The impact of Illicit Financial Flows on the South African political economy under Jacob Zuma, 2009–2018

• Date: 01 May 2020
• Author: Makhura Benjamin Rapanyane,Chuene Cedric Ngoepe
• Published date: 01 May 2020
• DOI: http://doi.org/10.1002/pa.2020

ACADEMIC PAPER

The impact of Illicit Financial Flows on the South African

political economy under Jacob Zuma, 2009–2018

Makhura Benjamin Rapanyane | Chuene Cedric Ngoepe

School of Social Sciences, University of

Limpopo, Sovenga, South Africa

Correspondence

Makhura Benjamin Rapanye, School of Social

Sciences, University of Limpopo, Sovenga

0727, South Africa.

Email: makhurabenjamin2@gmail.com

South Africa has also fallen a victim of a greater major concern over the scale and

negative impact of Illicit Financial Flows (IFFs) on the country's governance and

developmental agenda. However, there is an unjustified observation that as one of

Africa's biggest economies, South Africa is not a victim of IFFs. This observation

shows that scholars and academic practitioners have not yet uniformly come to a cul-

de-sac on this subject, and as such, this confusion constitutes a huge dichotomy on

the subject matter. Based on Afrocentricity as the alternative lens, this article argues

that there are after effects of the practice of IFFs in South Africa and that IFFs need

to be given a special attention in order to curb them from destabilising South Africa's

economic and political stability. Although this article discusses IFFs in general and

how they come about, the central focus of this article is to unpack the impacts of

IFFs under the Zuma administration and provide possible solutions. Methodically, this

article relied on the prevailing continental and South African discourse circulating

and thematic content analysis on conversations.

1|INTRODUCTION

South Africa is rated the 13th with regards to the problems of IFFs in

the classification of developing countries. The research output by

South Africa on IFFs shows that more scholarly attention is paid to

capital flight (money flowing out of a country due to economic crisis)

(Corporate Finance Institute Education, 2019). The foregoing should

be understood within the context that there is a considerable litera-

ture existing on capital flight under IFFs on the case of South Africa.

This literature mostly places focus on factors and magnitude exerting

influence on capital flight during apartheid and even during the post-

apartheid period. This embodies the view that South Africa's research

has not yet attended to the key aspects, which shapes IFFs' occur-

rence especially with a focus on South Africa. Although this is the

case, there is still a substantial research done but with focus on subre-

gional and continental level (African Monitor, 2017). In its brand new

report, Global Financial Integrity approximates that South Africa lost

“$37–$7.4 billion a year in potential government revenue due to trade

misinvoicing between 2010 and 2014”(Nicolson, 2018). This dis-

missed South Africa's attempt to attend to its developmental inten-

tions. This fact aroused should be accompanied by Mark Kingon

(former South African Revenue Service [SARS] commissioner) who

affirmed that no adequate measures were successful in dealing with

these IFF practices. He also articulated on how multi-agency squads

were assembled in order to resolve the other case, which involved the

losing of more than R9 billion in South Africa through IFFs. These

problems were also attributed to the shortage of SARS staff, which

culminated reduction of investigations in a more transparent manner

(Nicolson, 2018). Up to now, there seems to be no legislative segment

that is intended to counter IFFs in South Africa. This means that more

dependence is rested upon the legislations that deal with collabora-

tion and cooperation among numerous financial institutes, individually

posturing a wide range of standards of accountability, which incorpo-

rate Companies Act, diverse tax laws, Financial Intelligence Centre

Act, and general criminal laws such as those fighting fraud (Thakur,

2018). Maybe a question that must be asked in this instance is

whether these pieces of legislations are able to completely curtail IFFs

in South Africa. The answer is a simple no.

The analysis of the problem stemming from the background pro-

vided above surrounds around the authors' argument that the African

Monitor's (2017) report shows that South Africa's attention is rather

on capital flight under IFFs. This assertion does not change anything

Received: 28 May 2019 Revised: 21 June 2019 Accepted: 3 September 2019

DOI: 10.1002/pa.2020

J Public Affairs. 2019;e2020. wileyonlinelibrary.com/journal/pa © 2019 John Wiley & Sons, Ltd. 1of7

https://doi.org/10.1002/pa.2020

J Public Affairs. 2020;20:e2020. wileyonlinelibrary.com/journal/pa © 2019 John Wiley & Sons, Ltd. 1of7

https://doi.org/10.1002/pa.2020