Only a free market and disciplined Parliament can end corruption

18 September 2020
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When they consider how to root out corruption in government South Africans are fond of throwing around buzzwords such as "mechanisms", "transparency", and "accountability". These standards found in section 1 of the Constitution are fundamental to a healthy democracy, but they are thematic and need to give rise to real, substantial interventions - this rarely happens. Civil society must go beyond the buzzwords and enter the trenches of detail. Only then will it be discovered that the root cause of corruption in South Africa is found in two facts: There is an overregulation of the economy, and Parliament bestows too much discretionary power on executive officials. Both these phenomena incentivise corruption. 

Picture the following:
You come from a poor background, but political connections abound. You are failing to pay your child's private school fees and your family hasn't been on a holiday in years.

Your friend in the hypothetical Department of Business helped you get a job as a junior inspector. The Business Regulation Act of 2020 regulates every detail of private enterprise (turns out, this isn't too far from reality) and empowers junior inspectors to close down any business if they "are of the view" that that business does not meet the requirements "prescribed by the Minister of Business." One of those ministerial diktats is that a business' staff must "broadly reflect the demographic composition of South Africa."

You inspect a business with a well-to-do owner. You find that the staff profile at that business does not align one hundred percent with the demographic profile of South Africa: There's one woman and one Indian too many by the government’s standards, and thus the business does not align to the prescribed ratios. 

You see an opportunity: Surely the owner of the business will rather pay you a handsome bribe than see their business closed? It will cost them significantly less to pay you off, than to get rid of meritorious staff or appeal to the courts. You threaten to close down the business unless money exchanges hands. The owner obliges. You pay your child's school fees and take your family to Cape Town for the December holiday.
This is an eminently foreseeable in South Africa’s regulatory environment, and yet its causes are usually ignored, and at best underemphasised. With the new swaths of regulations that came along with the COVID-19 lockdown, it’s more important than ever for us to get this right.

Earlier this year, the Civil Society Working Group on State Capture, composed of 26 watchdog and civil society organisations, published its recommendations to the Zondo Commission. Many of these recommendations are commendable, but the fundamental point is missed. There is not a word on reining in the powers granted to regulators and government bureaucrats by Parliament, and the recommendations are similarly silent on easing government interference in the economy. 

If you want money out of politics, you must start by getting politics out of money. It is no accident that politicians find themselves in the pockets of big businesses. Big corporates seek favour from politicians - who are very happy to oblige, satisfying their own interests - because of the extent to which government controls their sectors of the economy. This is no defence of big businesses, but simply a recognition of the perverse incentives at play. Indeed, often these corporates themselves invite more control, asking government to make things difficult for their competitors.

The Frenchman, Frederic Bastiat, a nineteenth-century, left-wing champion of free markets, rallied against how big businesses have tried to pervert the legal and regulatory system in their favour. He specifically pointed out the hypocrisy of wealthy landowners and businesspeople complaining about redistributive policies, when they themselves lobbied for policies that protected themselves from competition. The whole market must be freed, argued Bastiat, not just for the few, but for everyone.

The root problem has always been and will remain the fact that there is no proper separation between State and economy. Unless such a separation is entrenched and understood by all involved, the cycle of protection (creating a privileged class), then redistribution (from the privileged to the underprivileged), will continue without end. In this cycle, the opportunities for corruption are endless.

Government is supposed to protect the public, not from all imaginable unfortunate or bad circumstances, but from a specific problem: The violation of rights. If there is no rights-violation, government has no mandate to act. Where we give government an unrestrained hand to pursue such abstract objectives as 'social justice' and 'sustainable development' - in other words, in the absence of rights-violations - we are opening the door to corruption. 

But more specifically, the concrete enablers of corruption are provisions in legislation that bestow unrestrained and uncircumscribed powers upon executive officials. In our example, that provision in the Business Regulation Act allowed inspectors to invade the commercial space without having to comply with any substantive checklist. 

Where a government takes its role of protecting rights seriously, a discretionary power would be exercisable where the executive official has good reason to believe - and this must be demonstrable - that some legal mischief or harm has taken place. But South African legislation is replete with provisions simply empowering the executive to do any manner of economically and socially destructive things without constraint. The only hope we currently have of constraining this untoward conduct, are under-resourced anti-corruption institutions. This won't do.

If we are to take the corruption crisis seriously, South Africa needs two things to happen. There must be a conscious effort for government to disentangle itself from the economy, and Parliament must stop putting unrestrained discretionary powers in the legislation that it enacts. Without this, the most we can do is hope the criminals in government fear our historically toothless anti-corruption institutions. This will usually depend on which political party is in power - a precarious guarantee of constitutional government indeed.

This article was first published on City Press on 10 September 2020 

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