"They will have the power to subpoena anybody, including members of the executive," the minister said as he announced the body's terms of reference in Cape Town.
Radebe said the commission, headed by three sitting judges, would also have powers of search and seizure and be able to compel witnesses to answer questions.
Failure to cooperate with the commission would be an offence punishable with a fine or up to a year in prison.
The commission would complete its work within two years.
It would submit a final report to the president with recommendations on whether legal proceedings should be instituted against anyone, contracts should be cancelled or financial losses to the state recovered.
Radebe said the mere fact that President Jacob Zuma instituted the commission indicated he would take its recommendations seriously.
The final report would be made public, he said.