Mpumelelo Mkhabela

Guptas turning entire state into corruption enterprise

2017-07-28 11:14

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The bribe-for-deals scheme designed by the Guptas to milk South Africa’s state resources has brought into practice an old joke that is often told in India.

In his book, False Economy: A Surprising Economic History of the World, Alan Beattie distinguishes between two types of corruption. One that bankrupts a country and another that allows economic development to flourish.

Beattie tells the Indian joke thus: The chief minister of an impoverished Indian state goes on an exchange visit to an American city where the mayor shows him around. First the American mayor points out a highway on the edge of town. "See that?" he says. He taps his breast pocket and winks. "Ten percent." Then he indicates a new baseball stadium. "See that? Ten percent." And so it goes. Finally, the mayor takes him under the portico of a grandiose City Hall. "See that? Ten percent."

The following year, the American mayor goes on a return visit to India. The Indian chief minister takes him up to his official residence, high on a hill overlooking the state capital. He makes sweeping gesture over the city, including the miserable sprawling slums, the open sewers, the potholed roads, the abandoned factories. "See that?" he says. He taps his pocket and winks. "One hundred percent."

The #GuptaLeaks reveal that Guptas are implementing a version of the hundred percent bribe model in South Africa to turn our country into a site of slums and misery. They set up a system that ensured that foreign companies were made to pay bribes to secure business with state-owned companies.

South African officials who took part in the looting schemes have had their spines thoroughly massaged – literally and otherwise – in Dubai so as to make them sufficiently wobbly.

As is the case with bribery, what is so foolish about the whole thing is that the scheme is financed by the South African state. Yet, South African officials are so dumb to believe that the Guptas are wealthy. Yes, they are wealthy, because we gave them a country to milk.

It’s almost as if there was so much bounty to feed on, we didn’t know where to start until the Guptas came. But they brought no money to South Africa. It’s not as if we don’t know what a genuine foreign investor from India looks like. 

What do the Guptas make? Nothing

South Africa is home to Indian foreign direct investors like Tata and ArcelorMittal, respectively run by billionaires Ratan Tata and Lakshmi Mittal. These two Indian companies brought money into the country and we know what they produce. Tata produces cars. ArcelorMittal makes steel. And what do the Guptas make? Nothing. They have invented state capture and crude corporate hijacking.

The bribes, hidden as commission fees, that multinational companies and other companies were charged by the Guptas and their associates to do business with state-owned enterprises, are insane. They inflated the costs of products and services procured by the state-owned enterprises. The shareholders (taxpayers) and the creditors of the state-owned enterprises are fed up with this rip-off.

This scheme also exposes the ANC as a highly hypocritical organisation. At its Polokwane conference in 2007, where Jacob Zuma became its president, the party passed a resolution to draft a code of conduct for South African companies operating outside our borders.

The idea was that South African-domiciled multinational companies, who have operations on the African continent, should show good ethical conduct. They should, in their foreign operations, reflect the good governance values that they are expected to uphold in South Africa. In addition, they should respect the laws of the countries where they operate. On the face of it, it sounded like a noble idea.

Like many lofty ANC decisions, it never got anywhere. Anyway, it would be difficult to enforce, especially as the party that propagates the idea is responsible for teaching multinational companies from other countries that we are just another corrupt underdeveloped country whose resources are there to be looted by whoever is willing to buy the president designer suits.

At the behest of the Guptas, many multinational companies have broken South African tax, corporate governance, money laundering and anti-bribery laws. They have done in South Africa things they wouldn’t dare do in their own countries. They were told that’s how things work in South Africa. They were told that’s how we roll.

Corruption enterprise

Ten percent is too small. It doesn’t have to be hundred percent. But it certainly must be price reasonable enough to buy a head of state and his cabinet. Such is the extent of the damage that Zuma’s ANC and the Guptas have done to the country.

The Guptas bribery rate is so high that it beats the local tenderpreneur rate. While the local tenderpreneur rate is the cause of many of unfinished or shabbily constructed schools, roads, clinics, sewage infrastructure and other public facilities, the Gupta rate is the source of the country’s quick decline in credit ratings.

The Gupta rate seeks to privatise the National Treasury and turn the entire state into a corruption enterprise. If the Guptas and their associates are not punished with hefty jail terms, South Africa will no doubt end up like the misery slums of India caused by the hundred percent bribe model. An Indian joke is about to become real in South Africa.

- Mpumelelo Mkhabela is a fellow at the Centre for the Study of Governance Innovation (GovInn) at the University of Pretoria. 

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Read more on:    guptaleaks  |  state capture
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