pay-offs are not necessary.”

Writing of the US financial sector in the immediate aftermath of the massive bail-out at public expense, former IMF economist Simon Johnson referred to a “quiet coup”, noting the “easy access of leading financiers to the highest US government officials and the interweaving of the two career tracks.” Johnson referred specifically to the revolving door between public office and Goldman Sachs, 
notorious for its role in precipitating the Greek economic crisis.

US Senator Richard Durbin recently said of the banks’ influence on the Senate, “frankly they own the place”.

In our own post-apartheid situation, elements of corporate capture are certainly not a recent phenomenon. The adoption of the 1996 GEAR policy programme, riding roughshod over the overwhelming 1994 RDP electoral mandate, was an early sign that individuals in key parts of the state (many deployed after stints at Goldman Sachs) had been corporately captured – if not through their pockets then certainly in their brains.

But there have also been a succession of more venal attempts at state capture through the perversion of “black economic empowerment” (BEE). Brett Kebble’s criminal circle was able to pervert senior government officials, partly through personalities within the ANC and ANC Youth League. The SACP exposed former ANCYL’s Julius Malema’s campaign for the “nationalisation of the mines” for what it really was – corporate capture of a new kind. Malema’s “nationalisation” campaign was funded by BEE mining interests at a time when their highly-leveraged mining shares were under water. The “nationalisation” call was little more than an attempt to bail out these interests at public expense.

More recently, the SACP blew the whistle on Koos Bekker’s Naspers/Media 24 empire and the manner in which it has infiltrated key state departments; delayed, indeed captured, the much-needed digital migration process and undermined the public mandate of the SABC.

Concern about the role of the Gupta family should, therefore, be neither a new concern nor a siding with one wing of private corporate interests against another. But thisdoes not mean we should now fall in line with the recent pro-Gupta counter-offensive which consists essentially in saying the Guptas are “only small players”. “If you think the Guptas are bad”, Irvin Jim, Andile Mngxitama, and Pinky Khoabane all argue, “what about the Ruperts and the rest of white monopoly capital?”

Here is where it becomes necessary to unpack the operational modes of various factions of capital. Johann Rupert’s extensive business empire was inherited largely from his father Anton, a Broederbonder. The Rupert empire is centred on two major corporations that emerged from the South African tobacco giant, Rembrandt – Remgro and Richemont. The former is an investment company headquartered in Stellenbosch with interests in finance, mining and industry, while Richemont is a Swiss-based luxury goods company. The Rupert business empire embraces hundreds of companies in 35 countries. It is an empire that does not depend on South African government tenders. Rupert can leave the schmoozing of ministers to others. He can fly on auto-pilot, handing over the coercion of governments to Garrow’s punitive markets.

However, unlike Rupert who operates in a downright disdainful manner towards the ANC-led government, Bekker’s Naspers/Media 24 empire, despite similar roots in Afrikaner capital accumulation, has other requirements. It operates within highly regulated sectors and there have been constant interventions from Naspers/Media 24 to suborn ANC MPs and government officials.

By contrast with the Ruperts and Bekkers, the Gupta family have been entirely reliant for their wealth accumulation on corrupting parts of the post-apartheid state. In particular, they have targeted key parastatals and certain provincial governments. The Ruperts and Bekkers appear to have at least some degree of commitment to South Africa, presumably both for wealth preservation and sentimental cultural reasons. (Rupert is reported to have cancelled all Richemont advertising in an overseas publication that once crassly described Afrikaans as “the ugliest language in the world”). The Ruperts and Bekkers repatriate some of their considerable global earnings back into South Africa. By contrast, the Gupta family are shipping their ill-acquired wealth (and possibly themselves) post-haste out of the country to Dubai in anticipation of a loss of political influence in the near-term.

For wealth preservation and sentimental reasons, the Ruperts and Bekkers require an effective, professional Treasury and SA Revenue Service to ensure there isn’t an economic meltdown. But the professionalism in the management of public finances demanded by the Ruperts and Bekkers is a capacity to enforce macro-economic choices favourable to their interests.

The Guptas, with their smash-and-run business model, have a different agenda. They have every reason to undermine a Treasury capable of asking rational questions, for instance, about mega-billion rand nuclear deals, or a SARS that probes high-income earners before they jet off to Dubai. Whatever its residual commitment to South Africa, established monopoly capital, with its roots in successive white minority regimes, has locked our political economy into a semi-peripheral, mineral exporting role within the global market. It is a path-dependency now in deep trouble, reproducing de-industrialisation, the squeezing out of small enterprises, and crisis levels of unemployment, poverty, household indebtedness and inequality.

We cannot, as a country, engage actively in a transformation struggle against this ruinous path-dependency without a strategically disciplined and developmentally oriented state, including an effective Treasury and SARS. We have to deal with the parasitism of the Guptas and others.

Cronin is a member of the SACP and of the NEC of the ANC. He’s also the deputy minister of public works.

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