The blame for the trauma of state capture doesn't lie only with the Zuma presidency

06 May 2018 - 00:00 By ZIYAD MOTALA
Trevor Manuel has raised a legitimate question about state capture.
Trevor Manuel has raised a legitimate question about state capture.
Image: Sunday Times

In a series of speeches, former finance minister Trevor Manuel has raised a legitimate question: why is it taking so long to prosecute those involved in state capture?

The erstwhile minister, a darling of the liberal establishment, sounds the war drums against state capture by the private sector. Our country is traumatised by the malfeasance and mutually profitable collaboration between the Guptas, the previous president, and others. However, the narrative that elites in the Zuma presidency were the first to manipulate state policies for financial gain is a convenient mistruth.

The period immediately after 1994 was not an innocent age and warrants scrutiny. The relentless push to embrace free trade, sweetheart deals that allowed favoured companies to move their assets abroad, and bilateral investment treaties were profoundly detrimental to the economy and the country's ability to deal with the legacies of apartheid. One must ask: who benefited from these policies?

Countries in the developed world agreed to engage in mutually beneficial free trade when their economies achieved certain levels of sophistication and development. They did this as their populations functioned under superior standards of education and high material standards of living.

South Africa adopted free trade under circumstances of extreme inequality, abject poverty and a deficient education system, impeded by decades of apartheid rule.

No similarly situated country has shown such obeisance to the neoliberal and largely discredited Washington Consensus - the 1989 free market "reform" policy recommended for developing countries - as South Africa. Whose interests were the decision-makers representing?

The trade agreements meant tariffs in the textile and other industries had to be reduced. This contributed to the decimation of key sectors of the economy, resulting in a loss of jobs and a greater need for welfare, all imposing a large financial drain on the state.

If there was a crime called economic treason, this would be a textbook example.

The embrace of free trade also meant that the country was legally circumscribed in subsidising its industries. For South Africa, this meant that the historically disadvantaged population, saddled with decades of discrimination and attendant disabilities, could not be subsidised or given a leg up to participate in the economy because this would invite charges of unfair trade practices. The decision-makers were the instrument of whose agenda?

The liberalisation policies also resulted in the movement of major South African corporate head offices out of South Africa, together with the outflow of large amounts of currency. Companies and their shareholders benefited by moving their capital to more lucrative markets. These companies were given the green light to move their head offices abroad, thereby reducing their obligations in South African and diminishing the tax base. What benefit did this bring to the South African economy or to the impoverished majority?

South Africa entered into many bilateral investment treaties with developed countries, which constrained its ability to adopt legislative and policy frameworks to advance its social and economic goals. Many of the treaties, which complement free trade, contained provisions inconsistent with constitutional imperatives.

Did the decision-makers who took South Africa down this devastating path fail to appreciate the impact of these measures on their ability to fashion progressive policies to benefit the disadvantaged? Or were they serving a different master?

Some might say the economic choices made immediately after 1994 are attributable to unsophisticated decision-makers within the executive with no banking, legal, or economics background, who were suckered into embracing poor policy choices. We now know that some decisions were taken with little consultation and incomplete analysis. More telling, there are no minutes of cabinet meetings surrounding the bilateral investment treaties.

At a minimum, let's publicly call on the decision-makers to justify their decisions. Were these deliberate choices to benefit some elite or just misinformed economic choices? If the latter, on a scale of blunders, it needs to be called out. Every instance of malfeasance, be it the crude and crass variety of the Guptas or the sophisticated version engulfed in the narrative of the Washington Consensus spider's web, needs to be investigated.

In terms of consequences, the economic, monetary, and trade choices immediately after 1994 that were indulgent to big business rank among the biggest rip-offs in the South African economy. If we are to reckon with state capture, we must understand that its history is rooted in policy choices made during this country's infancy.

• Motala is a professor of law at Howard University School of Law in the US


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