The public sector-business corruption tango continues unabated

The symbiotic corrupt relationship between business and government is alive and flourishing in South Africa

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01/09/2022 07:55:25

.Graphic: OUTA

The public sector-business corruption tango continues unabated 
This opinion piece by OUTA CEO Wayne Duvenage was first published in the Daily Maverick on 31 August 2022

The symbiotic corrupt relationship between business and government is alive and flourishing in South Africa, aided and abetted by the government’s lack of desire to implement whistle-blower protection and support mechanisms.

The recent arrests of Brian Molefe, Anoj Singh and others implicated in fraud and corruption of state funds are certainly to be celebrated. These are names that adorned media headlines on many occasions, and the charges brought against them raise our hopes that accountability for those who brazenly participated in State Capture can and will be meted out, even if it takes longer than we would have liked. 

While we celebrate these arrests (and hopefully a lot more to come), we have so much to do to stem the tide of corruption that is now endemic in all spheres of the government, from national departments to the smallest of municipalities. And if the wave of corruption continues to grow as it currently is, our criminal justice system will never get on top of the problem.  

Businesses are actively participating in ongoing corruption. 

The brazen and active participation in corrupt procurement practices by supposedly upstanding and well-resourced businesses, speaks to a serious collapse in moral and ethical leadership in the business world. 

The modus operandi of corruption between the public sector and business generally follows two routes. 

The first route channels the money through a front company (which is normally unable to provide the work or services tendered for), which then allocates the actual work to a “subcontractor”. Very often, the “subcontractor” is a competent and capable company that tendered for the contract in the first place. 

The second route channels the money to the capable company which tendered to provide the services and goods; however, the contract is only signed after “insiders” have approached them to inflate their prices to cover “facilitation fees”.  

In both cases, all the other lower-priced and potentially capable tenderers are disqualified on technicalities, and the tender is awarded at a massively inflated price tag. What is certain, however, is that businesses which participate in either of these modi operandi know very well that they are participating in corrupt transactions. Other than greed, they have no excuse not to blow the whistle or at least, simply decline the offer and walk away.  

There are dangers for businesses which transact through either of these modi operandi. 

In the first route, the government department pays the fictitious or front company the highly inflated price, and the company that is “subcontracted” to do the actual job hopes to be paid on time and in full for their work done. Very often, the competent subcontractor is left high and dry at some point in the project, with the corrupt individuals who control the money flows taking the bulk of the proceeds for themselves, often leaving the project incomplete and laying the blame at the door of the subcontractor. 

In the second modus operandi, the company doing the work must now introduce a new creditor on to their books, to whom the facilitation (corruption) fees or “commission” must be paid. This is often disguised through the appointment of a “consultant” or “specialist strategic adviser”, who then bills the company for a certain percentage (anything from 10% to 50%) of the payments received from the government department.  

What astounds me most when listening to evidence from whistle-blowers, is how the managers and executives of these supposedly upstanding companies go about justifying these facilitation fees under the guise of value-adding consulting charges to their staff, boards, auditors, or anyone who cares to enquire about these transactions. There is no doubt in my mind, that by paying these “commissions” or “consulting fees” — to an entity that has clearly not added any value to services or goods being provided — they are acting in a highly corrupt manner.  

In order for senior and executive managers to protect themselves from any possible fall-out, engagements with the “insiders” are often channelled through middle management levels, who get excited about performance targets and bonuses being achieved. This ensures the top brass are kept at arm’s length, with no direct links to their involvement, should the shady conduct be exposed. Invariably, if caught out, it’s the middle manager that takes the fall or is fired or paid off to keep quiet.  

Meanwhile, on the government department’s side of the transaction, if a state employee starts to ask questions or gets in the way of the transaction, they are either cut into the deal, thereby implicating themselves and becoming the fall guy if the paw-paw strikes the fan), or are threatened with losing their jobs, fired or suspended on trumped-up charges (often on full pay for years). In the worst case, they are assassinated, as happened to Babita Deokaran from the Gauteng Department of Health.  

This is our reality in South Africa. Every day, be it in some municipality, provincial manager’s office, or through a national department tender, taxpayers are funding corruption. For every kilometre of road the South African government pays for, my estimate is that we could have received 3km of roadwork. For every classroom, clinic or hospital we build, we could have received two to three.  

These corrupt deals make us extremely uncompetitive and overtaxed as a nation, and send the taxman in search of more revenue streams to cover the growing costs of gross maladministration and corruption. The poorest of the poor and the most vulnerable of our people are the ones who suffer the most.  

The President’s recent appointment of the National Anti-Corruption Advisory Council might be the catalyst for future action so desperately needed in the fight against corruption, but until then, this country is in serious and urgent need of a well-funded, independent and reliable entity, with which whistle-blowers can engage for fast and reliable security protection, along with other necessary support to keep their jobs. 

In addition, this whistle-blower entity could enable the flow of hard evidence pertaining to corruption as it unfolds, to a specialised corruption investigating unit that can work fast to halt the nefarious transactions and ensure that corrective action and accountability take place.   

Until then, potential whistle-blowers will remain mute and those that speak up face being shunned, suspended, fired or assassinated.

Help us oppose corruption

OUTA is standing up against government corruption and mismanagement. 

Our work is made possible though donations by our paying supporters.

Join us in working towards a better South Africa by becoming a paying OUTA supporter. 

In 2022, we’re in court challenging the AARTO law, the Karpowership generation licences and SANRAL’s secrecy over toll profits.
We’re also challenging electricity prices and defending South Africa’s water resources.

We want to see South Africa’s tax revenue used for the benefit of all, not a greedy few. 

Any amount welcome.