The idea of using government’s procurement budget to realise social and economic outcomes is not new. It was the backbone of South Africa’s ‘developmental state’ in the 1930s and formed a key platform of the apartheid project, especially in relation to cultivating a class of Afrikaner (nationalist) capitalists.
From about 2011 sections of the ANC and ministers and officials in the Department of Trade and Industry (DTI), supported by elements of organised black business, began referring to ‘radical economic transformation’. This was the name given to an ambitious project to leverage the procurement budgets of SOEs to displace established white firms and create new, black-owned and -controlled industrial enterprises.
The two largest SOEs were Eskom (which generated and transmitted electricity across the country) and Transnet (which was responsible for the national bulk rail network). Here was a vision of economic transformation that was not contingent on the reform of ‘white businesses’ and did not depend on the goodwill of whites to invest in the economy, to employ black people and to treat them as equals. It is easy to see why this vision was profoundly compelling across a range of networks within and outside the ruling party.
From around 2011, however, the project of radical economic transformation increasingly began to set itself up against key state institutions and the constitutional framework. At stake was a critical reading of South Africa’s political economy and of the constraints that the transition imposed on economic transformation. This was an analysis emerging from within parts of government and the fringes of the ANC. It resonated closely with the neo-Fanonian readings of South Africa’s post-colonial situation that were widely discussed on university campuses, in the Black First Land First grouping and in ‘ultra-left’ critiques of South Africa’s ‘elite transition’.3 It was not the position of the ANC itself. The centrepiece of this critique was the National Treasury – the department of state responsible for government finances, including approval of departmental budgets and allocating monies from the fiscus.
There was one major reason why the National Treasury was a red flag to the project of radical economic transformation: its constitutional mandate placed it on the very sharp horns of a dilemma. In South Africa the terms of public procurement are not defined simply in statutes (subject to legislative revision) but are inscribed in the ground law of the country. South Africa’s constitutional drafters were prescient, perhaps, about the significance that procurement would assume in the political life of the country after apartheid. The National Treasury, itself a creature of the Constitution, had to try to reconcile black economic empowerment (BEE) with considerations of fair value for the fiscus and for citizens.
When the National Treasury was seen to stall moves to extend the logic of BEE to the SOEs, it came under fierce attack. Indeed, the more the Treasury insisted that government entities proceed in a way that was ‘fair, equitable, transparent, competitive and cost-effective’, as set down in the Constitution, the more controversial it became.5 Furthermore, the Treasury was in favour of a conservative fiscal policy, which meant restraining public expenditure relative to gross domestic product rather than running up the deficit. Critics argued that this constrained the state’s ability to address the triple challenge of poverty, unemployment and inequality.
As the Zuma administration radicalised and tended towards illegality and straightforward criminality, so it became dependent on managing increasingly complex relations, many of them involving people engaged in unlawful activities. At this time the Zuma administration made moves to establish control over key state institutions, especially those involved in criminal investigations and prosecution: SARS, the Directorate for Priority Crime Investigation (known as the ‘Hawks’) and the National Prosecuting Authority (NPA). In all these proceedings there was the shadow of South Africa’s intelligence services, including the involvement of apartheid-era intelligence officers.
To construct what we call the ‘shadow state’, two imperatives came into play. Firstly, as the Zuma-centred political project tended towards illegality it was driven into the shadows, with the concomitant risk of the loss of political control. Hence, some form of management system was needed to keep it on course. Secondly, it became necessary to shut down certain investigations and immunise or protect key people from prosecution.
Taken together, the events occurring at SARS and those involving the Hawks (as well as the NPA) suggest that as the Zuma administration became radicalised, and resorted increasingly to unlawful means to pursue its agenda of radical economic transformation, so it was driven to ‘capture’ and weaken key state institutions. In this way, the political project of the Zuma administration has come at a very heavy price for the capability, integrity and stability of the South African state. This book describes and analyses the primary dynamics of this process.
Civil society reinvigorated
For a long time there was very little organised opposition to these events, but the South African media had largely managed to fend off moves to introduce formal censorship and there was still a legacy of brave, independent investigative journalism. Largely through the efforts of several such journalists, many of them associated with the amaBhungane Centre for Investigative Journalism, stories broke regularly about the corruption of government officials.
The public protector’s State of Capture report did a great deal to create public outrage, but the political response was strangely muted.6 Within the ANC some individuals raised concerns, but, as an organisation, the ANC reliably rallied behind its president. This began to change when then Minister of Finance Nhlanhla Nene was unexpectedly dismissed in December 2015. Financial markets reacted strongly and the South African currency, the rand, plummeted in value.
These events triggered a political response as thousands marched in the streets to protest ‘state capture’. Yet the phenomenon remained largely a middle-class one. It was not very difficult for those around the Zuma administration to present such opposition as either the work of political forces opposed to radical change or as working in the service of a foreign agenda.
This began to change after the dismissal in 2017 of the new finance minister, Pravin Gordhan, and his deputy, Mcebisi Jonas – both of whom are highly respected technocrats but also savvy politicians. Opposition to the Zuma administration grew, including from within the ANC.
The problem with the resistance until then, however, was that its analysis of what was going on was superficial. It ultimately fell back on the assumption that the president and his allies were corrupt and motivated by self-interest, or that they were kingpins of a vast network of patronage. Apart from the obvious flaws of such an analysis – it resonated with all sorts of racist clichés about African leaders – it obscured the political project that was at work.
In May 2017 we and several colleagues published a report called Betrayal of the Promise: How South Africa Is Being Stolen. We had worked quietly and quickly to gather as much information as possible that was in the public domain in order to ‘join the dots’, so to speak. The highlights of the argument we made in that report have been referred to above. The centrepiece of the analysis was the way in which the Zuma–Gupta political project turned against the Constitution, the law and South Africa’s democratic processes and institutions.
Essentially, we were able to show that the struggle today was between those who sought change within the framework of the Constitution and those who were ready to jettison the terms of the transition to democracy. The report proved to be hugely influential in South Africa, and we think it has played an important role in galvanising political opposition to state capture from constituencies beyond the middle classes. It marked an inflection point in two ways. In the first place, it provided a new vocabulary for understanding political dynamics that was readily taken up in the media and especially among social movements and political organisations, even those allied to the ANC. Terms like ‘shadow state’, ‘silent coup’ and ‘repurposing institutions’ have become part of the everyday language of