ANTHONY BUTLER: SA needs to wise up to ruses used to hide corrupt dealings

The country’s relatively sophisticated financial intelligence machinery and media are not enough

First published in Business Day and BusinessLive

21 JULY 2023

ANTHONY BUTLER

It is understandable that SA citizens struggle to muster much sympathy for the predicament of their national political leaders, but prominent ANC politicians really do confront a vexing challenge.

We are all familiar with the sad fact that leaders cannot rise in local or provincial political structures without judicious distribution of contracts, jobs and money. Unlike many other countries in the region, however, SA presents two major institutional obstacles to political ambition and the enjoyment of earthly comforts alike: a tenacious and well-organised investigative media and a relatively sophisticated financial intelligence machinery.

The Financial Intelligence Centre (FIC) Act obliges banks and businesses to report suspicious or unusual financial transactions, and the information gathered is channelled to investigative authorities, including the Asset Forfeiture Unit, the directorate for priority crime investigation and the Reserve Bank’s financial surveillance department.

Though the scale of monies recovered by these institutions is relatively modest, the reporting requirement is a significant deterrent and almost certainly encourages aspiring leaders to shift their activities to cash. There are reporting requirements on cash transactions above R50,000, but the FIC is overwhelmed with reports. Large cash movements tend not to be regarded as suspicious unless they are out of keeping with a transactor’s normal banking behaviour.

High-denomination notes can be used relatively safely to fund lavish lifestyles, pay for services rendered and fund internal party political campaigns. They may even be used for buying illegal surveillance equipment or for bribing delegates to amend their voting intentions.

We have caught fleeting glimpses of money at work across the decades: R500,000 in black plastic bags in the boot of union leader Willie Madisha’s car, former Madibeng municipal manager “Philly” Mapulane’s designation as “Mr Cash” as a result of allegations of cash-only kickbacks on local government tenders, or Zondo commission of inquiry testimony about bundles of R200 notes on the back seat of former finance minister Malusi Gigaba’s official limousine.

Illegal cigarette and alcohol distributors, or gangsters increasingly aligned with parties and party factions, presumably prefer cash. Given widespread claims of money bribes by familiar mining companies in other African countries, it would not be wild conjecture to imagine such behaviour in SA too.

Another advantage of cash is that it can cross borders. The ANC enjoys close “party to party” relationships with money-rich counterparts who have lax morals. Some friendly countries, such as the Russian Federation, have sometimes been accused of transferring large cash sums in diplomatic bags.

Cracking down on cash abuse is not easy. India’s “demonetisation” experiment in 2016 was designed to curtail the country’s huge shadow economy. It resulted instead in huge economic damage and probably failed to remove much “black money” from circulation.

Indian experience also shows that if cash becomes harder to deploy, wily politicians possess a wide range of alternative resource transfer options.

They can divert public funds to vibey digital communications consultancies that can assist them in their campaigns for leadership positions.

They can engage in what Indians call “Benami Transactions” — Benami being an Urdu word that means “without name”. In such cases, the beneficiary of a property purchase is not the person in whose name the property is purchased.

They may even use opaque transfer mechanisms, such as football player transfers or horse and cattle breeder sales, which allow large cash payments for items of objectively indeterminate value.

Citizens in SA will need to be alert to the use such widely known international ruses — and not just to bundles of banknotes in black plastic bags — if their efforts to curtail their leaders’ dubious financial stratagems are even partially to succeed.

• Butler teaches public policy at the University of Cape Town.