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An article written by Ian Kilbride
The term ‘Mafia State’ has recently made an appearance in the local media. This has arisen partly due the assassination of high-profile company liquidators, whistle blowers and corruption busters. If this pattern continues, we are soon likely to see attacks on journalists (and not just spurious legal cases against them) as has been the case in other countries where criminal networks operate in a brazen fashion, particularly where the state apparatus is weak or ineffective. We are far from being a mafia state, but this pattern must be stopped dead in its tracks.
A mafia state is a particular form of corruption in which criminal networks penetrate the state, government, parliament, the police, intelligence, military and state-owned enterprises. Politicians and high-ranking officials are either compromised, or simply bought-off by cash payments and other rewards that would otherwise not be available to them. A simple lifestyle audit of government officials would be a revelation in this regard. In return, criminal syndicates receive cover, protection and sometimes a cloak of legitimacy from their political and state-sector patrons. Recent reports suggest that the endemic and systemic corruption at Eskom may have been facilitated by extremely high-ranking political figures. If proved to be true, not only was Eskom ‘captured’ by particular interests, this process was facilitated and sustained by corrupt politicians. If true, this may constitute a treasonable act and those guilty must be treated accordingly, without fear or favour.
More broadly, the scourge of illicit trade penetrates many areas of the economy, criminalises its citizenry and robs the fiscus of valuable revenue. For South Africa to achieve its critical developmental objectives, it must tackle effectively the corrosive illicit trade that undermines its entire national economy. But to achieve this will require targeted and co-ordinated initiatives, interventions and programmes at the level of government, business, labour, communities and civil society more broadly.
Illicit trade operates on multiple fronts, including but not limited to, alcohol, cigarettes, fishing, mining, counterfeit electronics, pharmaceuticals, food, and apparel. The magnitude of the losses is staggering, draining revenue and resources from an economy that could usefully benefit from increasing investment in infrastructure and improving living conditions for citizens. For example, the South African Revenue Service (SARS) estimates that illicit trade costs the South African economy a R100 billion (USD 5.9 billion) every year. The OECD estimates that South Africa is losing $3.5 billion to $5 billion a year, or more than 1% of its GDP, to illicit financial flows.
Encouragingly, to stem the negative impacts of illicit trade and illicit financial flows, government announced in the 2023 budget speech that it plans to allocate the SAPS an additional R7.8 billion over the next three years to recruit and train 5 000 new officers annually. The National Prosecuting Authority (NPA) will receive an additional R1.3 billion to appoint 120 more employees and hire outside experts for complex cases, especially those dealing with financial crimes. Additional funds have been made available for the Financial Intelligence Centre (FIC), the Special Investigating Unit (SIU) and tax collection agency, SARS.
Finance Minister Enoch Godongwana stated that R3.3 billion will be reallocated to the newly instituted Border Management Agency that will come into effect in April. It will be responsible for managing all ports of entry and will strengthen efforts against the importation of illicit goods into South Africa.
Notably, in the 2022-2023 financial year, government took important steps towards rooting out corruption, increased the number of successful cases against serious organised crime and recovered R8.2 billion in revenue from criminal and illicit economic activities – up 331% from the previous year.
Along with more than 80 other countries, South Africa was recently evaluated on a number of policy, legal, regulatory, economic, trade, institutional and cultural indicators reflecting its structural capability to effectively protect against illicit trade.
South Africa’s scores are mixed, ranking 42nd out of 84 countries evaluated, with an overall score of 62.0 (out of 100). This is just above the global average (60.0), but still leaves South Africa in the bottom half of its peers in the Group of Twenty (G20). Notably, South Africa is ranked first among BRICS countries.
Among the four categories in the Index, South Africa registers its strongest performance in the area of government policy, where it ranks 37th of 84. However, the country struggles in almost all other categories including supply and demand, where perceptions of organized crime lower its overall performance.
So, what is the overall solution? Well, as my old teacher used to say, “Should try harder and could easily do better!”
Ian Kilbride is the Chairman and CEO of The Spirit Group and an Honorary Professor at Stellenbosch Business School