Connecting the dots: how Zuma and the Guptas’ state capture is structured
A new 63-page document compiled by academics from South African universities has connected the dots between president Jacob Zuma, the Gupta family and their many associates and businesses, showing the exact structure of state capture in South Africa.
This report suggests South Africa has experienced a ‘silent coup’ that has removed the ANC from its place as the primary force for transformation in society.
It aims to change the popular discourse from a focus on corruption to a focus on the systemic nature of ‘state capture’ as the political project of a well-organised network that strives to manage the symbiotic relationship between the constitutional state and a shadow state.
The report traces the ANC’s history of transformation, identifies seven broad areas of capture and control and details how the shadow state was built.
You can read the report in full here.
Notably, the report uses publicly available information, as well as media reports and statements from officials to tie things together – from the appointment of certain ministers and how their decisions and approvals ultimately befitted the Gupta family, to the links various players have to each other.
The conclusion reached is that a ‘shadow state’ has been built in South Africa, where a small network of individuals and companies are receiving the full benefit of procurement deals and contracts with state-owned companies – all with links to the president and the Gupta family’s network.
Capturing the state
According to the report, the recent cabinet reshuffle by president Jacob Zuma potentially completed the full capture of the state, by appointing Malusi Gigaba to the ministry of finance, taking control of National Treasury.
Gigaba was instrumental in initiating the Guptas’ hold of state resources when he was appointed Public Enterprises minister in 2010. It was through Gigaba’s approvals that a Gupta-linked company, Trillian, managed to secure contracts with state owned company Transnet.
From here, the web flew wider, with Brian Molefe coming on board as Transnet CEO, and Gigaba making changes to various SOE boards, appointing Gupta affiliates. Most of these at Eskom, which would then become the next key institution to siphon off procurement deals to the Gupta network.
According to the report, this was the starting point to the rise of the Gupta empire, which soon extended to mining operations – particularly in coal and uranium – and military contracts, all with the aid of the state, through dubious means.
Combined, Transnet and Eskom have procurement budgets well over R140 billion – making these two institutions the top prize for rent extraction.
Meanwhile, state departments, too, were reshuffled and restructured to make room for politicians who were loyal to president Zuma (including the police as well as state security departments) while the policy of ‘radical economic transformation’ is pushed to give credence to the rent-extraction behaviour.
The structure of state capture
The report details the structure of state capture, where players have the ability to secure a system of command and control over how the resources are accessed, moved and distributed.
“At the outset, control must be established over the sources of extraction, including the ability to flexibly respond to any changes in the operating environment. Once access to the source of extraction is secured, networks of middlemen or brokers must be established that can move resources within the network to sustain loyalty (this is critical to ensuring the survival of the network) and externally, usually transnationally.
The ability to transact within this network is facilitated through the establishment of political market places, where support is traded through the provision of access to resources.”
According to the report, this structure is represented by controllers, elite players, brokers and dealers – shown as such:
Controllers are ‘patrons of resources’ like Zuma and the Guptas, who sit at the apex and are usually the strongmen directly responsible for predation and exploitation.
The elites are responsible for establishing and maintaining patronage networks, which facilitate the distribution of benefits. These are people like premiers, ministers and CEOs – such as Ace Magashule, Faith Muthambi, Malusi Gigaba, Brian Molefe, Mosebenzi Zwane and Anoj Singh.
Brokers are entrepreneurs (e.g. Iqbal Sharma, Eric Wood, Salim Essa and Ashok Narayan) who act as middlemen who facilitate the movement of funds, information and/or goods both domestically and across transnational networks.
Dealers are groups that are able to move the money transnationally such as professional money laundering syndicates in Hong Kong, the United Arab Emirates and elsewhere.
Put in a more specific scenario, the academics showed exactly how the capture of a state-owned company (in this case, Transnet) looks:
While the nature of state capture is complex in structure, the goal is always the same: control the means of procurement, and filter money out to an elite network of individuals.
What can be done
According to the report’s conclusions and recommendations, the only way to combat state capture is to dismantle it completely – but this will be useless without a unified and fully supported economic framework.
“In short, there has never really been a broadly shared and fully supported economic policy framework. Radical economic transformation is already a factional political football,” the paper said.
“One can speculate that a positive outcome of this political crisis would be the adoption, for the first time ever, of a new economic consensus that can both unite the different factions of the Alliance by giving real substance to RET while enjoying broad stakeholder support in the business community, labour sector and civil society.
“Without this, the Zuma-centred power elite will be able to co-opt RET to mask ongoing rent-seeking practices via the manipulation of SOE procurement spend.”
Unless something is done, trust in the state will be destroyed, and South Africans at large will bear the brunt of these ‘corrosive development’, the report said. .
“Large-scale corruption enables much wider corrupt activities to go undetected at the lower tiers of government. Under such conditions, it is impossible to achieve transformative objectives that could improve livelihood of the majority of South Africans.”
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