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The Wheels of Corruption

29 November 2012, 12:20

Corruption is a lethal toxin that kills the spirit of free enterprise and public governance excellence in South Africa. It is a risk and reward game played by ruthless legal-wise people who seduce naïvely ambitious public officials and turn them into criminals.

According to an article published in the Economist in 2011, as much as 20-25% of annual state procurement expenditure in South Africa amounting to around R30 billion is wasted through overpayment and corruption. The auditor-general estimated that R26 billion is wasted or spent “irregularly” in a year. A third of government departments award contracts to officials and close family members, it was reckoned.

Many people in South Africa sacrificed for a free society and the jubilation that came with advent of democracy in 1994. Some of these people benefited handsomely from the fruits of their sacrifices and were rewarded for life, without the aid of corruption.  Some were not so fortunate though. Those who thought that free enterprise would take off without corruption and prejudice made a serious judgemental error. Their sacrifices did not transform into lifetime rewards. They became the first victims of early bouts of the plague of corruption that is now taking its toll in South Africa.

Corruption is the pursuit by dishonest people in devious partnerships and networks with the goal to acquire undue wealth and benefits for members who are prepared to partake in illicit and dodgy behaviour. Corruption is usually taken to mean dishonest or fraudulent conduct by people in positions with influence and power.

Imagine the following scenario from more than a decade ago. A senior black consultant teamed up with a white entrepreneur skilled in program management to start a legitimate program management firm to facilitate the rolling out of much needed municipal services and local economic development in poor communities. Initially the firm succeeds in winning small projects. With repeated successful delivery the scope and value of projects increase to a point where executives in contracting organizations hint that contract benefits must be shared and that firms they hold shares in must also benefit through projects. When one such a senior executive of a public enterprise, which contracted the firm to program manage its market development strategy, stopped payment on a contract to enhance the performance of a municipality, the wheels of corruption revealed itself.

The affected firm lodged a complaint over non-payment with the chief executive of the public enterprise and after an investigation he agreed to institute a process of arbitration. This was when things started to get interesting. It was established that a firm in which the senior public enterprise executive had been given a shareholding was awarded an infrastructure development contract in the same municipality. The project was connected to the scope and budget of the program management contract and payments were made from the budget set aside for the program management firm. It was when this budget ran out that the payments to the program management firm were stopped.

The legal department of the public enterprise engaged a law firm to handle the arbitration process. The arbitration costs would be for the account of the public enterprise. The firm of attorneys engaged by the public enterprise appointed a senior advocate as arbitrator who had previously handled cases for the public enterprise. At the start of the arbitration proceedings the arbitrator offered to withdraw from the case because the public enterprise had been his client in several previous cases. The directors of the aggrieved firm, wary of possible prejudice, accepted his offer. It was agreed that the process would be repeated with a new arbitrator.

The process to appoint a new arbitrator started and after several weeks a new lawyer was appointed as arbitrator by the law firm of the public enterprise. This time the directors of the aggrieved firm were required to foot the bill of the arbitrator and the fees of a lawyer to represent the aggrieved firm as required by Supreme Court rules. These extra costs and the non-payment of contract fees placed the aggrieved firm in financial dire straits.

Several weeks had passed after the hearing when the arbitrator demanded payment from the directors of the aggrieved firm before publishing his ruling. He had to be paid before he would reveal his ruling. When he released his ruling after payment, he had ruled in favour of the public enterprise. After the ruling the distraught directors of the aggrieved firm learnt that the arbitrator had his offices in the same building as the law firm that had appointed him. They then understood the intimate resonance they sensed between the arbitrator and the legal representatives of the public enterprise during the hearings. 

The directors of the aggrieved firm felt shattered and decided to close down their firm because of the ruling, the unpredictability of payment by the public sector and the enterprise-unfriendly legal environment.

The set of wheels which moved the corruption to its destructive conclusion comprised of an ineffective procurement leadership structure operating without a policy that prohibits public enterprise officials from taking up shareholding in private firms that deal with the public enterprise; a greedy official with shares in a predatory firm; the owners of the predatory firm who colluded with the official; and a network of legal experts familiar with the arguments, precedent rulings, court rules, contract laws and pressures that are needed to protect the felonious officials of a contracting public enterprise from the claims of cocky entrepreneurs and the victims of corruption.

The appearance of Public Protector Thuli Madonsela who understands the dynamics and networks that drive corruption so well had become the saviour and fountain of hope for entrepreneurs. She has brought closure and redemption to many of those castigated emotionally and financially by corruption. She had become the quiet and gentle enforcer of procurement discipline and public servant ethics. The people salute her and trust that she will continue to be the enemy of corruption and the flame of governance excellence and that she will succeed in removing evil from our society. She has truly become the people’s trusted chucker-out of corruption, fraud, mal-administration and improper enrichment at the expense of the state.

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