When the busi­ness of im­punity meets the im­punity of busi­ness

The Africa Report - - POLITICS - Pa­trick Smith Edi­tor-in-chief, The Africa Re­port

The apolo­gias from multi­na­tion­als em­broiled in South Africa’s ever-ex­pand­ing Gup­ta­gate scan­dal have a haunt­ing fa­mil­iar­ity. They mimic an ear­lier non-apol­ogy: the sub­mis­sion by former pres­i­dent F. W. de Klerk on be­half of the Na­tional Party to the Truth and Rec­on­cil­i­a­tion Com­mis­sion set up af­ter South Africa’s first free elec­tions in 1994. In prac­tised lawyer-speak, De Klerk as­serted that “mis­takes were made” dur­ing 50 years of apartheid, but that its lead­ers were “good and hon­ourable men”. Un­for­tu­nately, said De Klerk, while try­ing to counter the “men­ace of in­ter­na­tional com­mu­nism” a “con­text” was cre­ated in which “abuses by se­cu­rity per­son­nel were not suf­fi­ciently dis­cour­aged”. Sur­vey­ing the hu­man costs of Na­tional Party rule – more than 21,000 killed in po­lit­i­cal vi­o­lence – the com­mis­sion re­jected De Klerk’s for­mu­la­tion and con­cluded that apartheid was in­deed a crime against hu­man­ity. In Lon­don in Septem­ber, De Klerk was asked for his view on the in­volve­ment of Bell Pot­tinger public re­la­tions com­pany, KPMG au­di­tors and Mckin­sey con­sul­tants in schemes that looted the South African state trea­sury and un­der­mined hon­est of­fi­cials. Ever the lawyer, De Klerk replied: “It is too early to tell.” KPMG and Mckin­sey played apol­ogy poker. Start­ing with a low bid, they opened with a gen­eral state­ment of re­gret to no one in par­tic­u­lar, cou­pled with a few early re­tire­ments, a sus­pen­sion here, a sack­ing there. When peo­ple such as ex-fi­nance min­is­ter Pravin Gord­han started talk­ing about le­gal ac­tion, the par­ent com­pa­nies paid at­ten­tion. Part­ners from New York and Lon­don flew to Johannesburg, con­vey­ing per­sonal re­grets to Gord­han and other top of­fi­cials.

Threats to th­ese com­pa­nies are mul­ti­ply­ing. There are di­rect fi­nan­cial ones. How much did Mckin­sey’s and KPMG’S ac­tions cost the trea­sury? State util­ity Eskom is ask­ing Mckin­sey to re­fund the R1bn ($73m) it earned from a con­tract in part­ner­ship with Tril­lian, owned by a Gupta as­so­ciate, Salim Essa. The sta­tus of

that con­tract, judged il­le­gal by sev­eral in­de­pen­dent lawyers, is be­ing tested in court. KPMG, ac­cord­ing to one of South Africa’s top econ­o­mists, Iraj Abe­dian, could be held li­able for the loss of “tens of bil­lions” of dol­lars caused by its dam­age to in­sti­tu­tions and in­vestor con­fi­dence. De­spite their apolo­gias, both com­pa­nies refuse to ad­mit wrong­do­ing or le­gal li­a­bil­ity, and South Africans’ anger to­wards them grows. KPMG In­ter­na­tional has been slow to launch an in­ter­nal in­ves­ti­ga­tion into why its lo­cal com­pany pro­duced a po­lit­i­cally charged cri­tique, now with­drawn, of an anti-tax eva­sion unit that was trou­bling the Gupta broth­ers and Pres­i­dent Ja­cob Zuma’s son Duduzane. Gup­ta­gate could presage stronger de­mands for cor­po­rate and po­lit­i­cal ac­count­abil­ity. It ex­poses more clearly the me­chan­ics of grand cor­rup­tion. Suc­ces­sive me­dia re­ports con­jure an image of preda­tor politi­cians drag­ging re­luc­tant multi­na­tional com­pa­nies into a web of il­le­gal and mis­priced con­tracts from which mega-prof­its are laun­dered through tax havens. But Gup­ta­gate points to a dif­fer­ent dy­namic. Here, the com­pany is the preda­tor seek­ing out com­pli­ant and greedy politi­cians with whom to do busi­ness. What has de­vel­oped in South Africa is a high-ten­sion bat­tle be­tween in­de­pen­dent reg­u­la­tors and courts on one hand tak­ing on a crim­i­nal busi­ness-po­lit­i­cal con­do­minium on the other.

But be­fore any­one gets too smug about Mckin­sey’s and KPMG’S dis­com­fi­ture, the re­vival of 783 charges against Pres­i­dent Zuma re­minds us of the ori­gins of the cur­rent wave of grand cor­rup­tion. In the mid-1990s, West­ern gov­ern­ments such as Bri­tain, France, Swe­den and the US – res­o­lutely back­ing their na­tional arms man­u­fac­tur­ers – sold South Africa’s new gov­ern­ment some $6bn of weaponry. Much of it was ir­rel­e­vant to the coun­try’s strate­gic needs, and al­most all of it was at in­flated prices, pumped up by third-party com­mis­sion agents. Politi­cians such as Zuma are ac­cused of cut­ting them­selves into the deal; some di­verted cash into the cof­fers of the ANC to fund elec­tion cam­paigns. In fact, it was sim­i­lar to cor­rup­tion un­der apartheid rule. Then, politi­cians took their cut from the min­ing con­glom­er­ates and laun­dered their prof­its over­seas. The main dif­fer­ence to­day is that jour­nal­ists can re­port it with­out hav­ing se­cu­rity re­stric­tions slapped on them. Mis­takes were made, in­deed.

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