DCoG Deputy Minister Andries Nel

Speech by Deputy Minister Andries Nel State Capture and its Aftermath Conference

Address by Mr Andries Nel, MP,

Deputy Minister for Cooperative Governance & Traditional Affairs at

a Conference on: “State Capture and its Aftermath – Building Responsiveness through State Reform” hosted by the Public Affairs Research Institute on the University of Johannesburg

23 October 2018

 

We thank the Public Affairs Research Institute (PARI) for the valuable work it continues to do, especially in promoting incisive, evidence-based discourse that contributes to our long, complex and arduous project of building democratic developmental government and for inviting us to be part of this important and timeous conference on state capture.

 

In comes at time when as a nation we are heeding the injunction by our former Poet Laureate, the late Prof Keorapetse Kgositsile, in his poem Wounded Dreams:

 

“Together we can and must

rehabilitate our wounded dreams

to reclaim and nourish the song

of the quality of our vibrant being

as evidence of how it is to be alive

past any need for a single lie.”

 

When President Ramaphosa delivered the State of the Nation Address in February this year, he spoke of a new era of hope for the country, and pledged to tackle corruption, unemployment and inequality.

 

The President declared in no uncertain terms that: “We are determined to build a society defined by decency and integrity that does not tolerate the plunder of public resources, nor the theft by corporate criminals of the hard-earned savings of ordinary people.”

 

I have been asked to speak on, “whether the concept of ‘capture’ as has been understood in the South African context is useful in depicting what has happened at local government level and whether it assists in devising solutions to local government challenges, be they about recruitment, procurement, and so on.”

 

This question is very relevant. However, it begs the question: How has ‘capture’ been understood in the South African context? And specifically whether it can be differentiated from other forms of corruption and attempts to exert influence over state decision makers.

 

Without negating the need for conceptual rigor, I want to avoid a scholastic approach of splitting definitions and arguing about how many non-angelic captors can balance on the pinhead of a building society.

 

The question must be approached in relation to the role of a democratic developmental state in the building of a national democratic society, the society our Constitution enjoins us to build.

 

The Constitution envisages a united, non-racial, non-sexist, democratic and prosperous society in which the potential of each person is freed; a country that belongs to all who live in it, united in its diversity in which the divisions of the past are healed.

 

The revolutionary content of these words and the effort that their realisation will require is often lost in the course of their ritualistic incantation.

 

Uniting South Africa is necessary for the process of reducing poverty and inequality; unity in turn depends on the eradication of poverty and the reduction of inequality.

 

The National Development Plan argues that long-term growth and investment requires a shared vision, trust and cooperation between business, labour and government.

 

Presently trust levels are low.

 

A Citizen Survey opinion poll earlier this year found that 32 percent of respondents had no trust in their mayor, 20 percent little, 22 percent some, and only 20 percent a lot.

 

Mirroring CoGTA’s Back to Basics assessment, 23 percent of respondents felt their municipality was doing very badly, 28 percent badly, 33 percent well, and 7 percent very well.

 

According to the most recent poll trust in national institutions ranges from a low of 35 percent for traditional leaders, 40 percent for the SAPS, 46 percent for the NPA, 52 percent for the IEC, 56 percent for the Constitutional Court, and 58 percent for religious leaders.

 

The NDP requires collaboration between all sections of society and effective leadership by government.

 

In a society with deep social and economic divisions, neither social nor economic transformation is possible without a capable and developmental state.

 

But a plan is only as credible as its delivery mechanism is viable.

 

A developmental state needs to be capable, but a capable state does not materialize by decree, nor can it be legislated or waved into existence by declarations.

 

It has to be built, brick by brick, institution by institution, and sustained and rejuvenated over time.

 

It requires leadership, sound policies, skilled managers and workers, clear lines of accountability, appropriate systems, and consistent and fair application of rules.

 

The successful implementation of the NDP requires strong leadership from government, business, labour and civil society.

 

South Africa needs leaders throughout society to work together.

 

Given our country’s divided past, leaders sometimes advocate positions that serve narrow, short-term interests at the expense of a broader, long-term agenda. It is essential to break out of this cycle. This requires trust between major social partners.

 

Government must be responsible for a large share of implementing the NDP.

It will need to strengthen its accountability chain, improve its capacity, be prepared to make difficult decisions and work with others in society to solve challenges. This means communicating honestly and sincerely with the society.

 

The state sets the ethical bar for society as a whole. This makes it even more important that government acts to address the high levels of corruption in its ranks.

 

The legitimacy of the state is vital in finding what Joel Netshitenzhe describes as “the appropriate balance between embeddedness and autonomy – insulation and connectedness” – attributes of developmental states that are critical to their ability to inject strategic vision within society.

 

In this context our understanding of state capture and how to deal with it is important and urgent.

 

I align myself with the analysis advanced by Joel Netshitenzhe in his lecture to the Tshisimani Centre for Activist Education in August 2016 titled: “State Formation and State Capture.”

 

Friedrich Engels argues that the state is a product of society at a particular stage of development, when the emergence of insoluble contradictions arising from economic interests threaten to tear society apart and a power “seemingly standing above society” is required to keep this conflict “within the bounds of ‘order’”. This power is the state.

 

This is not to be confused with the liberal notion of the state as an independent and impartial referee. The state will always express the class dynamics prevalent in a society.

 

Equally, however, this is not to be confused with a narrow, economistic understanding of the state that reduces it to a mechanical instrument lying in wait to be picked up by whichever class predominates and wielded in a manner that implies a unidirectional and one-to-one correlation between the interests of that class and each subsequent action by the state.

 

On the contrary, Engels argues that whilst, “the economic situation is the basis, … the various elements of the superstructure — … political, juristic, philosophical theories, religious views and their further development into systems of dogmas — also exercise their influence upon the course of the historical struggles and in many cases preponderate in determining their form.”

 

In fact, this relative autonomy of the state is a fundamental precondition to its ability to “seemingly stand above society.”

 

One definition of state capture cited by Netshitenzhe argues that with other forms of corruption there remains “a plurality and competition of ‘corrupters’” whilst in a capture situation state decision-makers effectively become agents of the captors.

 

The deleterious effect of this “free market of corrupters” is manifest not only in the looting of public resources but the inability of the state to formulate and lead society in the implementation of coherent policies that transcend narrow short-term interests.

 

However, it could be argued that what differentiates state capture from other forms of corruption – no matter how systemic, pervasive, and destructive – is that: whilst other forms of influence peddling and corruption seek to influence decision-making processes, in a situation of state capture the captors effectively become the decision-making process.

 

George Monbiot argues in his book, Captive State: The Corporate Takeover of Britain, that: “Corporations, the contraptions we invented to serve us, are overthrowing us. They are seizing powers previously invested in government, and using them to suit their own ends. Captive State tells the story of this coup d’état.”

 

While this seriously limits the ability of any state to “seemingly stand above society” and to keep societal conflicts “within the bounds of ‘order’”, it fundamentally and fatally undermines the ability of a developmental state to lead a social compact based on trust and legitimacy.

 

Before turning to local government we must deal with the argument that for the state to be regarded as captured it must be captured in totality – executive, legislative, and judicial arms.

 

Netshitezhe agrees that the capture of critical pillars of the state is necessary for captors to act in a monopolistic or oligopolistic fashion.

 

However, he argues that: “… this does not necessarily mean that they should exercise control over each and every arm of the state. State capture can exist at a micro-level, as in the case of the allegations about trade union(s) and departments of education; or in various institutions at provincial and local levels.”

 

This is important because our system of local government consists of a complex institutional matrix of 257 municipalities.

 

It would be churlish to suggest that the system as a whole, or even the majority of it, is captured.

 

However the differentiated analysis of state capture advanced by Netshitenzhe is useful in informing a range of interventions to combat corruption and build developmental local government.

 

Transformation of local government and improving municipal performance is a medium medium to long-term project. There are no quick fixes.

 

The transformation of 1262 apartheid local entities, many of which were fundamentally corrupt, into a coherent system of constitutionally recognised and statutorily regulated wall-to-wall local government took a decade and was a major achievement – technically and politically.

 

The Back to Basic analysis of the state of our 256 municipalities shows that one third are functioning well, one third are getting many of the basics right but require support, and one third are dysfunctional or distressed.

 

Many of the causes of this dysfunctionality and distress are historic, structural and systemic and are not unrelated to challenges inflicted by other spheres of government.

 

Global Insight points out that, in 148 municipalities (69.5%) of municipalities more than 50% of their household populations live below the upper poverty line, often mirroring the boundaries drawn by apartheid spatial planning.

 

COGTA has initiated a conversation on reviewing the district municipality and local government wall-to-wall system.

 

Are wall-to-wall municipalities the optimal model to serve the needs of the people?

 

Do we need 44 district municipalities and what should their roles be vis-a-vis local municipalities?

 

Are the powers, functions of local municipalities commensurate with their capacity and configuration?

 

Is the distribution of powers and functions amongst provincial and local government optimal?

 

How to we improve planning, budgeting and targeted implementation amongst the three sphere?

 

But there are political and governance factors that, although not unrelated to these systemic issues, are nonetheless distinct and very problematic.

 

The fact that in 2016, 6775 (77.8%) new councillors were elected, while 2531 (27.2%) were returned.

 

The high turnover senior management after elections also contributes to instability and impacts negatively on service delivery. In June 2017 a vacancy rate of 39% for senior managers in local government was recorded.

 

Since the advent of the Constitution, provinces have collectively invoked section 139 of the Constitution 116 times from 1998 to date, averaging 6 interventions per annum.

 

Over the past 5 financial years from 2013 to date, eight (8) provinces collectively invoked 58 interventions in both their district and local municipalities.

 

Since 2012, 52 councillors have been killed.

 

As at the end of September 2018, 198 protests were recorded. The total for 2017 was 173.

 

In response to these challenges government adopted the Back to Basics programme based on 5 pillars: Putting people first; Ensuring delivery of quality basic services; Practicing good governance; Ensuring sound financial management, and; Building capable institutions.

 

During the 2017/2018 financial year, 423 appointments were concluded with competent and suitably qualified senior managers.

 

In 95 cases interventions were made to enforce compliance with the Municipal Systems Act and its regulations where appoints contravened these provisions.

 

1 120 candidates were screened to check whether they appear on the record of officials who were dismissed or who resigned prior to the finalisation of disciplinary proceedings.

 

This database will ensure that no manager who is dishonourably discharged will be employed in any municipality in the country for a period of up to ten years.

 

Since the amendment of the Municipal Systems Act in 2011, a total of 1651 municipal employees were dismissed for misconduct, and 130 resigned prior to the finalisation of the disciplinary proceedings.

 

CoGTA requests and analyses all forensic investigations conducted, monitors their implementation and refers matters to law enforcement agencies.

 

The Directorate for Priority Crimes Investigation (Hawks), are these matters.

 

Out of the 311 cases, 98 are in court, 178 are under investigation, while 35 are considered finalised or withdrawn.

 

We are working with the SA Reserve Bank and National Treasury to investigate and manage the consequences of the diversion of R1.6 billion from 15 municipalities to VBS Mutual Bank in contravention of Treasury instructions.

 

Even though there is an ongoing long-term improvement in municipal audit outcomes, 27 municipalities received repeat disclaimers.

 

No disclaimers should be tolerated. CoGTA is piloting the insertion of a clause in the contracts of municipal managers for them to be removed in case of disclaimers.

 

We are confident that the recent amendments to the Public Audit Act will assist in ensuring stronger action in cases of transgression.

 

The AG will now have the power to refer material irregularities to appropriate authorities to investigate.

 

The AG now also has remedial powers that can be leveled against transgressors. These remedial powers include the recovery of money lost as a result of the irregularities.

 

The failure to spend Municipal Infrastructure Grant allocations is unacceptable as it affects ordinary citizens who need water, roads, electricity and other services.

 

Many do not have the capacity to execute big infrastructure projects. Only 55 out of 257 municipalities have a qualified engineer.

 

In the past five years, since 2012/13, a total of R3.4 billion in MIG transfers was stopped and was reallocated from underspending municipalities to better spending municipalities.

 

CoGTA is deploying technical experts from the Municipal Infrastructure Support Agent (MISA), in the form of District Technical Support Teams, in 55 of the 87 priority distressed municipalities to provide support.

 

The effects of corruption and state capture are particularly harmful to our attempts to manage urbanisation and reverse apartheid spatial planning through the Integrated Urban Development Framework (IUDF).

 

In response to a question in Parliament on 22 August 2018, President Ramaphosa said:

 

“To build the cities and towns that we want, it is critical that government, the private sector and the NGOs work together to create a sustainable growth model of compact, connected and coordinated urban areas by integrating and aligning investments.

 

Through such a compact, through the transformation of our urban spaces, by strengthening property rights for all, we can ensure that the poor and working class live in decent communities located near to economic opportunities – and that parents can return home from work long before their children need to go to sleep.”

 

However, the obstacles to such social-spatial compacts is formidable.

 

They are vividly illustrated in a the excellent PARI publication, We are building a city: The struggle for self-sufficiency in Lephalale Local Municipality by Mosa Padi and Joel Pearson.

 

They argue that the convergence of private land ownership patterns, weak municipal planning and oversight capacity and jurisdictional limits imposed by inter-governmental relations has militated against the municipality’s ability to transform segregated apartheid spatial patterns and to determine the shape of development in the area.

 

They conclude that: “As long as development is a voluntary process controlled by property owners, the uneven and dislocated nature of the town’s development will continue.”

 

As a consequence, they point out: “Instead of densification and greater functional integration, many new developments have contributed to disjointed urban sprawl, which demands expansion of the network of bulk service provision and typically results in a heftier municipal maintenance bill.”

 

Following his very insightful book, How to Steal a City, Dr Crispian Olver has turned his attention to investigating the manipulation, if not capture, of land and development permission processes in municipalities. Tellingly, the City of Cape Town has refused him access to even basic documents.

 

I want to argue that the capture of institutions in municipalities dealing with land and development permission processes hold the promise of far more treasures to loot than those dealing with supply chain management, and with consequences that will be even more devastating in the long-term because they will literally be cast in concrete.

 

Much as the role of government in fighting corruption and building institutional capacity as a counterweight to corruption and state capture is important, the role of an active citizenry working with a developmental state is equally crucial.

 

George Monbiot argues in Captive State that: “The struggle between people and corporations will be the defining battle of the twenty-first century….. Democracy will survive only if the people … rescue the state from its captivity.”

 

I leave you with the allegory with which Terry Eagleton ends his wonderful work on Literary Theory: “We know that the lion is stronger than the lion-tamer, and so does the lion-tamer. The problem is that the lion does not.”