Urgent action needed: SA takes a stand against corruption, calls for global cooperation: Lord Peter Hain

In a commendable move, the Public Service Commission, the United Nations, and UNISA organized a crucial event, and I am grateful for the opportunity to address it. Congratulations to the government for banning Bain & Co from South African public sector contracts. Urging South African ambassadors to diplomatically press for global suspension of Bain is vital. The Zondo Commission’s damning findings demand prosecution. The pervasive corruption, involving global corporations and banks, underscores the urgent need for an International Anti-Corruption Court. South Africa must lead in establishing it to combat the devastating impact of corruption on the nation’s future.

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SA Government Anti-Corruption Conference Pretoria 8 December 2023

By Lord Peter Hain

Congratulations to the Public Service Commission, the United Nations and UNISA for organising this important event and thank you for inviting me to speak.

Congratulations also to the government for banning Bain & Co from receiving any South African public sector contracts.

Can I ask that each South African Ambassador or High Commissioner is instructed by the President and Foreign Minister to press diplomatically for governments in every country to suspend Bain? At the very least until it has answered charges in the South African Courts and repaid all the fees it earned from all state-owned enterprises under former President Zuma – estimated at R2 billion.

But given the devastating findings against Bain by the Zondo Commission, surely it is also unacceptable that the Company is licensed to operate commercially in South Africa, the UK, the USA or anywhere else in the world?

Remember that the Zondo Commission was excoriating about Bain, finding that it had acted “unlawfully” and referring it for prosecution; can I be assured that prosecution will happen?

The Zondo Commission’s findings, coming on top of those by the Nugent Commission, were a devastating indictment of a company which operates at, and influences, the highest levels of government and business around the world.

In South Africa, Bain used its expertise, not to enhance the functioning of a world-renowned tax authority, but deliberately to disable SARS ability both to collect tax and to pursue tax evaders, all in the service of their corrupt paymasters. The very company who possessed the expertise to bolster South Africa’s defences against the ravages of state capture, in fact weakened these defences and profited from it.

Yet Bain remains in denial, despite infamously and unlawfully carrying out former President Zuma’s personal instructions at an unprecedented 17 one-to-one meetings.

The prodigious looting, corruption and money laundering during the state capture decade would not have been possible without the connivance of, amongst others, Bain & Company, KMPG, McKinsey, SAP, and the banks HSBC, Standard Chartered and Baroda, several of whom have owned up and even repaid some fees.

Global corporates obtained sweetheart, fee-clutching state contracts helping former President Zuma’s business associates, the Gupta brothers, to loot the state and move their stolen billions out of South Africa, and then sometimes back in, undetected. These billions have not been recovered – and experienced financial crime and asset recovery specialists I personally introduced to the government in 2019 were never engaged.

Global banks like HSBC, Standard Chartered and Baroda admitted opening their electronic banking channels to the Guptas and their associates to transfer this money through their digital pipelines to less regulated jurisdictions like Dubai and Hong Kong, or British Overseas Territories in the Caribbean. And then to ‘clean’ the money by mingling it with other funds – so disguising its origins and enabling it to be more easily spent.

These banks should have spotted this suspicious activity much sooner, or immediately: secretive transactions to obscure the ownership of the accounts; unexplained payments to and from third parties with little or no apparent connection to the underlying transaction; the transfer of funds around shell companies which did not conduct trading and obscured the persons controlling them; and unexplained connections with, and movement of, monies between jurisdictions.

Global lawyers and accountants assisted the Guptas to set up complex ‘shell’ (‘front’) companies, hiding their true owners and enabling money to be moved from one country to another country where there is low transparency. Dishonest audits left suspicious transactions hidden. Estate agents enabled Gupta property purchases with looted, laundered money.

Global brand names from KPMG to McKinsey, from HSBC to Standard Chartered, all profited while the Guptas hid and spent stolen funds that could otherwise have been destined for essential South African needs for hospitals, schools, job creation or infrastructure, leaving South Africa’s public finances near bankrupted, growth stalled, triggering a collapse in the country’s GDP estimated at fully one fifth, decimating public services, and leading to paralysing daily electricity cuts and water supply contamination.

Can I urge the South African government to press the US and UK governments especially to get all the complicit global corporates and global banks headquartered in US and UK cities to open their books and reveal where the looted money went and to help return it. Bain & Co are headquartered in Boston for example.

London and UK overseas territories – from the Cayman Islands in the Caribbean to Gibraltar – are infamous money laundering hotspots. What is UK Prime Minister Rishi Sunak doing to stop this? Nothing as far as I can tell.

Can I urge the South African government to engage with the United Arab Emirates to get the authorities in Dubai to open all the books of the many companies operating there which money-laundered the Guptas’ looted funds?

Can I urge the South African government to engage with the government of China to get the authorities in Hong Kong to open all the books of the many companies operating there which money-laundered the Guptas’ looted funds?

Can I urge the South African government to engage with the government of India to get the authorities in Delhi to arrest the Guptas and seize their assets in the country to return looted funds? Why has the Indian Government not acted over the Bank of Baroda’s serious complicity in money laundering for the Guptas, because the Indian state part-owns Baroda?

Can I urge the South African government to engage with the government of Uzbekistan to get the authorities there to arrest the Guptas and seize their assets in the country and return looted funds?

Governments from Pretoria to Washington DC, from London to Delhi and from Brussels to Beijing must also do much more to properly regulate lawyers, bankers, real estate agents, accountants, and other financial service providers aiding money laundering; enforce laws against foreign corruption; and enhance transparency. Many of these are based in the financial centres of the Global North.

Money laundering is causing a staggering $1.6 trillion in global losses annually, with more than $7 trillion in private wealth held in secretive offshore accounts – the equivalent of 10 percent of global gross domestic product (GDP).

With corrupt leaders looting public funds for personal gain and thrusting their people deeper into poverty, South Africa and many African countries bear the brunt of this abuse.

Global Financial Integrity estimates that developing countries lose more than ten times in illicit financial outflows due to corruption than they receive in foreign aid,the real figure probably much higher.

More flows out of the developing world into Western accounts than the other way around, Africa particularly a victim with annual permanent outflows exceeding $100 billion a year. Making Africa a net creditor to the rest of the world: not the rich supporting the poor, but the poor supporting the rich.

Can I therefore urge the South African government to take a lead in establishing an International Anti-Corruption Court?

Over 300 prominent figures, including over 50 former presidents, prime ministers, and over 30 Nobel laureates, have already endorsed it – as have Canada, Ecuador, Moldova, the Netherlands, Nigeria, the European Parliament, and the UK Labour Party shadow Foreign Secretary David Lammy.

But why a new Court when we have the International Criminal Court? Because the ICC focuses on atrocity crimes such as genocide and war. It cannot prosecute individuals for corruption.

The core crimes in the new IACC’s jurisdiction would not require time-consuming fresh examination, because the United Nations Convention Against Corruption already obliges its 190 signatory countries to criminalise bribery, embezzlement, money laundering, and obstruction of justice.

The IACC would target high-level officials, bribers, and money launderers who commit a part of their crimes within member states.

Entrenched kleptocracies (like Russia or Zimbabwe) may resist joining the new Court, but kleptocrats frequently conceal their illicit assets abroad in countries like the UK, Europe, the USA, and many others. If those states joined the IACC, that would enable the Courtto freeze and recover stolen assets, even where they evade arrest by staying in their home countries or depositing their illicit gains in safe havens.

Moreover, if they travel to an IACC member state or a country with an extradition treaty, they face the risk of arrest, trial, and imprisonment.

Some in the Global South have suggested that such an IACC would be a creature of the West, claiming that the International Criminal Court has focused upon prosecuting developing country leaders rather than Western leaders.

They cite other international organisations like the United Nations Security Council, World Bank, the International Monetary Fund, and the World Trade Organisation, which do not represent countries of the Global South.

But representatives of the Global South were at the New Institute in Hamburg in late August 2023 when Integrity Initiatives International – an NGO of which South African Judge Richard Goldstone is a vice chair – organised the first in-person expert group to begin drafting an IACC treaty.

Participants included a justice from Trinidad and Tobago, an international prosecutor from Nigeria, two anti-corruption compliance lawyers from Brazil, an international court registrar from Cameroon, a victims representation lawyer from Bangladesh, and a legal scholar from Mexico, as well as experts from the US, Canada, Australia, and New Zealand.

Discussions focused on drawing lessons from the experiences of the ICC and other international and hybrid tribunals. They emphasised the critical need for extensive involvement of Global South stakeholders in the drafting process, alongside experts from the Global North, to ensure the new Court’s effectiveness.

Corruption is not confined to the Global South; it’s a global and transnational issue. That’s precisely why an international institution like the IACC is imperative.

Corruption sadly happens in every country across the world, including in Britain, notably during Covid.

But I often wonder whether South African government ministers have any comprehension of the terrible damage that has been done to the country by the state capture decade and continuing corruption by some Cabinet Ministers and others at every level of government in the country.

Do they ever think of their children and grandchildren? Because looting the country and appointing unqualified and unsuitable cronies to run public services and state-owned enterprises, leading to load shedding, South African Airways bankruptcy and collapsing services, is robbing the children and grandchildren of this country of their futures.

I am a trustee of two London-based South African charities, one operating deep into the old Transkei, not too far from Madiba’s birthplace, which was able to raise over R250 million from Western donors in the past. But no longer. People simply will not donate because of fears their money will be looted by unscrupulous politicians or public officials – even when as UK registered charities, bound by strict rules, there is no possibility of that happening.

I have also spoken to foreign corporates who invested in South Africa after 1994 and would still want to invest and create new jobs and prosperity, if it were not for the corruption which is still completely disabling the country.

Whilst I was teaching at Pretoria University’s business school GIBs, a mother studying for an MBA explained how she had refused to pay bribes to Driving Test Inspectors to allow her daughter to take a test. Her daughter had to visit five Test centres in Gauteng – beginning with Randburg – before she could finally find an honest Inspector, having uncovered a troubling dual system: one for those willing to pay bribes and another for those seeking an honest driving licence. Her commitment to integrity eventually prevailed, though at considerable cost and stress lasting nearly six months and costing her parents over R30,000. Can I please ask the President to refer this to the police for investigation?

Another MBA student I was teaching explained how her small business with just five employees depended upon three able Zimbabweans. But to secure visas for their continued employment, she would have to pay a bribe to Home Affairs officials. Can I please ask the President to refer this to the police for investigation?

South African citizens tell me that if they want almost any sort of licence or permit, or are stopped by traffic police, they have to pay a bribe.

It is like a cancer infecting every part of a human body, and which deters tourists and investors and will turn the country into a failed state if it is not eradicated.

Similarly, attacks on the Constitution and vicious intimidation of brave independent journalists by leading politicians in the ANC and EFF do irreparable damage to the country’s reputation.

Read more: DA Media Release: National Treasury wants provinces to sell lemonade on the street to fund their budgets

So do ‘Mafia State’ practices such as sabotage at Eskom and Transnet; assassinations of whistle blowers; contract killings by trained assassins; organised crime in the public and private sectors; extensive procurement corruption; disruption of transport; insurrectionary outbreaks; brazen theft of metals; and illegal mining.

As Chief Justice Zondo warned recently: “The levels of corruption in our country have reached completely unacceptable proportions, and unless something very drastic and effective is done soon, we will have no country worth calling our home.”

He added: “Most of the corruption we get in SA is in the area of public procurement. If we can close the taps in public procurement, we will make a big difference in our fight against corruption. We recommended the establishment of a public anti-corruption agency. We see that the Public Procurement Bill of 2023 doesn’t have an institution like that.”

But it takes two to tango. South African and global businesses have been culpable too. It is no exaggeration to say that business slept through the state capture years.

And the sorry story continues to this day with Ministers and Councillors still wanting backhanders to dispense contracts to companies eager for the work and willing to pay.

It is high time the business community owned up and ostracised anybody still playing this game. Because if that happened, corrupt politicians and officials would have their looting massively curbed, if not halted.

Most businesspeople moan about the slow pace of the government’s anti-corruption reforms. Yet implementation of the Zondo Commission’s 2022 report doesn’t only fall to the President and the law enforcement agencies.

Consultants, auditors, accountants and lawyers should refuse to sanctify wrongdoing in either state-owned enterprises or government.

Brave anti-corruption whistleblowers like Athol Williams, who exposed Bain, need to be encouraged and protected, not hounded, penalised, and shunned by South African business as he has so shamefully been – forced to leave South Africa to feel safe and to find a job in England.

Business Leadership SA, Business Unity SA, the JSE, SA Institute of Chartered Accounts, other Business Institutes, Educational bodies, Chambers, Business and Trade Bodies, need to be pro-active.

All of this to ensure that South Africa’s business reputation, which was consistently ranked in the world’s top five, is restored.

Otherwise,vital international investor confidence, so high under the Mandela and Mbeki governments, will not be restored. Foreign Direct Investment is critical to the country’s future economic success, growth and prosperity, as well as to eradicating poverty and unemployment.

Just as state capture was not all down to dodgy politicians, South Africa will not emerge from its morass of corruption, dysfunctional public services, cronyism, crime, poverty, low to negative economic growth and high unemployment unless everyone stands up to be counted and demands: ‘Never Again’.

Yet Chief Justice Raymond Zondo has expressed his frustration at the failure of the government to implement some of his most important recommendations in the Commission of Inquiry into State Capture, pointing out that of the 10 recommendations he made to stop procurement corruption, only four have been included in the new Draft Public Procurement Bill. He added damningly: “If another group of people were to do exactly what the Guptas did to pursue State Capture, Parliament would still not be able to stop it — and that is simply because I have seen nothing that has changed.”

Ministers and Councillors with Business must step up and insist that the country is set back on a path towards a society of equal opportunity for all, in accordance with the constitution and the rule of law.

Rightly a pariah under apartheid, South Africa is now cold-shouldered because of corruption, its reputation tragically falling from hero under first Nelson Mandela and then Thabo Mbeki, to zero.

Tragically, many thousands of freedom struggle activists have been betrayed by the politicians who have looted and brought the country nearly to its knees.

Similarly betrayed have been the heroes of the liberation struggle, leaders such as Nelson Mandela, Oliver Tambo, Walter Sisulu, Ahmed Kathrada, Lillian Ngoyi, Robert Sobukwe, Chris Hani, Steve Biko, Albertina Sisulu, Ruth First, Helen Joseph, Joe Slovo, Ronnie Kasrils – these and many others who were killed, banned, house arrested, exiled or served harsh jail sentences.

It is time to reclaim their mission, to rescue and resurrect this special country before it is too late.