A corruption amnesty would help South Africa escape the bonds of State Capture

The abridged version of this article has been written especially for publication in Daily Maverick. The full article can be accessed via the link here.

Introduction

Imagine a country with the following characteristics: Pervasive corruption, combined with the baleful influence of powerful leaders who retain power despite being implicated in malfeasance, has ensnared the citizenry in a web of shady transactions. Despite the authorities’ professed commitment to clean governance, for reasons of narrow yet rational self interest, many occupants of the corridors of power perceive that they need to obstruct all efforts that might expose their involvement in corrupt dealings.

Although the above scenario might well apply to our country’s halting attempts to transition out of the quagmire of the legacy of State Capture, it is acutely reminiscent of a historic situation, namely the toxic environment once prevalent in Hong Kong during the 1970s.

Things have since changed considerably in Hong Kong with the city presently scoring surprisingly well on renowned measures of clean government and boasting a Police Force that has been described as “Asia’s finest”.ⁱ Interestingly, one of the primary reasons for Hong Kong’s rapid transformation lies in its successful utilisation of an amnesty process that was made available to those who had in the past participated in corrupt activities, particularly the members of the Royal Police Force of Hong Kong.

That the extent and pervasiveness of State Capture have left South Africa facing the twin crises of institutional legitimacy and economic depletion, is by now, sadly, almost trite. It has been suggested that the grand-scale corruption that characterised the years of the Zuma presidency has “wiped out a third of South Africa’s R4.9-trillion gross domestic product”.ⁱⁱ This theft has occasioned obviously catastrophic consequences for the South African economy. There are considered estimates that, as result of the looting of the State coffers during 2010 to 2017, somewhere between 500,000 and 2.5 million jobs were not created; R500-billion to R1-trillion in tax revenue was foregone; and essential social programmes and services went undelivered.ⁱⁱⁱ

At the commencement of his administration, President Ramaphosa made the rooting-out of corruption and State Capture, and the recovery of stolen public monies, priorities of government. In recent public statements, the President has re-emphasised his administration’s commitment to fight corruption and State Capture. Thus, speaking at the Financial Times Africa Summit in London in October 2019, the President announced to a gathering of international investors that State Capture had possibly cost the country more than R500-billion.^iv

Nonetheless efforts to prosecute the corrupt and recover funds looted during the State Capture years have stuttered. One reason for the lack of progress is that those allegedly implicated in grand-scale corruption and State Capture are senior members of President Ramaphosa’s own political party, the ruling African National Congress. There is accordingly a widespread perception that the Ramaphosa administration is failing to uproot corruption because of a so-termed “fight back” by those allegedly implicated in corruption and who continue to wield the influence of high office, whether within government institutions or the structures of the ruling party itself.

The lack of progress has meant that, despite all talk of the time being that it is ripe for perpetrators to “start donning orange overalls”, and although there has been some limited successes in the past of relatively lower level corruption cases (for example, the prosecution of John Bock, the Northern Cape Premier), to date we are unaware of a single perpetrator associated with the era of State Capture having been jailed, or of there being any real recovery of stolen State funds. Thus, we suggest that a new approach, namely the offering of amnesty for corruption, is urgently required.

To provide the necessary context for our proposal of a structured corruption amnesty, we shall refer to the general theory of amnesty and its potential application to a range of different situations, the utility of previous amnesties in South Africa, and the efficacy of corruption amnesty in other jurisdictions (principally in Hong Kong). Having dealt with the general nature of corruption, we then consider the purview of the proposed corruption amnesty and have regard to whether full restoration of all proceeds and benefits obtained through participation in corrupt activities ought to be a fixed prerequisite of any grant of amnesty. We conclude by emphasising the need for innovative measures to be used if the legacy and prevalence of State corruption is to be overcome.

Amnesty processes

In theory, “amnesties presuppose a breach of law and provide immunity or protection from punishment. Historically, amnesties were invoked in relation of the laws of war and were reciprocally implemented by opposing sides in international armed conflicts”.^v Amnesty, however, does not merely involve legal considerations. Rather, an amnesty involves a complex combination of moral, political and legal considerations.^vi As Hannah Arendt pointed out Amnesty is for the sake of the community, signifying by the nullification of legal penalties and the removal of civil disabilities that the strife is terminated."^vii

Although amnesties are renowned for, and have typically been granted in, post-conflict circumstances, amnesty can be utilised effectively for a broad range of situations.^viii The common theoretical underpinning for the granting of amnesty is that it is “used as a mean to facilitate a shift from intractable situations in society…to more tractable ones”.^ix Thus understood, the granting of amnesty is a potential solution to any situation wherein a society needs to transform from an undesirable set of circumstances to a more desirable one. In this sense, it can be seen as a means to “establish a turning point between one state of affairs and another”.^x

Amnesties have been granted for a wide range of (previously unconventional) purposes, such as amnesties for firearm contraventions in countries such as South Africa, Kosovo and Iraq, but also for tax law violations in the United States and South Africa.^xi More importantly for present purposes, is that there are historical precedents where amnesties have been granted for corruption offences in countries where corruption had become pervasive and entrenched.

The problem of corruption

Corruption has proved to be a particularly pervasive and intractable phenomenon throughout the world, although more so in some countries than others. Part of the reason for the pervasiveness of corruption is its widespread and systemic nature. Once it becomes systemic, rather than being an individual problem (committed by a few, especially venal individuals), corruption becomes a social and cultural problem.^xii In a pervasively corrupt environment, the individual’s incentive to engage in corrupt activities is greatly increased. Further, where corruption is prevalent, society’s adverse perception of, and reaction to, corruption is attenuated due to the fact that corruption is ubiquitous and expected.^xiii

In such an environment, it becomes almost irrational for an individual not to act corruptly. Particularly because, in a systemically corrupt society (where many of one’s peers, and the officials who enforce the law, are also likely to be corrupt), the probability of being caught for corruption is low, whereas the potential gain may be high.^xiv Additionally, in some instances the pressure exerted on individual government officials by their superiors and peers may make it nearly impossible to resist corrupt activity.^xv Thus, “[a]n otherwise honest citizen, investor or bidder may decide to act in a corrupt manner because he or she thinks that others who compete with him or her for services, licences or tenders do the same”.^xvi In this scenario corruption becomes engrained into the very political fabric of society.^xvii

Once a culture of corruption is prevalent, it becomes almost impossible to achieve the eradication of corruption by conventional methods, such as the enactment of anti-corruption laws and the establishment of institutions that investigate and prosecute instances of corrupt activity. A significant reason for this is that the very government officials who are charged with the mandate of eradicating corruption are often themselves corrupt – or the individuals who are corrupt have such high status, power and influence – such that they seek to obstruct any attempt by society to eradicate corruption, both for the fear of being caught, and for the fear of losing out.^xviii

Put differently — those in high office may feel constrained to subvert anti-corruption measures precisely because they have too much to lose by being implicated. It is for this reason that a number of countries have either debated, or have commenced the process of implementing, the adoption of corruption amnesty laws for corruption offences committed by both citizens and government officials.

There is a compelling argument that conventional means to combat corruption are effective in societies that have relatively clean government, but are ineffective where corruption is at endemic levels.^xix Conventional anti-corruption methods simply cannot counter widespread corruption when they are undermined and obstructed by many of the very individuals that are mandated to give effect to them.

Moreover, where corruption is systemic, it is unlikely that institutions charged with prosecuting corrupt activities would have the capacity to investigate and prosecute the sheer number of corrupt acts and corrupt individuals that exist. What is needed, therefore, is a means to eradicate the seemingly impenetrable resistance and inertia that conventional anti-corruption measures face, as well as to decrease the overwhelming number of corrupt individuals and corrupt acts. Ultimately, what is required is a means by which to establish a change in social and political culture.^xx

Past amnesties in South Africa

South Africa has extensive past experience with amnesty processes. At the birth of South Africa’s democratic project, the TRC amnesty process, despite legitimate contestations as to its legacy, assisted in bringing about a political transition from the oppression of apartheid to a democratic dispensation.

More recently, an amnesty was successfully used as a means to regularise the financial affairs of South Africans who had contravened various exchange control laws. Prior to the implementation of the exchange control amnesty, numerous South Africans held assets offshore and were reticent about reporting or repatriating these assets.

Their reluctance to do so centred on an apprehension that a disclosure of their proscribed offshore assets would result in their criminal prosecution. There were, however, strong indications that those who had contravened exchange control regulations wished to regularise their affairs and “come clean”. Under the initiative of Trevor Manuel, the then Finance Minister, the State enacted The Exchange Control Amnesty and Amendment of Taxation Laws Act 12 of 2003 (“the Tax Amnesty Act”), which came into effect on 31 May 2003. Its objectives were,

“(a) to enable violators of Exchange Control Regulations and certain tax acts to regularise their affairs in respect of foreign assets attributable to those violations;

(b) to ensure maximum disclosure of foreign assets and to facilitate repatriation thereof to the Republic; and

(c) to extend the tax base by disclosing previously unreported foreign assets.”^xxi

Full disclosure, done through the Act’s prescribed application process,^xxii allowed a swathe of relatively wealthy South Africans to regularise their exchange control and income tax affairs at minimal cost^xxiii. This was done during a limited window period, commencing 1 June 2003 and ending 29 February 2004, during which the authorities processed the amnesty applications^xxiv.

In terms of the Tax Amnesty Act, an independent body — the amnesty unit — evaluated all applications for amnesty and either granted or denied approval in relation to the amnesty applications. The exchange control amnesty was widely regarded as overwhelmingly successful; it “attracted approximately 43,000 applications, with some prominent South Africans going public with their amnesty disclosures in a show of national pride and enthusiasm”.^xxv

In February 2017, the then Finance Minister Pravin Gordhan, when presenting his 2017 Budget Speech, confirmed that, as at 22 February 2017, SARS had received disclosures under the Special Voluntary Disclosure Programme of R3.8-billion in foreign assets, with an anticipated revenue yield of approximately R600-million.^xxvi The benefits of the exchange control amnesty were thus incontrovertible and indicate that, apart from other any other considerations, an amnesty for corrupt activities committed during the State Capture era could have enormous potential fiscal benefits.

Amnesty for corruption – the Hong Kong experience

The most renowned example of a successful corruption amnesty is the amnesty process that was implemented in Hong Kong in 1977. In the early 1970s, Hong Kong was regarded as one of the most corrupt societies in the world, overrun by corrupt officials from a wide array of public services, especially within the Royal Police Force of Hong Kong.^xxvii One of the principal means by which Hong Kong sought to combat its rampant corruption was to establish an independent body, namely the Independent Commission Against Corruption (“the ICAC”).^xxviii

The ICAC consisted of a “three-pronged” structure, with three separate units tasked with (i) investigation and prosecution; (ii) prevention; and (iii) education and publicity. The first “prong” was aimed at the investigation and prosecution of corruption, and was conducted by the “Operations Department” within the ICAC. The second prong, the “Corruption Prevention Department”, enabled ICAC to evaluate government departments and other public bodies by analysing their practices and procedures in order to establish whether each body’s practices were conducive to corruption, and, if so, to recommend means by which they could prevent, or ameliorate the risk of, corruption. The third and final prong of the ICAC was the “Community Relations Department”, which had the role of “(i) educating the public against the evils of corruption; and (ii) enlisting and fostering public support in combatting corruption”.^xxix

Armed with significant legal power and resources, the ICAC embarked on a rampage of investigations and prosecutions into instances of corruption in Hong Kong, particularly aimed at the Royal Police Force, as it was one of the most corrupt government bodies.^xxx The ICAC’s relentless investigations and prosecutions of the Royal Police Force ultimately resulted in untenable tension within Hong Kong, however, which culminated in a series of mass rallies and an astonishing protest during which members of the police force carried out an assault on the ICAC’s headquarters in order to threaten its officers and halt its investigations.^xxxi

The situation became so dire that Hong Kong was reportedly on the brink of a complete uprising. Further, the ICAC was effectively prevented from properly performing its role as Hong Kong’s primary anti-corruption agent.^xxxii Hong Kong thus found itself in an ungovernable quagmire, which required extraordinary measures to alleviate. As a solution to Hong Kong’s circumstances, the then Governor of Hong Kong granted amnesty to any individuals that had committed corruption offences prior to 1977, in an effort to mitigate the tension and to allow Hong Kong to move forward.^xxxiii

Although many critics at the time regarded the amnesty granted in Hong Kong as subversive of each of Hong Kong’s established anti-corruption initiatives, the public’s confidence and the rule of law, the outcome of the amnesty was overwhelmingly positive.^xxxiv The ICAC continued its mandate and the Hong Kong Police Force was rapidly reinvigorated: it employed new officers, changed its standards and culture, and, in many instances, even provided the ICAC with assistance in respect of its investigations.^xxxv In due course, the police force built up a stellar reputation, and, as noted above, even became known as “Asia’s finest”, while the ICAC made significant strides in its mandate to eradicate corruption in Hong Kong.^xxxvi Previously, Hong Kong was regarded as an epicentre of corruption, as “one of the most corrupt cities in the world”,^xxxvii but is now ranked as one of the least corrupt in the world in terms of Transparency International’s Corruption Perceptions Index.^xxxviii

The 1977 Hong Kong amnesty process demonstrates the potential game-changing nature of granting amnesty in circumstances where conventional anti-corruption methods have proven ineffective. Indeed, the granting of amnesty enabled Hong Kong to undergo a profound change in its social and political culture, on to a trajectory towards a permanent reduction of corruption.^xxxix

Aspects of the proposed amnesty

We emphasise that a proposed amnesty for corruption offences would not, and must not, amount to a get-out-of-jail-without-consequences card. A fixed prerequisite in the process would require that applications for amnesty be conditional on full disclosure of the relevant corrupt activities and the parties involved. Consequently, those who admit to corruption, but are later revealed not to have made (full) disclosure, would either not be granted amnesty or have their applications revoked. The records garnered through the amnesty process would also need to be made available to prosecution authorities without precondition.

To ensure its legitimacy and public support, the introduction of a corruption amnesty process is likely to require extensive engagement with the citizens of South Africa, together with public interest associations, to agree on the conditions required to be fulfilled by an applicant for amnesty, the extent of the privacy for the amnesty process, and the duration for which the amnesty is available to the public.

We do, however, suggest, that the amnesty application process be private and not public, made to an independent body similarly to the process and body established in terms of the Tax Amnesty Act. In our view, a private amnesty process will likely be more conducive to incentivising individuals to apply for amnesty and to make full disclosure of their corrupt acts than would a public amnesty process. A private amnesty process is not a pre-requisite for the ultimate success of the amnesty process, however. A crucial issue such as this, which we anticipate will be controversial, will require both political and public support, and, thus, must ultimately be left to public debate and parliamentary determination.

As a penalty for corrupt acts, a wide range of options are available, from a complete disgorgement of profits made through corrupt acts, to the use of alternative financial sanctions (such as penalties in the form of significant fines). It can be anticipated that the issue of penalties for applicants of the proposed amnesty process will likely be the most controversial aspect of a corruption amnesty in South Africa. It is for this reason that public debate on the issue of penalties, especially at a parliamentary level, will be crucial.

The question of penalties must, however, be considered with caution. For any penalties imposed must neither be too moderate nor too severe, as neither will yield optimal results from the amnesty process.

Thus, if an errant company that applies for corruption amnesty is met with an unsubstantial fine, the moral and political justification for the amnesty falls into question; and so too if the same company is met with too severe a penalty (for example a complete disgorgement of all proceeds from the corrupt act, such as the gross price of a contact procured by corrupt means), then such a sanction would inevitably lead to the financial ruin of the company, would likely be detrimental to the economy at large, and act as a significant disincentive to applicants who would otherwise opt to participate in the amnesty process.

Without being prescriptive, in our view, therefore, it may be best that a range of penalties for corrupt acts be available, depending on the type of corrupt act engaged in, whether the person involved is the “giver” or “receiver”, and the benefits (if any) that were derived by the applicant.

For example, for a company that obtained a state contract in terms of a tender procedure because it offered a bribe to state officials, either a disgorgement of profits, or a significant fine commensurate with the scale of the ill-gotten gains, may be appropriate. And for a state official who received the bribe, a fine of a similar kind may be appropriate, given that he or she is unlikely to have retained the full amount of the benefit received, which would make a complete disgorgement of the bribe impossible. Thus, we suggest that those charged with implementing the amnesty process would need to have the flexibility to impose an appropriate penalty from a range of financial sanctions, which may include anything from a complete disgorgement of profits to alternative penalties, such as hefty fines of the kind envisaged above. Given the controversial nature of the issue of penalties, however, the precise parameters and types of penalties available will be best left for public debate and consideration.

Concluding remarks

For many South Africans, the granting of amnesty will no doubt be a tough pill to swallow. The Hong Kong experience is, once again, instructive. In the aftermath of the amnesty process in Hong Kong, many concerned citizens argued and actively fought against the amnesty process. Once amnesty had been granted, however, those that came to accept it realised that “[i]t was not going to be possible to bring all those who had behaved improperly in the past to justice, but as least we could strive for the future. We just had to accept the fact that no society is perfect.” ^xl

We contend that the time has come for South Africans to accept that, although, in an ideal society, all those involved in corrupt activities and the looting of the state coffers ought to be tried, convicted and incarcerated for their actions, in the current state of affairs, it simply is not possible to bring all individuals involved in corruption to justice. However, if South Africa embarks on an amnesty process that permits government officials, and the general population, to start afresh, free from the web of corruption that is the legacy of State Capture, the country could commit its focus towards reinvigorating the South African economy, for the benefit of society as a whole.

Critics of our proposal might argue that the current commission of inquiry into State Capture, chaired by Deputy Chief Justice Raymond Zondo (“the Zondo commission”) ought not to be interrupted in fulfilling its mandate, and that the amnesty process would merely be a duplication of similar processes currently underway via the Zondo Commission. In our view, however, the Zondo commission and the amnesty process need not be viewed as antagonistic or mutually exclusive. Rather, we argue that the Zondo commission and the amnesty process can be complementary to one another. Indeed, we suggest that the Zondo commission and the amnesty process could together achieve an outcome (greater disclosure, and a larger number of confessions, including restitution) that neither the commission nor the amnesty process could have achieved on their own

Ridding South Africa of the deep-rooted corruption of State Capture will require an innovative and multifaceted approach. We suggest that a structured corruption amnesty could serve as one necessary aspect of such an approach. We have written this piece in the hope that South Africa will consider adopting an amnesty procedure as one of the innovative measures that will ultimately enable the country to escape from the surly bonds of corruption that plague what might become an otherwise promising economy. DM

Robert Appelbaum†, BA LLB (University of the Witwatersrand) is an Attorney of the High Court of South Africa. Partner at Webber Wentzel

Gavin Rome SC‡, BA LLB (University of the Witwatersrand), LLB (University of Windsor, Ontario, Canada). Advocate and Senior Counsel of the High Court of South Africa. Member of Group One Advocates and the Johannesburg Bar.

Sechaba Mohapi§, LLB (North West University). Advocate of the High Court of South Africa. Member of Group One Advocates and the Johannesburg Bar.

Ryan Hopkins**, Bcom (with distinction in economics) LLB (magna cum laude) (University of Cape Town).

This contribution represents the collaborative effort of its authors. The views and opinions made in it do not represent the opinions of Webber Wentzel nor Group One or the Johannesburg Bar.