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Gordhan and Jonas on corruption: Our SOEs are captured

Jul 26 2017 20:09
Lameez Omarjee

Johannesburg – South Africa is becoming the capital of corruption and state capture and state-owned enterprises (SOEs) are breeding grounds for these activities. 

Jonas was speaking at a lecture at the University of Johannesburg on state capture, alongside former finance minister Pravin Gordhan.

“State-owned enterprises are centres for money racketeering,” he said. To illustrate this, Jonas said that Eskom spends R45bn for 13 of its coal fired power stations. While Transnet is spending R300bn to improve rail infrastructure between now and 2019.

The money lost through state capture and corruption is forfeited by public services such as education and health and other objectives of the country, he said. 

Gordhan, who delivered an address before Jonas, commended the former deputy minister for rejecting a R600m bribe from the Guptas. “He said keep it because he was not prepared to sell out the sovereignty of our country.”

Gordhan described state capture as the stealing of institutions of the state by a small group of people, with  the intention of putting "money in pockets in South Africa or in bank accounts in Dubai". He explained that state capture was robbing the country of needed resources, impacting economic growth and job creation for young people. The negative sentiment is impacting the levels of investment. Investment into GDP is only between 18% to 19%, compared to the 40% and 50% China was investing during the peak of its growth, he explained.

How state capture works

Gordhan explained how state capture takes place through SOEs. He briefly gave an example of how state capture is the “commission” certain individuals benefit from through tenders from SOEs.

But it starts with changing people on boards and appointments of chief executives and chief financial officers. With the “right” people in these positions they can act as informers on tenders and that is how state capture enters procurement.

“You take an asset and reduce its value,” he said referring to what happened at Optimum Coal Mine, where a government department in collaboration with the SOE dropped the value of the mine, making it cheaper for someone else to buy.

READ: How Guptas, Duduzane Zuma could score from coal deal

Not only was Optimum cheap enough to buy, but Eskom’s CFO Anoj Singh offered guarantees for the buyer to borrow money to buy the mine. It’s not about whether the guarantee was used, but why it was offered in the first place, he explained.

Attack on institutions

But if capturing SOEs is not enough, efforts are then made to capture Treasury. Efforts are made to undermine the South African Reserve Bank which destabilises the economy even more.

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