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State of Capture: Much More

Than Corruption
Our experience had made us acutely
aware of the possible dangers of a
government that is neither transparent
nor accountable. To this end our
Constitution contains several
mechanisms to ensure that
government will not be part of the
problem Nelson Mandela, 1996
The Power Elite Anchored at the
If it were up to me and I made the rules,
I would ask for six months as a dictator.
You would see wonders, South Africa
would be straight. Thats why if you give
me six months, and allow Zuma to be a
dictator, you would be amazed.
Absolutely. Everything would be straight.
Right now to make a decision you need to
consult. You need a resolution, decision,
collective petition, Yoh! Its a lot of work.

President Zuma, July 2016.

7 Ways The Presidents Power-Elite
Undermines the State
1. Securing control over state wealth, through the
capture of state-owned companies by chronically
weakening their governance and operational
2. Securing control over the public service by weeding
out skilled professionals.
3. Securing access to rent-seeking opportunities by
shaking down regulations to their advantage, and to
the disadvantage of South Africans.
4. Securing control over the countrys fiscal sovereignty.
5. Securing control over strategic procurement
opportunities by intentionally weakening key
technical institutions and formal executive processes.
6. Securing a loyal intelligence and security apparatus.
7. Securing parallel governance and decision-making
structures that undermine the executive.
#1 & #2: Capturing the SOCs
and Weeding out skilled professionals
Cabinet and SOC board changes
April 2009: October 2010: ESKOM TRANSNET-
President Zuma Nazia Carrim wife of Iqbal
Jacob Zuma removes Public Sharma has
Muhammed Noor
becomes Enterprises Minister Hussain, family brokered
state Barbara Hogan after member of Gupta Gupta deals
she apparently business associate and is in
refuses presidential Salim Essa. business with
interference into SOC Romeo Khumalo co- Gupta
board appointments. director with Essa in a associates.
October 2010: company.
Vytjie Mentor called Mark Pamensky Tembakazi
to a meeting at the former director in Mnyaka is
Gupta Saxonwold Gupta company, the
residence and offered Oakbay. Chairperson
the Public Enterprise Marriam Cassim of the Gupta-
Ministry on condition previously worked for sympathetic
that she drops the Gupta company, Progressive
SAA flight route to Sahara. Professional
Mumbai. Mentor Ben Ngubane was in Forum.
refuses. business with Essa.
November 2010: Kuben Moodley was
Malusi Gigaba in business with
CONT: #1 & #2: Capturing the SOCs
and Weeding out skilled professionals
Cabinet and SOC board
September 2015: December 2015:
February 2011: March 2017:
Gigaba appoints President Zuma President Zuma President Zuma
Brian Molefe CEO of appoints fires Finance
inexperienced Minister Nhlanhla
Transnet. wholesale
Together with CFO backbencher Nene (reportedly
Mosebenzi Zwane hours after he Cabinet changes,
Anoj Singh, they
proceed to sign off into the important presented to getting rid of
huge deals. (See next position of Mines Cabinet on the Jonas and
slide). Minister. unaffordability of Gordhan. He
May 2014: President Seot/Oct 2015: nuclear power); replaces them
Zuma appoints Lynne Minister Brown replaces him with
appoints Brian Des Van Rooyen
with Malusi
Brown as Public Gigaba and Sifiso
Enterprises Minister. Molefe as Eskom who arrives flanked
CEO, a month later, by advisors Ian Buthelezi. Highly
Changes to the Denel
board, including: Anoj Singh joins Whitley, Jessie experienced civil
Nkopane Sparks him as Eskom CFO Duartes son-in- servants,
Motseki who owns a October 2015: law and including
stake in the Gupta Former Deputy Mohamed Bobat, Director-General
uranium mine, Shiva; Minister of Finance former Gupta
Mcebisi Jonas is employee, but is
Lungile Fuzile
Dan Mantsha who is and Deputy
adviser to Zuma and offered a R600- forced to reverse
million bribe by the his decision. He Director-General
Minister Faith
Muthambi. Guptas in return for appoints Pravin Andrew
players the Ministry of Gordhan. Donaldson have
Malusi Gigaba He refuses.
Brian Molefe Mosebenzi Zwane Lynn Brown Dan Mantsha
now left.
Des Van Rooyen Sifiso Buthelezi
#1 & #2: Capturing the SOCs
Between 2012 and 2019 Transnet announced that it would spend
improving its ageing rail network. February 2014:
December 2010: October 2013:
June 2011: Gigaba
Malusi Gigaba Transnet One month before
tries to make the tender is
moves Sharma chairman of announces R50
Department of billion locomotive awarded to four
Board but, according train builders, Iqbal
Trade and Industry to media reports, tender. They
official Iqbal appoint McKinsey Sharma (who
Cabinet refuses adjuducated the
Sharma (who is in based on his to advise on deal
business with the structure and tender process),
proximity to the together with Rajesh
Guptas) to Guptas. Gigaba funding. McKinsey
Transnet Board. agrees to Gupta and
creates a Special Duduzane Zuma,
December 2010: Board Tender subcontract part of
The New Age the work to acquire a stake in
committee, VR Laser Services
reports that Brian seemingly to Regiments after
Molefe will be which the original (ostensibly via VR
circumvent Laser Property), an
appointed Transnet Cabinets concern, fixed contract for
CEO. R35m balloons to engineering firm
and appoints that is positioned to
March 2011: Sharma chair (this nearly R100m
Key later
Three months (signed off benefit from the
committee oversees Transnet loco
this happens. tenders of R2.5bn internally by
Malusi Gigaba Iqbal Sharma
Molefe and CFO
Brian Molefe Anoj Singh Rajesh Gupta tender, (through the
Duduzane Zuma

and above)
#1 & #2: Capturing the
2015: Seemingly Ultimately,
Evidence has
in a bid to gain according to
also emerged of
access to the media reports,
how the
lucrative Transnet has
proceeds of
Regiments paid Trillian
March 2014: about R170-
these contracts
consulting have been
Transnet contract with million for
spirited out of
awards Transnet, the unexplained
the country
R50bn loco Guptas try to consulting work.
through various
buy Regiments, Evidence has
tender to four emerged of how
but fail. They shell companies.
train builders. then buy into Transnet paid
Trillian Chairman
advisory firm both Regiments
Tokyo Sexwale
Trillian after (apparently non-
launched an
which a material Gupta linked)
investigation into
portion of the and Trillian
the allegations
Regiments work (Gupta linked)
against Trillian
is redirected to hundreds of
but the company
them, apparently millions for the
with the help of same pieces of
their friend Eric consulting work.
and the
Regiments is
#2: Capturing the SOCs
Denel overhaul between July 2015 and May 2017

July 2015: January 2016: Pravin Gordhan calls May 2017:

Public Ntshepe out the formation of Finance Minister
Enterprises announces the Denel Asia as illegal Malusi Gigaba
Minister Lynn formation of in terms of the PFMA orders the
Brown overhauls Denel Asia, as neither he nor dissolution of VR
Denel Board and jointly owned by Brown had given the Laser Asia.
installs Gupta Denel and VR necessary authority.
loyalist Dan Laser Asia,
Mantsha as chair. owned by the The purpose of the
Mantsha then Guptas and Denel deal seems to
appoints ally Duduzane Zuma have been to give
Zwelakhe (and registered the Guptas/Zuma
Ntshepe as CEO. in Hong Kong). access to Denels
intellectual property
to develop and sell
military products to
the Asian market.
Lynn Brown Dan Mantsha Zwelakhe Ntshepe Duduzane Zuma Malusi Gigaba
#3 Regulatory shake-down

Government ministers acting in concert with private

interests use regulatory instruments or policy decisions in
an arbitrary manner to shake down incumbent
businesses including black businesses and favour
particular interests. Instead of prioritising job creation and
economic growth, decisions are taken for the benefit of a
particular company, faction or group.

The Minister of Mineral Resources Mosebenzi Zwane

made this clear when he said: We are clear that if
companies cannot mine safely, they should not be mining
at all, and should allow other potential holders, who
respect the laws of the country, to continue mining.

The use of the Heath and Safety law, for example, is then
used to achieve the firesale of existing assets in favour of
sectional business interests.
#1, #2 & #3: Capturing the SOCs:
How the law appears contracts
to have been used in favour of the
IDWALA & BRAKFONTEIN No water licence & weeding out of skills

2006: Tegeta Exploration and 2014: News breaks that March 2015: Three months However, shortly
Resources, Tegeta Resources, Tegetas Brakfontein Colliery in later, the Brakfontein Mine thereafter, Eskom
Idwala Coal are registered and Mpumalanga has apparently secures a coal supply contract informs Tegeta that it is
obtain prospecting rights in also started mining coal worth R400-million per year. suspending the supply
Mpumulanga, Limpopo, Free illegally and that polluted Despite, apparently not having contract to investigate quality
State, KZN. water is draining into an a water licence, the mine is inconsistencies following
adjacent wetland. The contracted to supply Eskoms problems at Majuba
Department of Water Affairs Majuba power station in Five days later, Eskom
issues a directive to the mine Mpumulanga for 10 years lifts the suspension
for failing to take reasonable bringing the total value of the after the Group
measures to prevent pollution contract to R4-billion. Executive for
2011: News breaks that and for using water without Generation
Idwala Coal is mining coal near authorisation, but apparently Matshela Koko
a sensitive wetland on the the company is able to apparently intervenes.
Vierfontein Farm in continue its mining without The Eskom employees who
Mpumulanga, apparently resistance. found inconsistencies with the
without the requisite water-use coal are coincidentally
licence. 2014: News breaks that Zola suspended and the two
Tsotsi (then Eskom chairman), In the lead up to the laboratories contracted to
2011: News reports state that has approved a R500-million Brakfontein contract being test the Brakfontein
despite not having a water coal supply contract with awarded, the following things coal are also suspended.
licence, Idwala has continued Idwala Coal in Mpumalanga. happen, according to the While Eskom, it
to mine and has by now The contract doesnt go media: appears, is going out of
damaged the area to such an through after some senior Four laboratory tests its way to bend the law to
extent that Department of Eskom executives express show that Brakfonteins enable the Gupta-
Environmental Affairs concern over Idwalas illegal coal is not of a high owned Brakfontein mine to
documents show that there mining operations. Shortly enough quality to use at continue, the power utility is
exists the possibility that thereafter, President Zumas Majuba power station. using the full might of the
protected species were Cabinet announces that the A fifth test finds the law against one of
destroyed. entire Eskom board will be coal to be marginally Eskoms oldest coal suppliers.
replaced, many of whom are within specification, but This is the Tegeta /
Gupta-aligned (see slide 4). still high risk Eskom Optimum scandal and
accepts this test and allows perhaps encapsulates the
story of state capture
#1, #2 &#3: Capturing the SOCs:
Coal contracts
How the law appears to have been used in favour of
the Guptas.
TEGETA / OPTIMUM How one company was forced out of business
in favour of a Gupta company
July 2013: Glencore, which July 2015: Four things August 2015: Glencore November 2015: Zwane
owns Optimum Holdings, happen: announces that they are travels to Switzerland to
writes to Eskom because i) Glencore asks Eskom placing Optimum Coal meet Glencores Ivan
they are losing nearly R1bn if they will consider paying Holdings and Optimum Coal Glasenberg. Thuli
per year based on their R300 per tonne of coal until Mine under business Madonselas State of
1993 coal-supply contract the end of 2018, and then rescue. Capture report cites an
of R150 per ton of coal. R570 between 2019 and independent source
They invoke the hardship 2023. Instead of saying that Rajesh Gupta
clause, which means that considering this and Salim Essa were
Optimum and Eskom could request, Eskom imposes a present at the meetings.
enter into negotiations if fine of R2,1-billion on Days after Zwanes return,
either party felt that the Glencore for supplying poor Optimums business rescue
coal-supply contract was no quality coal, ironically the practitioners conditionally
longer in their best interest. same month that it lifted agree to sell the mine to
the suspension on the September 2015: Tegeta for R2,15-billion.
May 2014 they sign a Co- Guptas Brakfontein Mosebenzi Zwane is
operation Agreement, Mine which had been appointed Mines Minister. In her report, Madonsela
which paves the way for a found to be of poor notes: It is potentially
new coal-supply contract to quality; unlawful for the Minister to
stop Glencores losses. ii) Glencore then use his official position of
announces authority to unfairly and
April 2015: Brian Molefe that it has to unduly influence a contract
becomes Eskoms acting retrench 380 employees for a friend or in this
CEO. because of its instance his bosss son at
financial troubles; the expense of the state.
May 2015: A month after iii) KPMG approach (Duduzani Zuma is a
his appointment, Molefe Glencore with shareholder in Tegeta). This
apparently meets with an offer from an scenario would be further
Optimums CEO to say that anonymous client later complicated if his actions
Eskom would continue confirmed to be the were sanctioned by the
#4 Securing control over the countrys fiscal sovereignty and #5
Securing control over strategic procurement opportunities by intentionally
weakening key technical institutions and formal executive processes.

Momentous national decisions are taken on the basis of ad-hoc

political judgments, without prior consideration of the legal,
financial, economic or other public policy implications. Where
technical opinions contradict the plans of vested factional
interests they are actively suppressed or excluded from
consideration. Processes are constructed in a manner that
avoids deliberation on basic facts and critical evidence.
Despite our mounting national debt and slowing economic
growth, intense pressure is placed on the National Treasury to
fund ill-considered political projects or issue sovereign
guarantees that will bind the country to foreign debt for years
to come. Guarantees are favoured because they enable the
executive to collateralize the country while bypassing
parliamentary approval. Often it is argued that large projects
will be financed by China or Russia all that is required is a
State Guarantee. What is not explained is that these projects
establish permanent obligations to foreign nations without the
democratic and transparent scrutiny of parliament. Hence, if
you have an irresponsible National Treasury, pursuing narrow
interests, the consequences will be catastrophic for the nation.
#4 & #5: Nuclear as an example
The proposed 9.6GW nuclear project is one of the largest public investment
programmes in South African history. Compared to the size of our economy, it
would be one of the biggest investments undertaken by any country in the
world. Therefore the decision has to be taken in the best interests of every
South African, not sectional business interests. The consequences otherwise
would be catastrophic for us, our children and our grandchildren and our great
grandchildren for decades to come. 2014: Contract
May 2010: The 2011: Cabinet 2011: Zuma
of the Director
Guptas and approves the establishes the
General of Dept
Duduzane Zuma Integrated inter-ministerial
of Energy
buy Uranium Resources Plan National Nuclear
Ones Dominion (IRP2010) 2010- Executive
Magubane a
Mine later 2030, a 20 year Committee
trained electrical
named Shiva road map, (NNEEC) as a
engineer with
Uranium via an outlining the mix political structure
more than 15
Industrial of the countrys that will oversee
years experience
Development future electricity the nuclear
is not renewed.
Corporation loan. generation. This programme.
The position is
includes the
left vacant for
need for 9600
nearly a year
MW of nuclear
when Thabane
power but not as
Zulu is appointed
the primary
Director General,
solution. The IRP
#4 & #5: Nuclear as an example
This report is
2015, several A joint 2017:
things happen: National never DoE transfers
Former Treasury -Dept submitted to procurement to
Finance of Energy Task any formal Eskom
Minister Nene Team is government
and former established to structure. Eskom releases
Energy take the Instead during RFI
Minister Tina nuclear build a Cabinet
meeting on 9 Court ruling
Joemat- programme declares the
Pettersson forward and December,
Nene delivers nuclear
accompany compiles procurement
Zuma to Brics detailed a presentation
laying out the plan invalid
Summit in preliminary because
Russia report that unaffordability
of Nuclear; government did
where Nene is models the not follow due
presented fiscal and and the
Energy Dept, process.
with a letter financial
of guarantee, implications of at the same
in his name, nuclear. meeting,
from the submits a
Russians, to memo to
sign Cabinet
against recommendin
nuclear. He g that nuclear
#6: Securing a loyal intelligence and security
The current leadership is increasingly and arguably deliberately governing
through a national security lense. The use of clandestine forces to influence
state operations and undermine constitutional institutions cannot be
December 2009: June 2012: Jiba suspends May 2014: President Zuma December 2014:
President Jacob Zuma and institutes charges appoints Nathi Nhleko as President Zuma appoints
appoints Menzi Simelane as against Major General Johan Minister of Police. Tom Moyane as
Director of the South Booysen, former Head of Commissioner of the South
African National Prosecuting the Hawks in KwaZulu- July 2014: President Zuma African Revenue Service
Authority (NPA). Natal, who was commences the process to (SARS).
investigating corruption remove Nxasana, after
December 2010: charges against presidential convening an enquiry to December 2014: Police
Nomgcobo Jiba, widely ally, Thoshan Panday. He is determine his fitness to Minister Nhleko suspends
known as a presidential subsequently arrested and hold office. respected Hawks Head
ally, is promoted to charged with 116 crimes, Anwar Dramat over
Deputise the NPA. including racketeering, August 2014: News of the allegations that he was
murder and attempted so-called SARS rogue unit involved in the illegal
April 2011: Head of Crime murder. The charges are breaks, implicating former deportation of Zimbabwean
Intelligence (a unit within later withdrawn. Finance Minister Pravin criminal suspects in 2010.
the SAPS) Richard Mdluli is Gordhan and former deputy At the time he was
arrested and charged on October 2013: Mxolisi SARS commissioner Ivan apparently about to launch
counts of fraud and Nxasana is appointed as Pillay. an investigation into
corruption, as well as for his NPA head. He clashes with Nkandla.
alleged involvement in the Jiba and lays criminal
murder of his mistress charges of perjury, flowing December 2014: Nhleko
husband. He has been on from statements she made appoints Lieutenant
suspension since then. under oath in the course of General Mthandazo
the Booysen case. Ntlemeza as Acting Head of
Dec 2011: Menzi Simelane the Hawks (made
is suspended following a permanent in Sept 2015)
Supreme Court of Appeal
decision that his
appointment is invalid,
based on questions around
#6: Securing a loyal intelligence and security

January 2015: Ntlemeza May 2015: Presiddent June 2015: Zuma appoints March 2017: Hawks head
suspends Major General Zuma agrees to let Advocate Shaun Abrahams Berning Ntlemeza loses his
Shadrack Sibiya, former Nxasana resign. He is paid NPA head. appeal and is ordered out of
Head of the Hawks in R17 mill the balance of his his position by the High
Gauteng. At the time he ten-year contract. Civil September 2016: Jiba Court based on his lack of
was investigating Mdluli. society groups file a case to struck off the roll of South integrity to hold such an
review the R17m golden African advocates for her office.
March 2015: Police handshake. In 2017 role in a number politically
Minister Nhleko suspends Nxasana drops a bombshell related cases. She is placed March 2017: Fikile Mbalula
Robert McBride, Executive in his responding affidavit, on special leave. is appointed police minister
Director of the Independent effectively claiming
Police Investigative President Zuma lied under
Directorate (IPID), also for oath when he said (in his
alleged links to deportation affidavit) that Nxasana
of Zimbabweans. wanted to leave out of his
own volition. Nxasana said:
It was never my intention
to make a request to leave
the office, nor did I ever
make such a request to the
President ... The presidents
version in this regard is
#7 of 7: Undermining of Collective
Political Institutions in the
There appears to be concerted efforts underway that undermine
collective political institutions in the Executive, including Cabinet. It
appears that critical decisions are delegated to handpicked groups,
masked as Inter-Ministerial Committees, that are able to function in
an unaccountable manner. Recent examples include:
The IMC on Banks (purportedly set up to investigate the
regulations and legislation that govern them, but strangely
chaired by Mines Minister Mosebenzi Zwane and set up after the
Banks closed the Gupta bank accounts);
The IMC on Communication, unusually chaired by the President;
The National Nuclear Energy Co-ordination Committee (NNEECC),
as already stated above, and chaired by President Zuma.
The nature of IMCs is that in and of themselves they lack
transparency, in that they do not report to Parliament (which
individual members of Cabinet are required to do) and they are not
formulated in legislation (as is the case of formal Cabinet
In essence, we must ask the question whether Cabinet is
still able to function as a forum for honest deliberation on
matters of public policy.

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