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Henley Business School Africa - Dean Jon Foster-Pedley

Dean Jon Foster-Pedley – on State Capture

MUCH has been written, and even more said, about President Cyril Ramaphosa’s New Dawn. But what does it actually entail? It’s a new beginning, but from what and to where?

For many it’s a new chapter in South Africa’s democracy, a distinct turn away from the state capture that came to characterise his predecessor Jacob Zuma’s entire administration, the industrial grade kleptocracy that sought to subvert state owned enterprises and entire government departments for the enrichment of a few, well connected elites.

State capture though is far more than the disaster story, it is the story of a society that has allowed itself to be subsumed by greed, the lure of a quick buck irrespective of the secondary, and more lasting, expense exacted on the community. The greatest damage though has been the collusion of business in this rot to the extent that ethics have been sacrificed on the altar of turnover.

It starts with the middleman. The payment of a ‘commission’ to win the tender. There’s a continuum here, one that starts with a disquiet about what is happening becoming a cognitive dissonance and eventually rationalised collusion – on the dubious principle that if your company doesn’t offer bribes you won’t get the contract and all the staff at the company will lose their jobs as a result.

Not every South African company is like this of course, but far too many are, aided and abetted by the very regulators that were set up to prevent this; like KPMG for one. Playing fast and loose with rule designed to safeguard investments and shareholders doesn’t always involve governments either; like Steinhoff for example.

The effects though are the same – someone somewhere gets hurt, badly.

In the public-private sphere, the effects are even more profound. Effectively they eat away at the very fabric of the society we are trying to create. In a well- functioning system, tenders would go to local entrepreneurs or – if they don’t have the capacity – to joint venture firms combining existing listed corporates with up and coming local companies. In the process of fulfilling the tender – building a road or a school or a clinic, the local empowerment partner would become duly skilled, such that it should be able to tender on its own merits for the next tenders. That way skills are transferred, we reward excellence, sustainable jobs are created and we develop a brand-new cohort of indigenous entrepreneurs and industrialists. Indeed, the downstream effect of this money being pumped into the local economy should further lead to the schools being staffed by local teachers and the clinics run by local doctors and nurses.

That’s the virtuous cycle. The vicious cycle of extractive corruption is the opposite – money being added to the contract to secure it, paid to someone who has never earned it by virtue of their skill or qualification, only their political access. That money doesn’t filter back into the system, instead it is taken out of the country and squirrelled away in an off-shore account, most probably in the United Arab Emirates. The work, now already inflated, is often given to those who cannot do it leading to further cost-overruns and delays in completion. When it is finished, it doesn’t last – as we have seen so often, most recently at Nkandla, Zuma’s rural KZN homestead. Roads wash away, buildings collapse. Sometimes in the worst-case scenarios, the entire contract has to be redone by proper contractors – if there’s money, otherwise the ruins are all that remain of a great plan stillborn in venality.

What is truly galling though is how the rot persists, where people cannot see the direct causal link, but instead venerate these parasitical middlemen as modern-day Robin Hoods stealing from the rich only to peacock in their finery and flashy cars.

They cannot see that these charlatans, in the words of Julius Malema – these tenderpreneurs, are there because of ill-gotten gains, the very funds that were intended to allow the community to break free from the shackles of poverty, to enjoy a better standard of living; reticulated water, schooling, health services.

The money hasn’t been stolen from the rich as such; the middle classes have paid their taxes and, in most cases, have promptly opted out of the state. They have sought their own solutions for privately contracting for health, education, security and, in housing estates, sanitation and utilities. It’s only the poor who suffer, preyed upon yet again, this time by unscrupulous individuals and companies.

The only way to stop this is to inculcate a value system that outlaws this – starting at primary school and continuing all the way through especially to business school.

Profit is not intrinsically bad, but profit for profit’s sake alone is not just bad it’s unimaginably damaging. Profit has to be extracted in such a way that every partner in the supply chain profits; from the workers to the shareholders, from the local community through to the nation itself. That means creating a system where people are empowered to speak, where processes are so transparent that nothing can be hid and where part of those profits is reinvested into those communities to sustain growth and development for generations to come.

We have to create and nurture the capacity within people to speak out when things are going wrong – well before we find ourselves teetering over the edge of the precipice. We need to speak truth to power when we start to feel discomfited, not when we have already entered the realm of cognitive dissonance or, worse, open and cynical collusion in the Bell Pottinger mode.

We have been gifted this New Dawn, but for it to reach its apogee, we have to find the resolve to do things differently, to call out the emperors when they stride about us in their unabashed nudity. We dare not be paralysed by our past. This New Dawn needs a praetorian guard of citizen and corporate activists.

Jon Foster-Pedley is the Dean of Henley Business School Africa.

(Published on Daily Maverick, 2 August 2018)

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