The Way Forward contd.
The way forward is rich, abundant, diverse, and rewarding for the countries that want to travel the road. It starts with African countries taking a huge step to put their houses in order. In entry number 34 of Building a Success Culture in African Countries, it finished with the “existential threat of corruption.” Let’s elaborate. Nigeria and Morocco are working on a $23 billion Gas Pipeline to transport Nigerian Natural Gas to European markets. Let us assume that the contract, when finally awarded, will contain a 10% inducement for the politicians. 10% of 23 billion is 2.3 billion. The money will not be deposited in local banks because it would be risky for the politicians; instead, it will be placed in foreign bank accounts and, in most cases, offshore accounts, as this must be done surreptitiously and discreetly. That means the country or countries, depending on the collaboration with Morocco, will have to pay more for the project, and the premium paid will not be invested in the local economy. It applies to every industrial and infrastructure project in virtually every African country, except for the most pristinely governed, of which there are only a handful. It also applies to supply contracts, not just development projects. State capture, as in the case of South Africa, has provided the world with a clear roadmap of how African politicians have sabotaged their own economies since independence.
South Africa is one of the worst cases of State Capture in Africa. The predicate was the political emancipation of Black South Africans, following Nelson Mandela’s ascension to the presidency of South Africa after twenty-seven years in jail. Due to a global outcry against the apartheid regime, which was aided by the advocacy and agitation of Winnie Mandela, the then-wife of Mr. Mandela. The anti-apartheid movement rose to an international cause célèbre. The emancipation of Black South Africans was an international endeavor backed by the NAACP in the United States and other anti-apartheid organizations worldwide. The inspiration for the global anti-apartheid movement was the suffering of black South Africans in South Africa. Following the emancipation of Black South Africans and the establishment of majority rule, the ANC, led by Nelson Mandela, came to power. The original goal of the ANC was to improve the circumstances of the Black majority. Enable their participation in the South African economy by securing job opportunities and contributing to the country’s prosperity through equity ownership in businesses. After Mandela left office, the new ANC evolved. The new ANC was driven by political opportunism and a rush to acquire illicit wealth, and it has gradually morphed into a gargantuan, corrupt, and self-dealing entity controlled by political operatives, culminating in many instances of state capture of public-owned financial institutions and enterprises, including the state-owned Electricity company, Eskom.
A profile of state capture of Eskom.
Eskom is the publicly owned electricity generation and distributor in South Africa, which has a virtual monopoly on the service. Eskom is the largest of its kind in Africa. The company ran effectively prior to the ANC assuming power. After the ANC assumed power, Eskom became embroiled in a labyrinth of corrupt machinations that eventually overwhelmed the organization, leading to the complete eclipse of the governance structure of the enterprise. It cascaded into state capture, financial, and management degradation. An organization that should have been ramping up to manage a surge in new customers because of the entry of many Black consumers into commerce, jobs, and opportunities, enabling them to move into better residences and needing an electricity supply. As this phenomenon unfolded, the ANC was unleashing the devastating and corrupt effects of state capture, which brought the company to its knees while simultaneously managing a rise in consumer demand.
- Corrupt contracts: Officials within Eskom, like former executive Matshela Koko, awarded multi-billion rand contracts to Gupta-linked companies, such as Tegeta, for substandard coal at inflated prices. This included a R1.6 billion guarantee and a R659 million prepayment to help fund the Gupta’s acquisition of the Optimum Coal Mine.
- Bribery and kickbacks: Large global firms, including McKinsey and ABB, were implicated in paying bribes to secure lucrative contracts at Eskom. Both have since been ordered to pay large sums in restitution.
- Infrastructure decay: Funds were diverted from necessary maintenance and investment, leading to the deterioration of aging power stations. The Energy Availability Factor (EAF) has drastically declined, resulting in frequent and widespread load shedding. Load shedding refers to the practice of intermittently interrupting power to protect the system from total collapse.
- Delayed and costly projects: State capture inflated costs and caused delays in new power station builds like Medupi and Kusile, which were plagued by irregularities and corruption.
- Operational dysfunction: In some instances, entire power stations like Tutuka lost effective operational control to criminal syndicates, further compromising the grid.
- Intended sabotage: Former Eskom CEO André de Ruyter revealed that criminal syndicates sabotaged power station equipment to secure lucrative repair contracts. This included the theft of diesel and other materials.
- Consequences of state capture
The corruption inflicted immense damage on Eskom and the country’s power supply: Electricity cost for the consumer has skyrocketed to a level that has not been experienced before, including during Apartheid. The company is relying on cash infusion from the government to stay afloat. The policies of the ANC and the collusion of party operatives with bad actors to turn the company into a cash cow for their personal enrichment caused the devolution of the financial integrity of Eskom, thereby relegating a quondam (L) strong enterprise that the Apartheid regime had bequeathed to the ANC.
This is not only happening in the electricity generation and distribution industry, but also in many state-owned enterprises in a myriad of industries. The ANC has dealt a severe blow to South Africa’s economic prosperity and deindustrialized a once highly functional and prosperous economy. South Africa has established numerous commissions but has been unable to effectively address the problem of state capture and corruption in general. For instance, the Zondo Commission was established to investigate state capture at Eskom and made recommendations. However, the infrastructure of corruption is entrenched and unyielding. It leads to the inevitable conclusion that corruption and evil machinations are winning because the government is using half-measures that are coddling the perpetrators instead of unearthing their machinations and the people behind them. The purpose of focusing on South Africa is not to suggest that it is unique, because that is not the case. Nigeria is a poster child for state capture, but there are several others that have earned the ignominious crown as bastions of corrupt activity.
For African countries to be taken seriously about putting their house in order, they must invest the capital, manpower, mechanics, and discipline required to “kill corruption.” It is an existential threat to independence and national sovereignty. There are whispers in donor nations that border on anathema. The theme is that if people cannot effectively run their countries and are perpetually in need of assistance, perhaps their countries should be taken over and managed by others. For those who think this is far-fetched, what defense do African countries, other than South Africa, have that will preclude externalities from overwhelming their countries, other than a hope for the outrage of the international community? The answer is there is none! What is the reason for the speculation? For one, it has been openly discussed by people close to high-level dignitaries of Western governments. The most blatant, unvarnished viewpoint was expressed by Erik Prince, founder of Blackwater, the military contractor that contracted with Western governments in live fire environments, such as Iraq and Afghanistan, and a former Navy SEAL. His sister is Betsy DeVos, former US Secretary of Education from 2017 to 2021 under President Trump. The Devos family is estimated by Forbes to have a net worth of $6 billion. The patriarch of the family, Richard DeVos, was a co-founder of Amway, one of the original multilevel behemoths. It is the foundation of the Devos family wealth. Dick DeVos, Betty’s husband, succeeded his father, Richard, as the head of the company and family after his father’s passing. The family has diversified its investment holdings, which now include a major sports franchise, as well as other investments in technology and the medical sphere. The idea is not to cast aspersion on a very successful family, but to point out that Erik Prince is a heavyweight whose words have real resonance and come from an informed source. He is a billionaire in his own right after selling the successful Blackwater, and has a pure-bred pedigree as a former Navy SEAL. A subset of the Navy SEALs is SEAL Team Six. This is an elite subset of the Navy SEALs that was responsible for eliminating Osama Bin Laden at his hiding place in Pakistan. This does not imply that he was a member of SEAL Team Six; their membership is typically kept very secret. However, as a member of the Navy SEALs, Mr. Erik Prince is part of the United States Military royalty and is very well-connected. He said what he said because it is part of the roving cigar discussions in high places of government, politics, and business in Western circles. What is the predicate for such comments? Well, if you listen to his comments, he referenced that African political leaders are robbing and stealing their people blind to spend the loot on expensive trinkets in Paris. There is an obvious oversimplification of how African political leaders are spending their ill-gotten wealth, as African countries are creating political billionaires and multimillionaires who own vast real estate portfolios, private jets, very expensive automobiles, and other luxuries. Having noted that, is there an untruth in the statement? None that any reasonable and rational mind will find. African countries are lobbying for a third debt forgiveness because they have failed to reap the benefits of the last two. African countries remain at the lowest rung of the global economic ladder. The region and nations are one medical or economic crisis away from a full-blown catastrophe. The imperative for “killing corruption” is simple: African countries cannot find the way forward until they weave into the fabric of governance an authoritative mechanism for ensuring that the finances of their nations are being stewarded effectively and maximally leveraged to change the trajectory of economic growth and development for permanent economic prosperity and emancipation of all African countries. To put a cap on the reasoning behind eradicating corruption in African countries is that African countries need all their resources channeled into solving the economic challenges facing the countries….to be continued in the next edition of Unleash Africa Newsletter.
Reference: The Legacy of State Capture: ANC’s Struggle with Corruption and Trust
https://youtu.be/yQQFuTEXWJA?si=cAJ9oPZPckdHIL7J
https://youtu.be/olbYeQMSoBw?si=cL-bElt1Hd95f1Fn
