SAFTU demands action against private as well as public sector corruption

The South African Federation of Trade Unions has noted the R15 million fine the Reserve Bank imposed on the South African branch of the Hong Kong and Shanghai Banking Corporation (HSBC) for weaknesses in its processes to detect money laundering and terrorism financing, and its order to the bank to fix the problems.

British law-maker Peter Hain has says that HSBC, the world’s seventh largest bank, had been “incredibly complacent about the way they’ve managed SA accounts, suspicious or normal. There’s no question that the Guptas, as HSBC admitted to me, had used their accounts.”

This provides further evidence for SAFTU’s long-held view that the ‘state capture’ scandal was never confined to the Gupta family and politicians and officials in the government and state-owned companies, but that people in the private sector were also deeply involved and that corruption is based on the foundations of an inherently corrupt capitalist system.

Hain told the UK parliament that HSBC’s SA branch had alerted its London office to the Guptas’ transfers of money from SA to the UK and other markets. However, the London unit had chosen to ignore those warnings and the UK’s Financial Conduct Authority was still “ploughing through a lot of evidence” as part of its investigation into the transfers and that he had provided investigators with “detailed information” about the transactions.

UK-based HSBC joins the growing list of big private companies who have been collaborating with the Guptas and their cronies – Bell Pottinger, KPMG, McKinsey, SAP, Trillian, Bain & Co.

SAFTU has also drawn attention to scandals with no proven link to the Guptas – the VBS implosion, which also involved auditors KPMG (again!) and PwC – and the Steinhoff collapse.

The federation has always demanded that the Guptas, and all the political leaders and SOE executives involved in looting, must be prosecuted, punished and forced to return stolen money, and that the ANC must be held to account for its complicity.

But at the same time it has also insisted that the same must apply to those in the private sector implicated in these and other unrelated cases of fraud, corruption or money-laundering.

Until now however the mainstream capitalist media has almost exclusively focussed on those in the public sector an vilified those responsible while portraying those in the private sector as just a few “rotten apples” in an otherwise healthy capitalist barrel.

SAFTU is therefore interested that at last a journalist, Chris Barron, has conceded that there is “Something rotten in corporate SA”. In the Sunday Times on 11 November 2018, he quotes Claudelle von Eck, CEO of the Institute of Internal Auditors South Africa, saying that private-sector corruption could be “quite a bit worse than we think” and that rampant corruption in the public sector has “lulled us into thinking that things are going very well in the private sector”.

According to IIASA’s 2018 Corporate Governance Index, corporate governance in SA has hit record lows. Mostly this reflects the calamitous state of corporate governance in the public sector, which Von Eck says has diverted attention from problems in the private sector and let companies off the hook.

She argues that Steinhoff and the VBS Mutual Bank scandal have been massive wake-up calls. “I think the focus in SA has been too much on the public sector. Part of that is because where the public sector is concerned it’s our money, it’s much more personal, and therefore we react a lot stronger than we would with private-sector companies.”

The index highlights the need for more shareholder activism: “Shareholders have themselves to blame as well for disasters like Steinhoff. They need to play a stronger role in holding organisations accountable”. Too many institutional shareholders “are not clearly seeing the role they are supposed to play”. By not asking the right questions, they have enabled corruption and corporate governance failures, she says.

The index also raises questions about the role and effectiveness of internal auditors. They report to audit committees and management, which either bully and intimidate them into sweeping inconvenient findings under the carpet or ignore their findings and fail to pass them on to the board.

She makes the startling statement that “We sometimes hear that there is a very deliberate intention to ensure the internal auditor is not at a senior-enough level and is not strong enough… An undue trust of management seems to have been their problem. They didn’t ask the kind of probing questions they should have. Professional scepticism goes out the window because we’ve become too close to the CEO or executive team.”

Welcome though these revelations are Von Eck seems to see these revelations as proof that there are a lot more “rotten apples” in the capitalist barrel than previously thought, rather than of an endemic structural problem within the private sector as SAFTU has argued.

The federation contests her view that what need is “more shareholder activism”. On the contrary it is the shareholders, particularly those with the most shares, who are responsible for criminal activities and cannot be trusted to prioritize any other issues – the workers, communities, the environment and the national interest – above their greed for profits.

Even if some small shareholders raise these concerns, they will be outvoted by the big institutional investors, who, in this highly monopolised capitalist economy, hold power and get the biggest return on their investments,
Steinhoff is the biggest warning of how this private sector crime can be overlooked and what it can lead to. As Jackie Cameron in BusinessTech wrote on 6 July 2018: “So mesmerised with Steinhoff’s success were stockbroking analysts and bankers that they failed to spot signs of trouble within the multinational retailer with South African roots.”

It led to the company’s share value collapsing in just two days, plumetting in value by R134 billion. This led to the loss of R15.6-billion of workers’ money invested by the Public Investment Corporation that manages R1.2-trillion worth of assets, overwhelmingly made up of government workers’ pensions and savings, and by numerous other workers’ provident funds.

Steinhoff is not unique, but just an extreme example of how the whole system operates. The Zupta scandal shows how the capitalist ethics of “me first” – putting profits and personal enrichment before the rule of law and the interests of the people of South Africa – has spread from the private and into the public sector.

Please follow and like us:

Be the first to comment

Leave a Reply

Your email address will not be published.