Robust society and strong institutions at the heart of fightback - Business Day, 20 October 2017

By David Christianson 

Speaking at a Thompson-Reuters event, Colin Coleman, head of investment bank Goldman Sachs, argued that SA was a hard country to break. He’s quite right.

SA’s robust society has previously confounded one utopian social project – grand apartheid. While the game has a long way to go, it appears to be in the process of sinking another in the form of Jacob Zuma’s kleptocratic dream, the state-capture or Zupta project, often referred to by its acolytes as "radical economic transformation".

The same forces that are sinking the Zupta project will in a similar fashion save the mining sector. At the heart of it are the country’s strong institutions. Coleman alluded to these when he praised SA’s "sound Constitution (and) strong judiciary" and referred to the unity on the part of business, labour and civil society.

Remarkable evidence of the fightback by these constituencies was provided by the statement in September by the Chamber of Mines that it supported a Cosatu-mobilised general strike against "state capture and corruption".

But the real evidence for SA’s institutional strength comes from the resistance that has torpedoed global firms perceived to be complicit in the Zupta project. Although at this point only Bell Pottinger has been sunk, KPMG and McKinsey have suffered damage on a scale sufficient to end their voyages through the South African market. These pirates could not have been brought to a standstill without SA’s institutions. Their depredations were exposed by an independent news media and opposition parties, all consolidated by social media.

Shuttered

Their peers in the business community acted, terminating business relationships. Their perceived crimes of omission and commission were judged in terms of the country’s robust legal framework, with laws applying to contract, libel and public procurement being referenced even though the companies concerned have yet to be found guilty in a court of law. The Guptas’ own bank accounts were shuttered by local institutions acting in response to information from the Financial Intelligence Centre.

The courts have yet to have a say in these matters. Nor has the electorate pronounced on the Zupta project – that moment will come in 2019. But the evidence suggests that the critical underpinnings of institutional strength – embedded social values aligned with the national Constitution and laws, social attitudes towards justice, a willingness to speak out and the existence of multiple channels for action – are stronger in SA than is sometimes understood.

The mining industry has faced an onslaught from the Zuptas, but is fighting back through the institutions. The Chamber of Mines is a fine example of this institutional strength and its high court review of the mining charter, due to be heard in December, is a lesson in how to fight back using SA’s institutional depth.

Further institutional resilience is provided by other representatives of business and labour, not just those at the peak, such as Business Leadership SA and Cosatu, but those representing nonmining sectors and professions too.

In September, the Association for Savings and Investment SA pointed out that although it represents domestic institutions holding R108bn in mining stocks, it had not been consulted on the 2017 mining charter. It called for a renegotiation.

Another example is the Independent Regulatory Board for Auditors, which is committed to investigating KPMG’s (now withdrawn) report on a "rogue unit" at the South African Revenue Service and which may have a future role in investigating the coerced sale of Optimum Coal Mine to the Gupta family in 2015.

Rating agencies have identified the white-anting of South African institutions, which must include the parastatals, the revenue service, the Treasury and the Department of Mineral Resources as a major concern. While not underestimating the importance of these critical institutions, they look unimpressive next to the vast institutional armoury available for the fightback.

Claims of South African exceptionalism are often misleading. But, compared to other developing countries, SA has an institutional depth without parallel, exceeding even that of its much-larger Brics partners. Revolutionaries have, since the 1960s, spoken of the long march through institutions. Revolutions, however, have failed to happen (in Western Europe) because those institutions fight back. The same is happening in SA.

*Christianson is with the Institute of Race Relations, a think-tank that promotes political and economic freedom.

Read article on Business Day here