Hitachi and Chancellor House: unconstitutional, illegal and criminal considerations
The South African 2011 municipal elections are over, the results are official: 57% of registered voters turned out to give the ANC led alliance (in which communists and trade unions are junior partners) 63.65% of the votes cast - down from 66.3% in 2006, and the main opposition party, the Democratic Alliance, 21.97%, up from 14.8% last time round. A few, perhaps 4% of former ANC supporters have been won over by opposition parties, but most showed their disappointment with service delivery failures by staying away from the polls conducted on 18 May. Unfortunately it is still the case that more voters did not vote than voted for the ANC. It is of vital significance to any analysis of these voting trends that there is a proper understanding of what Chancellor House, the ANC's "investment arm", is doing to the fabric of South African society and its nascent democracy.As investment arm of the governing ANC, which runs every city except Cape Town and every province except the Western Cape, Chancellor House has been instrumental in raising funds for the ANC's election war-chest out of all proportion to the puny amounts that the opposition parties in South Africa's "dominant party state" are able to amass through their own secretive fund raising efforts. IDASA, a "good governance" NGO, became so concerned about the abuses inherently possible in the unregulated political party funding environment a few years ago that it litigated the issue in the High Court. The outcome of the matter was fudged by a political promise that steps would be taken to legislate a regulatory framework that would ensure the "free and fair" elections which citizens are entitled to under the progressive post liberation SA Constitution. The promise has not been kept; no suitable draft legislation has been introduced, let alone made law. There is alarming opacity regarding the sources of funding for political parties.
The absence of a regulatory system does not, however, mean that it is open season for Chancellor House to do as it pleases. In any constitutional democracy all conduct is constrained by the law and the Constitution itself; the alternative is the "tyranny of the majority", a state of affairs that is wholly inconsistent with the substantive fundamental fairness that is at the root of the rule of law.
There have been comments in the SA media which suggest that the modus operandi of Chancellor House is unethical, improper and immoral. This criticism is based upon the willingness of Chancellor House to do business with the state and para-statals in order to amass profits for the benefit, directly or indirectly, of the ANC election machine. Certainly, the ANC is able to conduct election campaigns in a style and on a scale that is not remotely matched by any other party contesting for the popular vote.
Apart from the acquisition of mining rights, the most egregious example of the known methods adopted by Chancellor House is that of its role in the Hitachi Power Africa deal with Eskom, which was facilitated by the European Division of Hitachi, based in Munich. In brief: the ANC identified a need for extensive further funding for upcoming elections. The directors of Chancellor House, casting about for a juicy deal, hit upon the idea of taking a quarter share (and directorships) in Hitachi Power Africa, which then tendered successfully to build massive boilers for new power stations being developed by Eskom, a state owned enterprise. The chair of the tender committee involved was none other than Valli Moosa, a former ANC cabinet minister, and then chair of Eskom. The top management of Eskom is, lamentably, shot through with deployed cadres of the ANC there to do its bidding and to behave with unswerving loyalty to pursuing its "national democratic revolution". Getting additional tariff funding from Nersa, the national energy regulator, to enable Eskom to pay for the boilers, so that Chancellor House can receive bigger dividends, posed no problem at all. Nersa is also staffed with deployed cadres in all the right positions. The inwardness of the transaction is that the consumers of electricity who pay for the service they receive become contributors to the coffers of a political party, whether they wish to support it or not.
After the 2007 conference of the ANC in Polokwane, South Africa, the new Treasurer General of the ANC, Mathews Phosa, expressed concern about the palpable conflict of interest situation in the Eskom deal, and tried to exit from it, so far without success. (He also internally investigated the arms deals - findings have been kept confidential). Gwede Mantashe, ANC Secretary General and Chair of the SA Communist Party, arguably the most powerful man in SA, can see nothing wrong with what is being done and relies upon Chancellor House's freedom of association and its right to do business.
It is this attitude that requires analysis. The criminal law frowns upon collusive dealings in which parties, who are supposed to deal at arms length with each other, are anything but at arms length. Furthermore, contracts concluded in circumstances in which a conflict of interests of sufficient proportions exists are voidable. This happens when persons in a fiduciary position, such as trustees or attorneys, act in a situation in which their personal and official interests clash. For example, attorneys are not allowed to act for and against the same client, for obvious reasons. These are not matters of ethics or good morals, they are illegal and can be interdicted or set aside if they are allowed to stand in the face of well founded criticism. Companies used for illegal purposes can be wound up on just and equitable grounds. Their ill gotten gains are then forfeited to the state.
According to William Gumede of the Graduate School of Public and Development Management at Wits University: "Hitachi has been awarded a contract by Eskom to supply and install boilers for power stations. The ANC's stake in the deal through Chancellor House was estimated in 2008 to be R5.8 billion. For the sake of transparency, accountability and clean governance there has to be a firewall between the ruling political party and its leaders on the one hand, and state and private companies, on the other."
By way of contrast, it is worth noting that the biggest opposition party, the Democratic Alliance, ran its election campaign on a budget of a mere R60 million and struggled to raise the amount budgeted. It could not hire stadiums and pop stars for its campaign as the ANC did; nor did its advertising and posters reach nearly as many voters as the ANC could, by utilizing its ill-gotten gains. This disparity suggests that the gains of the DA are all the more remarkable, as it competes for votes on a playing field that is far from level. All opposition parties are using pea shooters in the contestation in which the ANC has the machine guns of which President Zuma sings at party gatherings in his signature struggle song "Bring me my machine gun" - a bellicose theme for any peacetime election campaign.
The Constitution itself guarantees "free and fair elections" to all citizens and naturally requires compliance with the rule of law. The Independent Electoral Commission has to ensure that all elections are "free and fair". The SA Human Rights Commission is there to protect the human rights constitutionally guaranteed to all and the Office of the Public Protector and Electoral Courts can look into any irregularities in the conduct of elections in the country. No election in which only one of the protagonists has access to the type of resources that flow from the dealings of Chancellor House can ever be fair. None of the other political parties have investment arms that are in any way comparable to the machinery of Chancellor House. The legality of that machinery is highly questionable.
It was Zakes Mda, a liberation struggle author, who observed some years ago that "The biggest constraint to development is corruption at the centre." Andrew Feinstein, the former ANC MP, has made it public knowledge that bribes paid on the arms acquisition programme were used to fund the 1999 ANC election campaign. In all, R2,1 billion in bribes were paid on the arms deals according to his educated estimates. The role of Chancellor House in these machinations is not clear, but its not inconsiderable dividend flow from the Eskom deal is in the public domain. This "politically connective" flow is a clear illustration of what Mda called "corruption at the centre". More recently, Sipho Pityana of CASAC, an anti-corruption NGO, remarked that "A state that is unable to openly explain and justify its actions and to protect itself from the scourge of corruption can never serve the imperative of social transformation, nor its people." This echoes the sentiments of Thabo Mbeki as related by his biographer, Mark Gevisser: "He was deeply distressed by the possibility of being succeeded by Zuma [as] part of a strategy to avoid prosecution...Mbeki allegedly worried that Zuma and his backers had no respect for the rule of law, and would be unaccountable to the constitutional dispensation the ANC had put in place."
If proper accountability is to be exacted from the ANC and its investment arm, it is not helpful to mischaracterise the illegal activities of Chancellor House and Hitachi as merely immoral or unethical. There are good grounds for a thorough and independent investigation of the goings on in Chancellor House. The trouble is that no official body of independent investigators exists in South Africa since the dissolution of the Scorpions unit of the National Prosecuting Authority and there is accordingly none of the necessary political and professional will and skill available to set an investigation in train. This may change in time, following the setting aside of the legislation in terms of which the excessively tame Hawks (successors to the Scorpions) operate, because they lack the necessary independence to tackle high level political corruption. The Constitutional Court has given government until September 2013 to rectify the law. At present, ostensibly independent constitutionally created institutions are saturated with deployed cadres who owe their primary loyalty to the ANC. Thus is responsiveness to the needs of ordinary people undermined. It remains to be seen whether the successors to the Hawks will be effective. In Gevisser's words: "A Zuma presidency...would be a dream shattered, irrevocably, as South Africa turned into yet another post-colonial kleptocracy; another 'footprint of despair' in the path of destruction away from the promises of uhuru."
Hitachi has thus far ignored entreaties that it account for its role in this fiasco. A complaint to the Attorney General in the USA, where laws exist to investigate allegations of corruption by those who do business there irrespective of where the malfeasance takes place, is under consideration. The ramifications of South Africa becoming a corrupted failed state are dire, not only for Africa but for all countries which can reasonably anticipate a flood of refugees from the misery and chaos failure brings.
Paul Hoffman SC
21 May 2011.
