State capture: The complicity of big, bad business

In his report on the systematic dismantling of the South African Revenue Service (Sars), retired judge Robert Nugent made note of the symbiotic relationship that was nurtured between the tax agency’s alleged captors.

On one side, was Tom Moyane, the public official who allegedly led Sars down the path of ruination. On the other, was Bain & Company, a private consulting firm paid handsomely to create that path.

“We think what occurred can fairly be described as a premeditated offensive against Sars, strategised by the local office of Bain & Company, located in Boston, for Moyane to seize Sars, each in pursuit of their own interests that were symbiotic, but not altogether the same,” Nugent said.

“Mr Moyane’s interest was to take control of Sars. Bain’s interest was to make money.”

Versions of this symbiosis between the public and private sectors have existed for decades. Some commentators see nothing inherently wrong with this, noting the role of business in supporting a weakened state. But others point out that the close proximity between business and government is at the very heart of corruption.

Corporate takeover

Last week Business Leadership South Africa (BLSA)  faced criticism after it seemingly defended corruption-accused Bain & Co and the consulting firm’s membership of its organisation. 

BLSA suspended Bain’s membership in 2018 after the release of the Nugent commission report. 

In May 2014, before Moyane’s appointment as Sars commissioner, Bain prepared a presentation called “TM First 100 days”. Vittorio Massone, a managing partner at Bain who had previously met Moyane, has stated that the document summarised what a candidate’s report card should look like after their first 100 days as commissioner. 

Nugent did not buy this, saying, on its face, “it is a clear strategy to be followed by Moyane upon his appointment at Sars”.

At a presentation on the “TM first 100 days” strategy, Bain introduced the idea of Sars 2.0. Employees who resisted any changes to the organisational structure of Sars, Nugent noted, would be neutralised. “This was a strategy more appropriate to a corporate takeover. The presentation had nothing to do with tax collection. It had all to do with seizing control of Sars,” Nugent said.

After Moyane’s appointment in August 2014, Bain and its new commissioner allegedly went to work putting their plan in action. What followed was the systematic dismantling of the otherwise functioning tax agency. In the process, Bain raked in millions of rands.

By the time the Nugent report was released in 2018, Bain had paid back all the money it received from Sars, which, together with interest, amounted to just short of R217-million.

In mid-2021, after meeting Bain, the BLSA was convinced that the consultancy had undertaken the necessary reforms to again meet the business organisation’s standards. Bain’s membership was reinstated.

But, after the release of the first Zondo commission report — in which Bain is once again severely implicated in the state capture saga — the BLSA was again faced with questions over the company’s membership.

‘Not inherently corrupt’

When asked about Bain, BLSA chief executive Busi Mavuso said in more than one interview that “the architecture and system of business is not inherently corrupt”, adding that the Bain executives who perpetrated state capture should be brought to book.

In her newsletter last week, Mavuso addressed the firestorm of criticism she faced after the interviews, calling claims that the BLSA defended Bain “nonsense”. 

“We made clear our views on Bain’s activities at Sars. Those views are unchanged. We fully support the Zondo commission’s recommendation that Bain’s contracts with the public sector be investigated and all legal remedies pursued.”

Bain ultimately made the decision to withdraw its membership from the BLSA, saying it should not “distract from the important work BLSA does on behalf of the business community for the good of South Africa”.

Speaking to the Mail & Guardian, Business Unity South Africa (Busa) chief executive Cas Coovadia agreed with Mavuso’s statement that business is not inherently corrupt. “There may have been businesses that acted in corrupt activity, either knowingly or unknowingly. But I don’t think that makes business inherently corrupt.

“I think that business has done a phenomenal amount of work to fight corruption — particularly organised business … You should ask the question: If SOEs [state-owned entities] or a government department is mentioned, is all of government inherently corrupt? We don’t believe they are.”

Spin artists

Michael Marchant, head of investigations at Open Secrets, suggested the character of business — as being either inherently corrupt or benign — is difficult to judge. 

“It’s quite a difficult question to answer. Because I think in the public narrative, people do just treat business and governments so fundamentally differently when it comes to corruption,” he said. “As much as business tries to spin it, we don’t really expect them to do anything other than pursue the interests of the shareholders, unfortunately.” 

But, Marchant added, it is unhelpful to see the role of business in state capture as a problem of a few rogue executives. 

“If you look at evidence of state capture, and if you look at the role of businesses around the world, at what point does the evidence become strong enough to show that there is a systematic problem in the way that these corporations are going about their business?” he asked.

In 2020, Open Secrets, a nonprofit organisation that investigates private-sector economic crimes, published a report titled The Enablers, which uncovers the private actors who helped clear the way for state capture to happen.

Marchant noted that there is an inbuilt scepticism of the public sector. “But it is really worrying that it doesn’t exist when it comes to the private sector … The private sector, from just an image point of view, has so powerfully managed to capture the public imagination. It is just much better at PR.”

Patrick Bond, a professor of political economy, said: “We must drop the neoliberal pretence that there is a distinction between the state and capital within the ruling party.”

Clean capitalists?

The overlap between business and government has existed as far back as 1652, Bond said. 

“Key examples of corrupt corporate state relations are Jan van Riebeeck, with the Dutch East India Company … And Cecil Rhodes with the British South Africa Company and also with the way he consolidated diamond mines and became governor of the Cape. So we have two quite spectacular state captures long before the Guptas, who were pretty mild-mannered in comparison.”

In the late 1800s, a handful of corporations, which had cashed in on the discovery of Kimberley diamonds and Witwatersrand gold, gained power over South Africa’s development policy. This became known as the minerals-energy complex. During apartheid, the minerals-energy complex enabled a few arms companies, banks and middlemen to profit significantly by assisting the military state.

“There is an assumption by the South African commentariat, especially the petit bourgeoisie who get to write and talk and think for money, that the state is subject to wicked brothers, like the Shaiks or the Watsons or the Guptas, but private capital is clean and has good ethical standards,” Bond said. 

“Yet the objective analysis shows exactly the opposite: the state is mediocre when it comes to corruption in comparison to capital.”

Bond cited PwC’s Global Economic Crime and Fraud survey, which in 2020 found that South Africa’s reported rate of economic crime was 60%. Although lower than previous years, the rate was well above the global average of 47%.

Moreover, according to the report, there has also been a disturbing increase in the level of involvement of senior management as the main perpetrators, escalating from 20% in 2018 to 34% in 2020.

When things fall apart

The hands of the private sector are not necessarily clean — in the state-capture saga or in many other examples of grand-scale corruption around the world — and their proximity to the public sector often means they are not held accountable for their crimes, Marchant said.

“It’s a narrative that corporations repeat around the world: You can’t pursue accountability too hard because things will fall apart economically. We need to push back against this narrative.”

In a state in which public sector trust and capacity has been diminished, a seemingly uncorrupted private sector has offered to step in. After the release of the Zondo report earlier this month, Busa resolved to support the National Prosecuting Authority with resources to prepare cases to prosecute the state capture-accused. 

In responses to the M&G the BLSA’s Mavuso said that organised business “has been instrumental in the rebuilding of state institutions that were gutted by state capture. Business has offered to do far more in this area, but is limited to areas where the government accepts its offers of assistance.”

But, Marchant noted, the interests of corporations often do not align with the interests of the public, which the government is tasked with safeguarding. 

“There has been such a breakdown that people are tempted sometimes to say, ‘Well, let’s just give up on the state. Let’s build parallel structures.’ We can’t do that. We have to insist on building a capable state,” Marchant said.

When asked whether the private sector’s role in restoring state capacity is problematic, especially considering business has also been implicated in the state capture project, Busa’s Coovadia said: “You need to look at it in context. Let’s take, for example, the work we did with the government on the vaccine roll-out. What would have been the result for the nation had business not offered its support?

“We have a state that is very weak. It is unable to deliver. Ideally what we should be doing is strengthening the state … We want to see a capable government. It is not in the interest of business to have a government that doesn’t even have the ability to create an environment for investment.”

It is important to guard against the private and public sector building corrupt relationships with one another, Coovadia added. “And when those occur, we need to call them out. But I don’t think we can make a general statement that business and government are so close that it aids and abets corruption.

“I think business is playing the role of a good corporate citizen in trying to assist government and we need to ensure we do that properly.”

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