Zondo must also investigate the corruption enablers – the bankers, accountants and lawyers

Hardly a day goes by without another breaking story of rampant corruption somewhere in the country. South Africans would be forgiven for wanting to throw in the towel in the ongoing battle against this scourge.

But surrender should never be an option because there’s just too much at stake. On International Anti-Corruption Day, observed annually on 9 December, we are again reminded of why it’s so important to keep on fighting corruption in all its different forms. Commemorated in recognition of the United Nations (UN) Convention against Corruption, which was signed in Mexico in 2003, this day provides an opportunity for anti-corruption advocates in the public and private sector to join forces against corruption and fraud in societies and communities.

We’ve all seen how devastating the immediate and long-term consequences of corruption can be. In his message for 2019’s International Anti-Corruption Day, UN Secretary-General António Guterres highlighted this when he said “people are right to be angry. Corruption threatens the well-being of our societies, the future of our children and the health of our planet. It must be fought by all, for all.”

Open Secrets and the London-based Shadow World Investigations compiled their research on corruption and fraud in a report that was submitted to the Zondo Commission of Inquiry into Allegations of State Capture earlier in 2020.

Titled “The Enablers: The bankers, accountants and lawyers that cashed in on State Capture”, the report aims “to reveal the structural problems that allow these professionals to enable grand corruption with impunity” and to provide “evidence to the [Zondo] commission of specific instances of complicity of various private actors in the Gupta racketeering enterprise”. 

It states that the money laundered annually in the global financial system amounts to $2-trillion (5% of global GDP), while 98% of large corporations on the UK and US stock exchanges are audited by the so-called big four accounting firms.

Some of the staggering South African figures included in this report are the highly suspicious escalation in cost of R16-billion on the Transnet 1064 locomotive deal  ̶  arguably designed to facilitate the payment of kickbacks — the R20-billion irregular expenditure at Eskom between 2012 and 2018, and the R600-million irregular pre-payment by Eskom to the Gupta family’s Tegeta company to enable the purchase of the Optimum Coal Mine.

It further indicates a R5-trillion loss to the South African economy over five years through State Capture, a R100-billion loss in tax revenue following the attack on SARS, and how R288-million (82%) of public funds spent on the Estina dairy project (meant for black farmers) was channelled to Gupta-controlled companies in Dubai and South Africa. Between 2015 and 2016, R106-million was paid into the project’s FNB account by the Free State government, of which R85-million was transferred directly to Gateway Limited in Dubai.

This all happened while 50% of South Africans live in poverty – in other words having less than R1,227 a month to live on.

Two other ground-breaking research papers on corporate tax avoidance in South Africa have found that the authorities have grossly underestimated the scale of unlawful profit shifting by some of the largest multinationals out of the country to lower tax jurisdictions. One of these studies estimates that the “tax loss to South Africa is valued at R7-billion per year, or nearly 4% of total corporate tax receipts”. It also points out that “it is the top 10% of firms that account for 98% of the estimated volume of profit shifting”.

The Open Secrets and Shadow World Investigations Report accentuates the devastating human cost of corruption. In poor countries, it says, people are killed by it and millions more are trapped in poverty.

We shouldn’t underestimate the integral role banks play in enabling transactions like the ones mentioned earlier. Many banks simply ignore laws and regulations which require them to do a range of checks to detect the proceeds of the corruption. Consequently, they are leaving the door wide open for corrupt people to launder their funds.

Sometimes this conduct is a question of gross negligence, but evidence all too often points to intentional complicity. There was, according to this report, a failure from these private enablers to fulfil legal or professional duties, and without full interrogation, these enablers would leave the work of the Zondo Commission incomplete.

The result will be that ongoing efforts to fully understand State Capture will be undermined, as well as rebuilding institutions and systems in ways that guard against similar abuse in the future.

Often these enablers view themselves as innocent with regard to State Capture, giving all sorts of explanations (such as that they were victims of political pressure — although not supported by evidence), presenting themselves as “hapless victims of injustice”.

This report further argues that “such a narrative, while convenient for these corporations and their executives, does not provide a full picture of their role in enabling criminal activity”.

This must be taken seriously and this narrative, with certain existing laws allowing complicit corrupt behaviour, will have to change. People cannot be allowed to prioritise profit over professional duties and the law.

The role of these enablers has become systemic and their absence from much of the scrutiny of State Capture so far is indicative of a global trend that minimises the significant roles that bankers, accountants and lawyers play in economic crimes.

These private actors continue to act with impunity because regulatory frameworks and institutions of accountability as well as the criminal justice system have been rendered ineffective.

Hence, the private sector, and more specifically their CEOs, must be held accountable if it can be proved that they failed to stop suspicious transactions. They should be summoned to the Zondo Commission, and if needed, prosecutions and civil litigation should be instituted against them.

The money lost due to corruption and fraud must be paid back and (for example) put into a fund to assist and develop so many South Africans who continue to languish in poor socioeconomic circumstances.

As we observe International Anti-Corruption Day, let’s also spare a thought for our many fellow citizens who remain trapped in poverty because of corruption. We should also remind ourselves of the hard work that still needs to be done to root out this scourge. What we could also do is to follow the lead of our courageous investigative journalists and activists who have been setting the example in their pursuit of transparency and accountability. DM