Apartheid Grand Corruption: Assessing the scale of crimes of profit in South Africa from 1976 to 1994¶
Hennie van Vuuren (2006). Apartheid Grand Corruption: Assessing the scale of crimes of profit in South Africa from 1976 to 1994. Institute for Security Studies, Cape Town (report prepared by civil society for the National Anti-Corruption Forum).
| Type | report |
| Scope | Wider apartheid literature |
| Method | archival narrative |
| Period studied | 1976–1994 |
| Regions | South Africa, Bantustans (Ciskei, Transkei, Bophuthatswana, Lebowa, KwaNdebele, KaNgwane), Namibia, Angola |
| Themes | business and state, macro fiscal finance debt, sanctions divestment, politics ideology elections, transition post apartheid, bantustans removals influx, methods data sources |
| Citation key | vuuren2006 |
Argument¶
The report argues that white-minority South Africa was not 'corruption free'. Secrecy, militarisation, sanctions and the approaching end of white rule fostered grand corruption, which peaked under P.W. Botha and F.W. de Klerk. It documents case studies: the Information Scandal, the Broederbond, secret defence funds and the CCB, SADF ivory smuggling, sanctions-busting oil purchases, capital flight and forex fraud, Reserve Bank scandals (Bankorp, Masterbond, Vermaas) and homeland graft. It claims that the old elite carried networks and practices into the post-1994 order, and that the TRC and later investigations left economic crimes largely unexamined. It ends by recommending a dedicated state investigation. The author presents it as indicative ('the tip of the corruption iceberg'), not exhaustive.
Evidence and method¶
Over 20 interviews (TRC researchers, journalists, activists, politicians, business and security personnel, some anonymous). Archives: SAHA, Wits Historical Manuscripts, UCT, Johncom, DISA, SAIRR. Official commission reports (Erasmus, Harms, Kumleben, Goldstone and others). TRC report volumes and Auditor-General data on secret funds. Many newspaper and magazine clippings (Rand Daily Mail, Weekly Mail, Noseweek, Sunday Times). Secondary books (Terreblanche, O'Meara, Aldworth, Klinghoffer, Pallister et al.). Capital-flight estimates from Khan (1991) and Mohamed and Finnoff (2004). Rand values converted to 2005 money with a CPI-based formula.
Place in the debates¶
- Was apartheid-era government 'brutal but honest' (white exceptionalism) compared with the corrupt post-1994 state? (see Post-apartheid economic policy, governance and corruption). Rejects it. Argues apartheid was systemically corrupt and that the claim of a clean past is 'deeply ignorant or racist'.
- Why the apartheid regime negotiated: sanctions and struggle versus elite looting and bankruptcy (see Why apartheid ended: reform, transition and elite bargaining). Quotes Ken Owen's 'liberation owed to greed' view and accepts it as 'clearly true in part'. Insists liberation had several causes including internal and external struggle.
- Continuity versus rupture between apartheid-era and post-1994 corruption (see Post-apartheid economic policy, governance and corruption). Stresses an inter-generational continuity of networks, individuals and practices across 1994, and treats this as a legacy of apartheid.
- Cost of sanctions-busting and the siege economy (see Sanctions, disinvestment and the anti-apartheid movement). Argues that embargoes forced purchases through middlemen at a premium, creating opportunities for graft and imposing large costs on the economy.
Findings¶
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Balance-of-payments estimates (Khan) show persistent capital flight 1972-1988. (p. 75)
Cumulative capital flight for the period is estimated at $12,4 billion and, during the two heaviest periods of outflows, estimated capital flight averaged 10% of gross domestic fixed investment.
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Trade mis-invoicing added a large further outflow. (p. 75)
cumulative capital flight through under-invoicing may have amounted to US$20 billion (worth well over R100 billion in 2005 value) for the period 1970–1988.
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Auditor-General figures show very large secret state funds, dominated by the SADF Defence Special Account, with little oversight. (p. 63)
The staggering figure of R339,19 billion is approximately equal the amount the modern South African state spends on procurement over a two-year period
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The oil embargo imposed a heavy cost on the economy and enriched middlemen. (p. 73)
between 1979 and 1993 South Africa spent US$36,2 billion (ZAR2005=87,7 billion—calculated at 1993 rand value) on purchasing crude oil.
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The 1985 credit squeeze and the introduction of the financial rand created opportunities for round-tripping fraud. (p. 71)
in the mid-1980s a parallel currency—the financial rand—was introduced. This allowed foreign residents to bring in capital on the basis that it would be valued at approximately four times the rate of the commercial rand.
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The Reserve Bank gave Bankorp very favourable support, later judged to exceed its authority. (p. 81)
in mid-1990 the Reserve Bank made a loan of R1,5 billion available at an interest rate of 1% per annum.
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The Davis panel found the Reserve Bank acted beyond its powers in the Bankorp rescue. (p. 82)
the Davis expert panel found that the Reserve Bank, under Chris Stals, had exceeded its authority in the way it assisted Bankorp between 1985 and 1995.
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Mass destruction of state records before 1994 limits investigation of apartheid-era economic crime. (p. 23)
some 44 metric tons of records from the Headquarters of the National Intelligence Service alone were destroyed.
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Forex fraud was widespread by the early 1990s, and officials were aware of it. (p. 78)
254 foreign exchange rackets were being investigated, involving about R2,7 billion (ZAR2005=R6 billion).
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Quotes Ken Owen's view that looting and bankruptcy brought de Klerk to negotiations, and partly endorses it. (p. 54)
the bankruptcy of a nation that had been looted until it could no longer honour its debts
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Central conclusion that repression and corruption coincided. (p. 94)
when the apartheid state was at its most repressive, it was also at its most corrupt.
Evidence ledger¶
Sources used¶
| Source | Kind | Period | How used |
|---|---|---|---|
| Author's in-depth interviews (20+ individuals: TRC researchers, journalists, activists, politicians, business people, security personnel) | interviews oral history | 2004-2005 | Provides testimony on corruption episodes (Terreblanche, Welz, van Zyl Slabbert, Sparks, Breytenbach, Thirion, Louw, Pauw, Gould, Thomashausen), often single-source. |
| Newspaper and periodical clippings (Rand Daily Mail, Sunday Times, Weekly Mail, Noseweek, Financial Mail, Business Day, Mail & Guardian, The Star, Citizen, Beeld, etc.) | newspapers periodicals | 1974-2005 | Primary basis for most case allegations (forex frauds, Masterbond, Vermaas, Kerzner, Diedrichs, homeland scandals). |
| Archival collections: SAHA, Wits Historical Manuscripts, UCT Historical Archives, Johncom Archive, DISA, SAIRR Library | state archives | 1976-1994 | Source for documents and press cuttings, e.g. Steyn Report in SAHA's TRC collection. |
| Steyn Report to the State President (Military Intelligence documents), SAHA TRC collection | state archives | c.1990-1992 | Shows military intelligence concern about CCB and front companies' impact on negotiations. |
| Truth and Reconciliation Commission of South Africa Report (Vol. 2 ch. 6; Vol. 4) incl. Auditor-General secret funds report | commission or official report | 1998 | Supplies Table 1 of secret funds by department 1978-1994, audit limitations and recommendations on covert funding. |
| TRC amnesty applications and hearings (e.g. Marthinus Ras amnesty application; Smit murders 1997) | commission or official report | 1996-1998 | Allegations of covert theft of ANC funds and findings on the Smit murders. |
| Commission of Enquiry into Alleged Irregularities in the Former Department of Information (Erasmus Commission) and supplementary report, 1978-79 | commission or official report | 1978-1979 | Basis for account of the Information Scandal and criticism of the commission's thoroughness. |
| Commission of Enquiry into Certain Alleged Murders (Harms Commission, 1990) | commission or official report | 1989-1990 | Evidence on Vermaas's friendships with ministers and the Reserve Bank's handling, and the Kerzner–Matanzima payments. |
| Kumleben Commission of Enquiry into the Alleged Smuggling of, and Illegal Trade in, Ivory and Rhinoceros Horn in South Africa (1996) | commission or official report | 1996 | Establishes SADF involvement in ivory trade through front company Frama Inter-Trading. |
| Other commissions of enquiry (Lebowa 1989; DET 1989; Development Aid 1991 (Pickard); KwaNdebele 1993 (Parsons); Goldstone 1993; State Land 1997; van Zyl; van der Heever; Nel; Skweyiya) | commission or official report | 1989-1997 | Documents departmental and homeland corruption examples. |
| Auditor-General reports (secret funds, CCB expenditure, House of Representatives 1990, KwaNdebele, KaNgwane) | commission or official report | 1979-1994 | Quantifies unauthorised CCB spending and homeland audit failures. |
| Varney, The role of the former state in political violence: Operation Marion case study (Investigation Task Board report, March 1997), incl. SSC sub-committee minutes 15 January 1986 | commission or official report | 1986-1997 | Source for covert funding of IFP and the R19.5m 1986/87 budget. |
| Brian Khan, Capital flight and exchange controls in South Africa, LSE/CSSAEIF Research Paper No. 4 (1991) | secondary literature compilation | 1970-1988 | Provides estimates of cumulative capital flight (US$12.4bn BoP approach; US$20bn under-invoicing). |
| Mohamed and Finnoff, Capital flight from South Africa, 1980-2000 (2004 conference paper) | secondary literature compilation | 1980-1993 | Supports claim of average capital flight of 5.4% of GDP per year. |
| Amsterdam Shipping Research Bureau oil embargo data (via Hengeveld and Rodenburg, Embargo, 1995) | secondary literature compilation | 1979-1993 | Estimates cost of oil purchases and middlemen, and Marc Rich's share of shipments. |
| Auditor-General/Treasury budget figures via Jacklyn de Kock, War and Society (1989) and Garth Shelton on defence and nuclear spending | secondary literature compilation | 1986-1994 | Gives estimates of defence budget and nuclear programme cost. |
| CPIX/consumer price data (Economist Intelligence Unit 1981-2005; Central Statistical Service Statistical News Release Dec 1987 for 1960-1980); NYSE composite index | official statistical series | 1960-2005 | Used to convert historical rand amounts to 2005 values under three scenarios (ZAR2005, USD-Bank, USD-NYSE). |
| Minister of Finance Trevor Manuel, 2006 Budget address (foreign exchange control amnesty results) | official statistical series | 2003-2006 | Gives 42,672 applications, R68.6bn assets disclosed, R2.9bn levies as proxy of externalised funds. |
| Hansard (Parliamentary statements, e.g. 8 December 1980; PFP MP Malcomess on oil suppliers) | parliamentary debates | 1980-1984 | Used for allegations of corruption in oil purchasing and secrecy. |
| Book-length accounts: Aldworth, The Infernal Tower (Bankorp lifeboat); Klinghoffer, Oiling the Wheels of Apartheid (Salem); Pallister et al., South Africa Inc. (De Beers/Thirion); Rhoodie, The Real Information Scandal; Bell and Ntsebeza; O'Meara; Terreblanche; Hyslop | secondary literature compilation | 1969-2005 | Supply detailed figures and narrative for Bankorp, Salem, De Beers, document destruction and general context. |
| Davis expert panel report on Bankorp (2002) and Heath SIU investigation (as reported) | commission or official report | 2002 | Findings that the Reserve Bank exceeded its authority in assisting Bankorp. |
| Statistics cited on fraud complaints, economic crime costs and asset register (von Lieres; SA Chamber of Commerce; Dept of Public Works) | official statistical series | 1986-1997 | Indicators of rising economic crime and unlisted state assets. |
Inference¶
Quantification: Illustrative figures.
Descriptive case-compilation: a catalogue of alleged corruption episodes drawn mainly from press reports, commissions of enquiry, TRC records and interviews, supplemented by secondary capital-flight estimates and constructed 2005 rand conversions. Claims of systemic corruption rest on accumulation of cases and analogy rather than systematic measurement.
Key claims¶
| Claim | Basis | Strength |
|---|---|---|
| Secret state funds allocated to departments 1978-1994 totalled over R52 billion (about R339 billion in 2005 rand), overwhelmingly through the SADF Defence Special Account, with inadequate audit. (p. 53) | TRC report drawing on Auditor-General figures (Table 1); author's conversion formula. | Partial data |
| Illegal capital flight and export under-invoicing during apartheid ran into tens of billions of dollars. (p. 66) | Khan (1991) models and Mohamed and Finnoff (2004), reproduced secondhand. | Partial data |
| Sanctions-busting oil purchases via middlemen cost South Africa heavily and created opportunities for kickbacks, though no proof of official kickbacks exists. (p. 64) | Amsterdam Shipping Research Bureau estimates, Klinghoffer's Salem case, PFP testimony. | Partial data |
| The Reserve Bank's Bankorp 'lifeboat' was effectively a gift to a Broederbond-linked bank worth about R1.1 billion in interest. (p. 72) | Aldworth's book, Davis panel findings, journalist commentary. | Partial data |
| Corruption escalated in the late 1980s-early 1990s as the regime anticipated its end, evidenced by scandals across departments, homelands and the private sector. (p. 42) | Press reports, commission findings, quotations from Terreblanche, Hyslop, Owen and Hiemstra. | Illustrative or anecdotal |
| SADF officers were involved in ivory smuggling for self-enrichment rather than only to fund UNITA. (p. 50) | Kumleben Commission quotation, interviews with Breytenbach and Thirion, Van Note testimony. | Illustrative or anecdotal |
| Large-scale destruction of state records in the early 1990s hampers investigation of apartheid-era corruption. (p. 14) | Bell and Ntsebeza's account of 44 metric tons destroyed at NIS; Auditor-General remarks. | Partial data |
| Apartheid South Africa was not 'corruption free'; the secret, authoritarian system fostered grand corruption extending into the democratic era. (p. 85) | Cumulative case catalogue and expert opinion; no systematic measurement. | Asserted |
The author's caveats¶
The author states that little exists in official records, evidence was destroyed, and the report relies heavily on newspaper clippings and single-source interviews with limited research capacity; the report is 'not exhaustive' but 'indicative', makes no judgement on cases, and many interviewees are unattributed. Auditor-General figures are acknowledged as unguaranteed.
Gaps in the evidence¶
The argument would need systematic data, such as audited accounts, Reserve Bank exchange-control records, Treasury secret-account ledgers and court files, to test scale rather than relying on allegations. Many were destroyed or classified at the time, but TRC submissions, Auditor-General working papers and foreign bank/shipping records could now be accessed through information requests or foreign archives. Counterfactual or comparative measures of corruption incidence under apartheid versus other regimes are also absent.
Replicability: Data poorly documented.