Investors are watching South Africa closely to determine whether President, Cyril Ramaphosa can turn the country around from the corrupt years of Jacob Zuma and live up to his promises. Ramaphosa’s task became more difficult as the news surfaced that South Africa’s economy contracted by 3.2% in the first quarter of 2019 and the ANC’s National Executive Committee added a further dent when it requested that the government changed the mandate of the South Africa Reserve Bank to allow quantitative easing. So, how do you restore business confidence and bring investors back to the country in this challenging economic climate? Paul Hoffman believes the best way to restore investors’ trust in South Africa is by restoring integrity. He says South Africa has the right foundations in a “magnificent” Constitution. The essential missing ingredient that investors are looking for is integrity and probity in governance. And he has a list of priorities that he says needs urgent attention if South Africa is to turn the corner in its economic trajectory. – Linda van Tilburg
Government creates an atmosphere conducive to investment
By Paul Hoffman*
On the same day that the Statistician-General announced that the SA economy has shrunk by 3.2% in the first quarter of this year, our worst performance in ten years, the Secretary General of the ANC, Ace Magashule, started his post NEC Lekgotla press conference on 3 June, 2019 with the sound observation that it is government that creates an atmosphere that is conducive to investment.
Once it is agreed that it is indeed up to government to do whatever is necessary to boost investment at a time when the economy is shrinking alarmingly, the obvious question is “How?” is this worthy objective to be achieved. Unfortunately, Comrade Ace was somewhat taciturn on this vital aspect.
The process of building business confidence, a necessary precursor to the landing of new investments is a tricky one at the best of times, and it is made trickier by the shrinkage in economic activity that the Statistician-General reveals in the cold figures he lays out for public consumption.
The current and perennial challenge of the integrity/trust/confidence/investment vs jobs/poverty alleviation/equality promotion calculation which Magashule does not address at all works like this:
- Without firm and established probity in strong systems of governance and integrity in the character and actions of those who govern there is no trust in the government’s ability to serve the people by performing its lawful obligations properly.
- Without trust in government’s probity and integrity investor confidence is elusive. Investors choose not to invest and prefer to sit on cash or near cash to see whether integrity is emerging or not; that is, if they don’t simply invest elsewhere in countries in which trust and integrity are abundant. These considerations apply both to foreign direct investment and to the attitude of local investors.
- Without investment in the economy, especially the labour intensive manufacturing, mining and agricultural sectors, the ability to create jobs remains stunted or static. The reported shrinking of GDP by 3.2% in the first quarter of 2019 is worrisome in the extreme.
- Without job creation, poverty and inequality remain stubbornly in place; indeed in recent years they have both been exacerbated in SA by the state capture project for which those in the Zuma administration are responsible either by omission or for their active participation in the looting of the state’s assets and funds.
- Widespread joblessness, under-employment, un-employability (due to failure of the education system) and resultant poverty stretch the social security net to and beyond breaking point.
- When the social wage becomes more than the country can afford, failure of the state ensues. Loans from expensive banks and the IMF follow and sovereignty is illusory as bankers call the shots and institutional international investors flee.
- These truisms apply to SA and to all countries equally. The investor driven market takes no prisoners and shows no favouritism. Some pension funds have rules prohibiting investment in countries which have “junk status” – SA is currently perilously close to this status.
In theory, SA has a magnificent platform off which to work. We have the basics: respect for human dignity, the promotion of the achievement of equality of rights and the enjoyment of the various freedoms guaranteed to all in the Bill of Rights, which our current president and many other patriots worked tirelessly for years to put in place.
In theory, we have a system of governance under the rule of law founded on openness, accountability and responsiveness to the needs of the people which is underpinned by strong institutions. The type of entities that work efficiently and effectively to discharge their constitutional mandates economically through stewardship of resources that is transparently aimed at delivery of services as envisaged in that Constitution.
The essential missing ingredient in the wasted Zuma years has been the integrity factor which lies at the root of the calculation covered by the seven points set out above. Zuma set out to seize, and almost succeeded in, capturing the state. He turned governance into a patronage network for the benefit of his friends, business associates and family.
Restoring integrity in governance ought to be acknowledged as the most urgent task now at hand. It is the primary duty of those who are currently tasked with running the country. Perhaps too many of them are former members of the Zuma cabinet; some are deployed cadres of his faction of the ANC, illegally working in the public administration and the state owned enterprises. Many more in government owe their primary allegiance not to the implementation of the values of the Constitution but to the aims of the national democratic revolution (NDR) – the political programme of the tri-partite alliance which has been in government at national level since 1994.
The aims of the NDR are to secure hegemonic control of all levers of power in society, to collapse the state into the party and to secure a socialist/communist one party future for SA. The SACP and COSATU, the alliance partners of the ANC, are at least open about what it is that they seek to achieve in the long term. The ANC itself mutters about the “balance of forces” in society and the need to proceed with the aims of the NDR with “dexterity of tact”, which is its code for “a lack of integrity”.
As the values of the NDR are deeply at odds with the values of the Constitution, there is no basis for governing with integrity in SA while the ANC led alliance is in government; nor while it pursues its “revolution”. The widespread practice of cadre deployment in the civil service and SOEs is illegal and unconstitutional, but there is no word from Magashule that it will be ended. The striving for hegemonic control is at odds with the constitutional multi-party democracy under the rule of law in which a free press and an independent judiciary act as bulwarks of the liberty of the people by ensuring that checks and balances on the exercise of public power remain in place.
The true believers in the NDR long for a socialist/communist utopia in SA. The Constitution, on the other hand, is aimed at multi-party social democracy with the separation of powers intact and the independence of Chapter Nine Institutions, which supplement the checks and balances on the exercise of power, guaranteed.
It is in the field of the criminal justice administration that the capture of the state has had the most damaging effects on the fabric of society and that conduciveness Magashule seeks. The Zuma penetration of lady justice has meant that a culture of corruption with impunity has grown in the public administration and among those in business who enjoyed the grace and favour of the crooked Zuma/Gupta axis. Those left behind to pick up the pieces don’t seem to be energised or even inclined to do what is necessary to end impunity.
In August 2017 Glynnis Breytenbach, shadow minister of justice, wrote an open letter to the then NDPP, Shaun Abrahams, giving him a masterclass in prosecuting properly, effectively and efficiently. Her advice was ignored and it is yet to be acted on by the current NDPP, Shamila Batohi.
This evidence of paralysis in the criminal justice administration is noted by potential investors as suggesting that those who have taken over from the Zuma aligned politicians are either still Zuma aligned (and fighting back) or are too incompetent or afraid to do what needs to be done to recover the loot from the kleptocrats and to prosecute them for their corrupt activities.
Even the heroic Minister Pravin Gordhan hesitates to do what is obviously needed in the way of following the stolen money of SOEs quickly before it is dispersed to the four winds. He appears to be labouring under the misapprehension that the Zondo Commission is the magic panacea. It is not. A commission of inquiry is a fact-finding tool of the executive. Its recommendations bind no one. It has no powers to arrest, prosecute or even civilly sue the capturers of the state or the corrupt.
While the NPA remains at least partially captured, it, like the Hawks, will not assist in repairing the damage done by the Zuma administration. Sadly, misappropriated funds will not be recovered timeously nor will miscreants be brought to justice efficiently. Using the civil law to track down the loot is still a viable option which government has inexplicably eschewed.
The talk about confronting the corrupt in high places is not matched by action of any significant kind. The Estina dairy case was botched and the kleptocrats roam free or have been allowed to flee while the prosecutors enjoyed their December holidays.
The new NDPP has a herculean task at hand just to clean out the Zuma aligned cadres deployed as senior prosecutors in the NPA. The Nkandla (2013) and Nxasana (2015) related prosecutions suffer from the “failure to launch” syndrome despite their centrality to restoring business confidence by going after the “big fish”.
The Hawks are grossly dysfunctional; they lack the operational and structural independence to deal with grand corruption. Under-resourced, inadequately trained and lacking the necessary security of tenure of office, they are not even the specialised body of corruption-busters envisaged by the Constitutional Court in its binding judgments on their adequacy and constitutionality.
The new Investigative Directorate in the NPA is of questionable constitutionality and has yet to get off the ground.
The political will to reform and transform the Zuma-deformed criminal justice administration is sorely lacking, even as the President makes his investor friendly remarks with or without “dexterity of tact” (as the NDR puts it). He says he is mulling the notion of a new Chapter Nine Integrity Commission but he does nothing about it.
If integrity in governance is to be restored and SA is to turn the corner in its economic trajectory, away from its current deepening recession to future shared prosperity and sustainable growth, the following priorities need urgent attention:
- Cadre deployment in the public administration and state owned entities must end because it is illegal and unconstitutional, appointments on merit are needed;
- The NDR must be officially abandoned and buried by the ANC in the interests of economic growth and renewed investment which will not be forthcoming while the NDR remains in place;
- An overhaul of the Hawks or, preferably, their replacement by an Integrity Commission to investigate and prosecute grand corruption is also a matter of priority;
- The Chapter Nine Institutions must be liberated from the clutches of deployed cadres and Zuma favourites;
- The education system must be healed and rendered functional. Ask Helen Zille to be minister of basic education and give her a free hand to get real about the 70% drop out rate before matric at schools in SA;
- Strong institutions of government, in which all personnel owe their first allegiance to the values of the Constitution, must be fostered and promoted;
- The culture of impunity for corruption must be ended with effective and efficient prosecutions of those involved, including those in cabinet, the NEC of the ANC and other high places;
- Steps must be taken both in the civil courts and the criminal courts of the land and the world to recover the spoils of state capture before they are dissipated or squirrelled away by the corrupt.
In this way integrity will be restored, trust will be built, confidence will return and the necessary investment to create jobs, reduce poverty and promote the achievement of equality will be forthcoming. These are goals envisaged by our Constitution. They are what government should have been doing with accountability, responsiveness and openness since 1994. The political will to do so now is what is required.
- Paul Hoffman SC is a director of Accountability Now.