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  June 5, 2015

The 10 Million Dollar FIFA Scandal in South Africa

Centre for Civil Society's Patrick Bond says revelations of corruption for 2010 World Cup host South Africa are emblematic of much deeper and troubling political problems
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Patrick Bond is Professor of Political Economy at Wits University in South Africa. Bond is the author of the recent books, South Africa - The Present as History (with John Saul) and the 3rd edition of Elite Transition. He is also the co-editor of BRICS: An Anti-Capitalist Critique.


SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to The Real News Network. I'm Sharmini Peries coming to you from Baltimore.

International football federation FIFA official Chuck Blazer recently admitted to accepting a $10 million bribe to secure the World Cup of 2010 in South Africa, which several South African officials have denied. FIFA local organizer and chief Danny Jordaan, however, admitted that a $10 million payment was made, but claims that that was for development purposes. Critics say that South Africa's population did not reap the benefits of any financial inflows from the games.

Joining us now from Durban, South Africa is Patrick Bond. Patrick is the director of the Center for Civil Society and professor at the University of KwaZulu-Natal in South Africa. Patrick is the co-author of the book South Africa: The Present as History.

Patrick, as always, thank you so much for joining us.

PATRICK BOND, DIRECTOR, CENTER FOR CIVIL SOCIETY: Thank you, Sharmini. Good to be back with you.

PERIES: So Patrick, let's really unpack how this kind of a scandal, FIFA-related scandal, in South Africa, $10 million, how did that all take place, and who was involved?

BOND: Well, indeed you're right that a $10 million payment was made in the year 2008. Don't forget that the World Cup for 2010, hosted by South Africa, was actually decided in May 2004. It's quite a convoluted path in May 2004 in which the man who is actually the main bribee, Jack Warner, who is a Trinidadian, and in charge of the hemispheric, aside from Latin America, the Caribbean and North American soccer federation. And he worked with Chuck Blazer. And Chuck Blazer has turned state's witness. And the reason is because he was caught on other charges two years ago for corruption. And he's got colon cancer. He's in Manhattan, and I think he's making some decisions about spilling the beans, and his 2013 testimony was just made public.

And it really does make pretty obvious that the way you win a World Cup if you're South Africa, and even if you have Nelson Mandela doing personal visits to the delegates who are going to vote back in May 2004, Mandela in his mid-80s at that time and under doctors' orders not to travel. But even with that you had to pay $10 million. The Moroccans, who were the main competition at the time, and the vote was 14-10, and the key people who made the vote swing towards South Africa included Jack Warner, the notorious vice president of FIFA with many corruption charges leveled against him, and Chuck Blazer. And the overall impact of this was that instead of paying immediately, the South African government did at least have sufficient controls so that this had to be done surreptitiously. And as you said, the sort of red herring here was to call this a development grant to the Caribbean, i.e. to the diaspora of Africa, to develop their soccer as one of the benefits to Africans of having the first World Cup in Africa take place in South Africa.

But it turns out this is rather a fiction because through their surveillance, we know the U.S. FBI and the Justice Department are pretty good at tracking financial accounts when they want to. It turns out that Chuck Blazer got not even quite a million, and that a lot of money was squandered by Jack Warner on his own personal needs. And so it was really very clear to many in South Africa that the integrity of the country and especially the integrity of Danny Jordaan, who just last week after the revelations came out was elected to be the mayor of the fifth-largest city, Port Elizabeth, defending the African National Congress who are going to have a very hard time in the municipal election next April. And particularly because Danny Jordaan, their standard bearer, now stands rather exposed as a briber to get that World Cup here.

PERIES: Now this kind of scandal, and particularly in South Africa is, I hate to say it, but almost normal. Because there's so many scandals every day when you read the papers there. Is this particular scandal going to stick? And do you think it will have any real demerit points, as far as the state and the people involved are in?

BOND: Yes indeed. I think there's going to be dramatic consequences from not just an unraveling of this particular bribe, but a question--well, look. If this whole World Cup exercise cost in the region of $5-7 billion dollars, the final costings depend upon whether you count new airports, special trains, all sorts of infrastructure including road works that were really done for World Cup visitors. And if you count it all up and you also add that the construction industry was very much implicated in corruption, collusion on the contracts, which is well known and established by the competition commission, we're talking about quite an awful World Cup from the standpoint of probity. Even though the South Africans have always claimed no, no, this was a clean World Cup.

Now, this is not simply a South African problem of course, Sharmini, because it is the Zurich-based FIFA, and the Zurich banks and the New York banks, and the New York soccer official Chuck Blazer who also stand very much implicated in the corruption. And indeed we are very aware of corruption. Just the same week as this is unfolding a $20 million palace that the president, Jacob Zuma, had built for himself basically with lots of security features, swimming pool, lots of extra add-ons, costing the taxpayer some $20 million. That was declared to be an irregular expenditure and yet this week, the same week that this corruption scandal over FIFA has blown, we've seen the police minister basically declare that the President is above-board and need not repay the money.

And pay back the money is one of the political memes in South Africa of the leftist economic freedom fighters against Jacob Zuma. They're going to really have a field day. In fact, in a way what Zuma has done is by being extremely stubborn and not wanting to pay for these unnecessary state additions to his big mansion in a rural part of KwaZulu, he's really put himself into a position where for the rest of his term, till 2019, he will be really ridiculed as being a very, very corrupt president. And now we have the most proud event in recent times, since the end of Apartheid, really, the World Cup also standing as corrupt. And at the very, very same time, we have the former president Thabo Mbeki unveiling massive corruption across Africa being run through the banks and multinational corporations, what are called illicit financial flows.

So it's a very interesting period when let's hope that the society gets as fed up with not just the soccer officials but the rest of those in charge of economics who are corrupting the society.

PERIES: Now Patrick, you recently wrote that currently Africa is estimated to be losing more than $50 billion annually in what you call illicit financial flows. But these estimates often you said exclude some forms of financial flows that are by nature secret and cannot be properly estimated, such as proceeds from bribery and trafficking of drugs and people and firearms peddling. Now, $50 billion annually is a lot of money. It's sometimes the entire budget of a nation. So how can this kind of corruption be curtailed, and what can be done about it? Which is a big question, because I know that a lot of other countries are dealing with it as well.

BOND: Yes, indeed. And Thabo Mbeki, former president here, very controversial reign from the year 1999-2008 when he basically lost power in a palace coup. And he's come back through the African Union and the United Nations Economic Commission for Africa to run this commission over the last three years. And as you say, it's $50 billion a year minimum is what these officials now are saying is being lost. And it's largely through multinational transfer pricing, or basically illegally moving the cost of doing business to favor various tax havens.

And that for example was unveiled this week by the Alternative Information and Development Center, and the big mining union, the Association of Mineworkers and Construction Union led by Joseph Mathunjwa. And what they've alleged, and I think they've shown quite conclusively, is that Lonmin, the big company that was responsible for that massacre in 2012 outside Johannesburg and Marikana, was itself pulling about $35 million a year out to Bermuda in a fake marketing scheme. That's just one of the examples. De Beers is another, with around $3 billion over a seven-year period that my colleagues Khadija Sharif and Sarah Bracking have traced as mis-invoicing.

Now, the point being you could stop this if you nationalize these platinum mines in the case of Lonmin, the diamonds in the case of De Beers. You could do much tighter regulation of what goes in and out of the country. But the bigger question, because this is about $50 billion that can be roughly measured, the bigger question's all the money that is illicit. And the Thabo Mbeki commission was very vague about that critical distinction, what's licit, what's legal, what's illicit.

So for example, exchange control liberalization is something that Thabo Mbeki himself supported. We've lost huge amounts of money in South Africa by allowing the exchange controls to gradually over about 30 times in the last 20 years be liberalized. And there are many other areas, like tax benefits and the cut in corporate taxes when apartheid ended, they were 48 percent. Today, 28 percent for the main corporate primary tax rate. These are the things that make Mbeki very much a very conservative estimator of illicit financial flows.

How would these be stopped, it's fairly evident that none of the people in power, because these are the same people who were ready to bribe to get the World Cup to come to South Africa, are willing to put on exchange controls, to take control of national finances, to nationalize some of the key industries where this corruption is happening.

PERIES: And that's not going to happen anytime soon.

BOND: Until we see more social movements, and especially a new labor movement relationship with social movements called the United Front, which is anticipated to launch next month. There is at least, with Economic Freedom Fighters' party, a small party of about 6 percent support in the last election, plus the United Front, and some of the other unions beginning to say, well, this really must stop. And the pressure on Jacob Zuma and his mates will probably increase.

The problem, of course, Cyril Ramaphosa, the number two man in charge, was also a 10 percent holder in Lonmin and was very happy to see his profits increase by taking the money out of South Africa to Bermuda. And that's really the crux of the matter of class struggle over the future of South Africa's economy.

PERIES: Patrick Bond, thank you so much for joining us. And we look forward to future reports from you.

BOND: Thank you.

PERIES: And thank you for joining us on The Real News Network.


DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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