State capture by the Guptas: The Silent Coup

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Betrayal of the Promise: How the Nation is Being Stolen‚ a 72-page report details how the Gupta family through various companies and friends‚ including President Jacob Zuma‚ gained beneficial positions to profit from several multi-million contracts with state owned companies‚ whether directly through shell companies and legitimate businesses or indirectly as brokers or ‘middle-men’ – and how their actions can be likened to a “silent coup”.

The report‚ released by the Public Affairs Research Institute (PARI)‚ was authored by a team of academics from various institutions who formed the State Capacity Research Project (SCRP)‚ which is leading a study on “the country’s emerging shadow state” and seeks to join the dots and paint the bigger picture of state capture.

“The SCRP is an interdisciplinary‚ interuniversity research partnership that aims to contribute to the public debate about ‘state capture’ in South Africa. This issue has dominated public debate about the future of democratic governance in South Africa ever since then Public Protector Thuli Madonsela published her report entitled State of Capture in late 2016‚” the preface to the report reads.

“This report documents the systematic repurposing of state institutions in accordance with a political project mounted by the Zuma-centred power elite. It was demonstrated that the purpose of this political project is systemic illegal and/or unethical‚” it continues.

“These pre-meditated and co-ordinated activities are designed to enrich a core group of beneficiaries‚ to consolidate political power and to ensure the long-term survival of the rent-seeking system that has been built by this power elite over the past decade. To this end a symbiotic relationship between the constitutional state and the shadow state has been built and consolidated.”

The report names Zuma’s power elite as‚ for example‚ Free State Premier Ace Magashule‚ Public Service and Administration Minister Faith Muthambi‚ Finance Minister Malusi Gigaba‚ Eskom group CEO Brian Molefe‚ Mineral Resources Minister Mosebenzi Zwane and Eskom and former Transnet CFO‚ Anoj Singh.

It details the network of patronage that has allowed the systemic abuse of state owned entities (SOE’s) such as Prasa‚ SAA‚ Transnet and Eskom‚ that emerged in Madonsela’s report and a large number of media reports.

The latter SOEs’ procurement spend has increased dramatically in the past decade‚ a symptom of the abuse.

Recommendations

The report concludes that to resolve the current crisis the Gupta-Zuma network comprising 12 companies and 15 individuals that hold a “symbiotic relationship between the constitutional and shadow state” need to be broken down and dismantled.

“This will require political action within and outside the tripartite alliance to dislodge Zuma as the kingpin of the symbiosis‚ coupled with legal action to criminalise and bring the perpetrators of state capture to justice‚” the report reads.

To this end‚ it says‚ the former Public Protector’s recommendation that a judicial commission of inquiry be established must become an urgent priority.

It would also require bold action by the banking sector‚ such as the “Reserve Bank to expose and shut down the financial mechanisms that the shadow state uses”.

“Using SOE procurement spend has tended to reinforce investment in large ‘big and shiny’ capital-intensive projects concentrated within the Mineral-Energy-Complex. This reinforces a pattern of job-starved economic growth in an economy with one of the highest unemployment rates in the world.

“What is therefore really needed is employment- and livelihood-creating investments across a wide spectrum of small and medium enterprises capable of absorbing large numbers of unskilled and semi-skilled workers.”

The report concludes by reaffirming the notion that allegations of state capture and even circumstantial evidence of such‚ leads to a breakdown in trust in the State.

“When there is no trust in public institutions‚ there is little goodwill to express solidarity through tax‚ criminality proliferates exploiting weaknesses in intelligence and crime enforcement authorities‚ and both capital and skills flee the country‚” the report reads‚ saying that under such conditions it is impossible to achieve transformative objectives that could improve the livelihood of the majority of South Africans as promised by the ANC.

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