The ANC was always more than just a movement for political liberation. It was also a popular force drawing strength from its moral underpinnings. Its turn to armed struggle after its suppression by the apartheid government in the 1950s and 1960s allowed it to wage what majority global opinion deemed to be a just war; it opposed legalised racism with a commitment to non‐racialism and political equality for all; and drawing its inspiration as much from Christianity as Marxism, it could present itself as offering a home for all South Africans, of whatever race, colour or creed, so long as they were prepared to embrace democracy. Consequently, when it arrived in power in 1994, the ANC was widely regarded as a peculiarly moral agency. It is therefore with dismay that much commentary now refers to the ANC as having become corrupted by the holding of power. Indeed, while one interpretation of Jacob Zuma's having defeated Thabo Mbeki for the party presidency at the ANC's December 2007 National Conference at Polokwane is that it signifies a popular reproval of the party's moral degeneracy; another is contradictorily, that it signifies the capture of the party machinery by a collection of the politically disgruntled and their dubious business cronies who are eager to replace Mbeki's acolytes in feeding from the public trough. While there are important elements of truth in both interpretations, there is need to situate the challenges which have been posed to the ANC's morality within the structural determinants of the South African transition. The focus here is on how two factors, the need for the ANC as a party to secure its funding and how it has chosen to promote what it terms the National Democratic Revolution (NDR), most notably through the instrumentation of Black Economic Empowerment (BEE), lie at the root of the ANC's dilemmas as an organisation.
The Moral Crisis of the ANC
What was supposed to have become a caring, nonracial society has become just another racially divided African kleptocracy … These days it's every man for himself and bugger the consequences.
Under apartheid all black people were in the same boat. There was an equalitarianism about their oppression that made it natural to be united and idealistic about the struggle to end that common oppression and build a better society. But liberation has ended that commonality and opened the way for individual opportunism, which many are grasping with a greed born of long deprivation (The Star, 24 January 2007).
This rot is across the board. It's not confined to any level or any area of the country. Almost every project is conceived because it offers opportunities for certain people to make money. A great deal of the ANC's problems are occasioned by this.
The paper outlined a series of proposals for promoting ethical behaviour, regulating members' engaging in business, and sanctioning misbehaviour. These will be considered below. Prior to that, however, it is necessary to illustrate the structural challenges of transformation that the ANC has faced, and how its own response to these has threatened an erosion of its ‘revolutionary morality’ (p.1).
The Challenges of the NDR
By the mid‐1980s, South African capitalism had begun to lose faith in the capacity of the National Party (NP) government to stem the rising tide of revolution. It was worried not so much by the threat of a violent overthrow of the apartheid regime as in the long term prospect of economic decline that the political stalemate between the government and its opponents represented. Increasingly, therefore, it looked for an accommodation with the ANC, while for its part, the ANC leadership ‐ recognising the unreality of strategy premised upon a revolutionary seizure of power ‐ presented itself as a partner with which large scale capital could play. Thus, with power and authority slipping from the NP, a morally‐charged and more worldly‐wise ANC was enabled to return from exile, and secure a compromise which entrenched a constitutional regime centred around human rights and democracy.
While it was the political negotiation process which grabbed the attention, much was happening behind the scenes. Just as the ANC was unable to overthrow the political, so it was unable to overturn the economic order. For a start, the collapse of the Soviet Union, one of the ANC's principal supporters, fundamentally changed the international landscape. This played to the strengths of those leaders within the ANC whose experiences in Eastern Europe had left them less than enamoured with state socialism. Such factors, along with pressure from bodies like the International Monetary Foundation, underlay the leadership's shift away from the redistributionist Reconstruction and Development Programme (RDP), with which it fought the 1994 election, to the pro‐market Growth, Employment and Redistribution (GEAR) policy in 1996.
Further momentum was provided by large scale capital. Prior to the Soweto uprising in 1976, large scale capital became increasingly engaged in initiatives to stabilise capitalism and to encourage a black middle class, not least by providing increased opportunities for blacks within corporate structures. No wonder, too, that during the early 1990s, large scale capital was to become heavily involved in courting the ANC. In this context, the balance of forces shifted dramatically against pursuit by the ANC of anything like socialism.
At base, the ANC was a nationalist movement whose principal focus was upon the capture of the state and the pursuit of democracy, and its programme was socialist only to the extent that its alliance with the South African Communist Party (SACP), and its associated dependence upon the Soviet Union for military aid, demanded it. Furthermore, the SACP had recognised since 1927 that the attainment of a ‘black republic’ was a necessary first step to socialism. Hence the ANC/SACP alliance came to be constructed around a two‐stage theory of revolution: democracy first, socialism second.
Within this formula was embedded the commitment to the overthrow of ‘internal colonialism’ (the domination of whites over the majority black population). This phenomenon was so extreme that it had stunted the growth of both a black middle class and black capitalism. Consequently, bar the relative handful of homeland rulers and urban councillors who collaborated with apartheid, the tiny black middle class was thrust into alliance with the working and popular classes behind the ANC. It followed that capture of the state and ‘internal decolonisation’ would require, both in terms of social justice and the needs of the economy, the rapid growth of the black middle class ‐ and indeed, the expansion of a class of black capitalists. After all, democratisation could not stop with the state: it also demanded popular control of the ‘commanding heights of the economy’. It was not a huge step for this to be translated by influential forces within the party after 1994 into a call for ‘demographic representivity’, or for the ‘blackening’ of the corporate sector, a demand to which large scale capital was happy to accede (albeit within limits, and over time).
In terms of the NDR, a black capitalist class is always suspect. Because its rise is dependent in part upon co‐operation with established capital and upon opportunities provided by the state, it is likely to resort to corruption and to develop into a ‘parasitic bureaucratic bourgeoisie’. To counter this, the NDR must cleave to the disciplines of ‘patriotism’ that is, to remember its social obligations to the impoverished community from which it has come and remain guided by the ANC (ANC, 2007b). However, while the notion of a ‘patriotic bourgeoisie’ has always sat uneasily with Marxian theories of class exploitation, its effective dilution since 1994 into the demand for ‘representivity’ has allowed for the upward mobility of blacks as individuals within the corporate sector to be presented as commensurate with the furtherance of the NDR. While the ANC's partners, the Congress of South African Trade Unions (COSATU) and the SACP may cling to more radical, activist interpretations of the NDR, the ANC leadership under Mbeki was to become increasingly bold in asserting that the ANC has never been a socialist organisation, and by implication, that the blackening of capitalism through BEE will be the revolution's end point.
However, the problem facing an emergent black capitalist class was its lack of capital and capitalist expertise. The solutions were essentially twofold (Southall, 2006). First, from the moment it moved into office, the ANC viewed its control over the civil service and parastatals (which accounted for around 15 per cent of GDP) as the instrument for extending its control over ‘the commanding heights of the economy’. This included the strategy of transferring state‐owned enterprises on discounted terms to blacks via privatisation. In the event, this did not prove to be particularly successful simply because the amounts of capital required for the purchase of all but ‘non‐core’ assets were too large for aspirant black capitalists to raise. In practice, therefore, the state sector served as the training ground in corporate management, knowledge and the expertise required by aspirant black capitalists for launching themselves into the private sector (Southall, 2007).
Second, the ANC's demand for ‘representivity’ drew a response from large scale capital that was simultaneously creative and defensive. On the one hand, conglomerates proved responsive to the ANC's ‘deployment’ of influential senior personnel to the corporate sector, recognising that whilst they had the financial capital to fund BEE, they also needed the ‘political capital’ that only ANC loyalists could provide. On the other, when from around 2000, the ANC's BEE strategy became more assertive, large capital responded by pre‐emptively negotiating 'transformation charters’ which established targets for black share ownership, management, employment, and skills training by 2014. Today, most individual industrial sector charters are in the process of being subordinated to a generic code introduced by the Broad Based Black Economic Empowerment Act of 2003. This may result in a change in the face which corporates present over time. However, while this will be welcomed by the ANC, a possible accompaniment may be a weakening of the commitment of the black business class to the party as a force for transformation in favour of its reduction to a vehicle for promoting their material advance.
It is clear that the NDR prioritizes control of the state as the essential instrument for transformation. However, in the context of South Africa's new democracy, this has posed the awkward necessities of funding the party and thrust it into a maw of controversy.
Paying for the Party
The ANC's transition from a liberation movement into a political party meant the withdrawal of many of its international donors, notably the Swedish Government, and its having to devise new ways of raising its own funding. This meant covering its costs not only for fighting elections, but for its party headquarters and national organisation. These expenses have proved to be substantial. Sarakinsky (2007:113) reports that the ANC's budget for 1999 was R300 million. The overall trend will have been for the costs of running the party to rise. In 2007 ‐ a year in which there were neither general nor local elections ‐ the ANC had to cover not only a bill of up to R7 million a month to cover the salaries of its staff employed in 53 regions, nine provinces and its head office, but also costs for premises, supplies, benefits, transport and so on (Paton, 2007).
How successful, until recently, the ANC had been in covering these costs remained a source of speculation, for two reasons. The first is that, with the exception of the requirement to supply audited accounts of expenditure of monies officially received from the Independent Electoral Commission (IEC), there is no legal obligation upon parties to make audited financial reports of their overall funding public. Secondly, the ANC has stood shoulder to shoulder with other parties in a determined bid to block efforts by civil society organisations to reveal the sources of their funding. However, as will be described below, the ANC's financial situation has recently undergone a remarkable transformation.
Apart from raising funds from friendly (mostly Asian) governments,1 the ANC has used four principal methods of varying sensitivity to democratic values to pay for itself.
State Funding
State funding is provided in terms of the Public Funding of Represented Political Parties Act of 1997. This prescribes that any party which is represented in the National Assembly or any provincial legislature is entitled to allocations of funding distributed by the IEC. Allocated funds may be used for party organisation, promoting democracy and voter education, with prohibitions preventing parties from expending official monies on direct or indirect remuneration to elected representatives or public officials, starting or participating in businesses, or engaging in unethical activities. Key to the way in which such funding works is that the Act empowers the President, acting upon recommendations from parliament, to proclaim regulations not directly prescribed by the Act. This means that it is parliament, controlled by the ANC, which has ultimate responsibility for deciding on the amount of funding which will be provided by the state, and which has insisted that such money be distributed upon a basis which is strictly proportional to parties' representation in legislatures. During financial 2006–07, for instance, the ANC received R49.3 million of the R74.1 million administered by the Political Parties Fund (Star, 20 October 2006).
Opposition parties have argued that they have been systematically disadvantaged by the strict proportionality embodied in the state funding of political parties. In contrast, the ANC has displayed no inclination to strengthen its opponents at its own expense. From a moral perspective, it has an arguable case (centred around electoral fairness), even if its opponents can come up with equally convincing arguments (centred around the need for strong opposition) against strict proportionality. However, more morally complicated is the funding nexus which the ANC has established with business.
Tapping Corporate Largesse
The desire of big business to forge a collaborative relationship with the ANC has been underpinned by substantial corporate funding of political parties. Undoubtedly, considerable funding has been directed towards the opposition, notably the Democratic Alliance (DA). As noted above, the political parties have fought against compulsory disclosure of their funding from private sources, as the sources themselves have on the whole proved uneasy at such revelation (the principal fear being that the ruling party might somehow penalise them, notably by refusing them contracts). However, a number of leading corporations made known their funding activities prior to the 2004 election as follows:
| Corporation | ANC | DA | IFP* | NNP** | Other |
|---|---|---|---|---|---|
| Kumba Resources | 600,000 | 200,000 | 120,000 | 50,000 | 30,000 |
| Anglo‐Vaal Mining | 1,380,000 | 200,000 | 180,000 | 140,000 | 100,000 |
| Sanlam | 700,000 | 350,000 | 200,000 | 200,000 | 50,000 |
| AngloAmerican | 3,000,000 | 1,500,000 | 480,000 | 240,000 | 240,000 |
| Anglo Gold | 960,000 | 960,000 | 640,000 | 640,000 | ‐ ‐ |
| Source: Sarakinsky, 2007:121; * Inkatha Freedom Party; ** New National Party |
What is interesting about these about these figures is precisely their disproportionality. Whereas the ANC has received around 65 per cent of public funding since 1994 in accordance with its share of the vote in successive elections, the ANC received only 53.5 per cent of the total funding donated to parties listed by these five companies, all of which operate in the mining sector. Nonetheless, these and other available figures indicate that the ANC receives the majority of such funding, the voluntary disclosure of which by the five companies listed above possibly reflected their intent to pressure the government to re‐think the draft of its mining charter for black empowerment, whose leak in 2003 had wiped millions of rands off the stock exchange (Sarakinsky, 2007:121). However, while the ANC has not been in a position to formally object to a corporate funding strategy under which it receives the lion's share of funding, it has been active in pursuing other means for tapping corporate finance.
The most creative, and open, of these has been its launch of ‘The Network Lounge’. This was introduced at its 2002 National Conference, where 18 corporations and 11 parastatals and government departments paid a substantial sum to associate with the ANC elite. After the 2007 Conference, at Polokwane, the opposition DA complained that participation in the Network Lounge by public entities, each of which would have been required to pay R5 million, may have resulted in up to R40 million of taxpayers' money having been channelled to ANC coffers (van Onselen, 2007; Citizen. co. za, 23 January 2008). Although the ANC claims it is an independent private sector company, it is owned by a subsidiary of Ukwanda Investments, a vehicle whose directors are all ANC luminaries (Mail & Guardian, 14–19 March 2008). Meanwhile, in 2006, the ANC had also established a Progressive Business Forum, a scheme operating from party headquarters whereby small businesses are offered silver, gold or platinum memberships (for prices between R3,000 and R7,000) with large corporations being charged between R12,500 and R60,000 to enable businesspeople ‘to network with ANC policymakers’. Whilst critics objected that the Forum trampled upon ethical concerns, the ANC insisted it was a legitimate scheme for fundraising and a platform for encouraging dialogue between business and the party (Sunday Times, 18 February 2007; Sunday Independent, 25 February 2007).
More obscure is the extent to which such networking can lead to influence peddling. By definition, such relationships are secretive, and it is only when details are leaked by those with axes to grind, or when they are laid bare by court proceedings, that they become public knowledge. Nonetheless, their potential for involving the ANC in highly questionable relationships can be illustrated by the party's connection to Brett Kebble, the mining magnate whose plundering of more than R2 billion from his companies, Johannesburg Consolidated Investments (JCI) and Randgold Exploration (R&E) and apparent involvement in drug‐dealing prefaced his mafia‐style murder in mid‐2006. Kebble's corporate swindling defies easy summary (but see Sergeant 2006). Nonetheless, there is sufficient evidence to indicate that Kebble's activities bordered on the criminal and that he was systematically cultivating ties with the ruling party.
There had been reluctance by institutions to finance black empowerment in mining after the purchase in 1996 of JCI by Capital Alliance Holdings, chaired by one of the ANC's early breed of empowerment magnates, Mzi Khumalo, ended in a collapse in the share price.2 JCI was thereafter unbundled into gold and non‐gold divisions, with a new entity, JCI Gold, walking away with the most valuable assets. It soon emerged that JCI Gold was controlled by Consolidated African Mines (CAM), a largely paper vehicle floated by Kebble on the stock exchange in March 1997 whose value had been talked up disproportionately. When, inevitably, CAM's share value came under pressure, one of the ways in which Kebble rescued the situation was by the sale of one of its non‐gold assets, Gem Diamonds, to Mvelaphanda, which was headed by another ANC icon, Tokyo Sexwale. Ironically, Kebble undervalued its shares, and Sexwale recalls that it was the Gem Diamonds' purchase that established Mvelaphanda as a genuine BEE entity (Sergeant, 2006:113). But the deal established Kebble's reputation as a backer of BEE, and subsequently he was to become involved in financing various empowerment deals. It was those which were associated with the ANC Youth League which proved the most controversial.
The first deal with the League was made in 2003 when Kebble helped eight empowerment groups, including the League's Lembede Investment Holdings, to buy a majority stake in stockbroking firm Tradek. Supposedly, Lembede was to provide sustainable funding for the League, but League leaders, notably Lunga Ncwana, Songeza Mjongile and Andile Nkhulu were heavily involved in their personal capacities (Business Day, 29 September 2005). It later emerged that a number of these entities had been used as fronts by Kebble to drain money from R&E, from whose board Kebble (CEO), his father Roger and Ncwana were fired in August 2005. Prior to this, in December 2004, Kebble had announced the launch of Orlyfunt, which investors were told would acquire an extensive portfolio of BEE entities and various mineral rights for R1.4 billion from JCI. The BEE companies looked impressive, including Lembede Investment Holdings; Dyambu Holdings (led by Hilda Ndude of the ANC Women's League and Baleka Mbete, the Speaker of Parliament); Ituseng Investment Holdings (led by Ncwana and Nkuhlu); the Koketso Group (led by Dali Tambo, son of Oliver Tambo); Ikamva Investment Group (led by Sharif Pandor); and the Kovacs and Umoya Groups (both led by ANC Western Cape executive member Chris Nissen). JCI and R&E would hold 40 per cent of Orlyfunt, and the BEE entities 60 per cent.
The clear intent was for Orlyfunt to pay for its part of the deal by issuing junk shares in exchange for real assets from JCI and R&E, while getting institutional investors to chip in hundreds of millions for a venture with a brilliant line up of BEE names. However, while this would have solved Kebble's cash shortage, shareholders in R&E's major subsidiary smelled a rat. This led to investigations which resulted in Kebble's dismissal, plunging him into further crisis and, apparently, deeper into the arms of shady characters. Despite this chequered history, a range of ANC luminaries turned up to his funeral at St. George's Cathedral in Cape Town, where khaki‐clad Youth Leaguers formed a guard of honour, and hailed him as a champion of BEE (Sergeant 2006:27–33; 199–202; Business Day, 5 September 2005).
The present indications are that Kebble funnelled more than R25 million stolen from his companies to the ANC and various of its members during 2002 and 2005. Trustees later demanded the return of R2.4 million from the ANC Western Cape, R750,000 from the ANC Eastern Cape, R6 million from the ANC Youth League, R14 million from Lunga Ncwana and R860,000 from Songezo Mjongile, both prominent members of the Youth League (Sunday Times, 11 March 2007). However, in June 2007, the ANC argued in court that a donation of R3.5 million from Kebble need not be returned as the latter's companies had received equivalent value in the ‘indirect benefit’ they had obtained from operating in the political climate created by the ANC (Business Day, 25 June 2007).3
Significantly, Kebble's ANC cronies were principally those who lined up with Zuma against Mbeki (although there is indication that he kept his lines open to President Mbeki) (Mail & Guardian, 26 May‐1 June 2006). But there is strong indication that he may have been looking to a Zuma presidency to get himself out of trouble. Ultimately, the collapse of the Kebble empire has proved an embarrassment to the ANC. However, it has been much more brazen in its defence of its own forays into business, despite evidence that they have prospered principally because of their favourable alignment to state power.
The ANC's Move into Business
The ANC launched its first business in 1992 when Nelson Mandela, Walter Sisulu and Tokyo Sexwale, among others, founded the Batho Batho Trust. Its official mandate was to benefit ‘the broader South African community, especially historically disadvantaged communities’, but its unofficial purpose was to finance the ANC. The trust established Thebe Investments, whose early business was obtained by virtue of its being viewed as the ANC's investment arm, and its promising to establish a line of communication to the new government (Randall, 1996:672). Over time, it was to acquire significant shareholdings in private health provision, finance and insurance, with an annual revenue of around R650 million. However, latterly, the relationship between the Batho Batho Trust/Thebe and the ANC has become more distant. In the late 1990s, Batho Batho diluted its stake in Thebe to 74 per cent, selling 26 per cent to Sanlam and Investec. Then, in 2006, it sold another 22 per cent to company management for around R100 million. Furthermore, in contrast to the demand by then party treasurer, Selby Msimang, that the proceeds of this sale should be used to pay off the ANC's debts of around R100 million, the trustees insisted that they had a fiduciary duty to respect Batho Batho's official mandate, and that the ANC's request for funding would be adjudicated like that of any other applicant (Mail & Guardian Online, 1 March 2007).
No such scruples have concerned the trustees of the Chancellor House Trust. Chaired by ANC historian‐activist Ben Magubane, the Trust is listed as a charitable foundation whose principal purpose shall be to ‘facilitate the participation and involvement in all economic and political sectors of South African persons and entities which have been historically disadvantaged’. However, as with Batho Batho, the intent is for the proceeds of the Trust to fund the ANC. In March 2003, the Trust launched Chancellor House Holdings.4
By 2006, when Chancellor's role as an ANC funding front came to light, it had significant holdings, notably in mining, energy, engineering and IT companies with BEE credentials, almost all of which were locked into contracts with government departments or parastatals. These included Chancellor's 25 per cent holding in Hitachi Power Africa which obtained a R38.5 billion contract from Eskom (which may be the single largest procurement in South Africa's history) to supply six giant boilers for new power stations (Mail & Guardian, 8–14 February 2006); an interest in Continental Africa Gold Resources which held a 23 per cent share in Wits Gold, and which had been granted ‘new‐order’ gold prospecting rights by the Department of Minerals and Energy (DME) for six of the nine areas it had applied for in 2006; and a ten per cent holding in Bateman Africa, an empowerment venture in engineering whose CEO is Sivi Gounden, formerly Director‐General (DG) of the Department of Public Enterprise (and a founding director of Chancellor Holdings), and whose focus is in natural resources and power generation, an area heavily dependent upon parastatal contracts. However, it is Chancellor's involvement in United Manganese of Kalahari (UMK) which has aroused the most controversy.
UMK was formed as a joint venture between Chancellor and Pitsa ya Setshaba Holdings which was awarded ‘new order’ prospecting rights to eight farm portions in the Kuruman district of the Kalahari.5 It shares these rights (51 per cent) with Renova Manganese Investments (RMI). The latter is a Bahamas registered subsidiary of Renova, an investment group controlled by Viktor Vekselberg, a Russian oligarch with massive wealth accumulated through deals in metals and oil. UMK was reportedly funded by Renova to the tune of $20 million, this effectively gifting nearly half this sum to Chancellor and Pitsa as RMI's partners. However, with 80 per cent of the world's known commercially exploitable reserves of manganese located in the Kalahari, Renova is said to be confident that the value of the project will rocket to $1 billion.
The grant of prospecting rights to UMK aroused complaints of special treatment from two other ANC‐related BEE entities, Kalahari Resources and Direleton Minerals & Energy, which protested that Pitsa ya Setshaba had been unduly favoured. If this was so, it may well have been because of Vekselberg's emergence as a key player in South African‐Russian relations, accompanying Russian President Putin on a visit to South Africa in September 2005, with Mbeki having appointed him to his International Investment Council. However, diplomatic expediency seems to have been underpinned by Renova's relationship with Chancellor House as a funding front for the ANC.
Whatever the niceties, the ANC's investments through Chancellor House have paid off remarkably handsomely, for at the Polokwane Conference Mendi Msimang reported that the ANC's acquisition of a sound portfolio of investments had enabled the party to achieve a sound financial position (Mail & Guardian, 8–14 2008). He was understating his case: by the time of the Polokwane conference in December 2007, the ANC's assets amounted to more than R1.75 billion (Sunday Independent 2 March 2008). This probably now makes it one of the richest political parties in the world!
The Misappropriation of State Resources: Oilgate
Academic observation has supported opposition criticism that the ANC in government has trespassed upon the division between party and state through the use of state resources for campaigning, especially at election times. This is scarcely an unusual criticism directed at ruling parties. However, strong evidence that the ANC has been prepared to use state resources for party advantage was provided by the Oilgate scandal.
Media revelations (notably Mail & Guardian, 20–26 May 2005) uncovered how the state oil company, PetroSA, irregularly made an advance payment of R15 million to Imvume Management for the supply of oil condensate sourced from a Swiss company, Glencore. Imvume was headed by Sandi Majali, who was described as an ‘economic advisor’ to Kgalema Motlanthe. However, when Imvume diverted R11 million of this sum to the ANC ahead of the 2004 general elections, Glencore turned for direct payment of the R15 million, and another R3 million owing to it from Imvume, to PetroSA. The latter thereupon paid Glencore the R18 million for fear that its Mossel Bay gas‐to‐liquid fuel point would have to close down. Although PetroSA made efforts to recover the money, Imvume defaulted upon agreed installments which have yet to see the debt (plus interest payments) fully repaid.
A host of questions followed, notably the extent to which senior members of the ANC knew of the transaction. These included Motlanthe and party treasurer Msimang (with both of whom Majali claimed a close professional and business relationship), as well as then Minerals and Energy Minister, Pumzile Mlambo‐Ngcuka, under whom PetroSA ultimately operated. It later emerged that Motlanthe, Msimang and the ANC's head of the presidency, Smuts Ngonyama, had traveled with Majali to Iraq in December 2000 in support of the latter's bid to negotiate an allocation of oil to the company by Saddam Hussein under the UN's oil‐for‐food programme (the Security Council having imposed sanctions upon Iraq following the latter's invasion of Kuwait in 1990).
The ANC's response to the exposé was that there was nothing wrong with a private company making a donation to a political party and tried to gag leading newspapers from exploring its relationship with Imvume. Meanwhile, DA leader Tony Leon had referred the allegations to the Public Protector, Lawrence Mushwana, whose constitutional function is to report upon possible abuses of power by government. However, Mushwana cleared PetroSA of wrongdoing and stated that his mandate did not allow him to enquire about the R11 million payment once it was held by a private company. Nor were ANC parliamentarians keen to pursue the matter, using their majority on the minerals and energy portfolio committee to endorse Mushwana's report. Although the public accounts committee found that the payment made by PetroSA to Imvume was procedurally irregular, opposition attempts to secure crucial documentation relating to the R15 million payment were blocked (Mail & Guardian, 2–8 September 2005; 23–29 September 2005). However, after PetroSA initiated legal proceedings to obtain repayment of the money from Imvume, in defiance of a secret agreement between the companies that it would not do so, Majali admitted that PetroSA had transferred the R11 million to Imvume with the request that it be forwarded to the ANC, and that he had maintained his silence about this previously out of political loyalties (Mail & Guardian, 11–17 September 2007).
Politics, Patronage & Business
The NDR charged the ANC with using state power to deracialise the economy. This predisposed the ANC to regard the parastatals as ‘sites of transformation’ where the capacity of the existing order to resist rapid black upward mobility would be at its weakest. In contrast, the ‘transformation’ of the private sector presented more problems. For a start, private property was protected by the constitution and the close scrutiny of the government's economic policies by global markets. Yet even this was dwarfed by two other challenges.
First, ANC ‘cadres’ were desperately short of the skills required by modern business. This meant that there was an initial desperate rush for jobs in the state, access to whose resources was widely viewed by party members as the easiest route to employment and wealth. In any case, the ANC had little understanding of bureaucracy (Suttner, 2007), and ‘transformation’ rapidly assumed priority over efficiency and capacity.
Second, aspirant black capitalists lacked the capital to buy their way into the corporate sector. Consequently, there was minimal change in ownership patterns within business during the first five or six years of ANC rule. Nonetheless, the basis was being laid for a rush from within the ANC for private wealth. There have been a number of key processes at work which revolve around the nexus between politics and business.
Forging Business‐ANC Linkages
The first process was the very simple one whereby individuals at the top of the corporate ladder struck up friendships with the incoming ANC leadership. Above all, this was exemplified by a focus upon Mandela, who after his release from jail came to enjoy ‘the company of the very rich’ and forged strong relationships with both Harry Oppenheimer, Chairman of Anglo‐American, and Clive Menell, ViceChairman of the rival Anglo‐Vaal mining group. Nor was Mandela fastidious in such friendships. The honeymoon of his daughter, Zindizi, was partly paid for by Sol Kerzner, who had made his pile by running casinos in the former homelands, and who was soon to be charged with bribery (Samson, 1999:501). When Mandela's estranged wife, Winnie, was arraigned for the kidnapping of ‘Stompie’ Seipei and as an accessory to assault before his murder, an American company seeking to reestablish itself in South Africa provided the International Defence and Aid Fund with money to pay for her defence (Herbstein, 2004:321). Although Mandela reputedly remained distant from the values of the rich, he was convinced of the need of the ANC to establish friendly relations with business if it were to create a thriving economy. Inevitably, such bonding translated into more substantive relationships: for instance, the final version of the RDP was presented by Mandela and Mbeki to Oppenheimer for approval (Gumede, 2005:80). Meanwhile, big business could earn valuable kudos by providing support for Mandela's charities, which ‘raised spectacular sums during his presidency’ (Samson, 1999:570). Other similar connections were almost certainly established between the ‘old guard’ and the incoming political elite.
Building Political Capital
At a more formal level, the large conglomerates were desperate to ingratiate themselves with the new regime by making deals with the politically connected or appointing them to high position. This dovetailed with the ANC's wish to ‘deploy’ high ranking loyalists to the ‘commanding heights of the economy’ (the mining and financial sectors being its initial primary targets). This process consolidated into the making of a small but significant corps of ‘black moguls’.
Although there are a number of significant black capitalists who cut their teeth in business under apartheid or by securing employment in established corporations in the 1980s and early 1990s, the more usual route into business has been through the exploitation of ‘political connectivity’. To be sure, in seeking to establish alliances with politically influential players, large scale foreign and domestic corporations and banks have preferred to deal with individuals with an established track record of competence. Indeed, this is a major reason why ‘the usual suspects’ tend to turn up in one BEE deal after another. Nonetheless, their closeness to political power is fundamental. For instance:
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Patrice Motsepe, chairman of African Rainbow Minerals (ARM), fourth in the list of South Africa's super‐rich ranked by the value of their shares (with 2006 holdings worth R7.94 billion),6 is unusual because he has never been involved directly in ANC politics. However, having formed ARM in alliance with Harmony Gold in 1994 and enjoying close links to Afrikaner capital through a large shareholding in Sanlam, Motsepe has family connections to leading figures in the ANC.7
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Saki Macozoma, who has shareholdings worth R520 million, started his post1994 career for the ANC in parliament before moving to Transnet as Deputy Managing Director (MD) and then as MD. Subsequently, he moved into the corporate sector and is today chairman of Standard Bank's asset management group Stanlib, although his major vehicle is Safika Investments, a BEE company heavily funded by Standard.
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Tokyo Sexwale, former Robben Islander who became Premier of Gauteng in 1994, is Chairman of Mvelaphanda Holdings, which he founded (with support from ABSA) in 1999 after leaving politics. He holds numerous other directorships, has the strong backing of Afrikaner capital, and has been listed as worth R979 million.
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Cyril Ramaphosa, the ANC's former General Secretary, crossed from politics to the corporate sector in 1997. Today he is executive chairman of the Shanduka Group (previously Millenium Consolidated Investments) which is heavily funded by Old Mutual. Worth R490 million, he has strong links with financial capital (Standard, First National Bank, Investec and Alexander Forbes), and mining (Anglo‐American/De Beers) as well as serving on the boards of SAB Miller and Macsteel. Ramaphosa remains important on the ANC's NEC.
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Mzi Khumalo, another former Robben Islander, was backed (amongst others) by Rand Merchant Bank in forming Capital Alliance in 1994, at a time when he was regional ANC treasurer in KwaZulu‐Natal. He now presides over extensive assets in finance and mining and has joint interests with Sexwale in the Pan‐African Mining Group. Other examples of ‘political connectivity’ include:
Husband‐wife partnerships which span politics and business: These are exemplified by Gauteng Premier Mbhazima Shilowa being married to Wendy Luhabe, a BEE luminary and Chair of the Industrial Development Corporation, Vodacom, Alliance Capital and Findveco; Social Development Minister Zola Skweyiya being married to Thuthukile Skweyiya, CEO of Fikiza Investment Holdings, Chair of Wesizwe Platinum and of Aflease Gold & Uranium Resources, and Director of Orlyfunt Holdings, Wescoal and Total South Africa; Education Minister Naledi Pandor being married to Ikamva Investment Holdings Chair, Sharif Pandor; and Transport Minister Jeff Radebe being married to Bridgette Radebe, CEO of Mmakau Mining.
Appointment of ANC politicians or former politicians to positions at the apex of the corporate structure: for instance, Manne Dipico, former Premier of the Northern Cape, serves as Chair of the Ponahalo Consortium and Deputy Chair of De Beers Consolidated Mines. Similarly, Popo Molefe, former Premier of North West province, is Chair of both PetroSA and Armscor.
Direct participation of ANC politicians and loyalists in business ventures in collaboration with established financial or industrial interests: Prominent amongst these have been Standard Bank's 2005 sale of 10 per cent of its shares to black partners (40 per cent of these going to a consortium led by Macozoma and Ramaphosa) and the purchase by Barclays (UK) of 50.1 per cent of the shares of ABSA in collaboration with the Batho Bonke consortium led by Sexwale and, indirectly, the Ubuntu‐Batho consortium led by Motsepe.8
The incorporation by established business of the politically connected is simultaneously a strategy to avoid adverse political exposure and an acceptance of BEE as a necessity for doing business. Of course, in drawing talented blacks into business, corporations can claim, with justification, to be ‘unlocking value’. Against that, small fortunes are being transferred to individuals in discounted shares in order to purchase political credibility. It is of no surprise that today 40 per cent of ANC MPs (including some cabinet ministers) are directors of companies, many owning companies outright. However, while politics has become the route to wealth for individuals, it appears that BEE has become a source of income for the ANC, for widespread rumours that pressure has been put on companies wanting to participate in empowerment deals to make contributions to the party has received apparent confirmation in revelations that the ANC received a donation of R9m following a R1.5 billion empowerment deal involving Standard Bank, Liberty Life and asset management company Stanlib in which Saki Macozoma was a central player (Sunday Times, 9 March 2008).
Moving from the Public to the Private Sector
The third social process has been the movement of senior public servants and parastatal managers into the private sector via BEE deals. In 1994, the ANC 'deployed’ personnel it could trust into senior public positions to bring about 'transformation’. As indicated, few ANC ‘cadres’ had either the background or predisposition to enter private business, and the government's BEE strategy was hitherto undeveloped. However, as senior figures grew in experience, increasing numbers of them moved across to the private sector where established corporations welcomed their ‘political connectivity’. The examples of such movement are legion:
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Former Directors‐General of government departments who have crossed to the corporate sector include Jakes Gerwel (the President's Office under Mandela), who is now chair of various corporations, including private health care company Afrox (as well as of South African Airways); Roger Jardine (Arts, Culture, Science & Technology), now a director of FirstRand, who before becoming Chief Operating Office of Kagiso Trust Investments was Chief Executive of Kagiso Media; Sipho Pityana (Foreign Affairs and Labour), who is Executive Chair of Izingwe Capital and Laetoli Investments; and Robinson Ramaite (Public Service and Administration), who is Chair of Simeka Investment Holdings and of Vusani Investments, as well as being a director of Kumama Platinum and Mvelaphanda Resources. Alistair Ruiters, former DG in Trade and Industry, who played a key role in developing the government's BEE strategy, was a considerable catch as an executive director for Samancor Chrome, (while also serving as co‐owner of Ehlobo Holdings, Ehlobo Foods and Ehlobo Heavy Minerals).
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Former Chief Executives of parastatals who have made a similar move include, above all, Saki Macozoma. But he has trodden a path followed by others such as Bongani Khumalo (formerly CEO Transnet and Deputy Chief Executive of Eskom), who is now Chair of the Gidani (Lotto) Consortium, Managing Director of JHI Real Estate and a director of Anglo‐Platinum; Mafika Mkwanazi (formerly CEO, Transnet) who is now Chair of Letseng Diamonds, CEO of Orlyfunt Holdings and Inkwenkwezi Gold Mining; and Dolly Mokgatle, (formerly CEO Spoornet), who is now Chair of Wiphold and an Executive Director of Peotona, as well as holding various non‐executive directorships. Gloria Serobe, Executive Director of Wiphold, similarly rose to prominence through positions in the Transnet stable.
The controversial aspect of such moves has been the potential unfair advantage which a former public servant might bring to a company from knowledge of forthcoming policy decisions, as when the former DG of Communications, Andile Ngcaba, joined Information Technology company, Dimension Data. He soon became its Executive Chair after a BEE consortium he led acquired a 20 per cent stake in the firm, which operated in an area he had previously regulated and which was bent upon increasing its business with the public sector (ThisDay, 3 June 2004).
The solution mooted for such situations has been a ‘cooling off’ period during which a former public servant should not be able to seek employment in the private sector.
However, for all that such linkages are officially controlled by tender procedures, they can be difficult to prevent if officials are determined to circumvent them (Business Day, 8 May 2004).
The Scramble for Tenders
The fourth social process which can be isolated is the consequence of the ANC's control of the state machinery as a source of tenders. This aspect has lent itself to corruption, patronage, and the monetarisation of relationships within the ANC.
The extent of corruption in tendering is difficult to estimate. The ANC is appropriately anti‐corruption in its official stance, and indeed has put in place important legislation and mechanisms to control malfeasance. Equally, however, it has proved reluctant to undertake enquiries which could prove embarrassing. There have also been two other activities at work. First, certain corporations have distributed financial largesse to secure contracts and favour from government (although their success in so doing is always hard to prove). Second, ANC politicians at all levels of government have sought to influence the tender process in their favour.
The arms deal of 1999 remains the single most controversial deal which the ANC government has concluded. A host of European companies started courting the ANC from the early 1990s in order to persuade them to rearm the defence force. In 1999, the government agreed to procure military equipment from BAE Systems, Saab, MAN Ferrostaal, ThyssenKrupp and Thales; R43.8 billion was regularly cited as the cost of the deal, but this rose considerably as the price of the rand fell internationally. It is almost certain that serious instances of bribery were at play. To be sure, the Joint Investigative Team appointed by Mbeki to pursue allegations of corruption and which reported in 2001 exonerated the government from all improper or unlawful conduct relating to the deal. However, this conclusion is highly unsatisfactory.9
For a start, it is has been established that the ANC's first Defence Minister, the late Joe Modise, received a payment of R10 million for signing a deal whereby South Africa agreed to buy German submarines. Then ANC chief whip Tony Yengeni was convicted in 2003 of defrauding parliament by failing to disclose a generous discount he had received on a four‐wheeled drive Mercedes Benz from one of the companies vying for a piece of the arms deal. (Another 30 people also allegedly received such discounts). More consequentially, the ANC's Shabir Shaik was later to be dispatched to jail after being found guilty of paying Jacob Zuma R1.2 million to further their relationship and for soliciting a bribe for him from the French arms company Thomson‐CSF (later Thales), with the consequence that Zuma was 'released’ from his position as the country's Deputy President in August 2005. There are further allegations that Shaik also received a R12 million bribe from Germany's Thyssen‐Krupp, and diverted subcontracts to his brother's company, Nkobi Holdings. Recent documentation obtained by the Mail & Guardian (14–19 March 2008) suggests that, all told, Thyssen, directed up to US$22 million to South African officials and cabinet ministers to facilitate the arms deal, and later followed up with a payment of R500,000 to the ANC in a bid to lobby the government into blocking a German probe into the scandal. Equally serious are suggestions that Mbeki himself had held seriously compromising meetings with Thales (Noseweek, July 2006) and the information that the Serious Fraud Office in the United Kingdom is investigating allegations that BAE paid over R1 billion in ‘commissions’ to secure the R30 billion deal with the South African government for Hawk jets and Gripen fighters (Business Day, 30 January 2007).
The arms deal may have been exceptional in its scope, yet there are indications that the incidence of corrupt practice in tendering is extensive. According to one report, 62 per cent of private companies surveyed agreed that bribery was becoming accepted business practice, and 39 per cent felt that bribery was becoming necessary for conducting business.10 Given the combination of moral, political and legal imperatives to allocate contracts to firms with the requisite BEE credentials, it is likely that ‘political connectivity’ is vital to the making of numerous awards.
Other factors also come into play. For a start, membership of the ANC comes cheap, having remained at R12 since 1994. Second, the privatisation of numerous government services at provincial and local level has hugely increased the number and value of contracts allocated. Third, ANC provincial and local authorities are, on the whole, opposed to transparency with the result that the ‘scramble for tenders’ is largely conducted behind closed doors, and public scrutiny unwelcome. This explains the hysteria with which the local ANC reacted to the loss of control over the Cape Town City Council to a DA‐led coalition following the local elections of April 2006. The ANC became furious when Helen Zille, the incoming Mayor, announced that her administration would conduct a forensic audit of all tenders, contracts and other financial dealings concluded under her ANC predecessor. When the ANC sought to destabilise the coalition, its antics eventually backfired when Patricia Lille's Independent Democrats threw their weight behind Zille and increased her fragile majority. The DA has further increased its unpopularity with the local ANC by opening up Cape Town's tender processes and abolishing a system of quotas which guaranteed a proportion of contracts for BEE enterprises.
Incidents elsewhere suggest that corruption in tendering is common. For example, following the election of 2004, the Scorpions, an investigating directorate of the National Prosecuting Authority, investigated claims that Ngoako Ramathlodi, who had just stood down as premier of Limpopo, and his finance minister had each received R5 million in kickbacks related to manage the province's R4 billion a year pension payouts by Cash Paymaster Services, a 100 per cent black owned company which had operated the system from December 2003 (Mail & Guardian, 14–20 May 2004 Noseweek, September 2004). Eastern Cape agricultural minister, Max Mamase, was forced to resign following allegations (later upheld) that payments on the bond for his house had been made by a property development company owned by a citrus farmer who landed a R16 million empowerment deal from his department (Mail & Guardian, 29 October‐4 November 2004; 18–23 March 2005). A previously unheard of company, Numque20, 60 per cent owned by the daughter of parliament's Deputy Speaker, landed a multi‐million rand municipal parking contract from the ANC‐run Cape Town City Council in 2005, but subsequently faced challenges in court from outraged competitors (Noseweek, November 2005). Finally, Mangaung (Bloemfontein) Mayor, Papi Mokoena, and other senior officials were fired from office by the ANC in the run up to the 2006 local elections following investigations into tender irregularities amounting to R150 million (Business Day, 19 October 2005).
Mbeki complained in mid‐2005 about a ‘mercenary, acquisitive spirit’ sweeping the ANC (Boyle, 2005). Yet many felt that it was the values which his own government had fostered which were responsible for promoting what the party itself acknowledged as patronage, arrogance, bureaucratic indifference and corruption within its ranks (ANC, 2007b). Such perceptions undoubtedly helped to swell the ranks of those who in December 2007 fell behind Zuma (despite the cloud of allegations which hung around him). However, whether the party's recommended solutions can successfully address such ills remains debatable.
The NDR, Money & Morality
The ANC's solution for the moral crisis in its midst has two broad thrusts. The first is the need for the building of a ‘new political culture’ centred around principles which seek to balance the right of all party members to earn a living and participate in business against legal and ethical behaviour, backed by recognition of the need for accountability. These would require the development of ethical guidelines respectively for (1) ANC national officer bearers, national and provincial executive committee members, regional and branch executive members, as well as for ordinary members; for (2) the ANC as an investor in business; and for (3) the ANC as a fundraiser. The second is the need for a new set of party controls, modelled upon those of the Central Control and Auditing Commission of the Communist Party of the Russian Federation, which would supplement the work of the party's Disciplinary Committee and which would pro‐actively monitor party programmes, finances, and policy implementation. The ANC's document on ‘Revolutionary Morality’ (ANC, 2007a) does not explain why the party is recommending the Russian Communist Party model, although it presumably came about via the fraternal relations between the SACP and its Russian counterpart. New codes of conduct, it is acknowledged, ‘will not make a difference if we do not create a new and effective way to enforce them timeously and decisively’ (ANC, 2007a:7).
The full significance of Zuma's dislodging of Mbeki from the ANC presidency has yet to emerge. Nonetheless, it is clear that much of the motive force behind this dramatic turn of events has been the backing for him provided by COSATU and the SACP, both of which have long been vocal in their condemnation of the Mbeki government's economic policy as pro‐capital, penalising the poor, doing little to effect redistribution, and as promoting a hugely rich, party connected, business elite at the expense of more broadly based black empowerment. However, even if, as these elements demand, this results in something of a shift to the left in the government's economic policy, serious challenges to a more vigorous assertion of ‘revolutionary morality’ will remain, and indeed may even be compounded by the present struggle taking place between contending factions within the party.
First and foremost, South African political economy continues to revolve around ‘an odd combination of new (political) power without money and old money without power’, with each needing the other to advance its interests (Financial Mail, 15 December 2006). This is structurally disposed to favour corruption, as is indicated by the incestuous relationship which has developed between Chancellor House and parastatals. Second, the need for party funding is more likely to increase than diminish. Although the case for public disclosure of private funding of political parties is by no means so strong as its supporters proclaim (Sarakinsky, 2007), it remains difficult to exclude influence peddling from this particular terrain. Third, as the ANC acknowledges, it is a multi‐class movement composed of capitalists, middle class, workers and the poor, and as such is a host to class struggle within a society imbued with capitalist values and consumerist temptations. In such situations, it is usually the rich and powerful who win out. Fourth, despite the determination of COSATU and the SACP to shift policy to the left, their cause will run up against the opposition of market forces which are unlikely to shrink from using their influence and resources to protect their interests. Finally, while the advent of stricter ethical principles and controlling structures within the ANC will be welcomed, their effectiveness will depend upon the necessary political will to implement them. Thus although the new party treasurer, Mathews Phosa, has recently commissioned a forensic audit of all empowerment deals and tenders acquired by Chancellor House, and has promised that heads will roll if malfeasance is revealed (Sunday Times, 24 February 2008), it remains unclear whether this is a genuine attempt to cleanse the party's Augean stables or an attempt to strike at empowerment figures linked to Mbeki. Furthermore, even though Phosa has suggested that it is improper for Chancellor House to be securing deals from government agencies, there is no further suggestion that the party would divest itself of its dubiously acquired wealth if this were now to become the company's official policy. Meanwhile, although now embarked upon this apparent moral crusade, the victorious Zuma faction remains determined to prevent their champion from having to appear in court to defend himself against allegations of corruption. Such developments are worrying, and indicate the need for democratic forces both within the party and without to assert themselves consistently if they are to halt the ANC's moral decline.