The myth that corruption has no victims is a dangerous fallacy. Some politicians argue, and many of their supporters agree, that they (politicians) may be guilty of corruption, but they did not commit a “serious” crime, like killing someone. Corruption kills. Corruption is the overwhelming reason why South Africa’s economic growth rate has plummeted, the country slipped into recession and global rating agencies downgraded it to junk status.
Corruption undermines the delivery of public services, slows economic growth and stunts development. Corruption diminishes public funds for public services, such as health, education and crime fighting. Slowdowns in economic growth, causes mine, factory and shop closures, and with it mass joblosses. For example, when South Africa falls into a recession, the country can lose more than 200 000 jobs as an immediate result thereof.
Losing a job causes family breakdown, rise in mental illness and a rise in crime as people turn towards crime. Corruption causes many potential foreign investors not to come to South Africa; but it also causes many local entrepreneurs to reduce current and shelve new investments – both slashes existing and potential new jobs.
A downgrade of a country into junk status, makes borrowing abroad more expensive. Investors either move their money out of a country or put new investments on ice. Many foreign institutional investors have a rule that if a country is assigned junk status they do not invest in such a country.
A mass flight of investors, more unemployed and more expensive debt servicing means that a country has less income. It has less to spend on essential public services, on job creating schemes and on new infrastructure or maintaining current infrastructure.
It means that a government has to reduce costs. It has to for example cut the public service, cut certain public services and welfare programmes.
Public Enterprises Minister Pravin Gordhan testified at the Zondo Commission of Inquiry that former President Jacob Zuma’s firing in December 2015 of former Finance Minister Nhlanhla Nene for allegedly stopping corrupt deals cost the economy more than R500bn. Gordhan said the “market value of the country’s 17 biggest financial and property shares fell by R290bn. This figure excludes the remainder of the equities market that was also hard hit by the decision. South African bods lost 12% of their capital value (R216bn)”.
The value of the rand plunged. The rand depreciated from R13.40 to R15.40 US dollars overnight.
Treasury Director-General Dondo Mogajane testified last week at the Zondo Commission of Inquiry that analysis by the Treasury team showed that 148 000 jobs were lost by this single event.
Last week Parliament adopted a law to increase VAT from 14 to 15%. The main reason for the VAT increase which will punish ordinary hardworking South Africans already struggling to make ends is that corruption has decreased government revenue, increased government costs, as government have to bailout corrupt SOEs, and channel more money into money-guzzling failing corrupt government departments.
Appointing incompetent managers and staff to run public hospitals, who in turn mismanage hospitals, corruptly give contracts to supply medicines to associates, causes patients who go for routine treatment to die in public hospitals. It is among the main reasons why South Africa’s public health system has in many places essentially collapsed.
Police not holding taxi drivers and owners accountable, because of corruption, while only focusing on what to them appears to be law-abiding citizens (for bribes), means that unroadworthy taxis and reckless driving cause thousands of deaths and injury by accidents – and the injury and loss of breadwinners, and plunging families into poverty.
Not policing gang leaders and gangsters in townships because of bribes, lead to sell drugs to youth unchecked, allow gangsters to rob and murder ordinary citizens, collapse local businesses because owners are forced to pay protection money, and owners and customers are frequently robbed, and forcing would-be entrepreneurs and investors not to set up shop in the gang-ridden area.
It also forces highly skilled township dwellers who could offer valuable resources to the community to move to the suburbs, depriving poor communities of their skills, social capital and networks.
Eskom, the power utility last month said it may have to implement national electricity outages because of a sharp fall in coal stockpiles at five of its power stations. In 2015, Eskom, who accounts for 90% of South Africa’s electricity supply, carried out electricity outages, called load shedding as it ran low on funds, incompetence and corruption.
Eskom’s problems are largely due to corruption, whether through patronage appointments of boards and executives, giving tenders to politically connected businesses without the skills and pushing out competent staff. Coal supply contracts have in the past been given to political connected businesses with no track record, skills or competency under the guise of black economic empowerment.
The past load shedding caused factory, mine and shop closures. Not only did the Eskom self-inflicted load shedding undermined market confidence in South Africa, it slowed economic growth, contributed to the country’s being assigned junk status by global rating agencies and caused mass unemployment.
Last month the South African Broadcasting Corporation announced it will shed more than 900 permanent jobs and more than 1200 freelancers. Corruption, whether through patronage appointing incompetent staff and essentially suppliers, and sidelining and dismissive competent, but critical staff over the past decade has mostly led to the organisation’s current woes.
The corruption has undermined public confidence in the broadcaster. Few people want to pay licence fees, advertisers are not interested and national sports events are not flighted because the broadcasters do not have the money to do so. For another, the SABC’s descent into corruption, has also destroyed the related independent production houses that used to produce for the organisation. This means it has cut off the potential of building a South African production manufacturing hub which could have created programmes for export to the larger world, earning foreign income.
The plundering of VBS Mutual Bank has not only caused poor black pensioners and stokvels to lose the little savings they have, it has led to the collapse of the bank, with the accompanied massive joblosses. The municipalities which deposited their money corruptly at VBS are now without funds for public services, deprived long-suffering citizens of municipal services.
Eight municipalities collectively deposited R1.2 billion with VBS Bank. It is illegal for municipalities to deposit public funds in a mutual bank. Some of the municipalities that deposited their money in VBS do not have the funds now to pay salaries of their employees.
Corruption causes deindustrialisation, whereby products that were produced in South Africa, and provided local jobs, investment and income, are displaced by foreign imports. Politically connected middlemen, with shell companies, no industrial experience, win government contracts under the guise of BEE to supply products and services to government. Conditions of the government contracts include using local products, labour and services.
However, these BEE “companies” after winning the contracts, get foreign companies to deliver the required products, without using local products, labour or services. Such foreign imports create jobs in their countries of origin, and cause an outflow of scarce money out of South Africa to pay for the imports.
Legitimate SA companies’ who were outbidded for the government contract won by the “BEE” bidder, now go under, closing down factories, causing joblosses and causing the manufacturing capacity to be lost to SA. Companies that supplied inputs to the local firm also go bust, with additional downstream joblosses.
Last year parliament agreed to hold an inquiry into Transnet following allegations that the Gupta family, associates and companies received backhanders to as middlemen from locomotive deals in a contract in which China South Rail was supposed to build locomotives in South Africa using substantial local products and services. However, it turned out that none of the CSR locomotives, which were priced at R50m each, were assembled in South Africa.
By William Gumede
William Gumede is Chairperson, Democracy Works Foundation (www.democracyworksfoundation.org) and author of South Africa in BRICS (Tafelberg)