South Africa: Multichoice-SABC deal may prompt formal rules on lobbying, says Zondo Commission

By Xolisa Phillip, in Johannesburg

Posted on Wednesday, 13 July 2022 19:01
South Africa's former President Zuma faces a state corruption inquiry, in Johannesburg
South African Deputy Chief Justice Raymond Zondo attends the Judicial Commission of Inquiry into Allegations of State Capture, where South Africa's former president Jacob Zuma is summoned to face a state corruption inquiry, in Johannesburg, South Africa, February 15, 2021. REUTERS/Siphiwe Sibeko

South Africa must give serious consideration to guidelines on lobbying, given the fine line between commercial gain and unlawful advantage, recommends the Judicial Commission of Inquiry into State Capture, also known as the Zondo Commission.

The Zondo Commission studied the terms of a five-year, R500m ($29m) deal entered into in 2013 by Multichoice, the operator of pay-TV service DStv, and the South African Broadcasting Corporation (SABC) – the country’s public broadcaster.

The Commission analysed evidence submitted by executives on both sides to determine whether the terms of the deal imposed by Multichoice on the SABC had a bearing on South Africa’s broadcast digital migration policy.

The country’s cabinet adopted the broadcast digital migration policy and gazetted it on 8 September 2008, in line with International Telecommunications Union’s requirements that member states switch off analogue broadcasting signals by 15 June 2015 and migrate to digital or satellite.

The switchover would free up radio frequency spectrum – also known as high-demand spectrum, an enabler of broadband services. The migration from analogue to digital terrestrial television would necessitate the mass roll-out of set-top boxes to millions of South African homes.

The government wanted set-top boxes to be encrypted as a mechanism to introduce competition into the pay-TV market that is dominated by DStv.

However, in its 2013 deal with the SABC, Multichoice included a clause requiring the public broadcaster to adopt non-encryption, which was at odds with the government’s official policy position and that of the governing party – the African National Congress.

Fine line

The Zondo Commission examined the Multichoice-SABC deal through the lens of policy capture and the primary means used to achieve that end: lobbying.

“Multichoice maintained that, at all times, it engaged in lobbying that was both lawful and appropriate,” says the commission. Multichoice also “… referred to the absence of national guidelines on lobbying”.

The commission found “… no evidence that Multichoice has been involved in any improper, unlawful conduct, still less conduct which amounted to fraud or corruption”.

Tracing the flows of state capture proceeds of crime has revealed the existence of widespread sophisticated money laundering networks operating within South Africa

However, the lack of national guidelines on lobbying “is, indeed, a topic that should be seriously considered by [the] government”, says the commission.

“There may often be a fine line between lobbying for commercial gain, even if done so vigorously and persistently, and lobbying with the view to obtaining an unlawful advantage,” the commission says.

The Multichoice and SABC saga is often cited as one of the reasons South Africa’s digital migration, which has been mired in controversy, as well as political and legal wrangling, stalled for nearly 15 years and delayed the release of spectrum.

The communications ministry had set 31 March 2022 as the deadline to switch off analogue broadcasting, but this has been successfully challenged at the Constitutional Court.

The ministry has now signalled 30 September 2022 as the final deadline for South Africa to switch off analogue broadcasting.

Laundering networks

During the course of its business, the Zondo Commission came to the conclusion that “tracing the flows of state capture proceeds of crime has revealed the existence of widespread sophisticated money laundering networks operating within South Africa.”

According to the Zondo Commission, these domestic and international money laundering networks, which were used by the Gupta enterprise to move proceeds of crime, are independent of the Gupta enterprise.

“They [money laundering networks] seem to have pre-existed the Gupta enterprise and to have serviced a wide range of clients other than the Gupta enterprise,” says the commission.

As a result, the commission wants the Financial Intelligence Centre (FIC) to conduct an urgent review into “the compliance of … South African banks with the FIC Act”.

Such a review would be “… in relation to proceeds of state capture laundered through accounts held by them, identifying whether, and to what extent, the FIC was alerted to these activities by reports under the FIC Act”.

It is unacceptable that an institution as powerful as a bank should have no obligation to hear… what a client has to say…

In its final reports, the Zondo Commission directed South Africa’s law enforcement authorities to urgently engage with HSBC to trace the proceeds of state capture laundered through offshore accounts held with the global bank in Hong Kong and China.

In a separate banking-related matter, the Zondo Commission assessed the manner in which South African banks handled the closure of clients’ accounts.

Between December 2015 and April 2016, four South African banks – Absa, Standard Bank, FNB, and Nedbank – closed the accounts of Gupta companies and other associates.

The banks declined to comment on the reasons for the account closures, citing their right to do so, as well as domestic and international statutes.

However, after weighing the facts surrounding the Gupta account closures and other similar cases, the Zondo Commission says “it is unacceptable that an institution as powerful as a bank should have no obligation to hear… what a client has to say before the bank may close that client’s account”.

The Zondo Commission has “recommended that relevant existing legislation governing banks be amended to introduce … [a] requirement of fairness or, if warranted, a new piece of legislation be enacted which will make this a requirement”.

Executive oversight

In South Africa’s system of checks and balances, wherein the three arms of government – executive, legislature, and judiciary – operate independently, parliament failed to hold the executive accountable in general.

That was more so the case with the presidency, according to the commission.

It has recommended the establishment of a parliamentary committee dedicated towards exercising oversight on the presidency. Although parliamentary oversight committees exist for other ministries, such a forum is currently not in place for the presidency.

Given the lasting damage caused by state capture, the Zondo Commission wants the government to set up a permanent commission “the main function of which will be to investigate, publicly expose acts of state capture and corruption in the way that this Commission did, [and] make findings and recommendations to the president”.

“Such a commission could be called the Anti-State Capture and Corruption Commission,” says the Zondo team.

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