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State capture in South Africa: time to think differently about redress and recovering the stolen loot

SOUTH Africans are plunged into darkness daily by rolling power cuts. These are a stark reminder of the destruction that years of state capture wreaked on Eskom, the state-owned power utility.

Eskom’s inability to meet the energy needs of citizens and the economy is now the undeniable example of how state capture made parastatals and other state institutions ineffective. The country urgently needs action to recover the stolen funds and fix the economy.

So far, President Cyril Ramaphosa has offered only a few general targets, and outcomes have been dissatisfying. For example, the “total of R2.9 billion” that he said law enforcement agencies have recovered is only a small fraction of the estimated R500 billion stolen through state capture. Impunity lies at the root of this mess.

The culture of impunity has lingered since the presidency of Jacob Zuma. If it is to be replaced with a new era of integrity and accountability, a lot more needs to be done. But what, and how exactly?

In my paper, I answer this question by proposing a workable, constitutionally congruent plan. I lay the foundations for a new anti-corruption redress system which would help the government to recover the money and restore dignity to the people of South Africa.

The starting point in my argument is that the constitutional separation of powers – the division of state authority and core functions – includes a fourth branch of state. It’s best described as the “integrity and accountability branch” and it should include the prosecuting authority.

When the special role of the prosecuting authority is thus understood, prosecutorial policy can be harnessed to begin recovering the illegal profits of state capture. This should start urgently – pending the necessary legislative intervention – with the use of the internationally recognised redress tool, the non-trial resolution. This tool can be adjusted to fit the South African constitutional context.

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Non-trial resolutions reimagined

Non-trial resolutions are mechanisms to resolve corruption cases without the need for a full criminal trial. Criminal trials entail an onerous burden of proof, “beyond reasonable doubt”. They also tend to be protracted and costly to run. Economic corruption cases are especially difficult to prosecute, given the complex nature of the fraud, which tends to cross international borders.

Non-trial resolutions take various forms and are used extensively internationally. They include a plea bargain, a deferred prosecution agreement, a non-prosecution agreement and a more informal declination to prosecute (for example, by way of letter).

To ensure localised fit and legitimacy, these instruments should collectively be termed “anti-corruption redress” mechanisms. In my article, I explain how and why it would be constitutional to start concluding such non-trial resolutions with state capture offenders pending the legislative introduction of the anti-corruption redress system I propose.

For now, prosecutorial policy (for example, by way of directives) could be issued to make use of a potentially valuable section of the National Prosecuting Authority Act, 1998: section 38. It allows the prosecuting authority to use specialists (such as forensic and legal experts) in “specific cases”.

State capture is surely a “specific case” deserving special attention. Section 38 could thus be used to conclude deferred prosecution agreements or other types of anti-corruption redress agreements. These would be concluded with people or entities who report their illegal profits themselves, or who are identified by whistle-blowers. This way, money can start flowing back into the public purse sooner rather than later.

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These agreements would set out the redress deliverables (such as paying back the money back by a certain date and rehabilitating the pillaged entity) and other rights and obligations of the parties. At this stage, no penalties for wrongdoing should be imposed – that needs legislative backing because the law presumes innocence.

But, to reiterate, recouping the ill-gotten profits of state capture can start (via prosecutorial policy). This component of my proposal is inspired by former Constitutional Court judge Johan Froneman’s formulation of the “no profit, no loss principle” in the 2014 case of All Pay 2.

The nub of this principle is that although penalties cannot be imposed without the proper application of the law, public accountability means that there is no right to profits unlawfully gained. The Zondo Commission reports provide details of who gained illegally.

Legislative reform

While the disgorgement (surrender) of the illegal profits gets underway as described above, the foundations can be laid for more comprehensive legislative reform. This is the third component of my proposal. I suggest that the country doesn’t need entirely new legislation on non-trial resolutions as suggested in the Zondo reports.

Rather, it should simply amend section 38 of the National Prosecuting Authority Act, 1998 to introduce the fully fledged anti-corruption redress system. As part of this system, there would be an anti-corruption redress body – perhaps a commission as a subset of the prosecuting authority’s existing Specialised Commercial Crimes Unit. It would need to be staffed with the right mix of experts. Cases would be determined on the lower civil standard of proof: “a balance of probabilities”.

The legislative intervention should provide for administrative fines (basically civil monetary penalties). These should be a percentage of the unlawful benefit the party gained from the corrupt deal. Administrative fines are already used in the country’s competition and environmental law regimes. They can improve deterrence and enhance redress.

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The proposed commission would determine the appropriate redress measures in a given case. It would weigh factors in the “redress balance” such as the extent of the harm, repeat offending, willingness to make reparations and good faith. So, for example, there might be an agreement to defer (delay) criminal prosecution if the offender displays good faith, cooperates and meets all repayment (and other reparation) obligations. The findings of the commission would be open to review by a tribunal of record – much like the competition tribunal.

In conclusion, the proposed anti-corruption redress system is fundamentally about the right mix of retributive and restorative justice to restore the dignity of the people of South Africa. It would help rebuild public trust in government, reduce impunity and usher in an era of enhanced integrity and accountability. Now is the time to make this happen.

LAUREN KOHN, Scholar & Legal Expert: Administrative & Constitutional Law, Department of Public Law (UCT); Attorney of the High Court of SA; Young Research Fellow (UCT); Founder: www.SALegalAdvice.co.za, University of Cape Town

By The African Mirror