This chapter explores the place of corruption, and the regulatory responses to it, in a particular sector of the South African state and society—social grant payments to the poor, disabled, and elderly. To what extent is this sector susceptible to corruption, and to what extent is there the capacity to combat it?
The chapter centres around what has been called the largest contract in South African history—a ZAR10-billion tender awarded in 2011 by the South African Social Security Agency (SASSA) to the electronic payments firm, Cash Paymaster Services (CPS). The tender involved a contract to administer several billion rands’ worth of government-funded social grants to more than 15 million beneficiaries over a five-year period; the beneficiaries are mostly South African citizens, but include some non-South Africans who are permanent residents.2 However, this contract, as well as the institutions designed to deliver the grants, were the subject of various hearings in South Africa’s highest court, the Constitutional Court, from 2012 to 2018.3 One of them, in February 2017, was highly publicized and televised live across the nation. Indeed, at the time of writing, events involving SASSA and social grant payments continue to make news headlines.
(p. 91) Underlying the controversy is a success story about South Africa’s transition from apartheid to a constitutional democracy. Section 27 of the Constitution provides for ‘social assistance’ as a constitutional right.4 This socio-economic right forms part of the Bill of Rights that was drafted during the country’s transition. In turn, the social grant payments sector to which it gave rise has made a significant contribution towards realizing the Constitution’s aspirations concerning socio-economic rights and effected a certain degree of redistribution of resources. As the Constitutional Court has noted,
For many people in this country the payment of social grants by the state provides the only hope of ever living in the material conditions that the Constitution’s values of dignity, freedom and equality promise. About 15 million people depend on the payment of these social grants. They are vulnerable people, living at the margins of affluence in our society.5
Without a doubt, then, the ongoing social grants saga can be seen as an instance of redistributive politics. Despite their relatively widespread legitimacy, South Africa’s social assistance policies have drawn criticism for their manner of implementation. Some critiques have pointed out that the aim of strengthening citizenship remains to be realized.6 This failure is attributed to a lack of implementation of the policies proclaimed in the Constitution. Other critiques have focused on the unevenness of the way in which the constitutional right has been implemented in different parts of the country.7
South Africa’s effort to address inequality by means of cash transfers that provide for the subsistence needs of the poor has been at the leading edge of a global movement working along the same lines.8 According to James Ferguson, emergent forms of programmatic thinking about poverty represent a new development within neoliberalism: by abandoning the regulatory and normalizing functions usually associated with social assistance, they seek to bring formal and informal social assistance into a new relationship with each.9 In the case of South Africa, a special concern has been ‘to iron out the strange racist inconsistencies of the grants paid by the Apartheid state and, critically, to avoid the financial implications of extending the generous benefits developed for whites to the entire population’.10 Indeed, as noted, South Africa would appear to be at the cutting edge of these developments. As Keith Breckenridge argues, ‘The combination of direct cash payments for the poor and biometric systems of delivery has quite distinctive roots in South Africa.’11
Redistributive politics, along with the relatively deep and broad-based societal understanding of social transfers of funds as a socio-economic constitutional right of the poor, are two distinctive features of the South African social grant payments sector. The payments and (p. 92) other activities within this sector are also shaped by the bureaucracies that have been established to plan and implement them; in other words, the institutional context in which these payments are made is an additional distinctive feature. In South Africa, the bureaucratic context for the payment of social grants is largely a post-apartheid construction, one consisting of a field with a mixture of private and public organizations.
The mix of public and private institutions operating in the social grant payments sector in South Africa is typical of the operation of the regulatory state in the Global South. Writing in the context of the literature on regulation that has emerged over the past decades, Dubash and Morgan recently identified and analysed the rise of the regulatory state in the Global South, citing states such as India and South Africa as examples. In the view of these authors, there are three contexts that ‘unite an otherwise deeply disparate “Southern” experience with the regulatory state: highly salient transnational pressures on the state, comparatively intense redistributive politics, and limited state capacity’.12 In terms of this analysis, social grant payments can be seen as a phenomenon of the regulatory state in the Global South.
The next section of this chapter describes corruption and the responses to it in the South African sector of social grant payments. The analysis considers matters at three levels—the level of the individual (with the focus placed on ordinary citizens, that is, members of the public), the level of the organization, firm or agency, and the level of the state and sector. Section 3 then identifies the form, shape, and prevalence of corruption at each of these levels as well as the regulatory responses given to it by organs of state. Terming these responses as ‘regulatory responses’ is not meant to imply that there is a single agency responsible for identifying and responding to corruption in the state, nor to imply that state responses are coordinated in any meaningful way. Section 4 then draws on the material of Section 2 in order to assess the current regulatory responses of the South African state and to examine a number of general propositions about corruption, legal institutions, and cultures of constitutionalism.
2. Corruption at the individual, organizational, and state levels
This section surveys corruption and responses to it at three levels of the social grant payments sector in South Africa. Over 15 million people are the recipients and beneficiaries of social grants. For many such, there is, at the individual level, what may be considered a low level of reported cases of fraud or corruption. Even so, there are high levels of suspicion and perceived corruption, which have contributed directly to at least two significant events in the post-apartheid institutional development of the social grant payments sector. The first event (discussed in the first part of this section) was the decision to reverse the initial grant of competence to provinces to disburse social grants and instead establish a single national agency to perform this important governmental task. The second event (discussed in the third part of this section) was the decision to include biometric techniques at the last minute in the specifications for the five-year tender for these payments from 2012 to 2017—the decision leading to the Constitutional Court’s invalidation of the tender award in 2014.
(p. 93) 2.1 Corruption in social grant payments at the individual level
Corruption at the level of individuals concerns individual recipients of social grants and the individual officials or representatives (within the public or private sector) who facilitate or pay the grant. This is the level where money often literally changes hands and where corruption is perhaps the easiest to comprehend and to suspect as taking place.
Allegations of corruption against individual recipients (members of the public) have proven to be evidentially thin, at least since the formation of SASSA. For instance, the High Court, in hearing a claim by Corruption Watch that a payment to CPS of ZAR316 million should be returned, found that the paper trail justifying this payment was inadequate.13 The payment was motivated on the grounds of ‘the elimination of ghost dependants, duplicate children and non-qualifying dependants’.14 On the other hand, credible allegations were made against members of the public that they were colluding with civil servants as well as against them, to the effect that they were acting fraudulently on their own.15 This sort of corruption is nevertheless better analysed at the organizational level (see Section 2.2). In any case, it is also important to note that the available data relate only to cases that have been detected and recorded.16
As in the case of housing provision, ‘welfare services’ are a matter of shared competence between the provinces and central government in South Africa’s division of tasks between national and provincial levels, as determined in Schedule 4 of the Constitution. In the immediate post-apartheid period, social grant payments were implemented through provincial structures. Some of the latter made the payments in-house, whereas others utilized or partnered with firms from the private sector. In the early 2000s, the decision was taken to centralize this function and establish a national agency.17 Upon its establishment, however, SASSA did not have the organizational capacity to perform the task of social grant distribution on its own, as a result of which firms from the private sector continued to be involved. In view of the vast sums of money being distributed, the opportunities for corruption proliferated at the individual, organizational, and state levels.
One part of the story of the establishment of a national agency to distribute social grants becomes evident in a series of social grant cases that emerged for a period, particularly in KwaZulu-Natal and, to a lesser degree, the Eastern Cape. These cases culminated in several class actions brought under the Social Assistance Act 59 of 1992. The consent orders granted in the cases contributed significantly to shaping policies and practices to do with the administration of social assistance.18 The class actions covered matters that are dealt with most appropriately not in court but within an effective bureaucratic structure. The matters included the right to appeal against the conditional award of a grant; the lapsing of a grant without a hearing where the basis for the lapsing is disputed; the right to a prior investigation before (p. 94) administrative action is taken; and unreasonable application requirements. These social grant cases may be seen as a significant comparator to the first-instance cases in the field of housing and evictions. The need to reduce litigation citing fraud by and incompetence of provincial officials was one of the factors that contributed directly to the setting up of SASSA.
In the run-up to SASSA’s establishment, there was considerable official concern about individual-level corruption (here including fraud by civil servants). As Kevin Donovan has argued,
[i]n democratic South Africa, subjective discretion has been viewed with suspicion as the state has sought to create equality of citizenship. In the realm of welfare, two forms of discretion have proven particularly troubling: illicit access to grants, and bureaucratic error. A preference for objective practice has deeply influenced the social grants, with biometric identification offering an impersonal and presumably neutral means of grant administration, aligning with a parallel discourse of widespread fraudulent access to the grants.19
The creation of a centralised Social Security Agency, which replaced a hastily put-together and uneven system of provincial decentralisation, was thus driven by a desire for standardisation; it was also motivated by the fear of fraud. Indeed, SASSA’s creation was heralded as an anti-corruption strategy, given that ‘[p]ractices of double dipping into funds would … not be possible with an Agency as the institution would have a better grip on social services’.20
The suspicion in official quarters that members of the public were engaged in corruption—and the relative neglect of corruption among individual civil servants—is evident in SASSA’s first annual report in 2007/2008:
A cancer afflicting the organization and which is a throwback from the past was fraudulent and corrupt practices perpetrated by some members of the public. The Agency embarked on an aggressive drive towards combating fraud and corruption. To this extent, the Branch: Internal Audit and Risk Management became fully operational and it worked very closely with the Special Investigations Unit in rooting out fraud and corruption.21
SASSA’s response—including the work of the Special Investigations Unit (SIU)—to fraud and corruption cases among members of the public appears to have been effective. On the basis of the data it reported (but not necessarily of the SIU data, which also exist), the number of such cases declined steadily over the ten-year period from 2007 to 2016 (see Figure 1).
Figure 1. Cases of fraud, theft, and corruption reported by SASSA, 2008–2017
Source: South African Social Security Agency, Annual Report 2007/2008 and Annual Report 2016/2017
Just as important as (and potentially explanatory of) the decline in the number of new cases of corruption detected at the individual level was SASSA’s growing focus on combating organized crime (presumably crime syndicates and procurement-related activity) in this sector.22 Noting that it failed by 5 percentage points to achieve its target of investigating 70 per cent of reported cases of fraud, corruption, and theft within 90 days, SASSA explained in its 2016/2017 annual report that the reason for this was that ‘[a]ttention was given to syndicate cases which are complex and time-consuming’.23 This seems plausible and also provides (p. 95) further evidence that the response by SASSA and the SIU to corruption at the individual level among the public was relatively effective. Moreover, one may observe that, on the whole, the level of individual fraud, theft, and corruption appears relatively low when seen against the large number of social grant recipients.
The statistics on the other side of the Agency’s work—the actual delivery of social grants since its establishment—are also relatively positive. The effective and efficient delivery of social grants provides another part of the explanation for the reduction in fraud, theft, and corruption. SASSA appears to have been living up to its motto, ‘the right grant, to the right person, at the right time’, and has correctly trumpeted its success in reducing litigation. In 2011, it reported:
a drop in the total number of litigation cases per annum from 61 498 to 1 944, a reduction of 59 544 litigation cases over the four years (2006/07–2010/11). This represents a 96.8% reduction in litigation cases. [The province of KwaZulu-Natal] had the most number of litigation cases (53 004) followed by [the Eastern Cape] (18 915) over the five-year period.24
The pattern of suspicion of members of the public nonetheless continued after the establishment of the Agency. SASSA officials appear to be preoccupied by the phenomena of phantom twins and grant-claiming by deceased pensioners. However, the evidence for such practices remains essentially anecdotal.25 Generously interpreted (as entirely composed of frustrated fraudsters), the claimed anti-fraud figures could amount to at most 0.5 per cent of beneficiaries. The vast majority of the grant-receiving public do not engage in fraud. It would not be going too far to say that the primary impact of the SASSA’s anti-corruption efforts is to demonstrate ‘a particular seriousness about the “crisis” in grant fraud and corruption on the part of [the Department of Social Development] and SASSA to a population and political elite deeply concerned with cost overruns and illicit grant access’.26
In one instance that came to light through court processes, the apparent need to combat fraud and corruption by individual recipients and beneficiaries was used to justify a further payment to CPS over and above the original tender. In 2014, SASSA made an (p. 96) additional payment of ZAR317 million to CPS for the ‘re-registration’ of beneficiaries. When Corruption Watch, a public interest non-governmental organization (NGO), filed an application in April 2015 to review and set aside the decision of SASSA’s CEO to approve this payment, SASSA justified the exercise as an anti-corruption measure. In a letter to Corruption Watch in September 2014, it said ‘the total re-registration of the entire database … was necessary to clean the database and rid the system of ineligible people. This process resulted in over 850 000 grants for adults and children being cancelled.’27 Similarly, the Minister of Social Development announced that the goal of the enrolment exercise was ‘to improve the integrity of our social security system, and to eliminate all forms of fraud and corruption’.28
The CPS re-registration effort was part of what Donovan has termed ‘the biometric imaginary’, ‘a collective understanding [that] posits biometric technology as a necessary, suitable and effective means of constructing a standardised and objective welfare state’. Biometric registration has had significant, albeit adverse, effects beyond detecting or deterring fraud and corruption.29 The national card-based biometric enrolment and payment system was touted as a way to make social grant payments more secure for claimants, the state, and the public purse. In actuality, though, as Natasha Vally argues, it has led to insecurity in that it promotes and reproduces precarity. Focusing on the perceptions of the grant recipients, Vally maintains that the three most pervasive forms of insecurity relate to the cancellation of grants; extensive, unauthorized monetary deductions from claimants’ accounts (discussed in Section 2.2); and the new kinds of waiting that the system has introduced.30
The regulatory response to fraud corruption at this individual level has consisted of anti-fraud measures taken internally by SASSA as well as of background security measures built into the payments system. One may conclude, on the whole, that these regulatory responses appear to be effective in countering corruption at the individual level among members of the public.
2.2 Corruption in social grant payments at the organizational level
A second level where corruption can occur is at the level of the firm or organization. Here, it is the behaviour of a private firm, such as a business or multinational corporation, or that of a state agency, including state-owned enterprises, that is liable to be identified as the root of corruption, inasmuch as the behaviour violates rules of fair completion and the like. Payments to or from a firm or state agency are the target of suspicion at this level; however, corruption here is usually harder to detect, identify and counter than at the individual level.
A major instance of corruption at this level is the arguably unlawful deductions that have been made from monies paid or payable to social grant recipients.31 These deductions (p. 97) and their legality featured prominently in the AllPay cases in the Constitutional Court, including in the highly publicized hearing mentioned above in the introduction. The Constitutional Court twice imposed protections on the exploitation of social grant recipients’ legal identities by CPS and its affiliates. Nonetheless, the response by the Court has not always been swift. Responding to the attempts by the Black Sash Trust to raise these issues in 2015, it stated:
If concerns about the alleged unlawful deductions from beneficiaries’ accounts and the continued benefits that CPS is alleged to reap from the continuation of the invalid tender are to be introduced in these proceedings, it will have an adverse effect on the finalisation of the process. . . These aspects may, if necessary, be pursued in the future.32
In addition to attempting to avoid a delay, the Constitutional Court may well have been motivated by its recognition of the limits of its own institutional power. A court is often seized with a particular aspect of a matter (such as the tender contract mainly at issue in this case) and lacks the tools to address other aspects of an underlying problem. The primary (or at the very least, the initial) responsibility for determining as a matter of law the legality of these deductions from social grants lies with the executive branch of government, in this case SASSA and the Minister of Social Development.
Is the CPS practice of facilitating deductions from social grants unlawful? The Social Assistance Act prohibits the sharing of beneficiary information. CPS has argued that under the contracts it has with cardholders, it has consent and is only sending marketing material.33 For its part, at the Constitutional Court hearing in February 2014, SASSA reportedly argued that ‘the deductions were not illegal and that once the beneficiaries received the money, the agency had no control over claims against that money’.34
The Department of Social Development (DSD) and SASSA attempted some form of regulatory response to the practice of making these deductions from social grants. The DSD claimed a power to make regulations against deductions within the context of payments. While the matter went on appeal, the High Court did not agree, ruling in favour of the legality of the deductions.35 In September 2018, the Supreme Court of Appeal appeared to agree with the High Court that the deductions were not necessarily illegal, as it denied leave to appeal and stated that the appeal had no reasonable prospects of success. In June 2016, SASSA laid criminal charges against CPS, claiming that it was violating recently promulgated regulations prohibiting deductions from beneficiaries’ accounts. CPS disputed the lawfulness of the charges and questioned SASSA’s competence to lay charges, suggesting that it was encroaching upon the supervisory jurisdiction of the South African Reserve Bank (p. 98) and the Payments Association of South Africa.36 A lengthy delay in the government’s establishment of an Information Regulator and a similar delay in the full implementation of the Protection of Personal Information Act have also contributed to gaps in the regulatory regime that aims to give protection to social grant recipients.37
As the Black Sash observes, Grindrod Bank is the bank that holds the SASSA-branded bank accounts into which social grants are paid, while Smartlife, MoneyLine, Manje Mobile, and Finbond are companies within the Net1 group offering financial services to beneficiaries and sending the payment instruction to Grindrod Bank. CPS, too, is a company within the Net1 group. In response to the Court’s orders, Grindrod Bank has undertaken to stop inviting beneficiaries to opt in to the financial services of third-party providers, including companies owned by Net1. However, the Black Sash points out that illegal use of the personal information of beneficiaries may still lead to illegal deductions through the authorized individual actions of salespeople employed by the affiliated Net1 companies and using the beneficiary database. It alleges that ‘sales persons, with authority, would be able to access and use beneficiaries’ confidential data to market services to beneficiaries and in so doing act in contravention of the spirit of the Court’s order’.38
A second route to the potential unlawfulness of the deductions lies within the electronic system for storing beneficiary information. This is not primarily a conventional database. The CPS system stores the personal information of beneficiaries on the cards of beneficiaries. In this system, as the Black Sash points out, given that the beneficiaries’ ‘confidential data is stored in the bank card chip’, they cannot access this information, nor can SASSA; only Net1 and its affiliate companies ‘have the software and hardware necessary to interpret beneficiaries’ confidential data which is stored on the bank card chip’.39 The exclusivity of data access by companies in the private sector—and correlative lack of access by a public agency, SASSA—raises issues of fairness and accountability.
An accountability mechanism brought to the fore by the social grants controversy is the leverage public and private shareholders can exert on corporations, in this case Net1, a multinational holding company that owns CPS and which is registered on NASDAQ and the Johannesburg Stock Exchange. Human rights advocates have called on shareholders to use their leverage to address the issues of potentially unlawful deductions.40 A response by Net1—the internal commissioning of a report from an auditing firm—would not seem to consist of a genuine accountability mechanism.41 There is a substantial amount of money at play—Net1 complied with the court order to report its profit and disclosed a sum over ZAR1 billion for the five-year period of the contract.42 This accountability mechanism (p. 99) warrants separate, in-depth investigation, but in the context of the social grants controversy, so-called shareholder activism has illustrated the maxim, ‘be careful what you wish for’: the CEO of Net1 was reported to have had the last laugh, seeing as he made about ZAR260 million when negotiating his shareholder-forced exit from the company.43
The media as well as many civil society organizations allege that CPS is involved as well in the second major instance of organizational-level corruption in South Africa’s social grants sector. Here, suspicion surrounds broad-based black economic empowerment (B-BBEE), which became a feature of the SASSA saga, albeit not its most prominent one, when Net1 dropped one B-BBEE scheme and devised a replacement. This has allowed it to maintain its insider position with the Ministry of Social Development and comply with policy on B-BBEE.44
In the past, ‘fronting’ and other illegal practices in black empowerment have not been strongly monitored. However, the B-BBEE Commission was established recently to take charge of rule-making, monitoring, and enforcement, as part of which it released a list of firms and transactions it is investigating for suspected violations of the B-BBEE Act and other non-compliance. In its target sights are SASSA and its relationship with CPS due to suspicions regarding fronting.45
Finally, there is also considerable suspicion about the competitive fairness of the regulatory regime for paying out social grants. Much of this suspicion stems from what is seen either as Net1’s record of innovation or its record of anti-competitive practice, and the result is that the competition authorities launched a preliminary investigation. The trigger for this came in February 2016 when the Democratic Alliance (DA), the more business-friendly of the two main parties in opposition to the ruling African National Congress (ANC), laid a competition complaint against Net1. The DA requested that the Competition Commission investigate:
the unfair advantage of Net1, Grindrod Bank and all their subsidiaries, who through CPS have direct access to the social development database of between 16 and 19 million clients or beneficiaries. No other bank has this advantage. There is also no certainty if any formal application and approval was made to or granted by the Reserve Bank or the Financial Services Board to have the direct bank link with the SASSA system.46
The complaint alleged that CPS was:
explor[ing] the database of the department to convert as many beneficiaries as possible of the targeted 16m to become Net1/Grin[d]rod Bank clients. Grin[d]rod bank does not have branches all over SA to service these clients, but currently uses the SASSA offices as ‘branches’ to service their clients. Over and above this, airtime, electricity and funeral policies are sold by Net1 or their subsidiaries, to the beneficiaries. This has become an uncontrollable increase of the debt situation of the vulnerable and poor.47
(p. 100) The complaint thus combined several themes in the suspicions surrounding Net1—that it was anti-competitive, exploiting state resources, increasing poverty, and violating the privacy rights of social grant recipients. In June 2016, the Competition Commission decided not to refer the complaint to the Tribunal for prosecution. This left the door open for further court action by the DA, but at the time of writing no such steps have been taken.
2.3 Corruption in social grant payments at the state level
The third level at which to investigate alleged or potential corruption and responses thereto is the level of state and society. The objective, in other words, is to determine if the structures of the state and/or the relationships the state fosters have been corrupted. Here, it is not only payments but their conditions and structure that are at issue—as are the very content and character of the rules themselves. Two key instances would appear to be, first, the awarding of the contract to CPS in 2011 through last-minute manipulation of the tender requirements and, secondly, what may be termed an attempt at engineering a continuation of this illegal contract in 2016/2017.
In 2011, the Constitutional Court considered the validity of the tender requirements. In this case, Net1 and CPS were found not to have done anything directly unlawful. Instead, SASSA was deemed to have failed to ensure that CPS’s black economic empowerment credentials were officially verified and to provide sufficient clarity in the tender documents.48 The Court drew a significant distinction, that between corruption and irregular procedures. It did not find corruption in the tender; it found only that SASSA deviated irregularly from procurement procedures. Nevertheless, the Court warned that ‘deviations from fair process may themselves all too often be symptoms of corruption or malfeasance in the process. In other words, an unfair process may betoken a deliberately skewed process.’49
At this state-and-society level, a category of payment comes into play beyond the distinction between payments due to corruption and payments due to irregular procedures. These are funds or payments made due to inadequate government policy, coordination, and implementation. They are the main subjects in the legislative and Public Protector accountability exercises that followed the February 2017 hearing in the Constitutional Court (see below).
If government intransigence was suspected in 2011 but only government incompetence proven, government inattention was surely the theme in 2016.50 To a South African public at large beginning to keenly follow allegations of high-level corruption, it seemed unbelievable that just three years after one Constitutional Court decision apparently saved the day for millions of social grant recipients, the same situation was again in the offing: the government had not created in-house capacity at SASSA to provide social grant payments. It was also unbelievable that Net1 was still able to claim, seemingly convincingly, that it was the government’s only option for paying social grants—and, moreover, use that capability for leverage, the scandal and controversy notwithstanding.
(p. 101) The Court itself developed its own novel mechanisms in the course of this litigation. It ordered that Bathabile Dlamini, the Minister of Social Development and hence the member of Cabinet responsible for social grants and SASSA, be investigated personally.51 The Court also ordered extensive monitoring of the extension of the CPS contract. Finally, and perhaps most extraordinarily, it developed a doctrine in terms of which a private firm, CPS, is treated as an organ of state. Arguably, giving CPS this status assisted the Court in the February 2017 hearing in mediating the crisis that arose at the end of CPS’s first unlawful five-year contract. One sees, in short, the emergence of a new and distinctive legal doctrine—an extension of the concept of an organ of state to a private body performing a constitutionally necessary duty.52
Another post-contract accountability exercise was the investigation by the Public Protector, an office established by the Constitution, into allegations of a close relationship between CPS and the Minister of Social Development.53 One opposition political party alleged that the Minister was intent on extending the contract awarded to CPS and demanded that any potential benefit flowing to the Minister be investigated. A further accountability mechanism was in evidence when a provincial legislative committee heard information about the extent of social grant deductions.54 This demonstrated not only the value of legislative oversight per se, but the checks and balances inherent in South Africa’s quasi-federalist structure; it also lent support to the notion that, with a central constitutional court as its anchor,55 a decentralized system can increase opportunities to hold state actors to account for their actions.
In summary, the preceding discussion has surveyed corruption in social grant payments in South Africa at three levels:
3. Constitutionalism: Defining and combating corruption
The payment of social grants involves state expenditure of billions of rands to advance the socio-economic well-being of one third of the country’s population. Clearly, however, a significant portion of these funds have been diverted for private rather than public purposes. As detailed above, there is evidence of varying degrees of fraud and corruption at the individual, organizational, and state levels; at each level, there are also regulatory responses thereto of varying degrees of effectiveness. This raises theoretical and practical questions both for South Africa under a post-Jacob Zuma presidency and for other constitutional jurisdictions, including those in Africa. Two of these questions are now examined: What does ‘corruption’ mean? What ought to be the role of courts and other public actors, such as competition agencies, in combating it?
To begin, one can explore the ways in which ‘corruption’ is defined. Arguably, the SASSA controversy has sparked an extraordinary amount of public discussion about the concept of corruption itself. In 2017 in particular, the discussion widened to consider the phenomenon of state capture,56 a discussion that has taken place within public-sector organizations and within private firms, as well as between these two sectors. Indeed, the private sector has a significant role to play in combating corruption—through compliance with best practices, in its interaction with the public sector, and by way of upholding standards and accountability. Examples of this are strategies within and amongst business firms to root out fraud and corruption.57
Examining this ongoing society-wide discussion of the definition of corruption, Brian Levy has identified two ‘mis-framings’. In his view, each has ‘potentially … pernicious consequences’:
The first is an over-eagerness to describe any and all shortfalls vis-à-vis ‘good governance’ in binary terms—as ‘proof’ that a rule-bounded polity and economy has been entirely overtaken by patronage. The second is a conflation of the distinction between patronage and predatory kleptocracy.58
Levy argues that
[a] binary framing of the tension between rule-boundedness and patronage … underplays the differences between the patterns of governance in low-, middle- and high-income settings. It also underrates the ways in which these differences are aligned with systematic differences in the ways in which polities and economies function.59
(p. 103) Nevertheless, this public–private discussion about standards and the meaning of corruption in the public sphere is a salutary development. Though it entails contestation, it should be seen as promotive of democratic practice since it may well be that, beneath superficial agreement that corruption is a bad thing, there is fundamental disagreement in South African society about ‘on whose terms corruption is fought, which is really a matter of how to use anti-corruption in a manner that builds power for one’s preferred political project’.60
Proceeding from the recognition that valuable public discussion has taken place on the meaning of corruption, a further significant question is the extent to which the courts can be effective in combating fraud and corruption at an organizational level. Francois Venter has asserted that courts may be able to combat the malady of corruption in South Africa.61 As he puts it, ‘[T]he judiciary is willing to engage the legislative and executive branches in calling them to constitutional order regarding their responsibilities concerning the curbing of corruption’.62 Venter doubts only the support of the government for the goal of containing corruption,63 arguing that this is a serious matter which places constitutionalism itself at risk:
[Can] constitutionalism … survive under the apparent offensive of an executive set on its dilution, if not its destruction, and if the country is gradually being led along the road to authoritarian, patrimonial rule under which even judicial correction may come to naught[?]64
In this regard, other commentators on constitutionalism have called for the use of a broader range of legal institutions to combat corruption.65
Although there appears to be no comprehensive study of Constitutional Court decisions touching on questions of corruption, a number of prominent recent cases, among them Economic Freedom Fighters v Speaker of the National Assembly and Others, certainly are relevant.66 Still, the constitutional framing of those cases remains focused on the separation of powers rather than the discourse specifically on corruption. To obtain that perspective, one should turn to Glenister v President of the Republic of South Africa and Others, a case that bent—some would say ‘warped’—the jurisprudence on the overlap of international and domestic law.67
In this case, the Court held that, properly interpreted, the Constitution placed some constraints of independence on the provision and structure of an anti-corruption agency such as the Hawks, which replaced the disbanded Scorpions unit. During the Mbeki era, the latter had been relatively successful in combating corruption by combining the investigative and prosecutorial functions of criminal justice in a single agency. The Glenister case prompted (p. 104) discussion, much of it in media editorials and opinion pieces, of constitutionalism and the role of the courts in combating corruption in the light of international best practices.68 The decision was both defended by one of the foremost justices on the Constitutional Court, Edwin Cameron,69 as well as subjected to critique.70
A further theoretical question linked to, but arguably distinct from, the question of the role of courts concerns the role of independent regulatory agencies in combating corruption. In an oft-cited work in comparative corruption studies, Susan Rose-Ackerman focuses on the industrial organization of corruption rather than on politics per se; in particular, in a chapter entitled ‘Corruption of High-Level Officials’, she examines the use of bribery to obtain major contracts and concessions.71 Here, she describes how the element of corrupt high-level officials changes the organization of corruption, especially with respect to large-scale projects:
First, if top officials, including the head of state, are concerned primarily with maximizing personal gain, they may favor an inefficient level, composition and time path of investment. Second, investors’ decisions may be affected by the fact that they are dealing with corrupt political leaders.72
Beginning with an analysis of the bargaining power of government officials relative to that of corrupt private actors, Rose-Ackerman considers kleptocracy, which is characterized by bribe recipients concentrated at the top of government and accompanied by multiple bribers. As she notes, ‘In the extreme, a powerful head of government can organize the political system to maximize its rent-extraction possibilities.’ Whereas the strong kleptocrat runs ‘a brutal but efficient state limited only by his own inability to make credible commitments, a second version, the weak kleptocrat, also exists’; in such a case, the kleptocrat ‘runs an intrusive and inefficient state organized to extract bribes from the population and the business community’.73 Seen from this perspective, South Africa would fall into the category of the weak kleptocracy.
Rose-Ackerman identifies three prerequisites for any anti-corruption programme: structural reforms towards ensuring efficient and effective public programmes; adjusting the mix of penalties, rewards, and undercover law enforcement in the criminal law; and procurement reform.74 Regarding the latter, she recommends that developing countries
experiment with experience-rating for contractors, the adoption of more transparent processes, and more reliance on bargaining. In developing countries with a scarcity of skilled procurement experts and weak public accountability the case for benchmarking and the purchase of standard items is even stronger than in the United States.75
(p. 105) While Rose-Ackerman’s work is helpful, economists closer to home are likely to provide a greater degree of contextual analysis. One state agency that undoubtedly comes across evidence of corruption is a country’s competition authority. David Lewis and Reena das Nair have recently undertaken a rigorous comparison of the regulatory regimes for promoting competition and combating corruption.76 In their view, the two endeavours are interlinked inasmuch as their core concepts—competition and corruption—are characteristics of economic activity: in different sectors and in different parts of the economy, there may be more or less competition and correspondingly more or less corruption.
Lewis and das Nair provide an effective analysis of the contribution a state competition agency can make at ‘the interface between corruption and competition’, with the focus of the analysis falling on what this chapter has termed the third level of state and society and what they call ‘the interface between the state and the market’.77 Attentive to the specificity of national situations, their analysis accords with the general literature on development economics, but devotes particular attention to the economics of competition. They argue that high levels of corruption and low levels of competition are mutually reinforcing states. As they put it, public officials that keep competition low create higher rents for themselves to appropriate, and vice versa.78 Significantly, Lewis and das Nair explore the ways in which competition enforcement can play an important role in combating corruption. They note in this regard that ‘corruption is starved of rent-seeking opportunities by the outcomes achieved through robustly competitive markets and by the enforcement of competition rules necessary to ensure that level of competition’.79
Having critiqued the existing literature for failing to appreciate the varieties of corruption that come into view through the perspective of competition economics, Lewis and das Nair propose several categories by which to define corruption. The two main ones are subsets of public service corruption and ‘conceptually distinct, but practically overlapping’. The first is ‘the abuse of the gate-keeping functions and discretionary decision-making powers of public servants’; the second comprises ‘instances when government policy purposefully sets out to create rents which may be appropriated by a firm or a selected category of firms in order to encourage investment in the targeted firms, sectors or regions’.80 The third is a broader category—political corruption. Here, the analysis employs frankly political terms:
[T]he driver of political corruption is, benignly expressed, the requirement to achieve political stability. More accurately—although this may indeed be a condition for political stability—it is driven by the efforts of a ruling elite to consolidate and extend its political power.81
The attention Lewis and das Nair pay to the variousness of corruption returns us to the issue with which this section began, namely the definition of corruption, as well as to the wider concern of this chapter with diverse, multi-level forms of corruption and the range of regulatory responses that are, or may, be given to it. Manifestly, neither the courts nor other organs (p. 106) of state such as SASSA or the Competition Commission have the capacity to combat corruption on their own. As was seen, for instance, even after the Constitutional Court raised a red flag, Net1 was seemingly able to regroup, switch B-BBEE partners, and manoeuvre its way back to a position of decisive influence over SASSA, a nominally independent agency.82 It seems abundantly clear, then, that in order to combat corruption, we must go beyond judicial decisions and their enforcement and at the very least travel into extra-judicial terrain—the space where the public and the private sectors mingle and perform governance and business as part of their everyday activities. This is the terrain of mundane but important managerial decisions about allocating resources, hiring or firing employees, and pursuing organizational strategies.
As such, one lesson that can be drawn from the foregoing investigation into the role and place of corruption in social grant payments is that to combat corruption, the focus has to be expanded beyond courts and the judicial accountability of state organs.83 Judging from the evidence, a wide set of institutions, practices, resources, and actors—including but going beyond the courts, and including but going beyond independent regulatory agencies such as competition commissions—is necessary for this purpose. In short, what is required is a variety of tools and structures that are appropriate to different levels of sectoral organization.
1 Susan Rose-Ackerman, Corruption and Government: Causes, Consequences, and Reform (Cambridge University Press 1999) 113.
2 Khosa and Others v Minister of Social Development and Others, Mahlaule and Another v Minister of Social Development (CCT 13/03, CCT 12/03)  ZACC 11; 2004 (6) SA 505 (CC); 2004 (6) BCLR 569 (CC) (4 March 2004) (Constitutional Court).
3 Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others (CCT 48/13)  ZACC 42; 2014 (1) SA 604 (CC); 2014 (1) BCLR 1 (CC); Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others (No. 2)  ZACC 12; 2014 (6) BCLR 641 (CC); 2014 (4) SA 179 (CC); AllPay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others (2015)  ZACC 7; Black Sash Trust v Minister of Social Development and Others (Freedom Under Law NPC Intervening) (CCT48/17)  ZACC 8 (17 March 2017).
4 CM Fombad, ‘An Overview of the Constitutional Framework of the Right to Social Security with Special Reference to South Africa’ (2013) 21 African Journal of International and Comparative Law 1.
5 AllPay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others  2013 ZACC 42 .
7 Beth Goldblatt, Solange Rosa and Katharine Hall, Implementation of the Child Support Grant: A Study of Four Provinces and Recommendations for Improved Service Delivery (Children’s Institute 2006) <http://wiredspace.wits.ac.za/handle/10539/4683> accessed 27 December 2017.
8 Keith Breckenridge, Biometric State: The Global Politics of Identification and Surveillance in South Africa, 1850 to the Present (Cambridge University Press, 2014) 188.
9 James Ferguson, ‘Formalities of Poverty: Thinking about Social Assistance in Neoliberal South Africa’ (2007) 50 African Studies Review 71.
10 Breckenridge (n 8) 189.
12 Navroz K Dubash and Bronwen Morgan, The Rise of the Regulatory State of the South: Infrastructure and Development in Emerging Economies (Oxford University Press 2013).
13 Corruption Watch (NPC) (RF) v Chief Executive Officer of the South African Social Services and Others (21904/2015)  ZAGPPHC 7 (23 March 2018).
17 Reddy and Sokomani (n 15).
18 Nick de Villiers, ‘Procedural Fairness and Reasonable Administrative Action Within the Social Assistance System: Implications of Some Settled Class Actions’ (2006) 22 South African Journal on Human Rights 405.
21 South African Social Security Agency, Annual Report 2007/2008 (SASSA 2008) 9.
23 South African Social Security Agency, Annual Report 2016/2017 (SASSA 2017) 29.
24 South African Social Security Agency, Annual Report 2010/2011 (SASSA 2011) 31.
30 Natasha Thandiwe Vally, ‘Insecurity in South African Social Security: An Examination of Social Grant Deductions, Cancellations, and Waiting’ (2016) 42 Journal of Southern African Studies 965.
32 AllPay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others (n 3) .
35 Net1 Applied Technologies South Africa and Others v Chief Executive Officer of the South African Social Security Agency and Others; Finbond Mutual Bank v Chief Executive Officer of the South African Social Security Agency and Others; Smart Life Insurance Company Limited v Chief Executive Officer of the South African Social Security Agency and Others (43557/16; 46024/16; 46278/16; 47447/16)  ZAGPPHC 150 (9 May 2017).
37 Alison Tilley, ‘Missing in Inaction: Inspector General of Intelligence and Information Regulator’ (Daily Maverick, (16 February 2016) <https://bit.ly/2M78Cm1> accessed 17 February 2016.
38 Black Sash Trust, ‘Submission to the Panel of Experts on the First Quarterly Report of the South African Social Security Agency June 2017’ (Black Sash Trust 2017) 6 <https://bit.ly/2AFyGAk> accessed 4 December 2017.
42 Phillip de Wet, ‘For Net1 a Big Profit is a Big Problem’ Mail & Guardian (Johannesburg, 30 May 2017) 19.
45 Ayabonga Cawe, ‘Malpractice Probe Shows BEE Process Controlled by Whites’ Business Day (Johannesburg, 14 August 2017) <https://bit.ly/2VPQ7av> accessed 14 August 2017.
48 Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others (No 2)  ZACC 12; 2014 (6) BCLR 641 (CC); 2014 (4) SA 179 (CC) (n 3) .
49 AllPay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others (n 3) .
50 News24Wire (n 44); Kent Roach and Geoff Budlender, ‘Mandatory Relief and Supervisory Jurisdiction’ (2005) 122 South African Law Journal 339.
55 Rotimi T Suberu, ‘The Supreme Court and Federalism in Nigeria (2008) 46 The Journal of Modern African Studies 451.
57 Edward J Balleisen, Fraud: An American History from Barnum to Madoff (Princeton University Press 2017).
61 Francois Venter, ‘Containing the Malady of Corruption in South Africa: Can Courts Stem the Tide?’ (2015) 132 South African Law Journal 748.
65 David Bruce, ‘Control, Discipline and Punish? Addressing Corruption in South Africa’  SA Crime Quarterly 49.
66 Economic Freedom Fighters v Speaker of the National Assembly and Others; Democratic Alliance v Speaker of the National Assembly and Others (CCT 143/15; CCT 171/15)  ZACC 11; 2016 (5) BCLR 618 (CC); 2016 (3) SA 580 (CC) (31 March 2016).
67 Glenister v President of the Republic of South Africa and Others (CCT 48/10)  ZACC 6; 2011 (3) SA 347 (CC); 2011 (7) BCLR 651 (CC) (17 March 2011).
68 Mark S Kende, ‘Corruption Cases and Separation of Powers in the South African Courts and US Supreme Court’ (2015) 60 New York Law School Law Review 183; Venter (n 61).
69 Edwin Cameron, ‘Constitutionalism, Rights, and International Law: The Glenister Decision’ (2012) 23 Duke Journal of Comparative and International Law 389.
70 George Langendorf, ‘The Map Is Not the Territory: How South Africa Followed the Anti-Corruption Roadmap and Got Lost along the Way’ (2015) 3 University of Baltimore Journal of International Law 31.
71 Rose-Ackerman (n 1) 27–35.
82 News24Wire (n 44); McKune (n 44).
84 Mark C Suchman and Lauren B Edelman, ‘Legal Rational Myths: The New Institutionalism and the Law and Society Tradition’ (1996) 21 Law & Social Inquiry 903.