🔒 The Editor’s Desk: Why corruption charges are so slow to arrive

With the election of Cyril Ramaphosa, South Africans began eagerly awaiting corruption charges. But these have been very slow to materialise. In this week’s episode of The Editor’s Desk, BizNews editor Jackie Cameron and I reflect on why charges have been so to come. We discuss the various schemes that tobacco companies use to dodge their taxes and we also explore the question of whether offshore investing makes sense for South Africans. In addition we talk politics, looking at why the DA may be misunderstanding certain political realities and poking holes in the idea that allowing independent candidates into parliament is going to make much a difference to the ANC’s dominance. Join us for a behind the scenes dive into the news of the week. – Felicity Duncan

In the last few weeks, BizNews has given a lot of coverage to skulduggery and potential skulduggery in the tobacco industry, showcasing some great interviews with people like Azeem Carim and Yusuf Kajee. As we have dug into these stories, it has become clear that they shine a light on a broader problem in SA: The people complicit in high-level corruption, especially top politicians, seem to walk around with absolute immunity.

When will we see charges? In this episode, Felicity Duncan and BizNews editor Jackie Cameron discuss the dodgy dealing in the tobacco industry and a recent BizNews interview on the topic of corruption charges, asking when we will see wrongdoers in handcuffs.

This episode also features conversation about the case for investing offshore and the perils of day trading, as well as some harsh political realities – the DA’s illogical approach to electioneering and the likely impact of opening parliament up to independent candidates.

Hello and welcome to BizNews Radio. You’re listening to The Editor’s Desk with me, Felicity Duncan, and with BizNews Editor Jackie Cameron. Jackie, last week Friday you had a very interesting chat with a couple of well-informed investment professionals looking at the question of offshore investing. Now, obviously, this is something that is on a lot of people’s minds right now. What were your main takeaways from that really very interesting webinar with Magnus and Fred?

Well, one of the main takeaways is that offshore investing is very popular. South Africans really are very interested in taking their funds offshore. And as Magnus Heystek underlined in his answers, the sad reality is that assets in South Africa have not done very well over the last couple of years. There was a bit of optimism when President Cyril Ramaphosa started and we had this ‘Ramaphoria’, but that hasn’t translated into improved gains for investors. 

So, he gave a lot of useful tips about where to invest, and one of the key takeaways is that: although the US looks like a bit of a mess at the moment with Covid-19 cases, there are still many interesting opportunities for investment in the US. So, individuals should not overlook this very significant market in the world. And Fred Razak, who is a global trader, was very much in agreement with Magnus that the US is the place to look for interesting shorter term propositions – if you’re looking to make money in the markets. 

It’s an interesting question, isn’t it? Because, of course, the rand has weakened quite significantly, if you look over the last call it 24 months. So, for people considering going offshore now – it’s an interesting moment to be doing that. Would you say that it’s sort of being driven by fear of more currency weakness? 

Well, the thing about the currency markets is there’s so many different factors. And in fact, we have a story on our business premium today about how a volatile dollar is actually bad for emerging markets and that we should all want the dollar to be strong, because actually a stable dollar is very good for developing countries. So, there are many different factors there. 

The general trend seems to be that the rand is weakening, but – as Fred pointed out – when you’re trading, there’s a lot of volatility and you can make money out of that volatility if you’re brave enough to try currency trading. 

Yeah, and that’s the thing, right, is that a lot of people are now wading into trading and that can be quite risky. There is a really interesting story last week about a young man – a young American – who committed suicide because he believed that he had lost seven hundred fifty thousand dollars in his little brokerage account, which actually turned out to be that he had just read it wrong. 

But when you have a lot of amateurs going into the trading space, there’s sort of increased risk of this kind of thing. So, when you hear about people taking bets on currencies and taking bets on options and all these kinds of complex futures markets, I mean, it could be a real source for concern. 

Yes, and Fred Razak did point out in the webinar that trading is really undertaken by people who consider themselves to be professionals. And one of the interesting things that we’ve seen in South Africa is that the Sasol share price has really powered up tremendously over the past couple of months. And this has been driven by day traders. 

There’s also another trend at play here, which is that there are a lot of people who’ve lost their jobs because of the Covid-19 containment. And we hear from traders that more people are coming into that market actually to try and supplement their incomes. But as you say, it’s very risky, and you’ve underlined in one of your world views the risks. 

People don’t know what they’re doing – they can really come to some serious harm. 

So, another risky area for people to put their money into was raised on Friday, and this is a scheme that is growing quite rapidly at the moment in South Africa. It’s called Crowd1. It’s basically a pyramid scheme, which has been expressly prohibited by the Financial Services Conduct Authority. But it still seemed to have a lot of legs, and it’s using the lure of well-known rugby players to attract people into the scheme. So, that’s another area to watch out for – many pitfalls in finances. 

Read also: Zondo to ask Zuma and Ramaphosa: What did you do to stop corruption at SOEs?

People have to be very careful and very well informed. And then also, as you say, you know, in an economic downturn, more people are looking to these things to supplement lost income. Now, another thing some people have been looking to supplement their income is the traded illegal tobacco. And we at BizNews have been covering a lot about the story. 

Do you want to talk a little bit about what is happening in the cigarette space in the light of the ban and in all of these sort of underground trades and things like that? Because, we’ve covered so much that the story is very complex. 

Yes. So, we’ve got two excellent interviews by BizNews founder, Alec Hogg, on these two insiders in the tobacco sector. And what’s quite fascinating is that there’s a bit of a perception that this is a black market. But in the interviews, it becomes clear that it’s also the so-called legal traders that seem to be benefiting from a very strange situation in South Africa, where you have the Covid-19 lockdown – including a ban on cigarette sales – with the minister who appears to be leading the decision making on Covid-19 containment none other than the former president’s ex-wife. 

And Nkosazana Dlamini-Zuma has been very insistent that its cigarette ban will help curb the spread of Covid-19. But, this is also costing a huge amount in lost taxes and it’s facilitated the proliferation of a huge illegal industry in cigarette sales. People are paying vast sums just to smoke a cigarette. 

And now, what we’ve also carried on BizNews in the past are interviews with Johann van Loggerenberg, who was a tax investigator who lost his job – basically pushed out because he was trying to uncover corruption. And he had joined the dots between the tobacco industry players and the Zuma family. 

And then we also heard this week in another BizNews webinar with my colleague Linda van Tilburg, who had on her webinar constitutional law expert Pierre de Vos, who explained that the most senior corrupt politicians have been very careful not to leave any incriminating evidence. So, they’ve been getting their friends and family members to do their dirty work, which is why it’s taking so long to get a senior political figure into the dock for state capture. And so those are the three top stories on BizNews at the moment. So obviously, there’s a lot of interest in corruption and when are we going to see people face the consequences. 

Read also: Here’s how Batohi, NPA can dismantle legal architecture of corruption – Paul Hoffman

It’s really interesting, because I think with the tobacco story – it’s something that everybody can kind of understand and follow along quite easily. So, it’s not a very complex industry. It’s something that people are familiar with. So, it’s a really nice way to illustrate and understand these webs of corruption. 

With the example of the interviews with Loggerenberg – talking about how this affects the Revenue Service and how this affects tax collections. It really gives great insight into how corruption sort of mechanically works in South Africa. I think that makes it something that people are extra interested in. 

So there’s a bad stench, pardon the pun, around the sale of tobacco in South Africa – not just because of corruption, but also because companies seem to be treading a very fine line between tax evasion and tax avoidance. And this is very much to the detriment of the South African taxpayers. 

So you have, for example, tobacco companies that will be sending half of the price of whatever they get for a packet of cigarettes out of the country as a so-called royalty. So, South Africa doesn’t see that money. So, most of the profits are pushed offshore. 

Now, we did hear in the special budget from Tito Mboweni – the Minister of Finance – that the government does have plans to go after companies that are very aggressive with their tax planning like this. And in fact, he did mention transfer pricing. 

So I think we’re going to see a bit more activity in that space. And as we’ve heard before, one of the areas where corrupt politicians have been brought down elsewhere in the world is through their tax affairs and, you know, sort of finding a loophole there, because it’s very difficult to nail them for the corrupt deeds, but easier to hone in on where they haven’t paid the tax.

That’s a very interesting point and a very good one. And it makes it all the more important to build up the capacity at the Revenue Service, so that they have the right people there who can go after these guys. Because you’re right – the tax avoidance strategies that turn quite quickly into tax evasion is a very common way for these corrupt politicians to actually finally come a cropper and corrupt business people, too. So a lot of very interesting content there on BizNews, and you can see why people are reading it and why they’re engaging with it. It’s an interesting area.

Yes. And now, speaking of interesting articles: you wrote a fascinating piece for your Worldview column – looking at political parties and you were responding to them. I wonder if you could just take us briefly through why you wrote that column, what the background was for that column, and you did some interesting little diagrams to go with that.

Absolutely. So the DA obviously lost ground during the last election. And in the lead up to the election, they had altered slightly their policy platforms under Mmusi Maimane. They were willing to bend and be more flexible in issues such as affirmative action and so forth, and they lost ground with a lot of DA voters – seemingly migrating to the Freedom Front Plus on the right. 

And so the DA was losing ground. And my analysis of that was that as the DA was moving to the center of South African politics, it was shedding voters to the right and that the party now must decide if it’s going to be a fringe or sort of right wing party or a broader, more centrist party that can be a big tent in the South African context. 

Now, the South African Institute for Race Relations, responded to this taking issue with my characterisation of the DA as moving towards the centre and said: ‘well, in fact, the DA is a centrist party, and what we’re seeing is the DA moving to the left’. And to me, this just really highlights something that is so frustrating about the opposition in South Africa, and that is just the sort of refusal to engage with the reality on the ground. 

There is no reason to think that the DA is a centrist party. They get less than 20 percent of the vote or around 20 percent of the vote. They’re a pretty marginal fringe party by any sort of definition in a democracy. And in fact, the centre party – the party that attracts the most votes (around 60 percent of the votes) – is the ANC. So, the ANC is in a very real sense, setting out what the centre is in South African politics. 

And so, to sort of argue that the DA is centrist is to just refuse to face the political reality of what the South African spectrum looks like. The South African centre is quite far to the left in a kind of classical political philosophy sense. And that’s just the reality. That’s just how people choose to vote. 

So, what the opposition party needs to do is find a way to appeal to the broad middle of the political spectrum in South Africa and persuade them to vote DA. And if the DA doesn’t even acknowledge that that’s where the centre is, I just – I don’t see how they can ever create a winning platform that’s going to bring South Africans, especially, of course, black South Africans onto their side. So, I get a bit frustrated sometimes with the opposition in South Africa. You know, I don’t think they necessarily present a real alternative for the majority of voters. 

So what do you think will happen now that the Constitutional Court has ruled that we will be able to have independent representatives in Parliament? This is one of the stories we’ve been covering quite extensively on BizNews, and it was a political development that was sparked by a politician who’s not particularly well known, but has been fighting for this situation to change for a long time. And we have an interview with her on BizNews.com. 

Her name is Chantal Revell, and she basically played a key role in getting the Constitutional Court to change the rules about who gets to serve in Parliament. Do you think this kind of development is good for the DA or do you think this could be its death knell in the light of your reading of the way the DA is strategising? 

Honestly, it’s a difficult one to answer. The reason that political parties have been so enduring and virtually – there’s no democracies around the world that are not ruled by a group of people from a political party. And the reason they have been so enduring is because they’re around all the time and they’re very good at collecting resources and turning those resources into campaigns to win office. So, the problem that independents always face is that their opponents are going to have all the resources of the political party behind them. Whereas the independent would have to create – from nothing – any kind of infrastructure to run an election campaign. 

So, independents are always running at a disadvantage. It’s not like a life-threatening situation. There are, for example, I think there’s about seven independents in the United States Congress – some of them in the House of Representatives and a couple in the Senate – and they’re independent. They’re not affiliated with either party, and they don’t benefit from either party’s resource gathering capacity or election running, campaigning capacity. 

But, I think it’s a good thing. I think that there should be no reason why independents could not be in Parliament, and I think that the Constitutional Court’s decision was right. But I think that, generally speaking, it is just going to be exceptional individuals or very wealthy individuals who are going to be able to effectively campaign as independents. And so, I would be very surprised if we ended up with more than a small handful of independents just because of the nature of how elections work. 

So, I don’t think that that decision on its own is going to have a particularly significant impact on South African politics. Just the mechanics of what it takes to get elected are such that you just need someone who can gather up the resources, and not every independent can do that alone, if that makes sense. 

Makes perfect sense, which makes you wonder then whether the people who have been hoping that this ruling will loosen the ANC’s iron grip on power have been overly optimistic. What do you think? 

Yeah, I think so. The ANC: the reason – one of the reasons, there’s a lot of reasons – but one of the main reasons that they have such enduring success is that they have a really huge grassroots organisation and they’re really very active in campaigning. They don’t really rest on their laurels as far as campaigning goes – they are hitting the streets very hard, especially in disadvantaged areas, and they’re handing out parcels. 

They really work very hard to get people to the voting booths and get people voting. And so, the ANC has actually a very strong call it political machine behind it. And that’s what propels it to victory a lot of the time, because, you know, really – the whole game in politics is to find people who want to vote for you and then make sure they actually go and vote for you. And the ANC is really good at doing that. 

The EFF is, for example, much worse at doing that – there’s a lot more people who would probably vote for the EFF than who actually go out and vote, because the EFF just doesn’t have those grassroots operations. But, you know, given that is one of the agency’s core strengths, I think it would be very unlikely that independence would be able to displace them. 

I think that what would displace them would be a political party with an appealing set of proposals that are effectively communicated and a political party that has the same powerful grassroots operation as the ANC: that actually goes to where voters are, persuades them and then puts them on a bus and gets them to the polls, because that’s what it takes to to win an election. So, I would be very surprised if allowing independents into Parliament really changed the balance of power in Parliament. I think it’s going to have to be more organisational than that.

Very interesting insights. Thank you, Felicity. 

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