The South African Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State (“the Commission” or “the Zondo Commission”) was established on 23 January 2018 pursuant to the remedial action taken by South Africa’s former Public Protector[1], Advocate Thuli Madonsela (“Adv Madonsela”) in her “State of Capture” report dated 14 October 2016. 

The publication of the State of Capture report followed an investigation into various complaints which Adv Madonsela had received concerning former President Jacob Zuma (who was in office at the time) (“President Zuma”) and his purported links to the controversial Gupta family (“the Guptas”). 

The scope of the Commission’s terms of reference were broad and included, amongst others, determining the extent of corruption in the awarding of contracts to companies by South African public entities and government departments, and whether it could be established that attempts had been made (and, if so, by whom) to influence members of the National Executive, state functionaries or other office bearers through any form of inducement or for any gain whatsoever.

The Commission held its first hearing on 20 August 2018 and went on to conduct further hearings over a period of more than 400 days. In total, more than 300 witnesses presented evidence before the Commission, and the investigative process implicated 1,438 persons and entities. The evidence gathering exercise was finally completed on 12 August 2021, when President Cyril Ramaphosa testified for the second time before the Commission. Given the extent of the evidence uncovered and the findings flowing from this evidence, the Commission’s report will be released in 3 parts. Part 1 of the Commission’s report was released on 4 January 2022 and consists of 4 volumes which cover an analysis of evidence and recommendations relating to: (i) South African Airways (and related entities); (ii) agreements between state-owned entities (“SOEs”) and the Guptas or their associated entities in respect of the New Age and Breakfast Shows (being a newspaper and television show), and (iii) the South African Revenue Service. Part 2 of the Commission’s report was released on 1 February 2022 and consists of 2 volumes which cover an analysis of the evidence and recommendations relating to two further South African SOEs, being Transnet SOC Ltd and Denel SOC Ltd, respectively

Parts 1 and 2 of the Commission’s report provide a fascinating, albeit chilling, insight into the orchestration of State Capture in South Africa. Through the use of political and patronage networks, individuals were able to extract funds from the State by, amongst others, securing lucrative contracts for entities in which they held an interest. In many instances, such ‘service providers’ were little more than shell companies providing minimal, if any, services in return. The Commission’s report details this and many instances of apparent corruption and flagrant non-compliance with the regulatory framework governing public procurement in South Africa. Whilst many feared that the Commission’s report would steer clear of any definitive findings, what has been published is hard-hitting and specific, and contains numerous recommendations that the South African National Prosecuting Authority considers prosecutions of the persons implicated in the report. It is for this reason that the Commission’s report has been described as a ‘…blueprint for pursuing successful prosecutions…”.[2]

Uncovering State Capture in South Africa required many years of the Commission’s work and the extent of the problem was not always apparent to the general public. However, there were early media reports which provided warning signs which pointed to the existence of interference by private actors in the political sphere in South Africa. For example, in 2013 it was widely reported that the Gupta family had been using the Waterkloof Air Force base as a private landing strip. At the time of such reports few could have foreseen the gravity of what would ultimately be uncovered. However, the early existence of such reports is perhaps a useful reminder as to the importance of media reporting and its role as a powerful tool in anti-corruption efforts. This in turn emphasises the importance of conducting risk-based due diligence prior to engaging new individuals and/or entities. A thorough review of a proposed counterparty’s corporate associations coupled with robust intelligence enquiries can identify potential areas of conflict or concern. Of course such enquiries will not always identify underlying issues and should therefore form part of an overall anti-bribery and corruption risk mitigation framework. Additional controls may include the use of contractual safeguards such as the incorporation of appropriate undertakings, warranties, and termination rights when engaging high-risk third parties. 

Conducting risk-based due diligence on prospective business partners is referred in the OECD Bribery Convention[3] as an “essential element” of ethics and compliance programmes. A failure to adopt such controls may result in the unwitting engagement of high-risk persons, and as illustrated by those entities implicated in the Commission’s report, the resulting reputational harm can be significant.

By Adrian Roux, ENS Africa