In South Africa, corruption is called state capture. A new report by Shadow World Investigations reveals how world bankers, lawyers, and accountants manipulate politicians. We speak with Andrew Feinstein, the report’s author.
This is a rush transcript and may contain errors. It will be updated.
Mark Steiner: Welcome to The Real News. I’m Mark Steiner, good to have you all with us. In South Africa, they call corruption in politics state capture, and it’s at the heart of the political struggle in South African politics now. Because it refers to the idea that government cannot act in the interest of the public if it’s fully in the pocket of powerful business people.
It was one of the main issues in the last May’s national elections in South Africa, and the reason that the ruling ANC, the African National Congress, that led the revolution against the apartheid state, received fewer votes than ever before, while maintaining its majority, a 62% majority. South African President Cyril Ramaphosa, promised to fight against state capture, but he himself was accused of doing the bidding of capital groups like the Gupta brothers.
Now, Cyril Ramaphosa has gone, went from a revolutionary leader of the mine workers, to himself becoming a wealthy owner and investor in mines. Former South African president Jacob Zuma has been under investigation for corruption. And last week, the court issued an arrest warrant against him, to force him to appear before the court, and answer allegations of corruption. Here is Pietermaritzburg High Court Judge [Vaya Palay 00:01:09].
Vaya Palay: in this instance, Counsel for Mr. Zuma was notified in advance, in the middle of January, that this document, or that sound evidence is required to justify his absence from court. And without that evidence, this court cannot do anything else but issue a warrant of arrest.
Mark Steiner: A new report, which was just published by Open Secrets and Shadow World Investigations, deals with the issue of state capture on South Africa, but from a very different angle. It’s entitled The Enablers, a report which focuses not on the direct relationship between capitalists and politicians, but rather on the people in between layers, the lawyers, the accountants, the bankers who enable this relationship to flourish.
One of the authors of that report is Andrew Feinstein, who is of Shadow World Investigations, is now joining us to discuss the report. He’s the Executive Director of Corruption Watch UK, and author of The Shadow World Inside The Global Arms Trade, which was the basis of a documentary film, that explores world’s largest and most corrupt arms deals that took place.
And previously, Andrew Feinstein worked with the ANC, under the previous South African presidents, Nelson Mandela and Thabo Mbeki, and Andrew, welcome. Good to have you back on The Real News.
Andrew Feinstei…: Thank you. Good to be here.
Mark Steiner: Let’s start with some background very quickly for our viewers. And let’s take a look at who the Gupta brothers are, and what went on with the former president, Jacob Zuma, who’s now being called before the commission, and what led us to this in the first place, what this means.
Andrew Feinstei…: So I think the situation is that the Gupta brothers are two brothers from India, previously based in Delhi, I think, where they ran a company called Sahara Computers. They got involved, in a peripheral way in South Africa, under the previous president, Thabo Mbeki, who, one of his ministers actually first introduced them into South Africa.
And they forged relationships across the AMC, most importantly, with then-Deputy President Jacob Zuma. Zuma toppled Mbeki from power. And when he moved into the Union Buildings, our presidential house in Pretoria, it was as though he took with him the Gupta brothers. And the process of what we described as state capture is really the process of giving state contracts to private interests, who are both unable to deliver on those contracts, but also pocket enormous amounts of money for those contracts.
So, an enormous number of very large government contracts, worth hundreds of millions of dollars, billions of South African Rand, were given to Gupta companies, many of them established as special purpose vehicles only for that contract. In the majority of cases, very little if anything was delivered, and hundreds of millions, billions of dollars, in fact, was siphoned out of the South African state, and into bank accounts around the world, most prominently in Dubai.
Mark Steiner: So let’s go to the report itself for a moment. I mean, I everybody agrees that capitalists have to be exposed for giving bribes, and controlling the political world, and controlling government. And politicians have to be exposed for betraying the trust of voters and promoting the interests of those capitalist powers, instead of the people themselves.
But why did you focus on the accountants, the bankers, the lawyers that hammered out these deals, and did it in secret? So talk about the focus of this, and why that happened, and the way you did it. And what’s the significance?
Andrew Feinstei…: So we have done a series of reports, on various of these instances, of what we refer to as state capture. But what was apparent to us, in every single case, is there was very prominent South African, and global financial institutions, auditing firms, law firms and management consultants, who made tens of millions of dollars, out of effectively facilitating these contracts that undermined the state. In addition to which, they played the crucial role in laundering the illicit proceeds from these contracts, that accrued to the Gupta brothers, but also to key South African politicians, who had awarded the Gupta brothers these contracts.
And without those enablers or facilitators, it would have been far more difficult for this phenomenon of state capture to have taken place, and especially to have taken place to the extent that it has. Because during the Zuma years, Jacob Zuma was president of South Africa for eight years, it is estimated that around one-third of the country’s GDP has been lost to state capture.
That could never have happened without the involvement of banks like HSBC, The Bank of Baroda, standard bank here in South Africa, and a bank called First National Bank, global law firms, consultancies, particularly Bain Consulting, and McKinseys, and a variety of others.
The audit firms that we’ve all heard about, KPMG, Deloitte, PWC, all of these entities, played an absolutely essential role at every part of the process of state capture. And while we are demanding that the South African judicial process deals with the politicians, who have been the recipients of the bribes paid by the Guptas, it is as important, not just for South Africa, to ensure that state capture comes to an end in this country, but for many other countries around the world, including the United States of America, which you could argue, under President Trump, is also experiencing state capture, to ensure that these companies to face prosecution, both in South Africa and in their home markets, wherever those might be.
Mark Steiner: So, [inaudible 00:07:39], so clearly, the Gupta brothers, the way you’re describing things, are, on the face of this, and you can… But from what you’ve just said, I mean this, this goes way deeper, much deeper than the Gupta brothers, much deeper in their relationship with Zuma. This has to do with the role, or the way you’re describing it, of international capital of the banks, of the finance industry, or the international arms industry, I’m sure, which you’ve covered intensely in your work before.
Andrew Feinstei…: Yeah.
Mark Steiner: So this is, this really it goes to the heart of, what we talked about even before you got on the air, which is, one of the reasons why, when the AMC finally took control of South Africa and ended the apartheid state, it was almost impossible to take on these capitalist powers who really were controlling everything. And what you are doing is uncovering what that really means. Am I right?
Andrew Feinstei…: Absolutely. So we have a situation where the apartheid state, too, wasn’t able to survive, and sadly, prosper, through the role of international banks, international lawyers, foreign governments, and a variety of foreign companies who broke the UN oil embargo against South Africa, and of course the UN arms embargo, against apartheid South Africa.
Now, the system of apartheid was not only morally corrupt, as a racist oligarchy, it was materially corrupt as well. About 50% of the budget was off the book, and was used for indecent, corrupt purposes. And that was facilitated and enabled by the private sector around the world. Sadly, what happened in South Africa was the corruption of the later apartheid period, alighted into our democratic era.
So, when I was an ANC member of Parliament in this country, I tried to investigate an arms deal, in which we bought $10 billion of weapons that we had absolutely no need of, and that we barely used today.
It’s estimated that around three to $400 million of bribes were paid on those deals. But the intermediaries, who enabled and facilitated those deals, like Barclays Bank, in the United Kingdom, like certain arms dealers based in Germany, and Belgium, and various other parts of the world. These were the same people who had enabled and facilitated the corruption of the apartheid era.
So had we dealt with the economic dimensions of apartheid during the Truth and Reconciliation Commission, it is quite likely that this massive arms deal, which was really the point at which the AMC and our nascent democracy lost its innocence, lost its moral compass, it is quite likely that that would not have happened. So that his vision is absolutely crucial.
And from the arms deal, which was the point at which the AMC made clear, that it was fine to plunder the state treasury, for personal and party political gain. From that point on, it was inevitable that we would reach the point we did under Jacob Zuma, where effectively, the state became a tool in the hands of private interests, the Gupta brothers, but also, all of these companies, who were making millions and millions of dollars, out of corrupting the South African state.
Mark Steiner: Which is why your report is so important, because it goes beyond the Gupta brothers into what really fueled all of this, and how it actually happened. And also explains, when you open your report, and as we conclude this, I mean, you talk about the human cost of this corruption.
You just mentioned, one-third of the GDP being the being, becoming part of this corruption, in lots of South Africa, means that, as you wrote about, millions of people are trapped in poverty. People die because of this. This is, this has a huge human and societal cost.
Andrew Feinstei…: Mark, the arms deal that I mentioned, the first point of the corruption of the democratic South African state, took place at a time when our then-President Thabo Mbeki, told the six million citizens of our country, who were living with HIV or AIDS, that we could not afford to buy the antiretroviral medication.
I remember him alive. As a consequence of which, according to a study undertaken at Harvard, over the following five years, 365,000 South Africans died avoidable deaths. Thirty-two thousand babies every year were born HIV positive, because we couldn’t afford mother to child transmission treatment, but we could afford to spend billions on jet fighters, that we can’t afford to fuel, let alone fly. And as we go into the state capture of the Guptas, every single dollar that is stolen from the Ciscos in this country, means that the two million people who require housing are less likely to get that housing.
That’s the millions of school children, who either don’t have a school, or have an inadequate school, and inadequate teaching. I’m likely to get a decent education, but those people who require public healthcare are unlikely to get it.
So quite literally, our own politicians, aided and abetted by these global banks, lawyers, auditing firms and management consultancies, are effectively stealing the livelihood out of the pockets of ordinary South Africans. So anybody who believes that corruption is a victimless crime need only look at South Africa.
The complicity of American and global companies in these crimes cannot be avoided. And so, what we are stating in this report, is that those companies too must face the legal consequences of their corrupt activities.
Mark Steiner: Well, Andrew Feinstein, I really look forward to seeing how this unfolds more, as this report comes out, and we see how South Africa wrestles with this, and the work that you do, and the work that other people are doing in the mine workers union, to equate a really true democratic South Africa, that comes to the fore.
And look forward to many more conversations, and just seeing where this takes South Africa and the world. Andrew, thanks so much for your work, and thank you for being with us today.
Andrew Feinstei…: Thank you so much for your time.
Mark Steiner: It’s been my pleasure. And I’m Mark Steiner here, for The Real News Network. Thank you all for joining us. Please let us know what you think. Take care.