black economic empowerment
Key terms
Corruption and state capture
Corruption tends to be an individual action that occurs in exceptional cases, facilitated by a loose network of corrupt players. It is informally organised, fragmented and opportunistic. State capture is systemic and well organised by people who have an established relationship with one another. It involves repeated transactions, often on an increasing scale.
Our focus in this book is not on small-scale looting but on accessing and redirecting rents (defined below) away from their intended targets into private hands. In order to succeed, the perpetrators need high-level political protection, including from law enforcement agencies; intense loyalty to one another; a climate of fear; and the elimination of competitors.
The aim of state capture is not to bypass rules to get away with corrupt behaviour; the term ‘corruption’ obscures the politics that frequently informs these processes, treating it as a moral or cultural pathology. Yet corruption, as is often the case in South Africa, is frequently the result of a political conviction that the formal ‘rules of the game’ are rigged against specific constituencies and it is therefore legitimate to break them. The aim of state capture is to change the formal and informal rules of the game, legitimise them and select the players who are allowed to participate.
Power elite
We use the notion of a ‘power elite’ to refer to a relatively well-structured network of people located in government, state institutions, state-owned enterprises (SOEs), private businesses, security agencies, traditional leaders, family networks and the governing party. The defining feature of membership of this group is direct (and even indirect) access (either consistently or intermittently) to the inner sanctum of power to influence decisions. It is not a ruling class as such, although it can see itself as acting in the interests of an existing class or, as in the South African case, a new black business class in the making. Nor is it just the political–bureaucratic leadership of the state, which is too fragmented to mount a political project reliably.
The power elite, which is not necessarily directed by a strong strategic centre, includes groups that are to some extent competing for access to the inner sanctum and the opportunity to control rents. It exercises its influence through both formal and informal means. However, what unites the power elite is the desire to manage effectively the symbiotic relationship between the constitutional and shadow states. In order to do this, and in broad terms, it organises itself loosely around a ‘patron’ or ‘strongman’, who has direct access to resources and under whom a layer of ‘elites’ forms. These elites dispense the patronage, which is then managed by another layer of ‘brokers’ or ‘middlemen’.
Repurposing
The repurposing of state institutions is the organised process of reconfiguring the way in which a given institution is structured, governed, managed and funded so that it serves a different purpose from its formal mandate. Understanding state capture purely as a vehicle for looting does not explain the full extent of the political project that enables it. Institutions are captured for a purpose beyond looting, namely consolidating political power to ensure longer-term survival, the maintenance of a political coalition and its validation by an ideology that masks private enrichment with references to public benefit.
Rents and rent seeking
Development is a process that is consciously instigated when states adopt policies to reallocate resources, directly and/or indirectly, to redress the wrongs of the past and to create modern, transformed, industrialised economies that can support the wellbeing of society. To achieve this, state institutions must be used to reallocate resources from one group to another, or to support one group to enable it to overcome the disadvantages of the past. These allocations can be called beneficial rents.
However, once the state takes measures that result in a flow of potentially beneficial rents to specific economic actors (whether these are businesses, households or public institutions), there is competition to access these flows and this creates the conditions for rent seeking.
While
