The racialising process and the shadow state

The racialising process and the shadow state

1. Shadow state: the background

1.1 An important 2018 book has been published by Wits University Press. This is Ivor Chipkin and Mark Swilling’s Shadow State: The Politics of State Capture, which codifies and extends the analysis in their extremely influential 2017 report, Betrayal of the Promise. The terms ‘shadow state’ and ‘state capture’ may not be familiar in many parts of the world, but have been central to discussions of South African political life over the last few years.

1.2 In 2016, knowledge of the Gupta brothers and their suspect role in South African economic and political life erupted into the public realm, thanks to keen and persistent investigative journalism. A number of high-profile scandals involving the Gupta family and other members of President Zuma’s inner circles entered public consciousness regarding ‘state capture’, to the effect that the Guptas possessed untoward control over political and even governmental matters as well as economic ones. Perhaps the most notorious, although not the most consequential, example was the commandeering in later 2013 of the state’s Waterkloof South African Air Base to fly in guests to a Gupta wedding,

1.3 A small side-shoot of the expanding scandal around the Gupta empire was discussed in a May 2016 WWW blog, regarding the curious matter of  what happened when a number of banks refused to do business with the family and their organisations. It examines a public letter and its revelations. In particular, that the details were committed to an epistolary form was used as a sign or proof of their veracity, and they were disputed in similar terms by insisting that this was  actually a false or counterfeit letter.  So a letter was at the heart of the scandal at this point in time. See http://www.whiteswritingwhiteness.ed.ac.uk/blog/the-guptas-state-capture-and-an-oakbay-employees-letter/

1.4 ‘State capture’ is an analytical term originally developed by Joel Hellman, Daniel Kaufman and others in IMF reports (see references at the end of this discussion). In February and March 2016 there was much reporting in South Africa of the network connections – adding up to a figuration in Norbert Elias’s terms – existing between the Gupta brothers and many in the Zuma inner group. This also indicated connections across companies in media, communications, construction, finance, infrastructure development, a wide range of other economic ventures, connections which also encompassed the highest levels of political life. Then in late 2016 then-Public Prosecutor Thuli Madonsela’s report, State of Capture, was published, confirming these connections and the illegalities involved. The bottom-line was that the Guptas had been not only able to exert undue economic influence, but also to directly control political placements including at the ministerial level, adding up to state capture and the existence of a shadow state operating alongside the formal one.

1.5 Betrayal of the Promise was published in May 2017, as a report emanating from the work of ‘State Capacity Research Project’ members, an interdisciplinary and inter-university group coordinated and published by the Public Affairs Research Institute. In turn, this built on State of Capture. As well as providing an integrated conceptual framework for understanding what was going on, the State Capacity project also aimed to collate the extensive published and unpublished material demonstrating the ‘repurposing’ of the state and to inform public opinion about this. Betrayal of the Promise provides much information and food for thought about how interconnections between the shadows state and the constitutional states actually happened. Its central argument is that [pp.2-3]:

…from about 2012 onwards the Zuma-centred power elite has sought to centralise the control of rents to eliminate lower-order, rent-seeking competitors. The ultimate prize was control of the National Treasury to gain control of the Financial Intelligence Centre (which monitors illicit flows of finance), the Chief Procurement Office (which regulates procurement and activates legal action against corrupt practices), the Public Investment Corporation (the second largest shareholder on the Johannesburg Securities Exchange), the boards of key development finance institutions, and the guarantee system (which is not only essential for making the nuclear deal work, but with a guarantee state entities can borrow from private lenders/banks without parliamentary oversight). The cabinet reshuffle in March 2017 has made possible this final control of the National Treasury.

The capture of the National Treasury, however, followed five other processes that consolidated power and centralised control of rents:

  1. The ballooning of the public service to create a compliant politically-dependent, bureaucratic class.
  2. The sacking of the ‘good cops’ from the police and intelligence services and their replacement with loyalists prepared to cover up illegal rent seeking (with some forced reversals, for example, Robert McBride)
  3. Redirection of the procurement-spend of the SOEs to favour those prepared to deal with the Gupta-Zuma network of brokers (those who are not, do not get contracts, even if they have better BEE credentials and offer lower prices).
  4. Subversion of Executive Authority that has resulted in the hollowing out of the Cabinet as South Africa’s pre-eminent decision-making body and in its place the establishment of a set of ‘kitchen cabinets’ of informally constituted elites who compete for favour with Zuma in an unstable crisis-prone complex network;
  5. The consolidation of the Premier League as a network of party bosses, to ensure that the National Executive Committee of the ANC remains loyal.

At the epicentre of the political project mounted by the Zuma-centred power elite is a rhetorical commitment to radical economic transformation. Unsurprisingly… the Zuma-centred power elite emphasizes the role of the SOEs, particularly their procurement spend. Eskom and Transnet, in turn, are the primary vehicles for managing state capture, large-scale looting of state resources and the consolidation of a transnationally managed financial resource base, which in turn creates a continuous source of self-enrichment and funding for the power elite and their patronage network. In short, instead of becoming a new economic policy consensus, radical economic transformation has been turned into an ideological football kicked around by factional political players within the ANC and the Alliance in general who use the term to mean very different things.

1.6 Underpinning this is the argument that, although radical economic transformation is a legitimate activity in repurposing state institutions to structurally change the economy to reduce poverty, unemployment and inequality when done by the formal state acting in a democratic capacity, doing this covertly to consolidate a Zuma-centered power elite adds up to state capture and threatens the long-term viability of key state institutions. The bottom-line here is that the rhetoric of radical reform has also been ‘captured’ and is now being used to justify the activities of the inner power elite that forms the shadow state. This is not just corruption, although corruption is involved, but something much more encompassing that threatens the very existence of a constitutional state by overlaying it with a shadow state apparatus.

2. Racialising processes and the state

2.1 Chipkin and Swilling’s Shadow State: The Politics of State Capture presents the same argument as in the report, although in more detail and in a conceptionally more sophisticated way,. Clearly there are numerous ways in which its contents could be considerated. However, its views about the character of the state and how this has been impacted are of most relevance to the White Writing Whiteness project. In particular, WWW research demonstrates the existence of the distinctive racialising process characterising both the state and the trajectory of change in South Africa. And while Shadow State has very different concerns, its detail throws some interesting light on racialising processes and so will be the focus of what now follows.

2.2 For an overview of WWW ideas about the racialising process, see http://www.whiteswritingwhiteness.ed.ac.uk/thinking-with-elias/analysing-the-racialising-process/. And the racialising process is discussed in detail in a book from the WWW project, which can be accessed at  https://www.amazon.co.uk/Racialising-Process-Writing-Whiteness-1770s-1970s/dp/1521403643/ref=tmm_pap_swatch_0?_encoding=UTF8&qid=&sr=

2.3 The processes of state formation and perpetuation importantly encompass accumulation, re/distribution, the monopolisation of legitimate force, and regulation; and these have a distinctive trajectory in South Africa, which make it significantly different from European experiences of long-term state development. Regulation and the racialising of systems of categorisation are central. Racial categorisation and the ongoing processes of racialising are not only still present in South African society two decades after the end of apartheid and the democratic transition, but are in important respects even more omnipresent. The uses of racial categorisation now reach into even mundane aspects of life, such as reporting traffic accidents and purchasing medicines. The requirement of racial categorisation as an everyday way of placing things, people and events is both ritualistic (being collected as a requirement but largely not actively used), and has become ever more present in the wider re-invention of race as a dominating feature of social life. And this has occurred because race categorisation is a key mechanism for radical social and economic transformation policies and black economic empowerment activities and instrumental in, for example, facilitating job appointments.

2.4 The regulatory aspects of state apparatuses world-wide are increasingly important, but less frequently considered in conceptualising what the contemporary state is/does, perhaps because many governments of both centre and right pronounce their disengagement from such activities although in practice actually promoting them. These regulatory aspects have been a marked feature in the South African context from the start of the European presence (in particular associated with passes and other ways of categorising race); and they have increased over time, propelled by the increasing scale of populations, technologies and activities that the state deals with, and the capacity as well as perceived necessity of regulation to ensure monopolisation, accumulation and re/distribution.

2.5 Regulation requires categorisation, for categorisations are the basis of being able to measure the effectiveness or not, not only of regulatory measures, but also of those to ensure monopolisation, accumulation and re/distribution. Regulation requires knowledge of things such as population size, its age structure, income levels, employment and unemployment, the incidence of crime and responses to it, levels of health and illness and so on. Categorisation shows which groups or sections of the population are experiencing what levels or measures of these and produces measures of social structure. Racial categorisation remains central in the South African context.

2.6 In South Africa, regulation and categorisation have been seen as a biometric initiative to ensure racial identification and control and introduced in the proto-apartheid past. Certainly this has been involved, but it is by no means the whole story, for the processes of regulation and categorisation have longer origins and now have a far wider remit. In addition, notions of ‘race’ and what constitutes it are a product, not a cause. And contemporaneously categorisations based on race have entered the equal opportunities and black economic empowerment frame because enabling disparities in resources and opportunities to be identified and targeted: redistribution as a desired result requires categorisation of types of persons in order to be measured and accomplished.

2.7 On one level, this is not so very different from other societies across the world, for the extension of regulation and categorisation with respect to racial categories is ubiquitous and race as an apparently fundamental aspect of how people are ‘naturally’ has been institutionalised widely. Such regulation and categorisation have occurred everywhere and must be seen as now on a par with monopolisation, accumulation and distribution as key elements of the late modern state. In addition, it is not just race that has been reinvented and treated in this way. ‘Gender’ too has become ubiquitous and replaced sex as a way of indicating both biological and social aspects of categorisation, and with this category also now appearing as key in the ‘required information’ demanded in many areas of social life. However, regarding South Africa, there are ways in which regulation and categorisation have occurred and are occurring in respect of race matters that are distinctive. Its specific history cannot be forgotten and reverberations of the different elements involved continue to mark the many ways in which racial regulation and categorisation are now completely taken-for-granted. This cannot be put on one side as incidental, for the effects powerfully play out in regulation and categorisation and also face-to-face relations between people.

2.8 So what light does Shadow State throw on such matters?

3. State capture, repurposing and radical economic transformation

3.1 Key terms in Shadow State are state capture, so as to change the terms of political and socio-economic life; the development of interlocking power elites and their brokers; repurposing existing state and related organisations to serve sectional interests; the reallocation of ‘rents’ (often in the form of state contracts for procurement) from legitimate re/distributions to corrupt ones; these things giving rise to a shadow state of key persons (controllers and other elite members) and ad hoc bodies (kitchen cabinets); use of the rhetoric of radical economic transformation to serve black empowerment to legitimate these activities; and beneath this apparently progressive political project is one that is actually venal and serving sectional interests. Many state-owned enterprises (SOEs) in other countries are externalised in South Africa, while its two key SOEs (Transnet and Eskom) issue nearly three-quarters of all SOE procurements, with both aspects helping fuel the state capture process.

3.2 Shadow State starts by claiming, erroneously, that state capture has characterised South Africa from the 17th century and the presence of the VOC or Dutch East India Company onwards (pp.1-2). However, there was no unified South African state until Union in 1910. But, although an argument about this could be made about Rhodes and his Prime Ministership of the Cape, this ended after Rhodes’s ‘fall’; and concerning the Transvaal under Kruger, this aspect was largely dismantled through the reforms enacted by Reitz as Transvaal State Secretary and Smuts as State Attorney; and regarding the so-called Randlords, even in the short Milner era post-1902, any shadow states aspirations failed because they were outmanoeuvered by the successes of Afrikaner politicians Botha, Smuts and colleagues. The point from where there is such a lineage and continuity in state activities is the 1920s and 30s and ‘volkskapitalisme’.

3.3 This saw the use of state mechanisms by the National government of the day to ‘Afrikanerise’ economy and polity by inventing and purposing a range of state-owned and private corporate institutions and organisations, which came to dominate key areas of socio-economic life and provided positions for people on the basis of connections rather than qualifications. And many of these are still part of the landscape. So what is happening now might perhaps be seen as the ‘Africanisation’ of the earlier institutionalisation of Afrikanerisation, and has been described as ‘neo-volkskapitalisme’. Another way of thinking about this is that there has been considerable continuity in state and para-state structures in South Africa since the 1920s and it is this that has enabled the present incarnation of state capture, rather than present-day state capture originating such structures and ways of working from scratch. The rhetoric of a radical economic transformation project to benefit the majority population is new (though paralleled with volkskapitalisme serving the majority white population) but with this being set against or even oppositional to key state institutions, seem to prevent progressive measures and serve ‘white hegemony’. This is the shadow states seen as a radical challenge to the constitutional state using the rubric of ‘white monopoly capitalism’, but with the reality being that the beneficiaries are actually minority sectional and elite interests, rather than the mass of people (pp.5-12).

3.4 Chipkin and Swilling and their associates discuss the fragmented character of the South African state in relation to particular issues that arise in attempting to counter the apparatus of state capture:

…for large parts of the 20th century the administrative structure of the country was broken up by the apartheid government. So by the end of the apartheid era there were 14 separate and parallel administrations, each with its own government and government departments in the Bantustans, together with the racialised administrations of the tricameral system at the national level. For this reason, the ANC’s tendency has been to maximise political control of government administrations… Hence, far-reaching steps were taken to locate key administrative power within the executive arm of government. At the same time, in the name of the ‘new public management’ movements… much of government’s work has been effectively outsourced to private companies, consultants and contractors. This combination of politicisation of public administrations and of outsourcing has given state capture its particular form – from manipulating government appointments two directing tenders to selected beneficiaries… (p.14)

3.5 It is not just that the state in South Africa is fragmented in this way. It is that for many decades it has had this particular form or structure and this is a design aspect, with recent public management fashions building on existing and long-standing ways of operating. For Chipkin and Swilling, the resulting shadow state takes a particular form which they describe using the rather unsatisfactory term ‘war economy’ (pp.19-27). This term originated as a way of modelling how states respond in the extraordinary circumstances of war, in becoming both very centralised and operating through externalised bodies. Although they do not discuss it like this, in South Africa, these structures have arisen to facilitate state capture as part of the long-term trajectory that its state has taken from at least the 1920s on. That is, it started with the state under National Party rule and governance, in using its powers to favour white and in particular Afrikaner interests. The key components are that,

…the ‘shadow state’ establishes a number of informal structures which produce systems of ‘profit, power and protection’ that, in turn, serve to further their operations, making possible continued preferential access to resources and power through an exploitative economic system. The cycle can, therefore, continue.

One of the key requirements… is the ability to secure a system of command and control over the way the resources are accessed, moved and distributed. At the outset, control must be established over the sources of extraction… Once access to the source of extraction is secured, networks of middlemen or brokers must be established that can move resources externally… to sustain loyalty… The ability to transact within this network is facilitated by establishing political marketplaces where support is traded through the provision of access to resources.

The skills of this patronage network are localised within a number of groups. The networks consist of three elements: the controllers, the elites and the entrepreneurs (also known as brokers)… (p.19)

3.6 The result of growing a shadow state that operates alongside and is intertwined with the constitutional state is that ‘state institutions are being repurposed to serve the private accumulation interests of a small elite’ (p.29), not transformation and redistribution to support equality measures. However, as noted earlier, this is represented as part of a radical political project (pp.31-32) because it shifts resources in an effective way and helps to grow not only a black inner elite (‘controllers’, in Chipkin and Swilling’s model of state capture) but also a black business class and a large managerial and administrative but highly dependent middle class, all tied into widespread systems of patronage and brokerage. At the heart of the mechanism is the repurposing of SOEs to mediate between the shadow state and the constitutional state, and even more so the routine operation of government as a tender-generating machine interconnected with a political patronage machinery (pp.45-53).

3.7 Tenders and procurement are central, the liquidity on which the apparatus runs and repurposing is achieved, with Shadow State providing a number of detailed examples of this at work (pp.59-100 and 101-31). The project of radical economic transformation was one that the ANC government had enshrined in its own policies, with a result of this being the rapid politicisation of public administration and public service after 1998, in order to establish political control of the state. The mechanisms adopted to achieve black economic empowerment also produced a highly politicised clientele group, with BEE deals also involving huge transfers and breaking up conglomerates, and at the same time limiting investment.

3.8 In the context of the major fragmentation of political and economic power that occurred,

…the Gupta-Zuma nexus came to be a relatively constant site of authority. It was an attractive one, moreover, because it could marshal substantial resources and was armed with a capacity to undertake propaganda… Saxonwold, however, hosted only one of what we have called ‘kitchen cabinets’, through which contemporary political power in South Africa is exercised…

The fragmentation of power across the state and its retreat into shadowy networks outside the formal architecture of government has been compounded by the ballooning of the public service…

…the organisation of the state came to be based less on functional criteria than on political ones, and was accompanied by the politicisation of state administrations… (pp.120-1)

3.9 Seemingly, this is to serve the project of radical economic transformation, but with this rhetoric ‘used to give ideological legitimacy to what is essentially a political project to repurpose state institutions for the benefit of a power elite’ (p.134).

4. The shadow state and racialising

4.1 The political reverberations of state capture processes are clear, in undermining constitutional government and its state apparatus from within, ‘repurposing’ these through moving effective action into shadow structures and roles. But are there also implications for the key aspects of the state regarding accumulation, re/distribution, regulation and the monopolisation of legitimate force? The short answer is yes.

4.2 Accumulation is a focus at a number of levels. ‘Locally’, it produces a shadow economy of contracts and bribes, kick-backs and pay-offs, along with semi-institutionalised roles such as fixers and brokers. At the level of the four constituent states in the Union of South Africa, their political and administrative elites have become linked to shadow forms of accumulation links to political manoeuvring. And at national state level, the culture of capture along with repurposing and rent-transfers has produced a pattern of high yield short term investments around favoured projects and corrupt procurements, of which a nuclear deal with Russia is perhaps the most notorious example.

4.3 Re/distribution is also a focus, in two rather different senses. One is the rhetoric of pretend RET, while the reality is the transfer of huge sums to a black inner elite of controllers, brokers and entrepreneurs. The other is the creation of a large managerial and administrative class whose well-paid positions and associated perks are largely dependent on the activities of the shadow state and its organisational forms.

4.4 Regulation is certainly involved, both in the negative sense of deregulating, and also in the increasing activities occurring around RET and BEE, but with this occurring as a by-product of other aspects of the shadow state. It is the rhetoric of racialising that is at work here, rather than its substance in extending systems of regulation to support actual transformation and empowerment.

4.5 The monopolisation of legitimate force at first sight looks an outlier here. However, a contract/procurement culture has become a way of life for many at local levels as the source of income and livelihood. When projects end by being damaged or destroyed, further contracts will be issued, so that violence against property has become entrenched, as a quasi-redistributive mechanism. A system involving kickbacks and bribes also gives rise at least to the potential, and in many cases the actuality, of violence against persons. With regards to both, what is legitimate and what is llegitimate force is up for grabs, along with who and what controls force at local, provincial state and national levels.

5. States and systems: a coda

5.1 What is a shadow state and state capture alongside and within a constitutional state as a system?

5.2 Minus the RET and equality rhetoric, perhaps the closest parallels are, firstly, with the National Party state and volkskapitalisme, and secondly, with traditional forms of African polities.  Regarding the latter, the form that the Swazi state took historically, for example, bears some interesting points of comparison. These include combining great centralisation with equally pronounced externalisation of power structures, promotion of a large dependent class of functionaries, extracting rents or payments for favoured contracts and so forth, although in a context where the intertwining of public forms and semi-private elite purposes were open and the form that the legitimate or constitutional (using the term broadly) state traditionally took.

6. References

Ivor Chipkin and Mark Swilling 2017 Betrayal of the Promise. Johannesburg: Public Affairs Research Institute, Wits. https://pari.org.za/betrayal-promise-report/

Ivor Chipkin and Mark Swilling 2018 Shadow State: The Politics of State Capture. Johannesburg: Wits University Press.

Hellman, Joel S.; Jones, Geraint; Kaufmann, Daniel; Schankerman, Mark. 2000. Measuring Governance, Corruption, and State Capture: How Firms and Bureaucrats Shape the Business Environment in Transition Economies. Policy Research Working Paper No. 2312. World Bank, Washington, DC. https://openknowledge.worldbank.org/handle/10986/18832

Hellman, Joel S.; Jones, Geraint; Kaufmann, Daniel. 2000. “Seize the State, Seize the Day” : State Capture, Corruption, and Influence in Transition. Policy Research Working Paper No. 2444. World Bank, Washington, DC. https://openknowledge.worldbank.org/handle/10986/19784

Kaufmann, Daniel and Hellman, Joel S. and Jones, Geraint and Schankerman, Mark A. 2000. Measuring Governance, Corruption, and State Capture: How Firms and Bureaucrats Shape the Business Environment in Transition Economies (April 2000). World Bank Policy Research Working Paper No. 2312. Available at SSRN: https://ssrn.com/abstract=236214

Dan O’Meara. 1983. Volkskapitalisme: Class, Capital and Ideology in the Development of Afrikaner Nationalism, 1934-1948. Cambridge: Cambridge University Press.

Last updated:  18 October 2018, 4 Nov 2018


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