JOHANNESBURG — The announcement yesterday that the UK’s Serious Fraud Office is expected to investigate whether Standard Chartered or HSBC have been exposed to alleged illicit cash outflows relating to the Guptas is sure to set the cat among the pigeons. Already, the FBI is probing two Gupta nephews in the state of Texas, meaning the long arm of the law could be coming for the infamous family. But Paul Hoffman offers this deeper thought on the UK’s Gupta probe. The first is that it may be in the interests of the UK to prevent a Saffer refugee wave heading its way if South Africa becomes a failed state. The second is that where was the UK during South Africa’s Arms Deal scandal? – Gareth van Zyl

By Paul Hoffman*

Lord Peter Hain of Neath, a Labour life peer and former anti-apartheid activist, has raised questions in the House of Lords regarding suspicion of British and European Banks and financial institutions being involved in state capture in SA. His interest comes at a time when it is apparent that a shortfall of R40 billion in revenue collected by the fiscus will be officially announced in the late October 2017 mini-budget in SA.

These two dots in the current news can and should be joined, not only because former Finance Minister Pravin Gordhan is continuously admonishing his fellow citizens to do so, but also because there is a connection between Lord Hain’s concerns and the downhill slide on which SA finds itself. The relegation to junk status, the rise in corrupt activities and the rickety state of much of the infrastructure in SA are all telltale signs of the increased risk of the failure of the country.

Should SA fail as a state there will be a severe knock-on or domino effect in the rest of the continent with the spectre of economic refugees looming large in the minds of the Lords as they ponder the questions raised for deliberation.

Lord Hain will be acutely aware that there is a large contingent of Brits living in SA, many of them retired comfortably with first world pensions feeding a comfortable lifestyle in an equable climate, both financially and in meteorological terms. There are also many more people living in SA who would be entitled to claim residence in the UK due to ancestral or other reasons. In the event of SA becoming inhospitable due to failure or looming failure as a state, a flood of refugees, both legal and illegal, political and economic, can be expected in the UK and the EU.

A good way of avoiding failure as a state is to bolster the rule of law and fair play by raising the issues that Lord Hain now alludes to in his questions for the House of Lords to ponder. By restoring fealty to constitutionalism and plugging illicit financial flows, it is possible to put SA back on an even keel and spare the UK and others to pain of finding space and resources to accommodate pensioners and others currently happily ensconced in SA.

It is a great pity that Lord Hain did not come to this insight long ago. He is on record as saying that there was no irregularity or corruption in the massive BAe arms deal with SA in 1999, when a huge sum of money was borrowed from Barclays Bank PLC by SA to acquire useless military aircraft the country could not actually afford to fight enemies it does not really have and need not bother to deter.

When BAe budgeted to supply the aircraft to SA and an amount of 200 million pounds sterling was included for “overt and covert commissions”. In the end some 115 millions pounds were spent accommodating the middlemen in the deal and the illicit financial flows were laundered in the British Virgin Islands through a company aptly named Red Diamond Trading. Scotland Yard uncovered all the juicy details of the bribery and corruption. The Serious Frauds Office provided an affidavit to the Pretoria High Court in and application to search for and seize the documents evidencing these transactions. The application succeeded and the documents are still in the custody of the Hawks, shunned by the Seriti Commission and neglected by the criminal justice administration in SA.

BAe has paid massive fines in the USA for not playing the game with a straight bat. Details of the cases brought under the American Corrupt Foreign Practices Act are pleaded in the particulars of claim in which the Quaker Peace Centre has taken up the cudgels to secure justice in the deal.

Read also: Crawford-Browne – current #Guptagate has nothing on the Arms Deal

According to the Quakers, the deal is illegal for three reasons. Firstly, the SA procurement criteria were infringed. Joe Modise’s “visionary approach” in which the excessive cost of the unsuitable aircraft was left out of account obviously does not pass constitutional muster in that cost effectiveness is required. Secondly, the loan from Barclays was not authorized. Trevor Manuel had no legal power to borrow the funds. Both of these features render the deal invalid. Thirdly, the deal ought to be cancelled due to the bribery and corruption that characterized it. There is a clause in the deal that obliges BAe to pay pre-estimated damages of 5% of the contract price, if the cancellation is due to bribery and corruption.

Serendipitously, the amount recoverable in the action mounted by the QPC is about R40 billion. This should come in very handy when the new Minister of Finance, Malusi Gigaba, gets to balance the books of the nation and needs to account for the shortfall of R40 billion that is now forecast.

As Lord Hain knows, state capture is just a grand form of corruption. The rot in SA started with the arms deals, in all of which a great deal of corruption and some arms were exported by the UK and EU to SA. If the return on the investment is not to be a flood of refugees who will be difficult to accommodate, then the answer to the questions raised by Lord Hain lies in empowering SA to clean up its act in relation to corruption, starting with the BAe arms deal. The lords should resolve to take back the aircraft sold and repay all funds paid thus far by SA. It is the right honourable thing to do.

• Paul Hoffman SC is a director of Accountability Now and the author of Confronting the Corrupt.

UK’s Gupta probe: Joining the dots after the horse has bolted – Paul Hoffman