Former South Africa president Jacob Zuma with Atul Gupta © Kopano Tlabe/GCIS
The writer is a former anti-apartheid leader and former Labour cabinet minister
South Africa’s decade of corruption under former president Jacob Zuma robbed its taxpayers of many hundreds of millions of pounds (billions of rand) and contributed to a catastrophic loss of gross domestic product of around a fifth.
But the recent finding of the country’s judicial commission headed by Deputy Chief Justice Raymond Zondo lambasting Bain & Company for “unlawful” behaviour under Zuma is just the tip of the iceberg of global and UK-based corporate complicity in South Africa’s state capture scandal.
The prodigious looting and money laundering would not have been possible without the connivance of Bain & Company, KPMG, McKinsey, SAP, and the banks HSBC, Standard Chartered and Baroda, some of whom have owned up and even repaid some fees. On the basis I have outlined in parliament, I also believe the law firm Hogan Lovells was complicit.
Global corporates obtained sweetheart state contracts helping Zuma’s business associates, the Gupta brothers, to loot the state and move their stolen billions out of South Africa, and then sometimes back in, undetected.
Global banks like HSBC, Standard Chartered and Baroda opened their electronic banking channels to the Guptas and their associates to transfer money through their digital pipelines to less regulated and transparent jurisdictions like Dubai and Hong Kong, or British Overseas Territories in the Caribbean. And then to launder the money by mingling it with other funds and disguising its origins.
These banks should have spotted suspicious activity much sooner, or immediately. Global lawyers and accountants assisted the Guptas to set up shell companies, hiding their true owners and enabling money to be moved from one country to another. Dishonest audits left suspicious transactions hidden. Estate agents received laundered money during Gupta property purchases.
Global brand names profited while the Guptas hid and spent stolen funds otherwise destined for essential South African public spending, leaving its public finances near-bankrupted and growth stalled.
Given the devastating findings on Bain in the first of three reports of the Zondo Commission — two still to come, and expected to cover other global corporates — it is unacceptable that Bain is licensed in the UK, the US or anywhere else, at least until it has repaid fees estimated at £100mn (2bn rand) earned from the South African state during the Zuma years, and answered charges in the courts there (the firm says the commission has “mischaracterised” its work).
Bain had contracts worth £55mn with the UK Cabinet Office alone over recent years; I have written to Prime Minister Boris Johnson asking that he suspend its government contracts and do the same for others accused by Zondo.
Turn-a-blind-eye governments are also part of the scandal. Unless the UK, US, Chinese, Indian and UAE governments co-operate with each other, state capture will happen again, either in South Africa or elsewhere.
Despite claims about tough anti-money laundering and anti-corruption laws, international criminals continue to loot and money launder through centres such as London, New York, Hong Kong, Delhi and Dubai with impunity.
Investigators require proper resourcing, yet never get it. In the UK in 2019 the head of the National Crime Agency requested an additional £2.7bn in funding for law enforcement — not granted.
Governments the world over talk the talk on corruption but have so far refused to take the necessary tough action against corporations to stop them enabling it. Without cross-border co-operation, no country will be emancipated from financial crime, estimated by the UN Office on Drugs and Crime to be worth up to 5 per cent of global GDP, or $2tn, each year.