The first wave of state capture had its origins in the cadre deployment and transformation policies of the African National Congress (ANC) which degenerated into the looting of state institutions. These policies allowed the party, through the government, extraordinary regulatory and administrative powers and deployed cadres just could not withstand dipping into the public purse.

A senior ANC leader once told me that what the party desired was a model of ‘sustainable wealth extraction’ in which the party, through the state, could draw wealth out of the country without driving investment out of the country – but bemoaned that greed and infighting among cadres was so great that they could not help but destroy the institutions they were deployed to lead.

The consequences can be seen in Eskom, in creaking infrastructure, failing municipalities, toxic rivers, dangerous hospitals, and corrupt policing. They can be  read in the testimony to the Zondo commission, the Gupta leaks, and the reports of the Auditor General. As Minister of Public Enterprises Pravin Gordhan is reported to have said, ‘If you thought it was bad, it was worse.’

But I am afraid that if the first wave of state capture related to the destruction of public institutions and infrastructure, the second (and later) waves may relate to the attempts at their rebuilding.

The formulae for those subsequent waves will have three components. The first will be large amounts of corporate, pension, and development financing being made available for rebuilding. The second will be the nominal ‘privatization’ or private contracting of firms to rebuild that which has been broken. The third will be to apply the above via the same regulatory and administrative mechanisms that led to the first wave of state capture.

Here are some practical examples:

The energy parastatal/municipal water works/public hospital/mining industry is failing. South Africa suffers an electricity/water/healthcare/mining crisis. Something must be done. New generating capacity/refurbished infrastructure/better healthcare administration/new mining investment must be brought on line to save the country. Large amounts of development financing must be raised, with business, government, labour, and the international community (especially under wave three) working closely together. Collectively they will agree that the ‘private sector’, or at least private-public partnerships, must do the delivery as the capacity of the state is so eroded. Calls will go out for applications from suitably qualified firms to do the work or lead these partnerships. But these firms and the contracts they win will be surveyed by the same political leadership and through the same prisms of cadre deployment and transformation that led to the first wave of state capture.

We at the Institute of Race Relations (IRR) think transformation is very important in the sense of introducing effective empowerment and affirmative action policies that identify people on the grounds of socio-economic disadvantage and help them into the middle classes. But what passes as transformation in the government and the ANC is not that but rather a racial nationalist policy that acts as a fig leaf to conceal corruption, malfeasance, and the looting of public funds by painting any critic of the policy as racist.

Put it quite bluntly; you can grow rich off looting Eskom into the ground, and then win the financing and tenders to supply the renewable energy that South Africa needs to keep the lights on. When anyone questions what is going on you can again throw the racism accusation at them (and in the case of renewable energy) the climate-change denialist accusation.  

What ends up happening is that, having exhausted the resources available from public institutions, the ANC’s political elite pivot under the guise of privatization and reconstruction to keep the cash taps flowing. State capture is ongoing – it is only the business and financial model that has changed. If you have any doubt think about what has happened at South African Airways (SAA) where banks and a development financing institution have stumped up several billion rand to keep the cash flowing without which that fragile cadre-deployment house of cards would already have come tumbling down. When asked why they did it, the development bank said that if they had not then SAA would have folded – not the basis of sound banking or investment policy.   

An implication of our ‘waves of state capture’ thesis is that it is too early now to speak of public-private partnerships, raising development finance, and rebuilding, and will remain so as long as the current political elite that looted the country is still in charge.

The first cycle of state capture lasted almost twenty years before running out of cash in the aftermath of the 2009 financial crisis and the frenzied looting that followed. If the looting had been done in moderation it might have lasted longer. The second may not last as long but given the quantum of private funds held within the country, including pension funds, it could last for many years. The third wave will come after those private funds are exhausted and international funding agencies are forced to step in.

The IRR first warned about the implications of cadre deployment and what is today called state capture almost twenty years ago. For much of the time that followed, the warnings were ignored or loudly countered. It is important to say that because this is not our first rodeo and the methods and tools we used to make that call 20 years ago are the same as those that allow us to flag the lining up of state capture ducks all over again.   

If you ask how these next waves can be avoided, the most compelling answer now is the complete defeat of the ANC so that it is out of government. Short of such an outcome, and short of a sincere effort to jail the corrupt in its ranks, our assessment is ever more that the ANC in government will repeat the cycle of state capture time and again, simply changing the source of finance ahead of each new wave.

Twenty years ago very few influential people were willing to admit, let alone speak out or act against, the dangers inherent in the nexus between cadre deployment, what passes as transformation policy, and the enormous administrative power of the state. Today, equally few seem able to admit that the ANC must be driven out of government to stop the cycle.

If you like what you have just read, become a Friend of the IRR if you aren’t already one by SMSing your name to 32823 or clicking here. Each SMS costs R1. Terms & Conditions Apply.

Previous articleSONA, the ‘only thing we’ll entertain’ – Modise
Next articleShock at FDP and CDU alliance with AfD in Thuringia
Frans Cronje
Frans Cronje was educated at St John’s College in Houghton and holds a PHD in scenario planning. He has been at the IRR for 15 years and established its Centre for Risk Analysis as a scenario focused research unit servicing the strategic intelligence needs of corporate and government clients. It uses deep-dive data analysis and first hand political and policy information to advise groups with interests in South Africa on the likely long term economic, social, and political evolution of the country. He has advised several hundred South African corporations, foreign investors, and policy shapers. He is the author of two books on South Africa’s future and scenarios from those books have been presented to an estimated 30 000 people. He writes a weekly column for Rapport and teaches scenario based strategy at the business school of the University of the Free State.

29 COMMENTS

  1. Spot on, ‘sustainable wealth extraction’ and “redistribution” to some selected cadres.
    I read an article by a black man -Chigozie Obioma in Foreign Policy Magazine – There Are No Successful Black Nations, Chigozie Obioma is an assistant professor of English and creative writing at the University of Nebraska-Lincoln.

    My observations reminded me so of the dogmas of the ANC and BLF and EFF- Black elites and activists operate exactly as defined in the article.

    a) Farcical democracies ruled by Elitist men who exclusively cater to their interests and those of their clipped circles.
    b) A culture of incompetence, endemic corruption, dignified ineptitude
    c) Destructive nature, selfishness and greed
    d) Tyranny, in a way in which they shut down any effort to reason or criticize any black-majority nations by labelling such attempts as “racism” or “hate speech.”
    e) Anyone within their race who makes such a suggestion will be deemed weak and pandering or a sell-out and will readily resort to violence to enforce their demands on an unwilling participant
    f) Desire to control their own Fiefdom

  2. “The most compelling answer now is the complete defeat of the ANC so that it is out of government” (extracted from article). No, there will also be political waves of corruption. The second political wave when the ANC drops below 50% is that the ANC and EFF will form a “coalition of the looters”, so the second political wave will extend for another 20 years or so.

  3. Thanks for a thought-provoking article.

    I may be a bit more pessimistic. I judge the state finances including state debt (including state enterprise debt) to have reached the point of breakdown already. If not yet, then after the Corona crisis (this year income will nosedive and the deficit soar pushing debt up further). All this means, the IMF umbrella is closer than all think. Which means, economic policymaking is about to be taken out of the hands of the ANC. Which will (hopefully) make it more difficult to steal money in a 2nd and 3rd round. Especially if the IMF insists that BEE be dumped on the ground that it’s economically inefficient.

    • This is why the ANC is likely to resist any substantial resort to the ANC. It will not countenance reforming the machine that drives patronage and accumulation for its members. They will instead resort to our savings and pensions, with the justification that C19 made this unavoidable.

    • It’s obvious the officials at the IMF must still belief in father christmas & goldilocks to even contemplate considering loans to this junk state conglomerate of looters called the Republic of South Africa. Even the bible refers to throwing pearls at pigs. Any loans will be regarded by our fearless leaders to be squandered on what they see fit. The grand & great grand children will have to figure out
      how to pay the arrears of any loan being made to RSA in the next maybe 20 yrs.

      • Former chairperson of the Passenger Rail Agency of South Africa (Prasa), Popo Molefe, says he approached the leadership of the ANC’s national executive committee (NEC) in to brief them about corruption and governance failures at the state-owned agency which manages R173 billion in rail infrastructure investment.
        Say no more!

      • Economic contraction is compounded by many African countries’ high levels of debt. Costs of servicing debt have increased to roughly US$40 billion annually. The currency depreciation experienced by many African countries in 2020 has also increased the costs of servicing debt. COVID-19 is thus likely to trigger a debt crisis in some African countries unless creditors agree to substantive amelioration effects.
        Quoted from ISS communication

  4. In much the same way that a road is built of layers, corruption is as well. People who have a vested interest in it, will be less likely to change the system than those who have none. The corruption in South Africa reaches to the level of minor civil servants who now openly elicit a bribe from citizens when required to perform their civic duty. Let the money run out, let the IMF come in. It is the lesser of two evils in this country’s case.

  5. If we let the IMF in we are dead in the water, if we keep the ANC we are dead in the water. Between the devil and the deep blue see. In the history of this planet, 4.5 billion years, no black struggle cadre which has thrown off oppression or white colonial power has ever succeeded. We must not ignore history.

    Why then do Europeans and Americans insist we hand over viable economies to corrupt Africans who oppress their own people worse than the colonial powers? This is where the problem lies, European and American powers knowingly exploiting corrupt African politicians to feed their insatiable greed, for example selling us antiquated aeroplanes and submarines we do not need. Look north, not here.

  6. No matter which way we slice it we are headed straight down Zimbabwe Road. It is tragic for our country and our young people. Most are naturally in denial, who wants to live a life in negativity, we love our country. The overall response to an assertion that we are going the same way as Zim is – no way, SA is different! We cannot believe that our ‘leadership’ is not concerned and will do everything they can to avoid that outcome. Well, so far they haven’t. The fault is not our ‘leaders’, it’s our thinking. Surely, if we are awake and honest we can see that our ‘leaders’ are incompetent and incapable of creative growth, plunder is much easier and as we have seen, carries no risks. The other part of our faulty thinking is from our perspective. Right minded people consider Zimbabwe to be a failure, unfortunately that is not what the ANC sees. They see a political party that has been in power for 40 years and has lived off the fat of the land for 40 years. That spells success in any politicians book.

    • Look at the locals operating in Botswana.
      One of the many mysteries about the Bridgette Motsepe affair is why President Mokgweetsi Masisi is pursuing it so relentlessly despite the harm it seems to be doing to relations with Botswana’s big neighbour, South Africa.

      It’s just emerged that Botswana is legally still on the trail of wealthy businesswoman Motsepe – who also happens to be sister-in-law to President Cyril Ramaphosa – for alleged money laundering and attempting to finance a coup against Masisi.

      The case against her sounds literally fantastic. She is alleged to have co-signed at least two Botswana bank accounts, holding some of the more than US$10 billion (R150 billion) said to have been stolen from the Botswana government to finance a ‘coup’ before the national elections last year. Botswana also claims Motsepe laundered millions of pulas through a Botswana security company to sponsor an opposition candidate against Masisi in last year’s elections.

  7. Expose the culprits via undercover video’s on social media! That is where our (and ANC’s voters) eyeballs are. One only needs to nicely “package” and edit these 3 to 5 minutes videos with a great story line.
    Have a look at the work of James O’Keefe on https://www.projectveritas.com/
    Almost anyone can do this: cheap, exciting, multi-facetted and… imo.. very effective.

  8. The answer is to beat them at the at the ballot box. But remember the superpowers in the northern hemisphere want this country at its current state creating the opportunity for them to loot our country and will never allow the ANC to lose.

  9. If ever the ANC and its allies are removed from power there will most certainly be a civil war in this country, without a doubt. The ANC has a history of violence and nothing is going to change that. If this happens it will bring its equally corrupt neighbour comrades, Zimbabwe and possibly others, to help it including the Chinese which already has a huge stake in South Africa. Unless the US UK, etc, get involved we will have no chance. This dictatorship could very likely destabilize this country so much that we will see chaos and lawlessness everywhere.
    All of this is very real and I hope I’m wrong and we find another way out of this.

  10. We are doomed as the anc have made sure they their ducks in a row:
    Police in their side
    So called Military on their side
    The Law courts have been rigged that certain Judges sit in certain court cases to swing the outcome
    China will back them for sure
    And the list goes on….

  11. I say lets go for it & SAVE our beautiful country – we have bled & survived until now – the ballot box is NOT the way to go as this is already a COMMUNIST state & the majority seems to be happy with a puny handout!!

  12. Until ALL those implicated in past capture/looting/mismanagement are behind bars and what can be retrieved has been done so, the private sector must refuse to partner with this government is any ‘way forward’ where any of these scenarios may unfold

      • Now we are on the spot. This BLM uprisings all over the world is just a huge smoke screen. Anything not black is a racist or a sell out. I suspect even Israel is busy going down. The sad thing is that many, many all over the spectrum is part of this anarchy that is planned a long time ago.
        One of the most important things to become a politician is to be a brilliant diplomat. Using words like “suspect” and “the police (or one of the hundreds of commissions) is /are investigating”. If you steal or bribe or participate in bribery, you are a thief, a criminal. End of story.
        The ANC, I believe will eventually go down, only to be going on with what is so natural to them, in another former with another name.
        Until such time that our criminal/justice/ NPA, etc change to protect the innocent and not the criminals, nothing will really change.
        G P C.

  13. When the Handouts are Over en die Geld is op…Pasop!!!
    The HUGE scale corruption and fraud in ANC government, has decimated the financial abilities of the BLACK and white middle class in our Beloved country. This is the diabolical underlying plan of these greedy people, as we are the only classes that had the financial ability to stand up against these corrupt politicians and there cronies…!!!
    But the biggest challenge still to come is not Covid…. its what the HELL are we going to do when the vast majority of the poverty stricken folks suddenly become aware of the fact that the FREE HANDOUTS are finished as the MONEY is all finished…..stolen and in overseas accounts !!!
    Of much more immediate concern to all should be that the genuinely starving and homeless will erupt En Masse and then the proverbial will hit the fan with huge looting and destruction!!
    Any person with an ounce of common sense KNOWS!!!!!!!

    • I believe it is called an “Arabian spring.” The worst season of civil violence that we can imagine. Will the ANC politicians be able to steer the revolt away from their feathered nests of corruption? If yes, the hungry masses will be heading towards the symbols of capitalism: SA’s banks and businesses, and the commercial farms.

      • This is so true. They vote for the ANC since 1994. They know and acknowledge that it is the ANC “leaders” who is solely responsible for no water, no service delivery etc etc.
        To correct this and to show their unhappiness with the leaders they voted for, they burn down the libraries, the schools, the busses, steal and loot everything else except the house and luxury vehicle of the Mayor, of the very people that give them nothing of what they, the politicians, promised the voters before they voted for them …..again and again and again.
        G P C

  14. The writer is correct that the first wave of state capture started 20 years ago. The Gupta’s were merely a wrinkle on the overall trend. Amongst the most successful in the state capture business has been the SACP. There biggest threat is that personal enrichment is not their main objective. It’s laying their hands on all of the levers of power with the intention of creating a Communist one party state. In that they have been spectacularly successful. With miniscule support they contrived to assume leadership of the most powerful posts in the land and at one time even of the ANC itself. Could it be that their vociferous opposition to the Guptas was motivated by their consternation of having their turf invaded?

  15. Frans is correct in his assessment of state capture and brings to light the sole purpose of the ANC-as-government – self enrichment at the cost of South African citizens. The question that now needs to be asked and answered is to what extent would the ANC willingly relinquish political power should it face defeat in a national election? My view is that it would not do so easily or even willingly since greed begets greed. It will not go down without a ‘fight’. Speaking of greed, state capture brings to the fore the psychological dimension inherent in political systems that needs to be flesh out more robustly by the epistemic community in order to gain a deeper understanding of how South African. This would entail researching politics right down to the individual level of those involved in state capture and the general populace supporting and condoning this vile act.

LEAVE A REPLY

Please enter your comment!
Please enter your name here