Corruption arrests and Land ho!

Several posts will be attempts to catch up on relevant news, and argue why I think these are, or are not, important. This is one of those.

Corruption Arrests

Do the corruption arrests constitute a step change in attempts to unpick the tangled web of ‘normal state and economic activity’ from rent-seeking and the criminal diversion of public spending into private pockets? The working assumption is that corruption diverts resources from the poor and hollows out the state so that it becomes at best a home for incompetents and at worst a vehicle for the criminal looting of public resources.

There has been about 40 (and counting) arrests relating to the Free State Asbestos contract, Bosasa, KZN SAPS catering tender as well as a conviction and expected further arrests related to the looting of VBS Mutual.

Then there is the episode of Ace Magashule last week warning against a ‘Hollywood style’ arrest of himself, probably to test the waters of his support (disappointing, for him) and to head-off just such a style of arrest of himself. There is so much criminality sticking to Magashule like bubblegum –Estina?, Pierneef?, the Asbestos deal, the kitchen sink? – I will talk about this in more detail in a follow-up post, but say for now that I will not be speechless with surprise if Magashule is arrested at any moment.

The ZAR6m-7m Pierneef that went missing from Ace Magashule’s Premier Office

Together, these incidents make it difficult not to see a new wave of anti-corruption activity, coordinated for maximum visibility, breaking as I write. It is also the fulfilling of the promise made by head of the Investigating Directorate in the NPA Hermione Cronje that high-profile arrests would happen before the end of September.

So what: Given the deeply embedded, multilayered, multi headed, tangled fibre of corruption through which most of our public life is threaded, it is unsurprising that many snort derisively about arrests or any high profile anti corruption action. However, I believe this would be a mistake. These arrests are obviously the result of painstaking preparation by the NPA, SIU, the Hawks, SARS and Crime Intelligence and other security agencies which in turn are institutionally more sound (although some more than others) because of actions taken by the executive (Cyril Ramaphosa and his cabinet) in early 2018.

Thus it will be impossible to argue that that CR has interfered in the process of prosecuting corruption and state caputure, even after he ammended regulations – in a game changing move – in July 2020 allowing evidence and evidence leaders to flow , from the Zondo Commission to the NPA, SARS and other similar authorities. (There is a good story on this behind a paywall here, but I can recommend that if you pay for only two new sources in SA, Businesslive and Daily Maverick should be your choices.)

Equally, it is too early to crack the Champagne, and probably too early to start saving to buy a bottle. We have every reason to take a ‘wait and see’ attitude. However this surge is the first of its kind and, as we know, the past is an imperfect indicator of the future. The way to eat the proverbial elephant is one mouthful at a time, and I believe the first course has been served..

Land ho … ho ho

Of the booby traps left in the wake of the (mostly) orderly retreat of the Zuma/Gupta/RET/Magashule faction at Nasrec in 2017, the land issue was potentially the most dangerous to the so called ‘reform faction’ represented by Cyril Ramaphosa (I will be discussing in a later post the assumptions we make when we assume CR is a useful proxy for ‘good’ policy prospects for the country as a whole).

It is widely held that the land question has mass public resonance as the sharpest edge of colonial and apartheid dispossession and as the most obvious and visible evidence of ongoing racial disparity. It is also one of many important commitments the ANC government has largely  failed to implement, despite a previously coherent programme of land restitution, redistribution and tenure reform.

The conference decision to instruct government to change the constitution to allow for land expropriation without compensation had some real, visceral support but was also backed by those who need(ed) CR to fail, so they could take back the ANC in 5 years time. ‘Failure’ in this case would arise either from a popular revolt if Cyril Ramaphosa failed to act or if action caused a flight of capital and skills running from weakening protections of private property and leaving behind economic paralysis – causing Cyril to reside over declining growth, making him less electable at the NC in 2022.

While the faction supporting Ramaphosa at Nasrec fought hard against the conference adopting the resolution, it gave in when the Zuma aligned group threatened to collapse the conference and put Zuma in power indefinitely unless their enemies stood back on the EWC question.

Ramaphosa has now gazetted the Expropriation Bill – replacing the Act of 1975 – which gives effect to what is already implicit in the Constitution (according to the long held position of the Ramaphosa camp). This position is that the constitution already allows the state to expropriate land without compensation. The Bill defines where this is ‘just and equitable’ and spells out explicitly what conditions for expropriation, with or without compensation, need to be met.

Parliament will continue with its process to amend Section 25 of the the Constitution – coming to a head in about 2nd quarter 2021, although the Expropriation Act will be living proof, supporting the view of the Ramaphosa camp, that constitutional change was never necessary in the first place. It is by no means certain that the ANC will cross the 2/3rds vote hurdle requirement for a constitutional change but we will have to wait for next year to see.

The Expropriation Bill spells out which land can be expropriated and where compensation may be nil: land purchased for speculation, state owned land unlikely to be used for other purposes, abandoned land, land in which the state has invested more than its market value, and where the land poses a health or safety risk to persons or other properties. But even in these cases the courts (and not the minister as previously speculated) will decided on what is equitable and just  compensation – which may be nil. Overall this reads as a reasonably progressive move that defuses some of the tensions surrounding EWC and remains overall market-friendly.

Undoubtedly as part of the timing, the government announced the release of 700 000ha of land for leasehold for aspirant or established black farmers. The land is mostly in the North West and Limpopo, with smatterings in all other provinces except Kwazulu-Natal and Western Cape.

A portion of the land has been occupied and part of the disbursement will require an attempt to ascertain how other farmers and/or squatters got access to this land and whether some of them may be worthy title holders. Whatever happens the process will not be smooth.

We should note as an aside that the sharper public demand appears to us to be for land closer to city centres for the building of houses. Most government planning on this issue acknowledges this fact, but does not take away from the dual approach: build a class of successful black farmers; make land available for building of houses closer to where people work.

So what: The internal/ANC risks to the CR faction will come due when the ANC holds its delayed National General Council which is designed to assess progress between National Conferences, but we can expected a last gasp attack on CR from the RET faction demanding he explain progress with the 2017 Nasrec conference resolutions. We think he has handled the order to nationalise the SARB (rubbish demand, too expensive, gains the ANC nothing) but EWC and the change of the constitution will carry more weight. However, the intention was to damage CR or damage the economy – the gangsters in the RET factions didn’t care which. And my view is the careful phrasing of the expropriation bill is not going to panic markets and all that is outstanding is the addition of “which may under specific circumstances be nil” added to Section 25 of the constitution and already defined in the Expropriation Act, by then.

 Keep an eye on: Last night’s request by Treasury for a delay in the MTPBS to the 28th of October, from the 21st. The Treasury is under the hammer of conflicting demands and requests. How hard it holds the line will be an important signal and the postponement might be a technical issue, but is grounds to increase risk levels.

Finally, Thursday is the day that the Nedlac agreed plan for economic recovery is due to be released. Those who have seen advance summaries have very little good to say about ANOTHER plan. We wait and see.

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