Oscar van Heerden | Misalignment and failure: The political economy of corruption in South Africa

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Corruption didn't begin under Jacob Zuma as many think, writes the author.
Corruption didn't begin under Jacob Zuma as many think, writes the author.
Darren Stewart

The rise of state capture during the Presidency of Jacob Zuma has to be understood cumulatively because corruption in South Africa has not only taken place over time but has also progressed through different phases, taking various forms over different periods, writes Oscar van Heerden.

It is often insinuated by many that corruption began in earnest post-1994 or by those more conscientious people that it was not as bad as it is now under a majority black government.

Whether you agree with these sentiments or not, it suggests a closer look at the factors and drivers of corruption in our country and whether we are making any headway to curb and stamp out this dangerous phenomenon.

So, I recently was asked to take a serious academic look at this phenomenon to correctly understand it, so it can hopefully be correctly curbed. This is what my paper found in a nutshell.

Key drivers of corruption can be understood as follows: Using a conceptualisation similar to 'rational choice theory', government policy suggests that corruption beyond apartheid is conceptually close to morally deviant behaviour. But by just focusing on public duty as a moral obligation to "treat equally those who deserve equally", it is hard to see how policy explains other historical and structural drivers of corruption in the private sphere. 

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Against the dominant 'rational choice' approach by government to understand and address corruption in South Africa, I suggest a more rigorous conceptualisation: corruption in the South African public sector can be defined as material incentives and opportunities that emerge when individuals and groups seek opportunities in the public sphere because unknown future institutional conditions, the “rules of the game” by which the private sector needs to operate cause doubt about the transformative capacity of the economy. If, in this theorisation, institutional voids and institutional uncertainty as sources of distinct obstacles to doing business, I want to suggest that they also provide material incentives for accommodating or circumventing institutional weaknesses through corrupt behaviour.

I propose three clarifications to the current literature on corruption.

The first builds on institutional theory to argue that institutional voids, specifically with respect to unpredictable changes in the institutional environment, create opportunities for the private sector to accommodate or circumvent policy and legal gaps in times of change. 

The second theorises the role of institutional misalignment, which I suggest results when material incentives for corruption and the rules of the game call into question the perceived transformative potential and carrying capacity of the economy. 

The third is to understand state capture as a cumulative process of material incentives and opportunities that emerge when economic growth is either below the minimum threshold to sustain livelihoods and/or is skewed towards elite (individual and group) interests due to government’s failure to radically and inclusively transform the South African private sector. 

To do so and recognising that state capture represents some kind of failure in the private sphere, I borrow and adapt the stress-strain-fail model from materials research. This allows us to conceptualise public sector corruption as a series of cumulative phases that correspond with the level of inequality in the private sphere and related reforms over time. Thus, resources first start leaking from the state and intensifying until a veritable "flood" results.

Institutional voids

A central question in an emerging body of International Business (IB) literature is whether firms and individuals in transitional economies such as South Africa circumvent institutional uncertainty. One perspective rapidly gaining ground in current IB discourse focuses on the concept of institutional voids. This concept, advanced by Alvaro Cuervo-Cazurra and Ramamurti (2014), Cuervo-Cazurra, Narula & Un (2015), and Luiz, Stringfellow & Jefthas (2017), grounds the decision-making activities of the private firms on institutional push factors (the avoidance of "competitive disadvantages resulting from their home country problematic regulatory contexts). 

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The challenge in this developing debate has been to theoretically pinpoint a more precise conceptualisation of early-stage corruption in transitional contexts. In their attempt to grapple with this question, Child and Rodrigues (2005) argue that "institutional constraints such as legal uncertainties and institutional voids in early transitions present legal loopholes that allow firms to accommodate or circumvent them. This occurs when unknown future 'rules of the game' (i.e., institutional arrangements), which pertained to South Africa’s early transition period, create regulatory voids.  

In the words of Luo and Chung (2013), firms can either "fill" or "abuse" institutional voids. Either way, actors may be able to find ways to work "around" weak institutions and find entrepreneurial opportunities in "institutional voids" (Mair & Marti 2009).

Institutional misalignments

My second departure point is that an element of institutional misalignment, which is a set of strain factors more intense than institutional voids, is a precursor to state failure. Although there can be little doubt that the post-apartheid institutional environment was characterised by both weakness and far-reaching changes in institutions, subsequent scholarship has emphasised the weakness of institutions primarily. 

However, I postulate that in South Africa's second decade of the transition, it was not institutional weakness but instead institutional misalignment, resulting from profound volatility in the institutional environment, that was critical in sustaining apartheid power relations in the private sector and eventually triggering state capture. Here I'm specifically talking about the Zuma years, of course.

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Another example would be after the transition from the Presidency of Nelson Mandela to Thabo Mbeki in the late 1990s, the advent of broad-based Black Economic Empowerment legislation meant that white-owned businesses could not know whether or when they would be given access to state business. There clearly needed to be more alignment between what was nominally and practically possible, between the types of strategies firms could conceptualise and those they could execute. I argue that this misalignment rather than institutional weakness led to fronting as a strategy to circumvent the transfer of wealth to blacks and, eventually, the government's reliance on state resources and institutions to drive economic transformation. 

Thus, I want to suggest that the extraction of rents or dispensation of patronage in South Africa occurs when institutional voids and misalignments result in hierarchies of power or individuals in the private sector subverting the impartiality principle in the public sphere to gain an advantage and extract a benefit.

Cumulative misalignments

Finally, the rise of state capture during the Presidency of Jacob Zuma has to be understood cumulatively because corruption in South Africa has not only taken place over time but has also progressed through different phases, taking various forms in different periods. Moreover, if we accept that corruption is associated with institutional voids and misalignments, it has to be understood as some type of "failure" to transform the economy radically and inclusively. 

I, therefore, turn to the model of voids, misalignments and failure as a stylised outline and use the three phases illustratively to structure our discussion of corruption data. I argue that institutional voids, together with misalignments, place stress and strain on the economy.

Initially, the effects seem minimal, but continued stress will lead to visible strain. For example, the inauguration of the market-driven GEAR policy in 1996 led to a private sector-driven frenzy of 'elite-pacting’ with a subordinate black business elite, while institutional risk after the advent of BEE policies in the first decade of the 2000s led to a frenzy of corporate restructuring and the externalisation of assets. 

When the extent of misalignment in the economy continues beyond a certain point, firms may choose to shift their operations outside the borders of the economy to a location with institutional and other conditions that they perceive as more amenable to their operations while the state turns inwards to a reliance on public resources to drive BEE. I argue that the latter reflects a phase we have come to define as state capture. 

The historical data reveals clear periods corresponding to the following stages of corruption in South Africa. 

1994 marks the first democratic elections in South Africa and the beginning of a period of profound institutional transformation and 'elite-pacting’ between an emerging black business class and white-owned and controlled business interests, including the externalisation of the assets of the latter abroad.

By 2009, when the presidency of Thabo Mbeki ended, the failure of many post-apartheid reforms, particularly Black Economic Empowerment as the primary policy framework for wealth redistribution, was becoming apparent, triggering a new set of economic and institutional challenges.

By 2012, the failure of BEE to redress historical disadvantage in the face of intractable 'barriers to entry' by blacks posed by an untransformed private sector opened an era of state capture. The analysis ends in the post-2016 period, characterised by a deep, multifaceted economic and institutional crisis and corresponding policy challenges. This partly explains how corruption and associated incentives are a cumulative process that results from primarily increasing inequality, institutional volatility and societal contestation. 

This is but a snapshot of my paper and requires further investigations and research. We have a long way to traverse if we are to confront the real drivers of corruption in South Africa and if, indeed, we are hellbent on putting a stop to it.  

- Dr Oscar van Heerden is a scholar of International Relations (IR), where he focuses on International Political Economy, with an emphasis on Africa, and SADC in particular


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