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www.swop.org.za

FEBRUARY 2019

By Karl von Holdt

The political economy ofcorruption: elite-formation,factions and violence

SWOP | Corruption WP10 text 1/31/19 8:00 PM Page 1

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WORKING PAPER: 10FEBRUARY 2019

Karl von Holdt is a senior researcher at the Society, Work and Politics Institute.

The political economy ofcorruption: elite-formation,factions and violence

Acknowledgements

The ideas developed in this paper owe much to discussions with many different people, includingFaeeza Ballim, Claire Benit, Andrew Bowman, Keith Breckenridge, Ryan Brunette, Josh Budlender,Michael Burawoy, Gavin Capps, Aninka Claassens, Taz Essop, Roland Hunter, Rahmane Idrissa, MaloseLanga, Fabio Luis, Gayatri Menon, Koketso Moeti, Lumkile Mondi, Alf Nilsen, Mandla Nkomfe, AparnaSundar, Crispian Olver, Nicolas Pons-Vignon, Aurelia Segatti, Dinga Sikwebu, members of the ‘Powerand patronage’ reading group, and my colleagues at SWOP.

Cover photo: Collage of South African newspaper headlines

Shared copyright resides with the authors Karl von Holdt, Swop and Friedrich Ebert Stiftung and is not for commercial use.

'Violent states, states of violence project'


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The political economy of corruption: elite-formation, factions and violence

1 From corruption to class formation

contents2 Dis-embedding and re-embedding

the economy in social life 04

3 The struggle to re-embed accumulation:the Thabo Mbeki regime (1994-2008) 06

References 24

4 The rise of the informalpolitical-economic system 08

8 Primitive accumulation 17

9 The battle over Treasury 19

02

5 Re-embedding class formation: theZuma regime (2009-2018) 10

6 The Zuma-Gupta nexus and state-capture 12

7 The Brics versus Western capitalism:competing models of accumulation? 15

10 Ramaphosa victory: unstable coalitions,corruption, violence 20

11 The prospects for an alternativecounter-movement 23


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SWOP | Society, Work & Politics InstituteFebruary 2019

Acronyms & Abbreviations

01

ANC African National Congress

BEE Black Economic Empowerment

BRICS Brazil, Russia, India, China and South Africa (5 emerging national economies)

COPE Congress of the People

COSATU Congress of South African Trade Unions

DA Democratic Alliance

EFF Economic Freedom Fighters

GDP Gross Domestic Product

JSE Johannesburg Stock Exchange

MP Member of Parliament

NDR National Democratic Revolution

NGO Non Governmental Organisation

SOE State Owned Enterprise

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The political economy of corruption: elite-formation, factions and violence02

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From ‘corruption’ to‘class formation’In March 2017 South African President Jacob Zumafired Finance Minister Pravin Gordhan from cabinet -and unleashed a storm of protest and mobilisation. Thismove was widely seen as the final onslaught in acampaign to ‘capture’ the state for corrupt networksstretching across South Africa and far beyond - to Russia,China, India and Dubai. Opposition political partiesand broad social movements calling themselves ‘civilsociety’ began to mobilise a campaign for the removalof Zuma. As important, a split emerged within the ANCas Gordhan and a network of prominent ANC leadersand veterans launched a struggle to ‘reclaim’ the ANC.The two key alliance partners of the ANC, the SACommunist Party and the Congress of South AfricanTrade Unions also spoke out against Zuma’s move, andjoined the campaign to remove him.

Protest, public meetings and massive marches tookplace. The biggest demonstration of the post-apartheidperiod was estimated to have mobilised about 100,000in a march to the Presidency in Pretoria, led by theopposition political parties with the Economic FreedomFighters (EFF) in the lead. Political rivals such as theEFF, the liberal opposition DA, the SACP, and some ofthe social movements and NGOs, joined hands in whatwas seen as a national crisis.

In Parliament, the opposition parties served notice ofa motion of no confidence in the President - the fourthsuch motion over the previous two years, but this timeattracting unprecedented interest because of speculationthat a number of ANC MPs would support it.

Ultimately this turbulence led to the election by a narrowmargin of Cyril Ramaphosa as president of the ANC inDecember, the recall by the ANC of Jacob Zuma asPresident of South Africa and his replacement byRamaphosa in January 2018, and his announcement ofa ‘new dawn’ for South Africa.

The transition from Thabo Mbeki to Jacob Zuma asANC president in Polokwane in 2007, and thesubsequent recall of Mbeki as South African Presidentin 2008 had also been accompanied by intense internal

struggles and mobilisation, but the 2017 contestationwas far more public, bitter and unpredictable. AfterPolokwane Zuma was able to move methodically toassert his dominance of the ANC, purging ANC alliesfrom positions of power and leading to the breakawayof COPE. Ramaphosa has had to move much morecautiously to establish his authority, and has been forcedto adopt a strategy of ‘unifying’ the ANC while facingpowerful resistance from within.

The narratives presented in the mediaand the public domain more generallydepict this as a struggle between astate-capturing network of politicians,officials, brokers and businessmenbent on looting and self-enrichment,and a band of righteous politiciansand citizens, drawing together the‘old’ ANC, activists, ‘good’ businessand citizens in general, intent onrebuilding institutions and goodgovernance, the rule of law,international credibility and fosteringgrowth and development. This isunconvincing, though superficiallyplausible.A much deeper set of social forces and processesunderlies and shapes the struggles within the ANC andmore broadly, and political struggles are inseparablefrom struggles over the shape of the economy, andspecifically over class formation. In this paper I try tosurface some of these deeper forces and processes inorder to develop a more sober analysis of currentchallenges and future prospects.


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Specifically, I make five arguments.

1. Corruption is a mechanism of classformation, rather than primarily amoral or criminal issue.The defining social process in post-apartheidSouth Africa is the formation of a new black elite.Other mechanisms in this process are:

— Black Economic Empowerment (BEE)

— Employment equity across the state andprivate sector

— Land redistribution

— Dispossession of rural villagers from communalland by an alliance of chiefs, black businesspartners and mining corporations.

But the formal economic sectors are dominatedby established business and corporations,opportunities are few, the demand is high andcompetition is fierce. In this context, the state isthe location of jobs, revenue, contracts, tendersand licensing and is an obvious resource in theformation of a new elite.

2. This has given rise to a pervasiveinformal political-economic system thatpre-existed Zuma s accession to thePresidency and which is much moreextensive than the Zuma-Guptaproject.This system is shaped by the intersection ofpatronage and factionalism, as patronagenetworks form political factions in order to gainpower in the state. Contrary to the prevailingpublic narratives, the purging of the Zuma-Guptanetwork from positions of influence and power,and even their jailing, will not lead to the demiseof this system.

3. The informal political-economic systemis violent.Violence is an important resource for factions inthe struggle with rival factions over power andaccess to opportunities, for enforcing factioncohesion, and for crushing community resistance.

4. Both corruption and anti-corruptionare a form of politics .Corruption is not simply a matter of bad moralsor weak law enforcement, nor is anti-corruptiona simple technical matter of restoring professional-

ism, enforcing procedures and implementing thelaw. Corruption is embedded in political processesand anti-corruption is also characterised by apolitics - that is, the specific configuration offorces that supports and mobilises an anti-corruption campaign emerges at a particulartime for specific reasons. This paper explores thepolitical economy of corruption in South Africa.

5. Ramaphosas trajectory, and the futureshape of corruption in South Africa,will be determined by the characterof the coalition he can forge - or thatwill be forced upon him - among partybarons within the ANC.

But one thing is sure - his coalition will includecorrupt figures, and the informal system of politics-patronage will remain pervasive. For the purposeof building institutions and attracting investment,it will be necessary to establish as stable a coalitionas possible - although the odds are stackedagainst success. I will return to this theme at theend of this paper.

I explore these themes through a somewhat schematicaccount of the transition from Mbeki to Zuma toRamaphosa in the ANC. In order to grasp the significanceof the struggles over elite formation, I make use of KarlPolanyis concept of movement and counter-movementrevolving around struggles over the dis-embeddingand re-embedding of the economy in society (Polanyi1944 [1957]). This reveals a contradictory process ofdis-embedding and re-embedding, rather than a lineartrajectory, which shapes the form of political struggle.

I use this framing to analyse the political dynamics ofthe Zuma regime, the fightback by Gordhan and hisallies centred on the Treasury, and the presidentialcontestation for control of the ANC. I consider thequestion whether the Zuma project constitutes analternative trajectory of accumulation under the rubricof radical economic transformation , and as an elementof this question trace the emergence of an alternativeset of global linkages centred on the Brics, primarilythe former Communist regimes of China and Russia. Idiscuss the constraints on and possible future of theRamaphosa project in the ANC, and the prospects fora more progressive counter-movement.



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Dis-embedding and re-embedding theeconomy in social lifeNeoliberalism has become the dominant critical framefor understanding development in South Africa, yetas Hart argues (2013:6) it remains inadequate to thetask of grasping the turbulent, shifting forces takingshape in the arenas of everyday life . Hart is concernedwith the important processes of hegemony andnationalism, but tends to ignore class formation andparticularly its material base. In contrast, I argue thatthe processes through which emerging elite classesare being forged are critical for understanding politicsin South Africa, in particular the sharp contestationswithin the ANC with which this paper begins. I turnto the work of Karl Polanyi in an attempt to grasp thesedynamics.

As is well known, Polanyi argues that capitalism broughtinto existence a dynamic of marketisation andcommodification through which a broader and broaderrange of social and productive activities are ensnaredin market processes and abstracted from social use.Ultimately, even the three fictitious commodities whichare essential for human society - land, labour and money- are commodified and destroy the basis of society andhuman life. These are fictional commodities preciselybecause they cannot in fact be turned into commoditieswithout destroying their social and life-giving function.Polanyi argues that this process of marketisationconstitutes a historical movement, which is resisted bysociety in the form of a counter-movement to re-embedland, labour and money, and subordinate the economyto social ends.

Colonialism itself was one such process of dispossessionand dis-embedding primarily land and labour in theglobal expansion of capitalism and marketisation, andstruggles of national liberation were struggles forrepossession, for re-embedding the people in theirown territory and in their own nation . The kind ofanalysis suggested here also points to the materialdimensions of nationalism, and particularly to the fiercestruggle of indigenous elites to come into existence

and lay hold of the sources of wealth in Africa generally,and not least South Africa - a process which deeplyexercised Fanons mind, despite his aversion to it (Fanon1961 [1967]).

This process of national class formation is pretty muchignored by most critical left analysis, including that ofHart, despite its absolute centrality to the understandingof politics in South Africa. To understand how this hasplayed out in the politics of the ANC it is essential tograsp the distinctiveness of the moment when the ANCwas at last able to establish itself in government - it wasof course the moment of globalisation and theascendancy of neoliberalism cemented by the collapseof the Communist regimes across the Soviet Union andEastern Europe.

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Numsa and other organisations march in Johannesburgagainst corruption and job losses - 2015

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It was in Polanyian terms a period of heightenedmarketisation and in particular the acceleratedfinancialisation which consolidates the abstraction ofthat fictional commodity, money, from any social use atall. Accumulation is disembedded from production andterritory, becoming a process virtually severed fromnational, governmental or policy intervention. The earlierwave of post-World War II anti-colonial movementscame to power in a different period, when thedevelopmental state and national strategies forindustrialisation were commonly adopted by newlyindependent regimes (as well as by entrenchedreactionary regimes such as apartheid South Africa),representing in some cases a Polanyian counter-movement seeking to re-embed development nationallyagainst the domination of Western capitalism at thetime.

In the 1990s, in contrast, the emerging global regimeof globalised and financialised accumulation, as wellas the prevailing geo-political order, tended to precludesuch strategies for newly independent or democratisingregimes, including that of South Africa. This providesthe essential global context for understanding thepolitics of the ANC.



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The struggle to re-embed accumulation:the Thabo Mbekiregime (1994-2008)Drawing on the theoretical argument outlined previously,we can turn briefly to characterise the strategic tensionsthat marked the Mbeki regime, understood to haveincluded the Mandela period when Mbeki was effectivelyrunning the government (1994-2007). In doing this Idraw on Hart s presentation of the dynamics of de-nationalisation and renationalisation, but reframe thisin terms of the Polanyian dynamic. The first phase ofthis regime was chiefly characterised by dramaticprocesses of dis-embedding accumulation, during whichcapital controls were lifted allowing a massive flight ofSouth African capital as well as the listing offshore andglobalisation of what had been very big and powerfulSouth African corporations, the sharp reduction ofimport tariffs and the consequent de-industrialisationof many manufacturing sectors, as well as fiscal austerity,privatisation and other aspects of a typical neoliberaleconomic reform agenda.

At a more political level, this period saw heightenedconflict between the ANC and its Alliance partners asit attempted to roll back and limit the power of thetrade union movement and the SA Communist Party.

Hart highlights the fact that Mbeki regime was notsolely characterised by neoliberalism, but also by specificand important processes of re-nationalisation: specifically,reconceptualising the national democratic revolution(NDR) - the core strategic concept of the ANC - as anarrow, disciplined technocratic project centred on theformation of a new patriotic black bourgeoisie , whichwas threatened by the ultra left posturing of his critics.In 2003 the ideological perspective of the Mbekigovernment shifted again with the articulation of astronger concept of the developmental state , abandon-ing the commitment to privatisation in favour of a strongrole for the state-owned enterprises (SOEs) in fosteringand shaping economic growth, as well as the adoptionof broader welfare policies to tackle the problems of

the marginalised masses occupying the secondeconomy (Hart 2013:199, also chapter 2).

For Hart, these shifts remain gestures towards re-nationalisation operating at the level of ideology, anddesigned to contain working-class challenges, ratherthan real shifts reflecting material goals. This is whereit becomes useful to introduce a more material analysisof struggles to re-embed accumulation in the nationalterritory of South Africa.

Thus the focus on creating theconditions for the emergence of ablack bourgeoisie is not just a signof Mbekis conservative orientation;it is rather an attempt to address avery real, very material and burningaspiration. Settler colonialism andapartheid had worked explicitly toprevent the emergence of blackmiddle classes and particularlyentrepreneurs, whether on the land,in commerce or in manufacturing.The result is that one glaring dimension of inequalityin South Africa - usually considered only in terms ofinequality between the bottom and top of society - isthat between black business and white business, aswell as between black and white middle classes morebroadly.

This is a dimension of inequality that simply insists onbeing addressed as long as business remains a significantclass in South Africa; moreover, the biggest and mostcompetitive white owned and managed corporationshave demonstrated scant commitment to the develop-ment of South Africa, globalising and shifting capitalat the earliest opportunity. Hence the question of apatriotic black bourgeoisie with national commit-ment,which so exercised Mbekis mind. These are very politicaldynamics with a real material content, and place thepolitical economy of a rising class at the centre of ANCpolitics.

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Likewise, the new emphasis on a developmental stateand the SOEs signalled a more assertive stance inrelation to the forces of disembedded marketisation,and an emphasis on re-embedding control of keyelements of the economy rather than relying on theneoliberal illusion of foreign investment. However half-heartedly these shifts may have been, they point to thevery real dynamics of a counter-movement focused onre-embedding finance, production and class formationin the national territory of South Africa, as well as assertthe sovereignty of the state in attempting to addressthe conditions of the people.

Unfortunately for Mbeki these shifts were too limited,contradictory and late. He relied on Black EconomicEmpowerment (BEE), a legislated and negotiatedprocess for the transfer of assets from existingcorporations to new black business partners. This doesnot consist of an unfettered transfer of assets; sharetransfers are financed through a range of mechanismswhich entail substantial debt financing for new blackowners. These transactions tended to establish blackcapitalists as junior partners and simultaneouslyconstitute a new source of profit for (white) financialcapital. Few of these renter capitalists have anyinvolvement in business operations or production. Whilein some cases BEE may have created the basis for anelite coalition between black and white business, theminority stakeholding and high financial gearing ofblack partners has made the constraints of this modelincreasingly clear. This empowerment elite remainssmall, economically weak and politically dependent onthe ANC, and compromised by the increase in inequalityover the same period in which they were empowered.The result, Plaut and Holden argue, is that the powerof the BEE elite remains precarious (2012:213-238).

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The rise of the informalpolitical-economicsystemNumerous black entrepreneurs, and aspirant entre-preneurs, were unable to access these opportunitiesbecause of political gatekeeping or because they lackedthe capital or the skills. Already, during the Mbeki periodas well as the presidency of Mandela, an alternativepolitical-economic system was emerging at national,provincial and local levels, through which networks ofstate officials, ambitious entrepreneurs as well as small-time operators, were rigging tenders or engaging inother kinds of fraud so as to use revenue flows fromthe state to sustain or establish businesses, or simplyto finance self-enrichment. Given the property clausein the Constitution, as well as the conservative strategiesadopted by the ANC government, and in the contextof economic domination by large corporations andwhite owned businesses, there was little alternative forchannelling the aspirations and burning sense of injusticeof black elites and would be elites in post-apartheidSouth Africa. The state - newly re-nationalised by theliberation struggle - had become the only channel forthe emergence of these aspirant classes, given thescope of its resources and activities (Von Holdt 2013).At the same time, the narrow scope and precariousstatus of Mbekis official black empowerment elite, wasone of the factors behind his political isolation and hisown overthrow by the Jacob Zuma tsunami .

Given the current focus on Zuma andthe Gupta family as the architects ofcorruption , it is important to note thatan informal political-economic system,including its intersection with violence,was already emerging in South Africaprior to and outside the emergence ofthe Zuma network.

Research into the intersection between communityprotests and ANC politics revealed how, already in2008-9, local government had become a source of

intense struggles over access to tenders, budgets andjobs between different factions of the ANC in manytowns and townships. Outsider factions positionedthemselves as leaders in community protests againstthe incumbent factions, with the aim of accessing theresources at the disposal of local government and,when they were successful, constituting new patronagenetworks to reward their followers. Violence wasfrequently deployed in these struggles, involving theburning down of homes and municipal facilities, assault,and increasingly, assassination. Local factional networkswere linked into regional and provincial ANC structuresand networks, where similar struggles took place overthe control of the ANC structures and therefore ofaccess to provincial government and resources (Dawson2014, 2017; Langa and von Holdt 2012; Mukwedeyaand Ndlovu 2017; Ndletyana 2013; Von Holdt et al2011; Von Holdt 2013, 2014).

At the national level the first major scandal to come topublic attention was that of the Arms Deal under Mbeki,which involved numerous kickbacks both big and small.Zuma himself had been caught up in the scandal, andin the lengthy court disputes over whether Zuma shouldbe charged, it emerged that there had been attemptedto interfere in the case by prosecutors linked to Mbeki.As president, Zuma moved to build a network ofsupporters in both the police and the NationalProsecuting Authority (NPA), in order to protect himselfand his allies against any further attempt at investigationor prosecution. Analysis of these dynamics made it clearthat control of the coercive institutions of the state(police, intelligence, prosecution authority, prisons, andultimately the judiciary) would be the logical outcomeof the consolidation of this informal political-economicsystem (von Holdt 2013, 2014).

A 2012 interview with a trade union national officebearer (see box on page 9), also an ANC and SACPactivist, gives a sense of both the scale of the involvementin diverting state resources, and the sense of a collectiveunderstanding that this was an acceptable, widelypractised and familiar set of practices


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People really laugh when you talk about corruption


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What is being described here is clearly a system ofpractices and understandings that pervades the ANCand the state, embedded in a local moral order thatprovides legitimacy and rationale for such practices.This is a kind of counter-movement to the dis-embeddingprocesses of globalisation and good governancechampioned by the Mbeki government and itstechnocrats, working to re-embed economic agencyand wealth formation in the emergence of a local elite- a counter-movement of local processes to appropriatewealth from the circuits of finance. And it was thispervasive informal political-economic system in whichZuma and his networks were able to locate themselves,and which also provided the basis for the emergenceof the formal discourse of radical economic trans-formation within the ANC.

This argument is reinforced by other research (forexample Beresford 2015; Lodge 1998) including therecent publication of an insider account of the functioningof such a regime in the City Council of Nelson MandelaBay which illustrates how successive factions of theANC in the Eastern Cape used their control of thecouncil to build patronage networks, foster murkybusiness operations, fund the ANC and enrichthemselves (Olver 2017), without any interaction withthe Gupta networks and surrogates that were so centralto the Zuma project.

Current revelations about the VBS Mutual Bank, andBosasa show just how long-standing and widespreadthese practices are.

I argue that this set of practicesconstitute an informal political-economic system. By a system I donot mean a structure which is centrallycoordinated or planned, but apervasive and decentralised set ofinterlocking networks that reinforceand compete with each other inmutually understood ways, andinclude the use of violence as astrategic resource.

Its about the kind of lifestyle they live, the cars theydrive, and including what we drink when we aresocialising. When you ask, But comrades, why arewe doing things like this? , They say, You live in thepast. And when it comes to tenders, the first thingthey want to know is how much they are going toget from the tender. When you ask them, How canyou do such a thing? , They ask you, Whats wrongwith you? This is how things are done. They reallylaugh their lungs out when you ask them aboutthese things.

It is the issue about our value system and what ourstruggle is about that is crucial to me, things suchas selflessness, serving people. So our cadres look

for one of us who seems to be doing better andthey follow on their footsteps and those becomedominant values which overshadow the old values.

The younger ones have been communicated thismessage that this is the way of doing things; so youdon’t need to be good at school; you don’t needto work hard; you can find short-cuts; you have gotto be connected. There are just too many peoplewho are trapped in corruption now. You cannot dealcomprehensively with it because the problem is atthe top. People know this will collapse the ANC orthe state if it is dealt with in a serious way. I amafraid, comrade, I am very afraid.


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Re-embedding classformation: the Zumaregime (2009-2018)The Zuma campaign to replace Mbeki took the formof a populist challenge in which Zuma as a figure cameto represent a point of condensation for multiple, pre-existing tensions, angers, and discontents that untilrecently were contained within the hegemonic projectof the ruling bloc in the ANC (Hart 2013:97-8), which,in Harts analysis, represented a strategy for mobilisingand simultaneously containing popular antagonisms.Zuma was able to embody rural authority, patriarchalrespectability and family commitment, militant in-surgency and deep ANC history, as well as familiaritywith popular cultural repertoires, and thus emerge asthe authoritative other to the remote and intellectualMbeki (Hart 2013: 204-7). This articulation of a nationalistpopulism represents for Hart a moment of re-national-isation against the predominantly de-nationalisingproject pursued by Mbeki and his technocrats. ThusZuma kindled SACP and COSATU hopes of a left turntowards a much stronger developmental state capableof re-embedding the economy and society, andaddressing the crisis of social reproduction experiencedby the working class and the poor generally. The Zumaslate of candidates won a decisive victory at the 2007ANC conference, a year later Mbeki was removed asPresident of South Africa, and Zuma became Presidentin 2009.

A left turn would have represented a more radical kindof counter-movement with an alternative re-embeddingstrategy. However, in retrospect it is clear that the Zumaproject was focused on strengthening and deepeningthe informal political-economic system, and locatinghim and his close allies at its centre. Quite rapidly anysign of populist mobilisation disappeared. On the faceof things Zuma preceded along similar policy lines asMbeki. The centres of global connection and neoliberalmanagement in Treasury, the SA Revenue Services(SARS) and the Reserve Bank remained intact. In reality,though, the Zuma regime - and this included his keyallies in the provinces and their allies located in theANC branches and regions and in local government -

was opening up the channels for the informal political-economic system to expand and incorporate newnetworks, including members of his own family. At thesame time, he and his allies were moving to gain controlof key positions in the National Prosecuting Authorityand the police, in the first instance protecting Zumafrom prosecution for his involvement in the Arms Dealprocurement scandal under Mbeki, but ultimately aimedat heading off investigation or prosecution of anyonein the rising networks.

The pace and scale of this project increased exponen-tially after the first three or four years in which Zumanetworks were consolidating their power at all levels ofthe ANC and government, at about the same time asa more explicit formal political discourse was emergingwith an emphasis on radical economic transformation .This centred initially on the idea of more aggressivelyusing state procurement to foster the development ofblack businesses, expanding to include direct fundingfor the formation of black industrialists. The StateCapacity Research Project - a consortium of progressiveresearchers - has argued that the presidency and newlyappointed officials in the state were increasinglyprepared to play fast and loose with the law and theConstitution, not simply out of self-interest, but out ofpolitical conviction (Bhorat et al 2017:47). The convictionwas increasingly articulated by Black management andbusiness forums that the rules of the game were riggedagainst black business, making it virtually impossibleto penetrate the private sector because of longestablished relationships, over and above the deliberatebias towards white-owned companies, in the words ofthe head of the Black Management Forum in 2016 (ibid:48).

While the Treasury and its networks of technocratsbelieved that fair procedures, international standardsof governance and rigourous competition could bereconciled with black economic empowerment inaccordance with the Constitution, its opponentsincreasingly saw not only Treasury, but also governmentsfinancial laws and regulations as well as the Constitution,as an obstacle to rapid racial transformation. Oneproponent of this perspective has argued that whitemonopoly capital and a credit-based black capitalistclass - formed through the official BEE policies - wasfighting back against the rise of a more independent

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tender-based capitalist class which, together with theleadership of political parties was engaged in a struggleto overcome the colonial class structure (Malikane2017, quoted in Bhorat et al (2017:48). This argumentdemonstrates the ways in which the project of re-embedding class formation, both rhetorically and inmaterial practice, goes significantly beyond theideological mobilisations identified by Hart, involvinga project to wrest economic power from technocratic,globalised, black and white elites committed to globalmarketisation, and re-embed it in processes ofaggressively forging a new black elite.

It should be clear that this more formal set of policypositions drew from and reinforced the informal political-economic system, and gave it an ideological legitimacyunder the Zuma government. It is very important foran understanding of the new Cyril Ramaphosa regime,though, to grasp the fact that the informal political-economic system extends way beyond the projects ofZuma and his circles.

Indeed, the murky dealings between the ANC leadershipof the Northwest Provincial Government, the majormining companies, and the traditional chiefs in theformer bantustan areas, demonstrate an entirely differentbut nonetheless rapacious collusion between stateofficials and politicians, multinational corporations andquasi-governmental traditional authorities, to dispossessrural villagers of their land and turn it over to thedestructive operations of large-scale platinum miningwhile enriching the former group - a process whichreveals a complex interplay between dis-embedding

and re-embedding different elements in the circuits ofcapital and commodities (Mnwana and Capps 2015).This rural strategy, already taking form before thetransition to democracy, was enthusiastically supportedduring the Mbeki years, and ratcheted up under Zuma.

It was through just such a deal in the Bapo BaMogalearea that Cyril Ramaphosa gained his stake as the BEEpartner of Lonmin (Capps and Malindi 2017), and wenton to play his notorious role in the repression of theMarikana strike which culminated in the 2012 massacre.

This particular case demonstrates, infact, the similarity of the politicaldynamics of official black economicempowerment policies, and thosethat inhere in the informal political-economic system outlined above -namely the exchange of politicalinfluence for lucrative partnershipdeals.Ramaphosa was effectively trading his access to thebusiness stake in the mining companies for his politicalinfluence with the ANC government, as revealed in hisinsistence to government ministers, on behalf of Lonmin,that the strike was a criminal affair rather than a legitimatelabour dispute (Forrest 2015). Such processes of resourcecapture had nothing to do with the Zuma-Guptapartnership.


Long-standinggrievances: Thokozacommunity March againstpoor services andcorruption - 1990

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The Zuma-Gupta nexusand state-captureAt the core of the Zuma project was an extraordinaryrelationship with a family of Indian businessmen, whichfacilitated the systematic process of capture of stateinstitutions through establishing a network of corruptministers and state officials, and siphoning off vast fundsthrough business tenders, broking and bogus consultingcompanies. Key targets were the biggest state-ownedcompanies with budgets of billions for capital expen-diture - specifically SA Airways (SAA), the state freightrail corporation (Transnet), and the electricity utility,Eskom. Pliant ministers and officials were appointed,and the boards of the corporations were filled with pliantdirectors and Gupta family associates. The Gupta sthemselves exercised tremendous power behind thescenes, often vetting and suggesting who should beappointed to what position, and not infrequently meetingwith potential appointees beforehand in order to letthem know exactly what they were expected to do.

The most brazen example that has cometo light was a meeting with the deputyfinance minister under Pravin Gordhan,Mcebisi Jonas, in which he alleges theyoffered him a sum of R 600 million if hewould agree to take over as financeminister and facilitate their deals.

A slew of information regarding these deals has enteredthe public domain during the Ramaphosa presidency,and the aim here is not to attempt an overview or fullanalysis, but rather to identify the political-economicsignificance of their modus operandi. Three examplesare sufficient to suggest something of this.

The first case is provided by Transnet, which in 2014issued a R 50 billion contract to four train builders,including China South Rail and China North Rail. It hasemerged since that the Guptas’s positioned themselvesas brokers in the two Chinese contracts, and receivedkickbacks, reportedly more than $100 million. At thesame time, Transnet insisted that the global managementconsultant, McKinsey, which had been appointed

transaction advisors, in turn appoint a Gupta-associatedcompany, Trillion as it s black empowerment partner,and dramatically inflated the fees for both. As anotherelement in this web of profiteering, a South Africanboard member of Transnet and a Gupta associate tookover a heavy engineering company which was beingpositioned as a major supplier to the four train builders.Similarly, a Gupta-linked IT company was inserted intoa partnership with global software giant SAP for a contractto provide an IT solution to Transnet. SAP was allocatedthe R800 million contract without a competitive tender,on the basis that the Gupta-linked company would get60% of the contract.

The second example concerns the electricity utility,Eskom. While the focus here is on the capture of Eskomon the Zuma years, Bowman (2018), presents Eskom asa microcosm of the policy incoherence produced by thecontradictory mix of disembedded and embeddedstrategies. Here too a new Gupta-linked set of boardmembers was appointed in 2011, and over time deliveredastonishingly large-scale benefits to the Gupta-linkedbusinesses. Most importantly, Eskoms muscle in thecoal industry was used to dispossess Glencore, a multi-national corporation with a global reach and a substantialSouth African component with a strong BEE element,from its ownership of a large-scale coal mine, and placeit in the hands of Tegata, a holding company fornumerous Gupta operating companies, in which thepresidents son also had a large stake. The mechanismused by the utility was to drive the coal company intobusiness rescue by refusing to negotiate coal prices,and then propose the Gupta mining company as a buyerat a massively discounted rate. Finally, it later emerged,Eskom financed the purchase through providing a R 659million prepayment to Tegata for the coal at a pricewhich it had previously refused to accept. Eskomcontinued to expand its contracts and pay exorbitantprices for coal from this and other coal mines owned byTegata

Trillion was also intimately involved with the variousfinancial and consulting projects at Eskom, includingagain with McKinsey in an extraordinarily inflatedconsulting contract which later turned out to be illegalbecause it had not been processed through Treasuryprocedures, and then again as an adviser to Eskom togrant a R 4 billion power station contract to a Chinese

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state company, Dongfang Electric Company, even thoughit had been disqualified by the procurement committeeon technical and price specifications.

The third case is that of the Zuma decision to introducea fleet of nuclear power stations into the policy mix forenergy in South Africa. This decision contradicted existingpolicy and has been critiqued by government researchinstitutions, independent analysts, Treasury, as well asfrom within the energy department, largely on thegrounds of it being the most expensive form of energyand also adding unnecessary capacity to the electricitygeneration industry. However it has been stronglysupported by Cabinet, and by some of the severalenergy ministers and energy director generals over thepast few years - these positions have been subject tochanges as Zuma attempted to ensure the programwould go forward. Circumstantial evidence suggeststhat an agreement has already been signed with Russiato supply the power stations. Finance Minister Nenerefused to sign a letter of guarantee with the Russianswhen he accompanied Zuma to a Brics Summit in 2015;later in the year he presented a Treasury analysis thatnuclear was unaffordable to the same cabinet meetingat which the Department of Energy presented amemorandum recommending nuclear procurement.Nene was fired hours later. In the face of Treasuryintransigence, the Department of Energy in 2017mandated Eskom to go ahead with the procurement,which it proceeded to prepare for until the courts ruledthat the entire process had failed to comply with dueprocess. Zumas desperation to keep this deal on trackwas revealed in his final negotiations with Ramaphosaover his resignation; his key demand appears to havebeen that his Energy Minister should be kept in placeafter his resignation.

Why is this deal is so important to Zuma? There is a viewthat the Russians have already paid over a very largesum, either to the ANC for its local government electioncampaign in 2016, or to Zuma himself, or to both, andthey in turn were putting considerable pressure on thepresident. The scale of the nuclear deal would also haveallowed for massive and wide-ranging rent-captureacross the supplier and construction pipeline. The Guptashad already positioned themselves and the president’sson for a nuclear boom by purchasing a uranium minein 2011.

These schematic descriptions of some of the operationsof the Zuma-Gupta network are drawn from the Betrayalof the promise report referred to above (Bhorat et al2017), itself a summary of large quantities of news reportsand other sources. Three features of these operations

are particularly interesting. Firstly, there is the importantrole played by global consultancies and service providers,such as McKinsey and SAP. The second is the importanceof state-owned corporations from Russia and China. Wewill return to these first two features below. However,here I wish to discuss the third - namely the extraordinarilynarrow base of beneficiaries - at least as presented inthis report - namely some key cabinet ministers andstate corporation board members, who presumablystood to benefit financially, and the Gupta family andassociates, overwhelmingly Indian nationals. The onlySouth African tender-based black economic beneficiariesappear to be Zumas son, and one South African boardmember.

The Gupta networks siphoned off an extremely largequantity of cash; no doubt large sums returned to thepoliticians and political networks, and helped to financethe building of factional political support throughpatronage within the ANC, but it is clear that theythemselves amassed a fortune through tenders, fraud,brokering, kickbacks, and so on.

This presents something of a puzzle:how could such a brazen project withsuch a narrow base of beneficiariesbe successfully implemented over theroughly seven-year period of itsascendancy? And how could a projectwhich, despite the rhetoric of radicaleconomic transformation, madevirtually no contribution to theformation of a black tender-basedcapitalist class survive politically?The focus of this report, and much of the media attentionpaid to the Zuma-Gupta state capture project, tendsto present it in this way - as a relatively narrow projectof looters, with the corollary that ending the core ofstate corruption requires a relatively focused, evensurgical repair job which excises the rot and re-establishesa constitutional state. In this analysis, Ramaphosa hasa relatively strong chance of succeeding.

However, the analysis is unconvincing. There must havebeen a significantly wider set of tender-basedbeneficiaries, each able in turn to distribute opportunitiesand largesse more broadly, in order to account for thepolitical longevity of and broad support for Zuma. Hencethe deep split between provinces at the ANCs December



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2017 conference, with strong support from a numberof provincial delegations for Zuma and his candidate,Nkosazana Dlamini-Zuma, and a very narrow win forRamaphosa. Further research will be necessary into thecircuits through which cash and opportunities weredistributed, what kinds of people benefited, and howthese were put to use. But even at this point it seemsimplausible to argue that the informal system was, asargued by Bhorat et al (2017), a system which wascentralised by the Gupta-Zuma nexus; it was rather adecentralised system in which various party barons werelicensed to conduct their own operations as long asthey provided political support or cover for thePresidential faction. Hence looting proceeded at anaccelerated pace across the system.

How does Polanyis concept of a counter-movement tore-embed fictional commodities such as finance andland contribute to our understanding of these operationsof the Zuma-Gupta project of state capture ? I wouldargue that they deepen and extend the earlier projectof the informal political-economic system, namely, re-embedding class formation through the appropriationof wealth from the disembedded formal circuits ofcapital. Thus the appropriation of finance through inflatedtenders and fraudulent contracts, and its recirculationthrough Gupta and Zuma linked companies and backinto political patronage networks, contributed to theemergence of new elites located in a convergence ofpolitical power and economic muscle. Strengtheningthis elite in turn contributed to the strengthening ofmuch broader networks at national, provincial and locallevel, each with their own mechanisms for siphoning offwealth at different levels of the state, whether in NelsonMandela Bay, North-West Province, or Mpumalangaand Gauteng.

All of these practices of the informalpolitical-economic system flouted therules and legislation of the formalconstitutional political systemregulating the operations of the statesystem, which are regarded as bestpractice governance in thefinancialised global order, and whichrender financial circuits inaccessibleto aspirant local elites, being generallydesigned in the broadest sense tobuttress and facilitate the dis-embedding processes ofmarketisation. Hence the logic of theinformal system was necessarily toattempt the capture of Treasury andthe tax agency, SARS.A further question arises from this account: to whatextent does the informal system constitute a competingmodel of national accumulation to globalisedaccumulation?

The political economy of corruption: elite-formation, factions and violence


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The Brics versusWestern Capitalism:competing models ofaccumulation?The project to accelerate elite-formation through resistingthe dis-embedding processes of marketisation whichfavours existing globalised South African corporationsand multinational corporations, through re-embeddingcontrol over the flow of opportunities, rents and contractsin local networks and often in non-market relationsbetween politicians, state officials and local entrepreneurswas clearly entangled with a new set of networks withstate-linked corporations such as China North Rail,China South Rail, Dongfang Electric Co, and Rostom,as noted above, as well as with murky networks ofbusinesses and money-laundering linked to India, HongKong and Dubai. At the same time, the project wasentangled with Western companies closely associatedwith neoliberal governance - McKinsey, Bain, KPMG,SAP. The way these entanglements developed overtime suggests interesting tensions between the twomodels.

The advantage to the Zuma-Gupta network of workingwith the state-linked corporations from the formercommunist countries of China and Russia, was that thelatter are accustomed to working in a zone of complexstate motivations and directives, are not subject to thesame kinds of official scrutiny by regulatory bodies asWestern corporations, and were thus relativelycomfortable with the unofficial set of transactions andconsiderations that defined the Zuma-Gupta operationsbecause they created opportunities for accessing newmarkets and global business opportunities. Buildinglarge-scale kick back provisions into their tender bidbudgets - such as fees for the Guptas, donations to theANC, et cetera - would have been relatively easy forthem. All parties would have shared an interest inrestricting the access of Western multinational corpor-ations to South African markets, and would haveunderstood the imperatives of local elite formation.

Western multinationals were however also entangledin this project, primarily to provide cover and legitimacyto the processes of state-capture - clearly these coreactors in the institutional architecture which regulatesand drives the deepening of the global neoliberaleconomy themselves act in murky and self-interestedways, and are prepared to collude with corporatemisdeeds (for example the Enron case in the US). Butthe intriguing twist to this story is the damage sustainedby these companies as the scale of the Zuma-Guptaoperation emerged in the public domain. Auditing andconsulting firm KPMG provided a key report on allegedwrongdoing at the tax collection agency, SARS, whichprovided cover for Zuma appointee Tom Moyane topurge the top leadership, and the Zuma-appointedboss of the police anti-corruption unit, the Hawks toinvestigate and lay charges against the troublesomefinance minister, Pravin Gordhan. This was in additionto auditing several of the state-owned corporations andignoring indications of massive fraud. As these operationshave been uncovered, KPMG has suffered massivereputational damage and loss of business in SouthAfrica, is dramatically downscaling, and is the focus ofregulatory investigations. Bain, a high profile globalconsulting company, provided the critical consultingreport which facilitated Moyanes deeper purge of SARSmanagement, enabling him to take control - and iscurrently attempting to limit the damage. Consultingcompany McKinsey is in a similar predicament over itsillegal and dubious contract with Eskom and itspartnership with Gupta-associated companies. The UK-based public-relations company, Bell-Pottinger, whichwas contracted by the Guptas during 2017 to launchfake news and social media attacks on the emergingopposition to the Zuma-Gupta project, was exposed,investigated and subjected to regulatory sanction;reputational damage was so great that it has sinceclosed down.

The implication of this twist is that when the globalhandmaidens of good governance abet a projectwhich challenges the expansion of market logic and itsregulatory institutions at the behest of the colonialother - Indians, Africans, the Chinese - they aresubjected to massive outrage and sanction from thecentral regulatory structures of the global system. This

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was one element in a more concerted fightback byvarious institutions and corporations - South Africanand global - against the Zuma-Gupta project.

But what of the question posed above - do theoperations of the informal political-economic systemin fact constitute an alternative accumulation strategyto the dis-embedding marketisation of the globalsystem? As noted above, it found an ideological rationalein the advocacy of radical economic transformationrooted in a developmental state. In theory, both radicaleconomic transformation and the Zuma-Gupta projectwere committed to rolling back neoliberal marketisationand re-embedding the economy in society, with thepurpose of facilitating the emergence of an embeddedblack capitalist class whose relation to the nation andthe state would ensure that it was more amenable tothe developmental imperatives of growing the SouthAfrican economy and benefiting its people. This modelcontrasted with that pursued under Thabo Mbeki -deepening marketisation and the penetration of globalcapital, the formation of a credit-based BEE capitalistclass itself progressively disembedded from societythrough its insertion into dependency on white andglobal capital, the distribution of grants to themarginalised poor, and the trickle down effect ofincreasing foreign investment. This contrast accountsfor the mobilisation of a broad range of forces behindZumas ascent to power.

However the practice of radical economic trans-formation under Zuma bore little resemblance to thismodel. It facilitated the expansion of the informalpolitical-economic system deep into the national stateas well as in the provinces and municipalities, in theprocess redirecting state funds towards personalenrichment, political faction building, the extraordinaryprofit-making of a foreign family, and the enrichmentof the president s own family. As noted above, so farwe have little evidence of this project aiding theformation of an indigenous capitalist class invested inlong-term growth and expanded accumulation.Furthermore, the process has involved deep damageto state institutions and their ability to provide publicgoods and services, or to lead the kind of economicdevelopment envisaged by radical economictransformation .

Clearly also the scale of diversion of state resourceswas unsustainable. State-owned companies such asSAA, Eskom, Transnet and others were plunging deeperinto debt, placing an unsustainable burden on statefinances. At the same time, the takeover of SARS ledto a decline in revenues - variously estimated as

something between R 50 bn and R 142 bn since Moyanetook over (Business Day, 6 July 2018) - as the newleadership moved to protect individuals and companiesfrom scrutiny and reduce their taxes, shutting down theinvestigations unit and the customs and exciseoperations to protect the illicit tobacco industry (inwhich allegedly networks linked to the Zuma-Guptanexus were involved) amongst others.

Certainly the Zuma-Gupta project hadno interest in sustainability of the state,whether financial or institutional. Thesame can be said of other instances ofthe informal political-economic system- local government patronage or theVBS saga, for example.

This system, then, appears to be defined by short-termist opportunism and plunder, rather than a long-term developmental project as suggested by its rhetoric.And a substantial portion of the looted funds were inturn disembedded through money-laundering intoopaque offshore assets.


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Primitive accumulationNonetheless, it is important to consider its economicsignificance in a broader frame. Here the innovativework by institutional economist Mushtaq Khan is helpful.He argues that in those postcolonial societies charac-terised by the absence or weakness of indigenouseconomic elites at the time of independence, a processof primitive accumulation takes place as incipient elitesplunder state institutions and private corporations -particularly where the latter are held by minorities ornon-indigenous owners - in a rapacious struggle toamass wealth. While this is economically destructive inthe short term, it may lay the basis for the emergenceof an indigenous capitalist class. (See box page 18)

South Africa obviously presents a very different politicaleconomy, not least because of its sophisticated anddiverse economic sectors, and the presence of a largesettler elite. But it too is characterised by the weaknessand economic exclusion of its indigenous elite.

While Mbekis BEE strategy aimed to create a new blackbusiness elite, it remains small and insufficient to absorbsufficient contenders.

Hence the growth of an informalpolitical-economic system whichpartly assists in the strengthening andgrowth of new black companies, butincreasingly under Zuma licenseswholesale primitive accumulationacross all state institutions. Thequestion is whether a significantnumber of the newly-enriched willfind ways to deploy their wealth intoproductive economic activity.In other words, the informal political-economic maywell provide the foundation for an alternativeaccumulation path in South Africa, which facilitates theemergence of a new black business class supported bystate owned corporations and in alliance, perhaps, withstate-owned companies from China and Russia.

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A Numsa March - 2015

William Matlala


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Bangladesh: from primitive accumulation to managed democracy

Khan s (2013) study of Bangladesh illustrates thepossibility of converting primitive accumulation intoindustrial growth. In the immediate aftermath (1971-5) of the civil war within Pakistan that gave birth toBangladesh, a fractious grouping of politicalorganisers, many of them armed, seized andsometimes stripped abandoned assets, industrieswere nationalised and mills and factories were usedto create rents and patronage. Public resources wereappropriated through the creation of excessemployment, inflated construction and importcontracts, and so on. The economic effects weredisastrous. However, once the political situation hadbeen stabilised by incorporating these factions intoa new governing coalition under military control,over the longer term the proceeds of primitiveaccumulation became the basis for the formationof a new class of capitalists with capital to invest,firstly when nationalised factories were privatised ,and secondly when the international Multi FibreArrangement created the opportunity fordevelopment of a garment industry. By the end ofthe 1980s there were over 100 new garment firms,

and by 2005 this had become an industry in which3500 active firms employed well over 2 millionpeople. (Khan 2013)

The period of rapid growth in Bangladesh waspresided over by the military which retained controlthrough the presidency while facilitating thetransformation of factions into political partiescompeting through elections (1975-90). A popularuprising in 1990 ended the system of managed todemocracy, leading to multi-party democracy withdeep practices of clientilism. Electoral crisis, stalemateand violence in 2006/7 was ended by an emergencygovernment backed by the military and internationalinstitutions for two years. This tried to impose ’goodgovernance reforms’, in particular a crackdown oncorruption. Thousands of political activists werearrested and charged, including the leaders of thetwo main parties and hundreds of businessmen. Inthe end this process collapsed because of proceduralflaws, lack of evidence, and sheer scale. The returnto democracy saw the rapid re-emergence of theold system of patronage.

William Matlala

Numsa March - 2015

SWOP | Corruption WP10 text 2/19/19 8:35 AM Page 21

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The battle overTreasuryTreasury and its associated institutions, which wereinitially left alone by Zuma as a way of avoidingdisturbance in the international financial system, overtime came to present serious obstacles to the expandingcapture and plundering of state resources.

Treasury has an oversight and regulatory function inrelation to the finances of the public sector andparticularly state-owned companies, making it difficultto play fast and loose with tendering procedures.

SARS investigations into tax fraud as well as the illicittobacco operations which appear to have had links intothe Zuma-Gupta networks, were also proving potentiallydangerous. Zuma’s response was to attempt to takecontrol over SARS and Treasury. Moyane was appointedhead of SARS in 2014. In late 2015, in the face of financeMinister Nene’s refusal to support the nuclear deal, hewas fired and replaced with a Zuma supporter. Turmoilin the financial markets, warnings from business, andpush back within the ANC, forced Zuma to back downfour days later and re-appoint Pravin Gordhan in theposition1.

Gordhan seems to have decided that the best form ofdefence was attack. He engaged in a public war ofattrition with Moyane (SARS falls under Treasury), andmoved to obstruct and prevent unprocedural deals onthe part of the state companies, including Denel, SAA,Eskom and Transnet. As more information about theZuma-Gupta deals leaked into the public domain,financial institutions began the process of closing Guptaaccounts on the grounds that they were ‘politicallyexposed’, making it increasingly difficult for the familycompanies to continue operating. When Cabinet putpressure on Gordhan to approach the banks an attemptto reverse the decisions, Gordhan went to court for adeclaratory order that this would be unconstitutionalinterference with the banks, and used the legal processto put documentation into the public sphere whichrevealed numerous unexplained movements of fundsout of the country by the family. The international ratingsinstitutions re-rated South Africa downwards to vergeon ‘junk status’.

The Gordhan strategy was one ofusing every opportunity to exposethe clandestine dealings of the Zuma-Gupta network to public scrutiny andoutrage, circumscribing Zuma’s roomfor manoeuver, and beginning togenerate a groundswell of resistancewithin the ANC, in civil society, frombusiness, as well as from theinternational institutions of thedisembedded economy.This momentum was accelerated by the leak of a hugetranche of emails from the Gupta accounts, feeding aconstant stream of revelations in the press about theextent of their influence over government officials.

The result was that Zuma was forced to either fireGordhan, or accept the gradual weakening of his positionacross many fronts. In March 2017 he fired Gordhan,precipitating a crisis in the ANC and a broader senseof crisis in the country. Gordhan and his network ofsupporters and allies began to mobilise an explicitcampaign within the ANC against corruption, ‘statecapture’ and Zuma.

The ANC began to polarise around the two figures ofZuma and Gordhan, as sketched in the introduction.The opposition political parties, as well as a variety ofNGOs and social movements had increasingly beenchallenging government decisions and policies drivenby Zuma in court, and as these cases wended their waytowards the Constitutional Court Zuma and governmentfound their decisions reversed by the judiciary, furtherreducing their room for manoeuvre. The Gupta family,fearing that the tide was shifting against them, continuedmoving assets out of the country and eventuallydisappeared themselves, leaving proxies to run theiraffairs. The Parliamentary ANC became more indepen-dent, challenging Zuma ministers and the representativesof state corporations over their decision-making andoperations.

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1 He had been Finance Minister during Zuma’s first term, and prior to that was head of SARS.


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Ramaphosa victory:unstable coalitions,corruption, violenceThe public campaigning by the Gordhan faction, theopposition parties, and civil society organisations peakedin June-July towards the Parliamentary vote of noconfidence. After that - for the first time some ANCMPs voted against their party, but not enough to winthe motion - the struggle moved inside the ANC as thetwo factions jockeyed for positions prior to the nationalelective conference in December, while the rest of thenation looked on. This was essentially a contest betweentwo presidential candidates. Cyril Ramaphosa, generalsecretary of the National Union of Mineworkers (NUM)in the 1980s, chair of the Constitutional Assembly inthe early 1990s, businessman and BEE beneficiary inthe 2000s, mining magnate implicated in the Marikanamassacre, and Deputy President of the ANC since the2012 conference, stood as the anti-Zuma candidates,backed by Gordhan s coalition. Nkosazana Dlamini-Zuma, head of the African Union, Zumas former wifeand veteran ANC politician in her own right, stood asthe leader of the Zuma networks campaign.

The factional mobilisation and bargaining on both sideswas intense, as each tried to build a majority coalition.The results were on a knife edge until the end, andultimately were determined by the positioning of theMpumalanga provincial delegation led by the provincesstrongman, DD Mabuza, who is widely understood tocontrol the province and its networks of patronage andcorruption, which have involved several politicalassassinations to eliminate opponents. Mabuza, whohad been an important figure in the Zuma-supportingPremier league, adopted a position as independentkingmaker, and negotiated with the Ramaphosa teamfor a position as deputy president on his slate. This wasrejected on the grounds of his unsavoury credentials.However, as it became clear in the conference that thevotes of the Mpumalanga delegates would decide whowas the winner, Ramaphosa relented. The result wasthat Ramaphosa was elected president of the ANC,with Mabuza as deputy.

The ANC emerged from the conference deeply divided.Ramaphosa has moved carefully and strategically atnational level to consolidate his position. Zuma himselfwas forced to resign as president of the country and isfinally facing the court case for corruption that he hadspent 10 years as president evading. Ramaphosa isnow president of the country, has removed some ofthe most offensive cabinet ministers and placed hisown allies in strategic positions. Gordhan is the newpublic enterprises minister and has replaced the boardsof several of the state corporations.

Key state officials in the Zuma-Gupta network, specificallyin the police, the National Prosecuting Authority, andSARS have been removed, or face court cases anddisciplinary enquiries. Commissions have beenappointed to investigate state capture and theinstitutional destruction at SARS, and Parliamentaryenquiries are being conducted into specific statecorporations.

However, Ramaphosas power isprecarious in the ANC, and it is byno means clear what the result of themultiple contestations, particularly atprovincial level, will be. The twoprevious presidents were able torapidly impose their authority on theANC and neutralise or purgeopponents. Ramaphosa is clearlyunable to move as decisively. TheZuma network of allies is still activeand powerful. As the various enquiriesand investigations unfold they maylead to a series of prosecutions inwhich many of them will beimplicated. It can be expected thatthey will fight back as hard aspossible.

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Ramaphosa himself does not necessarily have a mandateto end corruption. Firstly, it is not clear that those whovoted for him in the ANC presidential contest werevoting against corruption. While Gordhan, the SACPand COSATU, and their allies, were fighting explicitlyagainst corruption and state capture , an anti-corruptiondiscourse was not discernible at the electoral conference,nor was that explicitly an element in provincial cam-paigning over the elections. Delegates were as likelyconcerned about the dangers of a family dynasty takingcontrol of the ANC, about the ANCs dramatic declinein electoral fortunes under Zuma, and about what manynow take to be a principal of the ANC - that the deputypresident becomes the president.

Secondly, several of his main provincial backers arethemselves deeply implicated in networks of patronageand corruption. The staunchly pro-Ramaphosa leadershipof the Eastern Cape are implicated in the plunderingand institutional decay of Nelson Mandela Bay detailedin Olvers 2016 book. The deputy chair of the ANC inKwaZulu-Natal, who played a leading role in mobilisingsupport for Ramaphosa in that Zuma-supportingprovince, Mike Mabuyakhulu, has just been indicted incourt with seven co-accused for corruption and money-laundering. Not only was Mpumalangas support crucialto Ramaphosas victory as noted above, DD Mabuzasposition as deputy president puts him in line for thepresidency in ten years time.

As argued above, the informal political system of centredon patronage is pervasive, interpenetrating the ANCand the state at multiple levels and extending far beyondthe Zuma-Gupta network.

This account, sketchy as it is, demonstrates quite clearlythe way in which Ramaphosa necessarily depends forpolitical support on a coalition of party barons andfactions, many of them implicated in greater and lesserways in corruption. The barons and factions in turn alignwith the Ramaphosa coalition for a variety of strategic,tactical and expedient reasons - constituting a fractiousmix of interests which requires constant management.

Moreover, Ramaphosa is likely to remain vulnerable tothe same kind of populist challenge as Zuma posed toMbeki. His modest policy prescriptions differ little fromthe program that Mbeki championed. There is little ifany likelihood that these would have different outcomes.Unemployment, poverty and inequality will remaindesperately high. And attempting to shut off access tostate resources for primitive accumulation will starveaspirant elites of opportunities for wealth-making. Asimilar combination created the fault lines exploited by

the Zuma-led anti-Mbeki campaign, and it can beexpected that a similar campaign will be mobilisedagainst Ramaphosa; indeed, it is already present incurrent factional if relatively covert contestations.

The prospect for Ramaphosas success in his project ofrebuilding state institutions, reducing corruption andreturning to the marketisation - and dis-embedding -policies of the Mbeki era will depend on his ability tobuild a stable majority coalition around himself in theANC. This will in turn depend on his ability to mobilisecoercion in order to enforce credible rules of the game.

With regard to the first, such acoalition would have to include amajority of factions in the ANC, andthis means including key figures andnetworks of corruption. The moresuch figures are excluded, the morescope there is for disruption andcounter-mobilisation against theRamaphosa coalition.In short, the informal political-economic system ofpatronage will remain a vital part of political life. TheRamaphosa-Mabuza alliance, as well as Ramaphosasprovincial alliances, are a harbinger of what will berequired. The logic of this will be to limit the scope ofprosecutions for corruption.

Stabilising such a coalition would necessitate a tacitdeal protecting key figures from prosecution andpermitting continuing forms of primitive accumulationin order to allow ongoing elite formation, even if on amore modest scale. Such a tacit deal would have toinclude an understanding regarding the distribution ofopportunities and rent-seeking across the coalition.From Ramaphosa s point of view, this would be thenecessary price for establishing sufficient political stabilityto pursue his goals. On the other hand, he would beseeking to limit institutional damage to the state andthus establish some form of managed corruption. Forexample, one could imagine an understanding thatwhile kickbacks and inflation of tender contracts arepermitted, these should not exceed something like10%, and would be expected to deliver a reasonablygood quality public infrastructure or service. Any failureto do this would be punished.

Which leads to the second condition - coercive capacityto enforce the modus operandi of such a coalition. This

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is really the key weakness for the ANC and Ramaphosa.Ramaphosa himself is inclined to negotiate andincorporate rather than use force. This may be goodfor building coalitions, less so for policing them. Noris there any other figure with credible coercive capacityapparent within the leadership echelon. Comparativeinternational research suggests that the stabilisation ofcoalitions that can moderate or reduce corruptionrequires coercive capacity, often in the form of astrongman , frequently with a base in the military (North,Wallis, Webb and Weingast 2013).2

For a variety of reasons this looks unlikely in SouthAfrica, at least in the short term. Perhaps Ramaphosasgamble is that a strengthened and autonomous criminaljustice system will provide the coercion to keep politicalallies honest. The problem with this, though, is that itimplies an indiscriminate policing of corruption, onethat does not avoid figures who are necessary to thestabilisation of the dominant coalition. Prosecution ofsuch figures may be satisfying to all who opposecorruption - but it poses the distinct threat of destabilisinga potentially stabilising coalition, and providing thepretext for anti-Ramaphosa mobilisation.

It is not at all clear that this circle canbe squared. Hence the far greaterlikelihood that the dominant coalitionremains unstable and subject tofrequent challenge, paralysis andfracturing, accompanied by violenceand attempts to subvert the criminaljustice system.It is not impossible that such a dynamic produces asplit in the ANC. Many commentators welcome thisprospect, hoping that the emergence of coalition politicsbetween political parties would have the potential tolimit corruption as each has an interest in policing theothers. However, quite the reverse is possible - the DA-led coalitions in various municipalities have had toaccept increased bargaining over trade-offs, contractsand positions with coalition partners - or lose theirmajority.

The political economy of corruption: elite-formation, factions and violence222 My analysis of the conditions for stabilising coalitions of rent-seeking factions is deeply indebted to the work of North, Wallis, Webb and

Weingast cited above, as well as to the earlier book by North, Wallis and Weingast (2009).

The politics of anti-corruptionAnti-corruption campaigns are as political ascorruption itself. Anti-corruption campaigns are oftenappropriated for other ends. In Brazil, for example,the anti-corruption campaign led by the judiciarywas appropriated by right-wing opponents of theWorkers Party to impeach the President whileprotecting the far more corrupt right-wing politiciansand ultimately led to the ascendance of the far rightBolsanaro. This will certainly not in the deeplyentrenched system of political corruption. In Indiathe right-wing BJP mobilised anti-corruption rhetoricto defeat the Indian Congress Party without tacklingcorruption itself.

In Bangladesh, and all out good governanceattempt to arrest and prosecute hundreds of corruptpoliticians and businessmen collapsed quite rapidly(see box on page 17).

In South Africa at local level, those who mobiliseagainst corrupt councillors are not infrequentlyimplicated in corruption themselves. The EFF was

highly vocal about corruption and constitutionalvalues as a way of discrediting Zuma, but has sincepositioned itself as a defender of figures accusedof corruption, and has itself been implicated inseveral episodes of corruption. The same can besaid of numerous trade union leaders. The DA maybe more programmatically committed to anti-corruption politics, but hardly in the interests ofredistribution to the poor.

It is not clear that corruption has great popularattraction either. The widespread mobilisation bycivil society against Zuma in mid-2017 seemed tosuggest broad popular support for fightingcorruption. However, it was the crisis and publicdivision within the ANC that created the conditionsfor this: mobilisation could be understood as supportfor a struggle within the ANC, rather than a struggleagainst the ANC. No anti-corruption campaignbefore or since has attracted anything like thisbreadth of support.


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The prospects for analternative counter-movement?The above prognosis suggests that a liberal democraticconstitutional order is unable to contain the contra-dictions produced by 370 years of settler colonialism.Neither of the two economic trajectories on offer seemto address these contradictions - deeper marketisationwhich further disembeds accumulation and life, orrampant primitive accumulation. Nor are either of thetwo prospects outlined above attractive - volatility,violence and crisis, or rule by a strongman.

Can an alternative counter-movement to re-embedsocial and economic development be imagined?

Such a counter-movement would have to address thetwo central problems - firstly, the necessity for theformation of a black capitalist class on the land and inindustry, and secondly, the necessity to address theliving conditions of the people so as to produce decentlife. It is difficult to see how these could be addressedwithout a very large-scale redistribution of wealth fromits current holders, whether in the form of a wealth tax,or more directly through appropriation. In this theproponents of ’radical economic transformation’, theappropriation of land and so on, are not wrong.

But how could the proceeds of such redistribution bechannelled into productive investment and productivelife, rather than siphoned off into patronage, factionbuilding and extravagant consumption? The likelihoodfor this would depend on the organised strength ofthose classes that have an interest in the expansion ofproductive life, rather than parasitic and renter activities.Here the weakness of black entrepreneurial formationsis a real liability. One reason for the absence of a strongindustrial policy in South Africa is the absence of a blackmanufacturing class to champion it. The problem isillustrated by the failure of Eskom over a long periodto make any contribution to industrial development,despite its mandate to do so (Bowman 2018), also by

the systematic diversion of funds allocated for landredistribution and black farming into the hands ofcorrupt officials and their networks (Business Day, 24January 2019).

Nor do the prospects for a popular movement basedon the working class and the poor, and with this kindof vision for the future, seem particularly promising. Itis true that there is mobilisation and confrontation acrossdiverse social sites around the country - universities,urban and rural communities, mines and industries.However, these movements also face difficult obstacles.Firstly, many of them are also penetrated by patronagenetworks and shaped by elite aspirations. Secondly,and linked to the above, the ANCs hegemony remainspervasive, making it extremely difficult to establish theautonomy of movements. Thirdly, many progressiveideas and slogans have been appropriated and dis-credited by groupings associated with the Zuma andright-wing populism - radical economic transformation ,land redistribution, nationalisation of mines, et cetera.Finally, social movements and working class organisationsare themselves fragile, fractured and in a state of flux(Von Holdt & Naidoo 2019).

Despite these weaknesses, perhaps over the longerterm such a counter-movement could emerge fromsome kind of alignment between a revived popularmovement, a black middle class yearning for a differentfuture, a nascent black capitalist class and even elementswithin the ANC and the state3.

In the immediate future, however, ifthe trajectory of elite politics as wellas popular politics outlined above isaccurate, the current period is likelyto be characterised by multiplecontestations over materialopportunities, political power andsymbolic representation, giving riseto an increasingly volatile, unstableand violent political space.

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3 Interesting straws in the wind are provided by the DTI s policy of fostering black manufacturers, as well as by a little-noticedreport of the first National Planning Commission (NPC, 2015)


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Bowman, Andrew (2018), Electricity, state-ownedenterprises and economic transformation in South Africa:the political economy of the Eskom crisis unpublishedpaper.

Capps, Gavin and Malindi, Stanley (2017), Dealing withthe tribe: the politics of the Bapo/Lonmin royalty-to-equity conversion, SWOP Working Paper 8,Johannesburg: SWOP.

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Dawson, Hannah (2017), Protests, party politics andpatronage: a view from Zandspruit informal settlement,Johannesburg. In M. Paret, C. Runciman, & L. Sinwell(eds), Southern resistance in critical perspective: Thepolitics of protest in South Africas contentiousdemocracy. (pp. 118-34). London: Routledge.

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Von Holdt, K., (2013), ’The transition to violentdemocracy in South Africa , Review of African PoliticalEconomy, No 138, pp 589-604.

Von Holdt, K. (2014), On violent democracy , in TheSociological Review, 62: S2, Violence and society:towards a new sociology, edited by Jane Kilby and LarryRay, pp 129-151 (DOI: 10.1111/1467-954X.12196).

Von Holdt, Karl and Naidoo, Prishani (2019), Mappingmovement landscapes in South Africa , Globalizations,Vol 16 (2).

Von Holdt, K., Langa, M., Molapo, S., Mogapi, N.,Ngubeni, K., Dlamini, J., and Kirsten, A. (2011), Thesmoke that calls: Insurgent citizenship, collective violenceand the struggle for a place in the new South Africa:seven case studies of community protests andxenophobic violence . Research report. Johannesburg:CSVR and SWOP.


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