Abedian: SA needs to be tough on corruption, Chinese-style

Cape Town – The private and the public sector in South Africa must stop trying to solve ethical problems with political solutions, said economist Iraj Abedian at the Cape Town Press Club on Friday.

Abedian, the CEO of Pan-African Investment and Research Services, suggested SA needs to become “more Chinese” in the way it deals with corruption.

“In China the consequences for corruption are visible – either in the streets or behind bars. But in South Africa we are trying to find political solutions for economical and ethical matters," he said.

"It doesn’t work. You can’t have a political solution for KPMG. They must go. You also can’t have a political solution for McKinsey. They must pay. This would be Chinese-style.”

Abedian has in the past few weeks been outspoken about the consequences that auditors KPMG and global consultants McKinsey should suffer for their alleged complicity in corrupt activities.

On Friday in Cape Town, he spoke at length about the erosion of "social capital" in South Africa in both the public and private sectors.

Zuma, Cosatu and the SACP 

He said this erosion started in 2008 and 2009, when the ANC started focusing on the importance of what it termed a developmental state.

“Former president Thabo Mbeki was within the neo-liberal paradigm, which was contrasted as anti-developmental and the opposite of what President Jacob Zuma, Cosatu and the SACP stood for,” Abedian said.

He stressed that a developmental state was in theory a “good thing” that includes job growth, the erosion of infrastructure backlogs and cutting poverty. 

But a developmental state can only succeed if you have a capable machinery of state and ethical leaders, which South Africa did not have, he said. 

“Countries like Singapore, South Korea and Japan have used the developmental state paradigm, but they could deliver on the two prerequisites (capable machinery and ethical leaders) and they achieved success despite some corruption," said Abedian. "Because corruption was the exception, not the norm.”

According to Abedian instead of developing into a capable state South Africa has become a predatory state.

“The notion of a developmental state was therefore customised to our own socio-political circumstances.”

In a developmental state the government is viewed as the engine of economic growth. State-owned enterprises had to lead the way with energy, water and infrastructure development, which leads to a statist economic policy Abedian said.

As a consequence, the private sector was sidelined, excluded from SA's policy discourse and macroeconomic investment decisions.

“A lot of businesspeople however got involved in the developmental state paradigm, working with the state,” Abedian said, “not as partners, which is what it should be, but as contractors. This is different to doing business jointly.”

This, according to him, destroyed the ethical foundation of business.

“We have a situation today where even audit companies are compromised. Lawyers are compromised. Ministers, directors general. And those who are not compromisable, are sidelined, because they get in the way of the ‘developmental state’.”

Ethical transformation

How can this be fixed?

Abedian suggested the private sector undergoes its own RET – not radical economic transformation - but radical ethical transformation.

“The private sector must stop pretending their house is in order and that corruption only happens in the public sector. Let’s be absolutely clear: many lawyers have pocketed it in the last eight or so years, defending people who have looted.”

South Africa needs a public discourse around the ethical conduct of business, he said. “We have lost a great deal of social capital. Sectors need to come together and discuss how to get their credibility back – chartered accountants, academics, teachers, nurses.” 

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