State capture did not start with the Guptas

Truth be told, the problem of state capture started in 1994 with the government’s trade policies, writes Ziyad Motala.

Johannesburg – Political events in South Africa over the past few months suggest that South Africa’s democracy is blighted and in a tailspin. Many are appalled by the political leaders who stagger from one low to the next.

Those in power signify a sad object lesson of corruption, patronage and abuse of state institutions. The phrase “state capture” has entered our vocabulary to signify abuse of political and economic power to advance the political and economic elites.

If truth be told, the problem of state capture started in 1994 with the government’s trade policies.

Many ordinary people feel they have not benefited from global-isation. There is a perception that decisions within the EU and free trade agreements were taken by elected elites for the benefit of economic elites, to the detriment of the welfare of ordinary people.

Real anxieties about free trade and a perception of economic decisions taken by elites for the benefit of elites was also a critical catalyst in catapulting Trump as the US president-elect.

South Africa embraced the Washington Consensus and signed expansive free trade agreements after 1994, with little or no input from the workers or communities affected by those decisions.

Subsequently, the government systematically eliminated tariffs on imported items – as if South Africa was an advanced developed country.

Even though South Africa is Africa’s largest economy, the majority subsist in underdeveloped conditions.

The uncritical embrace of free trade resulted in the decimation of large sectors of the economy and the large-scale loss of jobs. These industries were important in providing employment to the poor. Many moved from employment to welfare.

Under the World Trade Organisation agreements, the government is legally circumscribed in subsidising its industries.

This means the historically disadvantaged, saddled with decades of discrimination and attendant disabilities, cannot receive state subsidies because this would invite charges of unfair trade practices.

Workers and communities, if they understood the full implication of these policies, would have demanded input into government trade policies and in all likelihood would have opposed them.

Brexit and Trump’s election, apart from their ugly face of bigotry and demagoguery, also represent the revolt against globalisation and free trade by an alienated population, frustrated by decisions taken by unfettered political elites to the disadvantage of ordinary people.

Brexit and the Trump phenom-enon inform us that in the brutal conditions of the marketplace, the majority are not merely consumers. They are also workers and producers. The free trade and investment policies adopted by South Africa have reaped dire consequences seen by the greater levels of poverty.

The policies beginning with Minister Trevor Manuel were neither informed nor reflective of the input of workers and the communities affected by widespread job losses.

It was a cavalier treatment of the poor and signifies, if not the first, perhaps the most consequential example of state capture by the elite. Manuel, the erstwhile Minister of Trade and Industry and later Minister of Finance, championed trade orthodoxies and monetary policies that showed obeisance to the economic elites.

Not surprisingly, the elites and the media lionise and celebrate him as a visionary.

They glorify him, given that Manuel and the government delivered the steak for the elite. For the ordinary person, they delivered mostly sizzle. The incongruence between those who needed to be helped and those who have been helped is astounding and shameful. One needs no reminder that, on the Gini coefficient, South Africa has become the most unequal society in the world since 1994.

Our government signed numerous bilateral investment treaties (BITs). The BITs allow foreign entities to challenge regulat-ory frameworks to advance the public good, which undermines the government’s social and policy objectives.

The question is how does one explain the existence of the post-1994 BITs and the liberal free trade and monetary policy? Was it lack of foresight or state capture?

Insidious deals did not start with the Guptas. Starting from the very top, namely Manuel, all the way to the bureaucrats that negotiated these treaties, there was no consultation with the public.

It is disconcerting that there are no minutes of cabinet meetings or any sort of empirical findings to show the benefits these trade agreements would bring to ordinary South Africans.

An informed analysis and dialogue with the broader interests, affected by these decisions would have revealed, as was subsequently discovered at great cost, that BITs are inimical to the constitutional imperatives and constituted a surrender of the state’s law and policy control to the detriment of the historically disadvantaged.

Under the BITs, which the government in the post-Manuel era has largely renounced, the imperative of local, particularly black economic empowerment, is circumscribed by the national treatment and other clauses.

By way of illustration, the political elites, at the behest of big business, also liberalised South Africa’s currency controls and allowed major corporations to move their headquarters outside South Africa.

The conventional orthodoxy, disseminated by business, media, and many academics, suggested these were also sound decisions, for which Manuel received lavish veneration and now economic rewards.

The companies and their shareholders benefited by moving their capital to more lucrative markets.

This special dispensation has brought no advantages to the economy or to ordinary South Africans. Instead, it has had detrimental consequences.

The liberalisation of currency controls allowed companies that were truly South African to move their primary listing abroad.

This permits the likes of Anglo-American, Gencor and SA Breweries to repatriate their profits to foreign destinations and simultaneously to reduce their tax liability in South Africa, to the detriment of the general welfare.

These companies represented the crown jewels of the South African economy. Crucially, these companies had to invest their profits in South Africa to benefit South Africans prior to the sweetheart deal they received post-1994.

The cavalier free trade and investment policies, delivered by rascal politicians, exemplify the beginning of the grotesque state capture.

* Motala is professor of law at the Howard School of Law.

** The views expressed here are not necessarily those of Independent Media.

The Sunday Independent

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