UNMANDATED SPACE-Volume 1 – Issue 4, 2021

UNMANDATED SPACE

~Imvo Zabangathunywanga~

STATE CAPTURE AND ITS DISCONTENTS: WHAT LIES AHEAD?
Volume 1 – Issue 4, 2021
04 May 2021

Today, the conversation about the state and future of South Africa is highly strained and fractured. The reason is simple: the politics have evolved to a point where the transition to a new South Africa has been cast anew by experience rather than the aspirations of the early post-1994 period.

One of those strained conversations to have today is around the distinction between the concept and practice of ‘state capture’ on the one hand, and ‘corruption’ on the other. According to the dominant narrative, there is no distinction or necessity to nuance each of the concepts. Mainstream media and the general public discourse have taken it as God-given that the two concepts are in fact, the same. Nothing can be further from the truth.

This author does not support the dominant narrative(s) around ‘state capture’. However, he does support the ‘anti-corruption’ programme in government and elsewhere in society. And he believes majority of South Africans do too.

In the entire state capture spectacle, many seem to forget a simple fact that capitalists exist to capture the state. They do this in various ways, including by directing public policy decisions to favour their interests. Organised labour or the church, for example, does the same. Interestingly, the influence of labour or the church on the state does not receive the same amount of scrutiny and has certainly not made it to the Zondo Commission.

The idea that certain influences or interests that have a bearing on the functioning or even orientation of the state are more important and more deserving of scrutiny than others; is itself a biased view and certainly ideological.

Politics and the nature of state power

We need to define politics and the nature of state power.

At a strategic and abstract level, politics is a contestation between various interests (including political parties) in society to capture state power with the primary aim of distributing resources. In this definition of politics, the role of the state in the economy is implied and accepted. In simple terms, the state is both a shaper and mediator of various interests in society.

Of course, mainstream economic theory (which is often on the right of the ideological spectrum) prefers the market rather than the state as a mediator or distributor of resources and other social benefits. To the extent that the state must distribute anything, it must just focus on redistribution through social grants. Oh! Poor people, they must wait for the nanny. That is the mainstream view or market fundamentalism if you like.

The nature of state power

It is true that the state is the space where we find the highest concentration of power in any given society. This is so because one of the sources of state power is official violence over which it has monopoly. However, much as that is the case, power is in fact dispersed throughout society and can be found in the hands of business, labour, churches and other interest groups. The concentrated nature of state power is in turn affected by these power poles whose total effect is to produce relative or tempered state power. In the state too, power is dispersed across the various state institutions.

Some time back in 1998, the governing informal coalition called the Tripartite Alliance decided to appreciate that as the new government, they will be exercising political and state power within a capitalist economy. And so, they said in the State, Property Relations and Social Transformation:

‘Central to the issue of the role of the state is the question of public resources and their utilisation. Thus, an important indicator of control of state power is the capacity or otherwise to set rules for, or actually determine, the accumulation and employment of capital. Indeed, the current state is restructuring the budget in line with the objectives of the new ruling bloc; it is restructuring assets in the hands of the state along the same lines; it is setting out the framework within which capital is accumulated and allocated through measures such as Competitions Policy, Labour Legislation, Procurement Policy and so on.’

Further to the appreciation of operating in capitalist economy, the ANC in particular defines the relationship between the state and private capital as ‘contestation and cooperation’. Indeed, the Competition Commission among other regulatory bodies, is one such instrument that regulates this relationship. For example, if a proposed merger between two businesses has the potential to promote greater investment, growth and jobs, the merger is approved. But if the merger is harmful to the economy, the public or national interest, the merger is not approved. Another example is when abuse of dominance is investigated and sanctioned by the competition authorities. That is what is meant by ‘contestation and cooperation’.

Admittedly, the state is one of the most powerful and unavoidable institution in public life, however, its power and role is constrained by other power poles in society, not least which is the business sector as the most interested of them all. This admission is important because it helps us appreciate that the state is forever contested by various interest groups in society.

This then tells you that it takes more than state actors to facilitate influence over the state, let alone corruption or capture – the latter is a concept I consider as unhelpful if it is misunderstood or applied bluntly. Once concepts and practices are misunderstood, it becomes difficult to understand what is going on in the country. The exercise of prediction too, becomes fuzzier.

Corruption, state capture and contestation for state power

The concept and manifestation of ‘state capture’

In the public discourse, the concepts corruption, state capture and contestation for state power are sometimes used interchangeably and thus obfuscate the debate rather than illuminate it. So, what is state capture and how does it manifest itself?

There are at least two conceptions of state capture. The first one is a narrow definition. It refers to parochial (unsophisticated) capture which subverts rules, institutions, and acceptable norms to achieve its aims. The second one is a broad definition. It is more sophisticated wherein the process of capture itself, not only follows established rules, institutions, and norms, but generates its own legitimising rules in the instance where the rules are not clear or favourable. This kind of conception suggests that not all forms of state capture are problematic.

According to media reports, the Gupta family is accused of exercising narrow state capture and that could be problematic for them and society. Similarly, it has been revealed that the long-term coal contracts at Eskom, the co-called ‘evergreen contracts’ some of which date back to the Apartheid era, are also a form of narrow state capture.

Historically, the state-business-society nexus has never proceeded on a straight line. In their quest for upward mobility in the ladder of accumulation, white business working with the ‘white racist state’, as the late Professor Magubane called it, collaborated at different times of our history to capture the state, often in the most brutal, direct, exploitative, and oppressive manner.

For example, the Migrant Labour System, Colour Bar Act and later the Group Areas Act, as well as the homeland system, were a form of formal and systemic state capture at a grand scale. It was about securing regular cheap labour, controlling the movement of people and reserving jobs for whites. So, the mining houses propped up the state and in return, the state provided all sorts of institutional arrangements to secure the survival and profiteering motives of the mine owners and other related players in the primary sector. These were state-sanctioned interventions influenced by private business. In part, that is how the Minerals-Energy-Finance Complex developed in South Africa.

Successive white South African governments continued to support the same kind of state capture which effectively became a form of accumulation and rent seeking. The development of key economic infrastructure such as railway lines was also another arrangement sponsored by the state to support white business interests. As we know, the rail system was originally designed to ensure the smooth transportation of raw materials from ‘mine-to-port’, in a manner that makes it easy and cheaper for export earnings.

It is none other than Francis Fukuyama who wrote in 1991 that, ‘the Afrikaners used their capture of state power in 1948 to advance themselves socially.’ As a result of these socio-economic and political arrangements, almost all of the white population and later the Afrikaners in particular, enjoyed a better life at the expense of the black majority. Various social benefits accrued to the white people so much that state capture was a legitimate and acceptable phenomenon to them.

The concept and manifestation of corruption

Put simply, corruption refers to acts of illegality or criminality as defined in law. Corruption is not necessarily state capture. Yes, some acts of state capture can amount to corruption but, this is not the same as saying, every state capture action leads to corruption or crime. Put differently, it matters how the state is captured. Some forms of capture are legitimatised by practice, precedent, norms and standards and even law itself.

Corruption too has a long history in South Africa. Steven Friedman puts it nicely:

‘Corruption in South Africa dates back to colonisation in 1652… The period of Dutch rule he began, which lasted until 1795, was marked by tax evasion and corruption by public officials…The most prominent colonialist of the time, Cecil John Rhodes, was forced to resign after he gave a friend an 18-year monopoly catering contract for the government-run railways… Given this history, it is not surprising that corruption was a constant feature of the apartheid period.’

Friedman sees some continuities in the practices and culture of corruption between the colonial, Apartheid and the democratic state. In this regard he states that:

‘The seeds of post-1994 corruption were, therefore, deeply planted in the country’s past. But corruption since then is also a symptom of another way in which the past was carried over into what was meant to be a new society. Before 1994, the groups which controlled the state used it to ensure that they controlled the economy too…What today is called “state capture”, the use of the state to serve private interests, was common to Afrikaner and British rule.’

If at all our state was functioning optimally and had sufficient capacity, it would not need the Commission on State Capture, rather it would simply pursue every alleged act of corruption as part of normal course. In other words, if the Commission is to be successful in its work, it should report on one thing only: why is it that the state and its criminal justice system is unable to detect, investigate and prosecute corruption? Because as I have intimated earlier, state capture is not the same as corruption!

Political contestation

Political contestation on the other hand, is basically the contests that political parties and other forces have in relation to the quest to capture state power and wield it in their interests. As suggested earlier, this author believes that the main purpose of contesting state power is so that it is utilised to secure a fair distribution of resources in society. Otherwise, the social contract collapses!

Of course, at this stage the narrative is set in the media and the public domain that we need the State Capture Commission. Otherwise, I would suggest that those who are honest and committed to this country, should come forward and report acts of corruption and we have law enforcement agencies pursue those cases swiftly.

All that the Zondo Commission will achieve is to say: this kind of state capture is of low quality, things need to change, here are the possible rules to reset the game. The Commission will not do away with state capture proper or as defined in this discussion. Why? Because state capture – if understood in the broadest sense – is a continuous political contestation between various interests in society which vie for the control of state levers in order to influence the distribution of resources. One hopes that this ordinary contestation in the polity will not be criminalised in the name of fighting state capture or corruption.

Gupta: what is in a name?

With the foregoing, it is clear that there is a huge difference between the Guptas and established capital, if the reports are anything to go by. The difference is the level of sophistication. This simply means that there are established rules on how you join the big table. In theory, everyone is welcome to join the big table, but they must do so by following the established rules, regardless of the degree of fairness of the said rules. It is called the rule of law as opposed to anarchy.

We must admit though that not all of the players in the big table got there by following the rules. Yes, our history is fraught with all sorts of brutal legacies. The ascendancy of some of the established capital was not always sophisticated and peaceful as Friedman illustrates above. It is one thing to disrupt the rules or the system and yet another to blatantly break the rules. That is the nub of the issue in so far as the Guptas are concerned – if the accusations are true.

Today, we know that ruling ideas are those of the ruling classes. And so, smart and strategic businesses focus on policy and legislation and not narrowly on state contracts like the unsophisticated Guptas allegedly did. It seems to me that state contracts are the endgame of a long and involved process of influence and capture. And better still, real entrepreneurship should forego reliance on state contracts to exist and thrive.

Anyway, established white business can now afford to be patient and take the long view because; they now sit comfortably after decades of accumulation of reserves, profits and safety nets. They have mastered the art of investing in policy research and analysis in a thorough way. They can indirectly influence or invent rules such as ‘unsolicited bids’, ‘non-disclosure’, ‘cool-off periods’, company gradings, business associations, penalties, and tariff regimes, etc.

Unsolicited bids, for example, are one of the ways in which lobbying is formalised between the state and business. Private business needs these kinds of formal mechanisms to approach the state with ideas to make money without being accused of undue influence or corruption. But it seems the Guptas thought that it is sufficient to have state contracts and a media house to capture the state.

Typical of South Africa, the focus is likely to be absolute and one-sided. We are too obsessed with politics. Maybe it is because the majority is mainly confined in political corridors of power. After the Zondo Commission, there may be a lot of focus on regulating political deployment and less on regulating economic power or strengthening public institutions and insulating the state bureaucracy from narrow sectoral capture by business interests.

What is to be done? 

What we need is not the fight against state capture or individuals who allegedly facilitated state capture per se. Rather, we needed to strengthen the state, ensure that it has sufficient autonomy and is insulated from narrow sectional or even parochial capture, ensure inclusive economic growth and pursue corruption cases where there is evidence. It is more important and urgent to fight against corruption than state capture – especially if one takes the broad definition of state capture as a point of departure – unless there are other unspoken incentives or goals such as politics.

State capture in the broadest sense is not going away, it will only change form and intensity at particular moments in history. After all, stated earlier, it is in the nature of capitalists to capture the state! Therefore, in the interest of the state and the people as whole, the state must establish rules for the game so that state legitimacy is not eroded.

I have already suggested some approaches above, but we need some practical suggestions too.

Firstly, at a more strategic level, South Africa needs to have a state that enjoys ‘embedded autonomy’ and has a meritocratic bureaucracy that is firmly focused on the imperatives of development. That is the orientation and capacity you need for a developmental state. ‘Embedded autonomy’ means that the state ought to be autonomous enough to avoid narrow sectional capture and yet, sufficiently networked in society in order to drive national development effectively.

Secondly, the country needs to formalise and regulate the lobby industry in South Africa, once and for all. So that the rules of engagement between businesspeople, politicians and bureaucrats are fair, equitable and transparent.

We have reached the stage where we need to monitor and assess the influence of the state-think-tank-business nexus on public policy. Both business and think-tanks are important players in the orbit of state capture. For example, KPMG, Trillian, Bain, McKensey etc, through their lobbying work, have impacted our governance and democratic system without any accountability. Ideally, in a robust democracy, all power must be checked and held accountable.

There is danger that if state capture as a concept is not properly defined, every approach, engagement, relationship or transaction with the state may be defined as state capture and therefore, undesirable or even criminal. Indeed, if we are not careful, ordinary day-to-day lobbying may be criminalised. That is if you consider the worst-case scenario.

As things stand currently, even before the Zondo Commission delivers its report, government officials and politicians are now too scared or even unsure if an ordinary invitation for a coffee chat with a businessperson who is exploring a business opportunity, constitutes an act or a process of state capture.

Even those who have funding and just want to understand government goals and regulation so that they can tailor their corporate strategies and investment to align with government may be increasingly unsure as to what is right and wrong. That is why it is important to define the form of capture or lobbying that breaks the rules.

Finally, we need public policy reforms on political deployment. We need to strengthen the policy and institutional processes, as well as the criteria for selection of political deployees in order to ensure that quality cadreship is deployed. We also need to decide which layer(s) of the bureaucracy are open for political deployment. Such a policy instrument must ensure that the deployment process is transparent, rules-based and produces better policy outcomes. Already, there are many departments, municipalities and government agencies domestically and internationally that can serve as best practice from which comparative lessons can be drawn.

If these things are not done, we will continue to confuse each other and perhaps waste another time with a second commission of inquiry into state capture soon. I hope that is not what lies ahead.

David Maimela is Executive Director of The Polisee Space, a pan-African public policy think-tank.