An ANC losing control of its own empowerment industry

MANY analysts and commentators make the point that corruption is endemic in the ANC and that its consequences will eventually make South Africa a failed state.

But a different scenario is unfolding and the elites in Luthuli House are keenly aware of it. The ANC is losing control of large parts of the empowerment industry to which it was historically linked. This is placing enormous financial pressure on the party and posing a growing political threat to the state. It also explains why Russian oligarchs have become such a vital alternative source of income for Luthuli House.

The most visible disruption of the corruption value chain was the enactment of the Political Party Funding Act, which was assented to by President Cyril Ramaphosa in January 2019. The aim of the act is to promote transparency and accountability as a form of oversight in the relationship between political parties and the private sector. 

Until the end of 2018, tenderpreneurs and empowerment partners wore out the chairs in Luthuli House. The relationship between cadres in the private sector and political patronage in Luthuli House was opportunistic, but was based on an interdependence that gave the government a firm grip on the political and/or potential criminal behaviour within the empowerment sector.

I once attended Progressive Business Forum (PBF) gala nights between patrons and cadres, and the roaring merriment fuelled by expensive whisky and the accompanying back-patting from the comrades was nerve-racking.

The PBF was actually just the ANC's way of robbing state coffers on the back of opportunistic agreements that paid dividends for Luthuli House's treasury. If ever there was blood money, it was those deals.

The legislation, which came into operation in April 2021, uprooted the institutional connection between Luthuli House and the empowerment sector, left the ANC's treasury without its primary source of income and made cadres susceptible to new relationships with mafia-like families and criminals.

The gruesome normality of Paul Mashatile's strongman meetings in Melrose Arch with, among others, the so-called Alex Mafia, which News24 has been reporting on in painstaking detail for the past month or two, reached hurricane strength during the PBF's gala nights. The rumours of donations and endowments that seeped into the quicksand of struggle bookkeeping during Mashatile's tenure as treasurer-general in Luthuli House are blowing through the Union Buildings like an uneasy south-easterly wind.

Mashatile and his colleague Zweli Mkhize, who also once managed the liberation party's purse, should be relieved that the public discussion about the dense corruption network within state enterprises diverts the spotlight from the ANC's accounting system.

Nerve-racking capital shortage

A good example of the rift between the empowerment industry and the ANC is the Karpowership controversy.

A messy public battle is raging between cadres and tenderpreneurs for mega-contracts worth billions in the deal between the Turkish company Karadeniz and a South African empowerment partnership, Karpowership Holdings. The empowerment partners will ultimately have a 51% shareholding in the agreement.

The amount in question is a modest R190-million, but since financial institutions no longer feel up to the political risks and possible reputational damage of tenderpreneurs and empowerment contracts, this small sum is an avoidable risk. So much so that the Turkish company has already offered to make the amount available as a loan just in an attempt to get the agreement on minister Gwede Mantashe's table.

Five years ago, there would have been no shortage of funders for the project, but the fact that the deal will go through the mill of public accountability leads to a nerve-racking scarcity of capital in the empowerment value chain.

Since January 2019, financial institutions have become wary of projects in which the risk largely shifts to the financiers and/or the partners of the tenderpreneurs. Without the ability of the ANC and the government to exert less-than-subtle pressure, it becomes increasingly difficult to fund empowerment. And with the downward pressure on economic growth, the opportunities for medium-risk entrepreneurship are also increasingly rare.

The ANC once had a firm grip on empowerment agreements, and without the approval of Luthuli House and provincial executive committees it was almost impossible to reach the front of the queue for government contracts.

Government and the ANC put enormous pressure on “white monopoly capital" and the big financial institutions to finance these agreements. For the former, the agreements sometimes involved financial benefits, but the real value was in the assumed political capital.

Over time, enabling legislation made it impossible to maintain a position in the dense network of value chains in the formal economy without a politically connected partner.

Something else that's developing is a cynical mistrust in the ANC's ability to protect capital owners from empowerment partners.

The perception that the ANC and the government can no longer really exercise oversight and control over cadres and tenderpreneurs is decisive in the risk profiles of viability studies. The political patronage of the past has given way to private bodyguards with deep roots in organised crime.

The net effect is that tenderpreneurs have to survive independent of the ANC. This makes empowerment a minefield highly susceptible to a mafia-like dispute-resolution culture.

The clearest manifestation of this cold ecology outside the atmosphere of the ANC and the government's political stranglehold on financial institutions is the bacterial entrenchment of warlords and organised crime in the logistics value chain of state enterprises such as Eskom and Transnet.

Jacob Zuma and the false waltz

The best example of cadres, tenderpreneurs and empowerment operators challenging and undermining the state was the violence and looting of July 2021.

The periodic burning of trucks at Mooi Rivier Toll Plaza in KwaZulu-Natal in the past few years has everything to do with tenderpreneurs who, without the patronage of the ANC, have to maintain a place in the logistical value chain of road transport.

In part, this violence is a pattern that was created due to the informalisation of the coal supply chain to Eskom's power stations in Mpumalanga. But it was also due to the dynamics of Jacob Zuma's arrest in July 2021, which led to large-scale looting of the economy in parts of KZN and Gauteng.

Ramaphosa is keenly aware that the ANC has lost control of the increasingly criminalised empowerment industry. The likelihood of social unrest is the ANC's most pertinent political fear.

The false waltz with which the president and justice minister Ronald Lamola managed the Constitutional Court's ruling that Zuma was not entitled to parole was largely an attempt by government to compensate for its inability to control the cadres and tenderpreneurs in the criminalised value chain of KZN's formal economy.

In the process, the corrupt Zuma put Ramaphosa in a situation where he had no choice but to treat South Africans like idiots.

The remission of Zuma's prison sentence, which coincidentally corresponds with Ramaphosa's drive to oblige his political predecessor, is probably the most clumsily managed process imaginable, but the ANC and the government had to act in a way that would not release a spark in the powder keg of KZN's criminal value chains.

Murder of a law officer

One of the better examples of the ANC and the government becoming outsiders in the criminalisation of the state and the economy is the murder on August 6 of Lt-Col Frans Mathipa of the Hawks, presumably by a military sniper.

Mathipa was attached to the National Prosecuting Authority's crimes against the state division. Hennie van Vuuren of Open Secrets, a non-profit organisation with a mission to promote accountability for economic crimes, asked in Daily Maverick if this was an operation by the special forces of the South African National Defence Force (SANDF), formerly known as the Recces.

The law says special forces may only work abroad, or within South Africa only as part of a national state of emergency and with the permission of the president. However, parliament still has to approve the activities.

One of the vehicles of the special forces, registered in the name of a front company, was picked up by cameras at the Mall of Africa on the same day that Abdella Hussein Abadiga and his bodyguard, Kadir Jemal Abotese, were kidnapped. The same vehicle also appeared at the naval dockyard in Simon's Town during the unloading of the Lady R's cargo.

Nine months later, there is still no trace of these two men, who, among other things, are suspected by US intelligence of being affiliated with the Islamic State of Iraq and Syria (Isis). Their activities are also linked to Isis in Mozambique, where SANDF special forces have a specific involvement.

In court documents, Abadiga's brother claims there is overwhelming evidence that the SANDF had something to do with the kidnapping. He handed over the evidence to the Hawks, and as part of the investigation Mathipa obtained the telephone records of soldiers seen on CCTV cameras at the Mall of Africa.

All indications are that Mathipa told the SANDF he had enough evidence to arrest the soldiers who were at the mall on that day regarding the kidnapping. The snipers drove a luxury German car and Mathipa was executed with great precision.

Van Vuuren and Open Secrets are careful not to causally link these events, but in the context of the president insisting that the findings of former judge Phineas Mojapelo's Lady R investigation not be made public, complex questions arise about what Ramaphosa knows.

Whatever the reality is regarding Lady R and the execution of Mathipa, as well as the Russian debacle of the past year, his presidency is taking on a sinister undertone.

The ANC has lost control over criminals in its inner circle. Organised crime has gained a hold on the cadres and tenderpreneurs of the ANC and no longer needs Luthuli House to do what it does.

♦ VWB ♦

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