/ 24 February 2024

State capture clawbacks inspire hope

Protesters In South Africa Demand The Extradition Of The Guptas At Uae Embassy
Pay back the money: A new approach and tools are enabling the National Prosecuting Authority to recover money stolen during the Zuma-led state capture era. Photo: Deaan Vivier/Getty Images

Corruption is not simply a crime, but an impediment to socio-economic development and the realisation of human rights. After all, public money must be used to provide social assistance, healthcare services and an uninterrupted electricity supply. It must not be used for private enrichment. 

The South African tale of state capture — repurposing of the state under former president Jacob Zuma to enable industrial-scale looting with impunity — is a stark illustration of private greed trumping the public interest. The tale is, however, still unfolding. And it seems it is not simply one of plundering and pitfalls, but some promise too. 

A year ago, I urged the state to “think differently about redress and recovering the stolen loot”. I proposed the introduction of “non-trial resolutions reimagined” — which I dubbed “redress agreements” — through prosecutorial policy. I showed how such an approach will legitimately expedite the recovery of state-capture gains while the slow wheels of legislative reform, and traditional criminal justice, keep turning. 

Appropriate use of redress agreements will deepen a culture of integrity and accountability. Such a culture is needed to restore public trust in the government and ensure justice for South Africans — the ultimate victims of state capture.

In his 2024 State of the Nation address, President Cyril Ramaphosa claimed that justice for state capture is being served: “Great progress has been made in bringing those responsible for state capture to justice… Stolen funds are being recovered.”

I consider this claim by reflecting on some interventions by the National Prosecuting Authority. 

What’s being done to get the money back and enhance integrity?

The latest intervention — announced on 6 February this year — is the “development” of a “corporate alternative dispute resolution policy directive”. It promises to speed up the return of the ill-gotten gains of corrupt corporates to the fiscus.

The other noteworthy intervention is the establishment of a new “office for ethics and accountabilityy” within the prosecuting authority.

In large part, these interventions by the prosecuting authority are a promising endorsement of my proposal on how best to get moving with state-capture redress.

But the announcement of the new policy directive does raise some points to ponder if we are to avoid further pitfalls on the road to state-capture recovery. It is timely to consider these as we await publication of the directive.

Corporate alternative dispute resolution – promise and pitfalls

On 6 February, the deputy national director of public prosecutions and head of the NPA’s Asset Forfeiture Unit, Ouma Rabaji-Rasethaba, announced the introduction of a new “alternative dispute resolution policy directive” to “increase corporate accountability” for state capture. 

The hope, according to Rabaji-Rasethaba, is that the directive will “serve as both the carrot and the stick” in an expedited, collective fight against corruption. How so?

The directive will “provide for a limited form of non-trial resolution” to start getting some of the stolen money back while full-blown “legislative reform” is pending. This is sensible. As Rabaji-Rasethaba rightly stated, “[e]conomic recovery is a pressing priority for South Africa and all its people.” 

To this end, the new non-trial regime will encourage corrupt corporate offenders to conclude what are in essence settlement agreements with the prosecuting authority to avoid (or delay) their prosecution if the settlement terms are met. 

These terms may require the corrupt corporates to admit responsibility, return their unlawful profits, implement self-cleaning programmes and provide information to aid the prosecution of implicated individuals. 

Payment of “reparations” may also be required — terminology probably chosen to avoid the more obvious punitive connotations carried by the likes of “fine” and “penalty”. 

There is indeed promise in the prosecuting authority’s “new weapon”. In fact, it is already proving to be a valuable addition to the state’s corruption-busting arsenal. Rabaji-Rasethaba referred to “the recently concluded landmark resolution by the NPA with SAP”, the German multinational software company. In terms of this resolution SAP has agreed to pay back at least R2.2 billion in “restitutive and punitive reparations” to the South African fiscus. 

It is also encouraging that the new policy directive reveals a proper appreciation of the prosecuting authority as part of South Africa’s fourth branch of state, which I describe in my doctoral research as “the integrity and accountability branch”. On this basis, prosecutorial policy can be harnessed to expedite the return of the stolen profits through “redress agreements”. If done right, such use of policy directives is lawful and rational.

On the matter of “doing right”, I am however a little sceptical about the use of prosecutorial policy to require payment of “reparations” over and above the surrendered illegal gains. The imposition of such fines should ideally have legislative backing. Put simply, it is not for the prosecuting authority unilaterally to determine, and impose, penalties by way of policy. Should offenders offer as much, that’s a different matter.

The announcement of the directive raises a further point to ponder. What of complicit individuals, particularly those from the public sector? The report of the state capture commission lists plenty of these looters by name. Should they not also be given an incentive to surrender their stolen profits? Why should the new NPA “weapon” be limited to business, and thus, the private sector?

Rabaji-Rasethaba emphasised that the country was bled dry by corporate collusion during the state capture era”. This is true, but it should be recalled that the dubious deals and looting were masterminded, and facilitated, by individual state officials.

It would be a pity not to bring these individual offenders within the remit of the much-awaited “non-trial-redress” regime in some way. Such an omission would not serve the public interest. 

Rabaji-Rasethaba noted that the new approach was developed with technical assistance from the Organisation for Economic Co-operation and Development (OECD) and other experts. But OCED research reveals frequent use of “non-trial resolutions” with both “juristic” and “natural” persons. In other words, these redress mechanisms are used in various jurisdictions to recover the unlawful profits of corrupt business entities as well as individuals. 

South Africa needs the return of the money stolen by the likes of the “Zuptas” — not just the ill-gotten gains of the Deloittes and KPMGs

The new office for ethics and accountability

In November 2023, new regulations were made under the National Prosecuting Authority Act to enhance integrity and accountability within the prosecuting authority. This is an important development that, to date, seems to have gone a little unnoticed.

The regulations establish an “office for ethics and accountability” to “develop, promote and maintain an inherent culture of ethics, integrity, accountability, compliance and good governance in the prosecuting authority.” 

Additional tools provided for in the regulations include an “integrity scorecard” for the annual assessment of the prosecuting authority, and it is an offence for someone to “improperly interfere with, hinder or obstruct the Office or any member thereof in the exercise, carrying out or performance of his or her duties and functions”.

These new regulations signal clear recognition of the importance of the independent and proper functioning of the prosecuting authority. It is, as I have long argued, an important“hybrid” institution that falls under South Africa’s fourth branch of state — not a mere executive adjunct. 

The road to recovery from state capture

The prosecuting authority certainly seems to be making solid strides in the direction of state-capture redress. It should be commended for this while we await the new directive with bated breath and high hopes.

Some big leaps are, however, still needed by the state more broadly. One of these should be the establishment of a standing anti-corruption commission — more on the legal technicalities of this proposal in due course. 

For now, it suffices to note that attaining redress for state capture is an ongoing journey, not a destination. And South Africans should perhaps hold on to the fact that this journey to date reveals not simply stalemates and setbacks but some successes too.

Lauren Kohn is a legal scholar in constitutional and administrative law at the University of Cape Town, an attorney of the high court, the founder of www.SALegalAdvice.com, a young research fellow at UCT and a visiting research fellow and PhD candidate at Leiden University in the Netherlands. Her first doctoral article on state capture redress is available here.