State Capture Is Not Something New In South African Political Economy

The so-called state capture is nothing new in the South African political economy. State capture can be defined as a process where business or private individuals use political connections to influence state decisions. They use proxies, often politicians, inside governments to promote certain interests in return for profit. Major corporations in the United States (US) for an example work very close with the lobbyist groups in order to influence political decisions. According the latest statistics provided by the Centre for Responsive Politics there are 11505 lobbyists in the US, together they spent 3.21 billion USD in 2015. The most powerful lobby group in the US is the National Rifles Association (NRA). Their power and influence is reflected in the tug of war on gun control currently taking place in the US politics.

The entire modern economy of South Africa is based on undue influence of business over politics and visa versa. The enactment of the Native Land Act of 1913 is a typical example of how politics legislated in order to facilitate the corrupt and immoral objectives of business. In turn business ensured that the government was kept in power and assisted in funding their projects. The Native Land Act of 1913 proliferated the cheap black labor industry which supplied labor to the agricultural industry which was dominated by the white Afrikaners. The local chiefs and white Afrikaner farmers controlled the rural areas where most African lived and worked. The tensions between the agricultural and mining sectors of the economy led by the Afrikaners and English respectively led to several disagreements. The Fagan Commission was appointed by the government of Jan Smuts in 1946 to investigate changes to the Native Land Act. The main recommendation of the commission’s report was to relax the influx of Africans to the urban areas. The white Afrikaner farmers resented the fact that their “labor” was lost steadily to the mining sector in the urban areas of South Africa. Secondly the urban white Afrikaners disapproved of the competition brought by the new black cheap labor in the urban areas. Prime Minister Jan Smuts lost the election in 1948 and his detractors and supporters alike blamed amongst others his support of the Fagan Commission for his defeat.

The history of state capture in South Africa

Afrikaner Broederbond (AB) was a secret, exclusively white male Afrikaner Calvinist organization in South Africa dedicated to the advancement of Afrikaner interests. All the prime ministers of South Africa including Jan Smuts were members of the AB. The Amalgamated Banks of South Africa (ABSA) was formed by an amalgamation of United, Allied, Trust and Volkskas banks. Volkskas bank was established by the Broederbond in 1934. Remgro, which owns several major companies in South Africa, was the holding company of Volkskas bank. Remgro still exists however the company has since diversified and its shareholding has transformed to include women and people of other races. Remgro owns shares in the E News the only independent news channel in South Africa. The formation of the AB ensured that white Afrikaners in South Africa became the main role players in politics and economy. When the National Party (NP) the last governing party before the first democratic elections in 1994 came into power, it exerted pressure to the Anglo American, the main economic player at the time, to sell some of its stake to Federale Mynbou. Anglo American sold some of its gold mining assets to Federale Mynbou, which later became BHP Billiton. Federale Mynbou was the main financial empowerment vehicle of the Afrikaners. The decision to yield and subsequently sell some of the gold mining assets was as a result of the capital realizing that they could not be successful without the ruling Afrikaner inclusion in the economy. That entire process was facilitated by politics. The creation of the economic base strengthened and legitimized the state within the Afrikaner society. The new Afrikaner industrialists used the newly found wealth to maintain the political status quo and funded the activities of the NP including its apartheid project.

The advent of democracy in South Africa in 1994 also witnessed another form of political trade off between the owners of capital the new political ruling elite. Through the Black Economic Empowerment (BEE) program, South African big business which was dominated by the whites was willing to give a portion of their company shareholding to the blacks. The objectives of the BEE were twofold; first to get more black people to participate in the mainstream economy Second it was for political reason, business could only survive and thrive if the majority shared in the economy. BEE benefited those who had strong political connections mostly black males aligned to the ruling African National Congress (ANC). Furthermore like in the case of the white Afrikaner, the newly found wealth was utilised to facilitate and fund the projects of the ruling ANC. During the ANC pre manifesto launch dinner in Mbombela in 2014, the president of the ANC Jacob Zuma said tongue in cheek that it pays to be the member of the ANC. The statement invited loud prolonged cheers from the wealthy members of the ANC at that function.

Conclusion

There are a number of companies that are currently benefiting from the strong relationship with the state around the world. Most companies dedicate resources to ensure that their relations with the state/client remain cordial and beneficial. This is how business functions in a competitive world. South Africa has gone through similar experiences in the past. Moreover as democracy matures in that country, prospects and investment opportunities for big government contracts increase, business will seek to influence politicians in order to maintain a competitive edge. The challenge is how can business continue to lobby the state for business without creating political crisis, as it has been the case recently in South Africa. Secondly, what mechanism can the government of South Africa put in place to ensure that lobbying does not deteriorate into corruption as recently experienced.

(The writer is Head of Research Relations at Al Jazeera Centre for Studies)

(Main Photo: The Afrikaner Broederbond group, founded in 1918)