Category: <span>Article</span>

ARC Briefing Mozambique February 2023

click Mozambique Summary 10 February 2023 President Filipe Nyusi (2015-present) meets with the CEO of French-headquartered TotalEnergies Patrick Pouyanné on 3 February in the northern province of Cabo Delgado. The latter has engaged a consultant to assess the current security situation as it mulls over the lifting of the force majeure declared over its LNG project in April 2021. Linda Greenfield, the United States (US) ambassador to the United Nations, calls for greater efforts to repel insurgents expanding south from Cabo Delgado, whilst pledging US support to work with Mozambique in the United Nations Security Council to achieve this aim. Domestic security is further in the spotlight as instances of cross-border crime between Mozambique and South Africa raise the risk of social unrest, while the killing of a Renamo member causes concern for the peace deal agreed between Frelimo and Renamo parties.  Instituto Nacional de Estatistica (national statistics agency) reveals that Mozambique recorded its highest average inflation rate since the aftermath of the 2016 hidden debt scandal in 2022. The annual inflation rate for 2022 is recorded at 10.2%. Bank of Mozambique’s (central bank) Monetary Policy Committee opts to keep its benchmark policy rate of 17.25% unchanged but cautions the government of its high public debt. The government also establishes a working group to ensure Mozambique’s removal from the global Financial Action Task Force’s (FATF) ‘grey list’ whilst earmarking strong investment in the country’s agriculture sector to drive growth.

go to site President Nyusi courts TotalEnergies…

President go site Filipe Nyusi (2015-present)met with watch Patrick Pouyanné, the chief executive officer of the source site French-headquartered Buying Diazepam Usa TotalEnergies, on 3 February in the embattled Cabo Delgado region, where Pouyanné was visiting to review the security and humanitarian situation. Pouyanné visited the towns of see Palma and click here Mocimba da Praia and the TotalEnergies Afungi gas site and then met Nyusi in enter Pemba. The CEO’s visit to the country is significant as the company’s project remains shuttered since declaring force majeure on 26 April 2021 citing the high-security risks in the country after insurgents attacked Palma, near its gas project. The project is valued at over $20 billion and includes the development of two fields located in source link Offshore Area 1 and the construction of two liquefaction trains with a total capacity of 13,1 million tons per annum.

Nyusi has long sought to reassure investors that state-backed forces have regained control of the region, and managed to neutralise the threat from insurgents, making a return to operations safe. He has called on firms to invest in the region and begin operations, which a few have heeded. Although, Pouyanné noted that the security situation in the Cabo Delgado region has “improved significantly”, also acknowledging the role played by several go site African nations who “committed themselves to restore peace and security,”, he divulged that the company has engaged the services of enter Jean-Christophe Rufin, a humanitarian and human rights expert to conduct an independent assessment to determine “whether the current situation allows for a resumption of activities while respecting human rights”.

Pouyané made it clear that the lifting of the force majeure would require security in the region, the resumption of public services and a “return to normal life” for inhabitants of the region, all of which Rufin will assess and provide a report on by end-February. In response, the Mozambican government has stated that it is “very optimistic” that TotalEnergies will resume its operations by March.

Pouyané’s visit also comes as a London (United Kingdom) court dismissed an appeal by the environmental rights group Buy Xanax 0.25 Mg Online Friends of the Earth, which challenged the validity of the UK government’s investment in the TotalEnergies liquified natural gas (LNG) project in Mozambique on 13 January. The court found insufficient merit in the rights group’s argument that the UK government’s funding of the project was incompatible with the Paris Agreement on climate change. This will also help throw weight behind the project, and possibly speed the process up if it resumes.  

Mozambique carried out its first shipment of LNG in November, to be sold to UK firm Buy Diazepam Cheap BP, under a 20-year contract with an optional 10-year extension (see ARC Briefing Mozambique Dec 2022).  A resumption of operations by TotalEnergies would provide a significant boost to Mozambique’s profile and potential for long-term LNG development, however, this is by no means a certainty over the near term.

Buy Diazepam Powder source url …as US pledges to support efforts to repel insurgents in Cabo Delgado Linda Greenfield, the follow link United States (US) ambassador to the United Nations committed to greater efforts to repel insurgents expanding south from the northern province of Cabo Delgado during a visit to Mozambique on 26 and 27 January. She also pledged the US’s support to work with Mozambique in the go to site UN Security Council to achieve this aim. She stated:

“We have to redouble our efforts to push back on terrorist actions and the activities that are terrorising ordinary citizens such as the citizens of Cabo Delgado… we’re working closely with the government to address those issues.”

Despite an improving security situation and the widescale dampening of the insurgents’ presence in Cabo Delgado, the militants have resorted to carrying out sporadic attacks in the region and beyond, contributing to the ongoing displacement of people. US-based go site ABC News reported on7 February that extremists killed an aid worker from the France-based humanitarian organisation Doctors Without Borders in Cabo Delgado. The UN Development Programme (UNDP) also cited the conflict in Mozambique as one of the contributors to making the African continent “the global epicentre of extremist violence” in its Journey to Extremism in Africa report released on 7 February. Since the conflict began in late 2017, nearly 5,000 people have been killed and approximately 1 million people internally displaced. The Catholic charity, Denis Hurley Peace Institute also warned on 3 January of impending famine in Cabo Delgado, stating that internally displaced people in the province are experiencing food shortages.

Mozambique and South Africa collaborate to quell cross-border crime

Instances of cross-border crime have also heightened the conflict risk in the areas of Mozambique which border northern KwaZulu-Natal province (South Africa), necessitating a response from authorities. Law enforcement officials from both governments committed on 31 January to collaborate to curb the growing instances of cross-border crime which have plagued the border towns, particularly in light of the rise of syndicates smuggling vehicles drugs, and other goods across the border.

South Africa’s national police commissioner general Fannie Masemola delivered this commitment during a stakeholder meeting in the Hluhluwe community in KwaZulu-Natal which was prompted by residents of the area allegedly burning six vehicles, including a tourist bus and truck, claiming to be frustrated by the increase in the number of vehicles stolen from their area reportedly en route to Mozambique. Masemola stated that a delegation of Mozambican law enforcement officers present had agreed to work more closely with his officers and to respond to the community “within a week or two”.

Such incidents also pose significant risks for trade between Mozambique and South Africa, Mozambique’s largest trading partner, as this is a popular route for the transfer of goods between the two countries. Mozambican transporters have already stated that the risks of violence may slow down the carriage of goods between both countries.

In a further development, the South African government’s plan to erect jersey barriers on the highly porous border between Mozambique and several South African towns has come to a halt after the South African Special Investigative Unit’s investigation into the project discovered irregularities in the R8.7m tender for the construction of an 8km border wall. The delay of this project will add to the risks already present and could create further instability in these areas.

Monetary Policy Committee keeps policy rate unchanged

National statistics agency, Instituto Nacional de Estatistica, revealed on 16 January that Mozambique recorded its highest average inflation rate since the aftermath of the 2016 hidden debt scandal, recording an average annual price increase of 10.2% in 2022. Despite this, on 25 January the Monetary Policy Committee of the Bank of Mozambique (central bank) opted to keep its benchmark policy rate of 17.25% unchanged. The committee stated its decision was due to:

“The prevalence of the high risks and uncertainties underlying the forecasts for inflation, notably the impact of the liquidity generated in the economy, resulting from the pressure on public expenditure, and the continued geopolitical tension in Europe”.

The central bank also cautioned the government on the high rate of public spending and resultant debt in the country with domestic debt standing at MZM 288.7 billion ($4.5m). The UN Economic Commission for Africa (UNECA) has expressed similar sentiments, noting it expects to see more countries seek to join the G20 Common Framework for Debt Treatment to restructure their debt, although it declined to name them. António Pedro, the executive secretary of  UNECA, cited the increase in interest rates and appreciation of the US Dollar as factors which may drive more countries to this approach.  Mozambique’s debt to gross domestic product (GDP) ratio ballooned to over 100% in light of the 2016 hidden debt scandal, however, US-headquartered Fitch Solutions expects debt to fall to below 100% in 2023 from 101% in 2022. That said, it cannot be ruled out that facing a mounting debt burden, the government may seek to restructure part of its debts under the framework, particularly if it is successfully managed by countries such as Zambia and Chad.

Mozambique focuses on regulation to support economic growth

Justice, constitutional and religious affairs minister Manuel Malunga announced on 21 January the government’s plans to ensure the country’s removal from the Financial Action Task Force’s (FATF) ‘grey list’. Mozambique was added to the list in November 2022 along with the Democratic Republic of Congo and Tanzania after the task force identified “strategic deficiencies” in these countries’ anti-money laundering regulations and implementation. The government launched a working group co-led by the European Union and the World Bank on 23 January to assist the country in meeting the requirements to exit the ‘grey list’. The Council of Ministers has also announced that it expects to consider and approve a new tax benefits regime for the regulation of the country’s cooperatives. Through a more harmonised and current regulatory framework, the government aims to enable greater economic participation and protection of players in the country’s large informal sector.

The government is also looking for new technologies to drive efficiencies. It announced plans to integrate electric vehicle technologies to tackle the challenge of congestion of its public transport services, and through the transport, communications, industry and commerce ministries, it plans to engage in a public-private partnership to build an electric bus assembly plant in Mozambique, with the first phase seeking to assemble around 1,000 such buses. This will enable the government to harness the surplus of electricity being produced by the national power utility Electricidade de Moçambique to adopt a more cost-effective transport system, which would also be less impacted by the fluctuations in global fuel prices as has been the case, particularly since the onset of the conflict between Russia and Ukraine in March 2022. The cost of public transport has been a contentious one for the public, particularly considering increased fuel prices. This prompted the government to introduce a temporary subsidy for public transport costs to quell protests in July 2022 (see ARC Briefing Mozambique Jul 2022).

Investments in expanding the agriculture output are also continuing and the resumption of cotton production in the Sofala region is expected to provide a welcome boost to the economy. The entry of Mandorla Investimentos Limitada into the market with an MZM150m ($2.3m) investment, replacing China Africa Cotton which operated in the region until it declared bankruptcy in 2021, has helped this happen. The firm expects to produce 6,000 tonnes of cotton in 2023. The agriculture sector represents a high-priority focus area for the government and president Nyusi announced on 26 January that he is seeking to mobilise $4.5 billion from international financiers to be invested in the country’s agriculture sector over five years. Describing specific sub-sectors of interest to the state, Nyusi said:

“There were ideas in supporting wheat production, rice production, support in youth training in Palma district, in the training of women, and support for innovations. We were also encouraged to embark on the carbon market”.

About ARC Briefing:

ARC Briefing is ARC’s essential business information service.

Companies at any stage in their Africa expansion, whether building or communicating an Africa strategy, investing directly, expanding current operations, financing other investors, doing the legal leg-work or researching the Africa growth trend, need ARC Briefing.

ARC Briefing is an information service keeping you:

  • Up to date with Country Chronologies of business-critical events
  • In the know via Country Briefings on political, economic, business and operating trends. Written in-country, ARC experts analyse and comment
  • Ahead with Country Planner which details future elections, budgets, regulatory changes etc.        

Please contact us by email or call + 44 (0) 20 7078 4080

Follow us on Twitter: @ARCBriefing

ARC Briefing Ghana January 2023: IMF Reaches Deal with…

Ghana Summary 10 January 2023

The International Monetary Fund (IMF) announces on 12 December that it has reached a staff-level agreement with Ghana’s government for $3 billion to be disbursed via the IMF’s Extended Credit Facility (ECF). Government agrees to a comprehensive debt restructuring programme to secure the agreement, triggering global rating agencies, which view this restructuring as a de facto debt default to further downgrade Ghana’s sovereign credit rating. Trade and industry minister Alan Kyerematen submits his resignation to President Nana Akufo-Addo (2017-present) to focus on his campaign ahead of the ruling New Patriotic Party’s (NPP) upcoming leadership primaries in which he is considered one of the leading candidates.  Kyerematen’s resignation increases expectations of an imminent cabinet reshuffle. The opposition National Democratic Congress (NDC) holds its elective conference on 17 December, electing former party general secretary Johnson Asiedu Nketiah the new party chairperson.  Asiedu Nketiah defeats the incumbent party chairperson, Samuel Ofosu Ampofo by 5,569 votes to 2,892. The #FixTheCountry movement holds protests in Tamale (Northern region) on 7 January, calling for constitutional review and expressing discontent with the handling of the economic crisis.

Staff-level agreement reached with the IMF

The IMF announced on 12 December that it had reached a staff-level agreement with Ghana’s government and the relevant authorities for a $3 billion three-year agreement which will be disbursed via the IMF’s Extended Credit Facility (ECF). The agreement still needs to be ratified by the IMF’s executive board, however, the institution’s board votes against the recommendations of the respective mission and this ratification are largely viewed as a formality. As such, Ghana should gain access to the ECF funds before the end of January 2023.

This ECF funding is a bailout that will go a long way to stabilising Ghana’s economy which has been in a state of crisis for several months marked by rapid currency depreciation and soaring inflation. Global currency markets reacted favourably to the news of the IMF agreement and the cedi strengthened by more than 31% from GHS 12.98/$1.00 on 11 December to GHS 8.95/$1.00 by 16 December. This currency strengthening should go some way in helping reduce inflation in the country as it will make imported goods such as food and fuel more affordable, a promising development as Ghana Statistical Service has indicated in several reports that such imported goods were major contributors to the current surging inflation levels. Consumer price inflation is currently at a 21-year high reaching 50.3% in November compared with 40.4% in October.

In order to secure the ECF agreement, Ghana had to make several concessions to the IMF, namely agreeing to a comprehensive debt restructuring programme that has seen Ghana suspend payments on some of its foreign debt obligations, a move which is essentially a voluntary debt default. This programme includes a suspension on payments servicing Ghana’s Eurobond debt which accounts for $13.1 billion of the country’s total $28.4 billion external debt. Ghana has also agreed to approach the Paris Club of creditor countries and apply to participate in the G20 Common Framework process for debt relief and restructuring agreements.

Ghana has also introduced a debt exchange programme under which Ghana would ask its creditors to exchange around $9.7 billion in domestic debt for new bonds. The deadline for this programme ends on 16 January, however, this exchange programme has faced intense local opposition, which has a deadline of 16 January, especially from labour unions who are fearful that such a debt exchange would negatively impact workers’ pension plans which hold government bonds. The government elected to exempt pension funds from the domestic debt restructuring to avoid a threatened countrywide indefinite strike over this matter.

The debt restructuring programme also had the negative result of triggering credit rating downgrades by global rating agencies. United States-headquartered Fitch Solutions and Standard & Poor’s (S&P) both announced credit ratings downgrades for Ghana on 21 December. Fitch downgraded Ghana’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) to ‘C’ from ‘CC’ and downgraded the issue rating on Ghana’s partially-guaranteed $1 billion notes maturing in 2030 to ‘CC’ from ‘B-‘. S&P lowered its sovereign rating for Ghana to ‘selective default’ from CC in its second downgrade for Ghana in December after lowering its rating for Ghana’s long-term bonds to CC from CCC-plus on 6 December (see ARC Briefing Ghana Dec 2022). These cuts occurred a month after US-based Moody’s announced that it had cut Ghana’s credit rating by two levels from Caa2 to Ca.  These rating cuts were widely expected as all three agencies had previously warned that they would view any large-scale debt restructuring to be the equivalent of a debt default (see ARC Ghana Briefing Nov 2022). These rating cuts will result in Ghana needing to offer higher interest rates on its government-backed bonds. This will increase the cost of borrowing for the government and hurt its debt burden. However, the government has accepted this as the necessary consequence of securing the IMF bailout as access to the ECF will help stabilise the country’s economy and enable the state to meet most of its budgetary obligations. This stabilisation is essential for the economic crisis to end and for the state to commence the recovery process.

Trade minister resigns ahead of ruling party primaries

Trade and industry minister Alan Kyerematen submitted his resignation to President Nana Akufo-Addo (2017-present) on 5 January 2023 as Kyerematen moves to focus his energies on campaigning to be elected as leader of the ruling New Patriotic Party (NPP). The NPP will hold its leadership primaries on a yet-to-be-confirmed date later this year.

Kyerematen’s resignation has intensified speculation about the NPP leadership race as his decision to exit the government coincides with emerging perceptions that the contest has narrowed to a two-horse race consisting of Kyerematen and Ghana’s vice president Mahamudu Bawumia. Other potential candidates believed to be considering a run for the party leadership are Assin Central member of parliament (MP) Kennedy Ohene Agyapong and agriculture minister Owusu Afriyie Akoto.

The perception that the primaries will come down to Kyerematen and Bawumia appears to have permeated across the NPP’s senior leadership, leading to growing calls for the two men to reach an agreement to form a joint ticket with one taking the role of leader and the other of deputy leader. Such a negotiated alliance is unlikely as both men currently believe they have a viable chance of winning the primary but such an agreement could bring about party unity and ensure that the NPP puts forward the strongest ticket in the 2024 general election.

The NPP will consolidate into two camps – centred on Kyerematen and Bawumia respectively – in the coming months in absence of a grand agreement. This will elevate political tensions within the NPP and potentially even cause divisions within the cabinet and the NPP parliamentary caucus which could lead to legislative gridlock given that the NPP-led coalition has a single-seat majority in parliament.

Kyerematen’s resignation has also increased pressure on Akufo-Addo to announce a cabinet reshuffle. The president has not appointed a permanent replacement but has rather made finance minister Ken Ofori-Atta the acting trade and industry minister. This decision has also caused tension within the NPP and the opposition National Democratic Congress (NDC) as Ofori-Atta has shouldered much of the blame for Ghana’s ongoing economic crisis.

The political fallout from the country’s economic crisis has also placed pressure on Akufo-Addo to reshuffle his cabinet. The NPP itself is eager for Akufo-Addo to remove and replace poor-performing ministers, creating the view that he is taking aggressive action. The NPP is fearful that public anger over the economic crisis will hurt during the 2024 election and, as such, is eager to change the discourse around governance in the country and has suggested consolidating ministries in a cost-cutting exercise

Among the ministers considered most likely to be removed are Akoto, who is expected to follow Kyerematen’s example and focus on his party leadership campaign, fisheries minister Mavis Hawa Koomson, labour relations minister Ignatius Baffuor Awuah, and natural resources minister Samuel Jinapor. The fate of the broadly unpopular Ofori-Atta also remains uncertain. The finance minister remains a close ally of Akufo-Addo, and reports indicate that the president was impressed by Ofori-Atta’s success in securing a $3 billion financing agreement with the International Monetary Fund (IMF), but Kyerematen’s resignation will likely force Akufo-Addo’s hand leading the president to announce a cabinet reshuffle sooner rather than later.

Opposition elects new leader

The opposition NDC party held its elective conference on 17 December, electing Johnson Asiedu Nketiah, the former NDC general secretary, as chairperson. Asiedu Nketiah defeated the previous incumbent Samuel Ofosu Ampofo by 5,569 votes to 2,892. Awudu Sofo Azourka was re-elected as the party’s first deputy chairperson, and former MP Fifi Kwetey was elected as the new NDC general secretary, while Barbara Serwaa Asamoah retained her position as deputy general secretary Sammy Gyamfi, who ran unopposed, was re-elected as the national communications officer while former deputy Ashanti regional minister, Joseph Yamin, was elected as the party’s national organiser.

This new executive committee has been tasked with preparing for and winning the 2024 general election. The NDC are in a strong position to regain power given the widespread frustration over the NPP’s handling of the economic crisis but Asiedu Nketiah will need to unify the party behind him and begin presenting his case against the ruling party. Asiedu Nketiah should face no challenges in achieving this given his former role as the party’s general secretary and the fact that several executive members retained their positions.

Demonstrations called demanding systemic government reforms

The ‘#FixTheCountry’ movement held protests in Tamale (Northern region) on 7 January, indicating that widespread societal frustration with the government and its mishandling of the Ghanaian economy has continued despite the announcement of the staff-level agreement with the IMF. The movement coincided the protests with Constitution Day (celebrated on 7 January) and demanded a review of Ghana’s constitution.  

The #FixTheCountry is a rapidly growing movement advocating for major governance reforms in Ghana. The movement is comprised of multiple different nongovernmental organisations (NGOs) and activist groups and is particularly strong in northern Ghana. The ongoing economic crisis has re-invigorated Ghana’s civil society and labour movements and the widespread social frustrations have led to several protests in recent months. This is significant as Ghana is entering a period of elevated political sentiment as the ruling party will hold its leadership primaries this year and the country will hold its general election next year. This has created opportunities for social and labour movements to pressure political parties to meet their demands while the economic insecurity caused by the high inflation levels has caused a sense of urgency to secure gains for workers and vulnerable groups.

About ARC Briefing:

ARC Briefing is ARC’s essential business information service.

Companies at any stage in their Africa expansion, whether building or communicating an Africa strategy, investing directly, expanding current operations, financing other investors, doing the legal leg-work or researching the Africa growth trend, need ARC Briefing.

ARC Briefing is an information service keeping you:

  • Up to date with Country Chronologies of business-critical events
  • In the know via Country Briefings on political, economic, business and operating trends. Written in-country, ARC experts analyse and comment
  • Ahead with Country Planner which details future elections, budgets, regulatory changes etc.        

Please contact us by email or call + 44 (0) 20 7078 4080

Follow us on Twitter: @ARCBriefing

Africa Risk Consulting: Interview with Lord Hain

The Judicial Commission of Inquiry into Allegations of State Capture – also known as the Zondo Commission – was a public inquiry launched by the government of Cyril Ramaphosa in August 2018. Whilst the initial furore created by the daily revelations of how insidious Zuma’s state capture project was have somewhat calmed down, it is as important as ever to understand why the commission is so critical, not just for South Africa, but across the continent. 

Tara O’Connor caught up with ARC advisor, Lord Hain, on his involvement in the Zondo Commission… 

Lord Hain, thank you for agreeing to speak with us around your commitment this year to combat corruption in South Africa. In particular, we are interested in your involvement in The Judicial Commission of Inquiry into Allegations of State Capture and your report presented to the commission in November 2019. What was the key motivator for your giving evidence to the commission? 

Thanks, Tara, and for the opportunity to discuss the commission and the report presented, which is of the utmost importance to how we move forward in South Africa. As you know, whenever there are large-scale corruption cases in Africa, there is a propensity to ignore the complicity of international actors in the facilitation of money laundering activities, but rather to focus on the domestic changes that are needed in the subject country. The commission is already well aware of the systemic lack of transparency and accountability of South African government bodies that allowed corruption to thrive. Instead I wanted to use the opportunity to make a plea for the international community to acknowledge its own role in the saga. Domestic changes are, of course, needed in South Africa, yet lessons must be learned by international actors who helped and continue to help corrupt individuals enjoy the spoils of their illegality by allowing them to move their ill-gotten gains from South Africa and then sometimes back into the country undetected. It has to be realised that without these players, state capture could not have been as monumentally lucrative to its perpetrators as it so tragically has been. 

You have been particularly vocal about the role played by banks in state capture in South Africa, can you explain why they were a particular focus? 

Yes, I have always been very vocal about this. Simply because I strongly feel that it is the banks who are at the frontline of tackling state capture that have repeatedly failed in their duty to prevent it. Electronic banking remains the simplest and fastest means of transferring funds between people and across borders. It allows criminals to move their money to more convenient and less regulated jurisdictions and it ‘cleans’ the money by mingling it with other funds and disguising its source so that it is easier to spend. As we know, the Guptas used a number of international banks to transfer money around their network and disguise payments. The banks appear to have assisted the Guptas in two ways: first by allowing bank accounts to be opened and in doing so granting access to the bank’s global network; and secondly by allowing the transfer of illicit funds into and out of accounts. 

There were, however, clear warning signs even in publicly available materials that the Guptas’ activities were suspicious and these ‘red flags’ should have been spotted by the banks either much sooner or immediately – including the secretive nature of numerous transactions, unexplained payments to and from third parties and unexplained connections with and movement of monies between jurisdictions. Given that banks ought to have access to customer data and transaction data for all accounts they open and transfers they facilitate, they are well placed to monitor the legitimacy of any and all transactions, in addition to having regulatory and moral responsibilities to recognise and stop illegal money flows. They systematically failed, time and time again in this case. We have to hold them to account, but also must force them to implement more stringent measures going forward. Banks possess the technological and financial clout needed to force change and my advice is that that power should be harnessed to assist regulators to target their often too limited resources. 

What must the banks and private enablers do differently to ensure this is not repeated? 

Data sharing will be critical. There must be an increase in the sharing of data within and between banks, professional enablers and the state, so that there is greater visibility around the risk profile of customers and transactions. I know of course that some sharing of information already occurs, however, it is clearly not effective. These banks have to cease hiding behind confidentiality and work collaboratively and pro-actively to share useful data and intelligence on a confidential basis with South Africa, global regulators and enforcement agencies. 

Understanding who the beneficial owners (BOs) of corporate entities are is integral to enabling banks and professional enablers to understand the background to a transaction so that a proper assessment can be made of whether there is a corruption risk. For them to recognise suspicious customers or transactions, they have to know the identity of the customer and they must be forced to conduct proper and thorough due diligence on EVERY client. I recommended that audits should be conducted by the South African Reserve Bank on all banks in South Africa. These must happen more regularly and without notice and a random sample of due diligence files should be reviewed regularly as part of this. 

Transparency between all parties will also be key to how we move forward. In South Africa, there should be increased transparency around the parties that enter into contracts with state-owned enterprises by creating a BO register. This would help banks and professional enablers to assess the legitimacy of payments from state-owned enterprises to third parties. In order for this to be effective, I suggest the register be updated and verified by an independent body on a monthly basis. 

You have said that there have to be some changes around Black Economic Empowerment (BEE) in South Africa. Are you able to elaborate a bit more on what changes you would like to see? 

The Black Economic Empowerment (BEE) programme is so important to South Africa’s future. And given its importance, it is all the more tragic that it has been wrongly exploited and manipulated by state capture criminals over a protracted period. I have emphasised repeatedly that greater transparency and accountability in this area is essential to ensure that the important and legitimate aims of the BEE programme are not undermined through corrupt manipulation by a few corrupt individuals (such as the Guptas) and their illegal ‘rent seeking’. 

In recent history, contracts with state-owned enterprises have been awarded to enterprises under the BEE initiative that do not have, or intend to obtain, the requisite capability to properly perform those contracts, nor intend to further the aims of the BEE movement. In that regard, there must be increased transparency around whether BEE parties a) have a relevant track record; b) meet basic up-skilling requirements to perform a contract e.g. do hire and train black employees to the number and qualifications required for competency under the contract; and c) satisfactorily perform their contract against contractual key performance indicators including final sign-off on completion. The number of employees retained by businesses claiming to operate as a BEE enterprise should also be recorded, verified and disclosed, as those that exploit the BEE initiative usually create a shell company with very few employees (much fewer than would be needed to fulfil the contract) solely to win the contract. It really is a tragedy how such actions have worked to undermine the necessary objectives of the programme. 

How could this additional transparency be achieved? 

In the form of regular public updates by the state through the Department of Public Enterprises websites and a whistle-blowing hotline for the reporting of breaches 

What lessons can be learned by other African nations from this matter? 

Across the continent, citizens deserve better than the looting and devastation caused by state capture that still occurs. I hope the recommendations, some of which I’ve summarised in this discussion, and all put forward to the commission, are implemented not just in South Africa but are used as guidance to all nations. Key to this is an understanding that fighting corruption requires global action and global co-ordination from a range of stakeholders, including governments, businesses, banks and NGOs. Without this cooperation, the state capture of South Africa or another country will happen again. 

Therefore, throughout Africa, international actors across the public and private sectors must commit their resources to strengthening regulations, improving corporate governance, increasing transparency and coordinating globally to reduce financial crime. Without cross- border cooperation and engagement of the public and private sectors, no country will be emancipated from financial crime.