“Don’t throw away the cradle because of the death of a child”: Deception, simulation and a ‘getrich-quick’ culture in the context of increasing economic inequality and the financialisation of
everyday life1
Detlev Krige
Abstract
Key circumstances associated with increased economic inequality and financialisation in contemporary
Johannesburg and Soweto - large-scale unemployment, a lack of retirement planning and deep financial
illiteracy, the rising costs of living, incredible upward social mobility for a few, an budding get-richquick public culture, the corporatisation and incapacitation of the state through the outsourcing of
service functions and tenderisation of procurement processes - have resulted in a growing sense of social
and economic uncertainty. These circumstances have created the conditions under which deception,
simulation and speculation have become everyday social and economic practices. In this context of
jobless growth and high levels of unemployment, and where citizens are exhorted to be entrepreneurs
and active entrepreneurs, multilevel marketing networks, pyramid schemes and ‘word of mouth’
recruitment strategies have flourished, simulating in the process the workings of finance and formality.
‘Entrepreneurs’ of all sorts are exploiting these structural conditions under the guise of discourses of
‘empowerment’, ‘humanitarian aid’, ‘black economic nationalism’, ‘entrepreneurship’, ‘the right to
consumption’ and ‘religious prosperity’. At the same time a set of cultural values and social logics that
are not necessarily produced by neoliberal capitalism and financialisation (but are certainly activated by
them) makes it hard for citizens to recognise or admit the forms of deception involved, unless deception
is seen to be central to the operation of the modern state and/or the present ‘get-rich-quick’ culture.
Introduction
The Kine Centre in Commissioner Street downtown Johannesburg is not a landmark building. It
languishes in the shadows of the landmark building which stands opposite it on the southern side of
Commissioner Street: the tall and imposing Carlton building. The Carlton has for long been a symbol of
1
This paper is for presentation at the 2nd Workshop on Popular Economies in South Africa, London School of Economics,
24th-25th May 2010. It may be cited with permission from the author who should be contacted at pfdkrige@telkomsa.net
1
Johannesburg and indeed of the very changes that have over time taken place in Johannesburg,
economically and socially. Everyone born and bred in the City of Gold knows it and recognises it. Many
tell stories of Sunday family outings to the Carlton in the eighties, before ‘the foreigners’ took over the
city. Many prominent businesses were located in the building, including the Chamber of Mines, before it
too joined the flight of white capital during the late 1980s when businesses fled the city and took up
residence in Sandton’s emerging CBD (and which have since become the ‘black hole’ of financial
capitalism in southern Africa as it sucks in workers’ pension funds and shoots these across the planetary
financial markets in the form of investments in futures contracts, sometimes never to return). Still, many
people use the towering presence of the Carlton to navigate the city. But while symbols can condense
and focus several meanings into one object or image, and thus stand for many things at once, they also
tend to hide or detract attention from other things.2 A focus on the sun-catching Carlton, however an
important landmark it is, thus detracts attention away from what is taking place in its shadows: the
street-level economic occurrences, interactions among congregants in second-floor offices used as
churches, businesses transactions in adjacent buildings, and the everyday flow of traffic and people and
money. One of the many things Carlton Centre ‘hides’ in its shadow is the Kine Centre, the smaller,
relatively non-descript building which over the last decade has been home to several pyramid and multilevel recruitment (or ‘push-push’) schemes. In a sense, it is the (unofficial) headquarters of (illegal)
‘push-push’ schemes in southern Africa, a Sandton simulated for the poor and marginalised. It is from
this very building that Pyramid King (and preacher, politician and entrepreneur) Sibusiso Radebe of
Miracle 2000 launched yet another ‘empowerment scheme’ in 2005 after he had spent two years in
prison for his involvement in Miracle 2000.
Today several NGOs, training institutes, financial services and investment companies and one-man
political parties have their offices here, in the area of the CBD where two decades ago white capital and
considerable economic power were concentrated. Today the Kine office space is also taken up by
several ‘dummy companies’ selling counterfeit Canadian diamonds or gold coins. It is here where agents
of international travel companies registered in tax havens in Europe hold daily presentations with
projectors and laptops and PowerPoint presentations they had downloaded from the internet, pushing
2
And South Africa is drenched in symbols that romanticise, glorify, divide, and recount standard yet superficial symbols that
stand for simplistic explanations or renditions of (Marxist and liberal) history. Our tendency to find meaning and solace in the
surface form of symbols that are little more than stereotypes rather than in their content makes us both gullible and terrible
‘presentist romantics’.
2
pensioners to become members in multi-level ‘business clubs and networks’. It is in these presentations
where incredible rags-to-riches narratives are spun around unsuspecting citizens by overly enthusiastic
yet ‘hard-working’ agents who are desperate for new recruits so they can feed their children. Here sleek
presenters are offering pensioners and working class women the opportunity to connect to the global
world of consumption, leisure and financial investment from which they have been barred by
generations of white people. Now is the time to make this yours! God wants you to be blessed now!
My research assistant and I had interviewed a number of women and a few men who had all been
‘victims’ of pyramid and other ‘push-push’ schemes around Gauteng. Many of them had made reference
to ‘presentations’ they had attended at Kine Centre (together with a few other offices or centres in
Midrand, Soweto and the East Rand) so it was only a matter of time before we had to go and observe for
ourselves these ‘presentations’. Thus it was that one week day just before 11am I had parked my car at
the underground parking at Carlton Centre and crossed the street to Kine Centre via the Small Street
Mall. On the ground floor of Kine Centre between the south and north side entrances were located
several businesses selling clothes, computer hard- and software, a short-term commercial credit provider
offering quick consumer loans, and a restaurant. In the middle of the ground floor, constituting a lobby
of sorts, was a queue of about twenty people. They are all standing in line to sign their names into a
register at a security checkpoint before being allowed access through glass security doors to a lift and,
eventually, to the other floors of the building. Waiting for my research assistant to arrive from Soweto –
he was taking for the first time one of the new busses of the recently launched and City owned bus rapid
transport system called Rea Vaya – I decided to join the queue. Earlier that morning I had purchased an
airtime voucher from my research grant and had sent the pin code to Oscar’s mobile phone so he could
sms me (send me a text message) how far he is from the city. At the garage where I had stopped to buy
the airtime I was told I could not purchase the airtime with my credit card, only with cash. The attendant
said it was because ‘airtime is like cash’ and if my bank refuses the transaction then the airtime would
be lost as it is considered consumed once the pin has been activated.
In front of me in the queue in Kine Centre was standing the only other white person in the queue, a
slightly overweight woman of around 45 years old wearing a loose-fitting, conservative dress. I was
wondering whether this is ‘Amanda’, the white woman (‘boss lady’) we were told about who runs the
‘CAG presentations’. I was close to the front of the queue when Oscar arrived. I signed in without
encountering any problems but when Oscar could not remember his identity number correctly the two
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security guards accused him of being a foreigner (Oscar is very ‘dark-skinned’ as we say in South
Africa). It was only after he had phoned his cousin to get his correct ID number and after repeated
protests from me that we eventually made it into the lifts and up to the 7th floor. It was around the time
of the waves of attacks on foreigners in working class neighbourhoods all around South Africa so we
thought their reluctance to let him in was linked to those events. Or perhaps they beefed up security after
Sibusiso Radebe was shot by angry investors in his office in this very building a few years ago. Either
way, Oscar and I had been here before: the previous Saturday we had attended a presentation of ‘TVI
Express’i but then Oscar had his ID with him. Today however we had come to sit in on a presentation on
the recommendation of Ma Beth, a family friend of Oscar’s who attends the same Methodist
congregation as his mother and who lives in the same Sowetan neighbourhood he hails form (and where
I resided during my PhD research).
Ma Beth is a pensioner of around 60 years old who previously worked as a social worker. Her husband
is a taxi owner who still runs his business, even though he is ‘taking it slow’. They live in a very
comfortable (middle-class) house in a quiet part of a neighbourhood in deep Soweto. The backyard
behind the house is large, large enough for Ma Beth to run from there a crèche for about twenty children
with two full-time employees. Ma Beth is a tiny woman, but exhibits a lot of energy, enthusiasm and
self-motivation. She never stops talking. She seems forever involved in some opportunity or another that
seems to stem from a discontent of not having been given the opportunities earlier in her life which she
believes she deserved. The fact that her one neighbour’s sons is now a leading figure in the financial
services world and very, very rich also does not make it easier on her. I can sympathise with her anxiety
about social status, given how under apartheid energetic and active people like her had few avenues
through which to channel their social energy and aspirations other than in status competitions and
‘prestige tournaments’ with fellow victims of the system. When during interviews with her our
discussion touched on crime and corruption, a sad shadow would cross her face for a moment but then
she would pull herself together, put on a brave smile, wave the worries and ‘negative talk’ away, and
talk about something more ‘positive’. Among many of the other things she does, Ma Beth is an agent for
CAG Airtime Scheme. When we first met, she spoke non-stop about CAG Airtime Scheme and a little
bit about Direct Advantage, a multi-level marketing company which launch she had attended a few days
earlier in upmarket Gallagher Estate, Midrandii. But it was CAG Airtime Scheme she was most keen to
talk to me about, even after I had explained the nature of my research to her.
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Halfway through our first interview, with me asking terribly difficult and straightforward questions
about the exact nature of CAG Airtime Scheme’s business and in the process dropping a reference to
Sibusiso Radebe’s Miracle 2000 pyramid scheme, she said: “We have a saying in my mother tongue,
Zulu, that you don’t throw away the cradle because of the death of a child....We say you don’t throw
away the cradle because of death. Say you’ve been getting miscarriages, you’re getting stillborns but
you don’t throw away the cradle. Meaning, you don’t lose hope”. And then she smiled and asked
whether I want to join her ‘downline’, quick to imagine the large numbers of students in my social and
work network who need extra money and who can join ‘under me’ (whom I can recruit) and who will
‘push’ her up (the pyramid, although she never used this word). Before I could tell her that that was not
really a workable idea, she continued: “Look, I’m going to arrange. I’ll be speaking to my up liners. I
would like you to meet the directors personally. But I don’t want you to be disturbed in your studies. I
also want good results so that your parents in Cape Town will say, ‘You see, you said you are going to
study and now you are no longer studying about businesses but doing business’. I don’t want you to lose
the focus of studying. Can you see that I’m a good upliner? But it’s all good things that I want to happen
in your family. We bury the past.... Ja, and they [your parents] must see that you are working hard....
hulle moet hierso kom [they must come here]. We book them a nice hotel in Sandton, you can now
afford.” I was taken aback: “Sandton”? To which she replied: “Yes, why not? You book them a nice
hotel where they will relax and say to them, ‘Feel at home’”. By now she was on a roll: “And when they
ask you where you get so much money you will say: ‘Ek leer en ek werk [I learn and work]’. That will
make them happy. That’s all what you need, good relationships so that God will bless us. Am I wrong or
right?” Of course I could not tell Ma Beth she was wrong. I knew enough about protocol not to disagree
with an older woman who could claim or emphasise or enact the social convention that she is my
mother. And she knew that I knew, and exploited these very skilfully.
So there Oscar and I were going up the elevators to floor 17 hoping to learn more about the CAG
Airtime Scheme which Ma Beth is an agent for and which she wants me to introduce to students at Wits
University. I was taking a few pictures of the inside of the building when no one was looking, and
eventually we found our way the right office which was the very same office we were in the previous
Saturday for a TVI Express presentation. Ma Beth had smsed us that she was running late for the start of
the presentation and our scheduled introduction to ‘Amanda’, so we joined the ten other women who
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were sitting on plastic chairs waiting for the presentation to begin. Seven of these were old enough to be
pensioners while three were around their thirties. These women were not ‘black diamonds’ or
‘graduates’ but ‘semi-literate’ as Oscar described them afterwards. Then a woman appeared from an
adjoining office, walked up to the front and introduced herself as Brenda Mokoena and the presenter for
today.3 She talked for a while and then Ma Beth joined us, apologising profusely for being late. Then the
woman I saw earlier in the queue at the security entrance appearing from the adjoining office. Brenda
introduced her as Amanda and Amanda took the stage. She spoke in English with a thick Afrikaans
accent for about 15 minutes during which she explained the scheme to everyone. She also handed out a
form (see appendix) and one manual which we passed around but had to return after the meeting or
purchase for R50. A few times during the presentation she looked nervously in my direction but was
seemingly comforted when I asked a silly, non-threatening question during question time.
In summary, she described the scheme as a business club one can join for R20 (on top of that CAG
Solution will deduct R2500 per year automatically from your commission fees once you reach level
four). In order to reap the benefits of being a member, you must recruit other members. The more
members you recruit, the higher you move up in the club. For every six members you recruit, you move
up to the next level and you are rewarded by a commission fee as well as airtime – “then you will start
earning interest and you can even earn enough money to buy a new cellphone”. It is important to recruit
people who work hard so they can “unlock your business”, she said. After she spoke she offered people
from the audience the opportunity to ask questions: “Ask me, ask me if there is anything”. No one had a
question at this point so she introduced one of the agents called Diana, cracking a joke and
demonstrating familiarity by holding her hand for a few seconds. Diana, a forty-year old woman,
speaking in Sotho, then continued to regale the audience with stories of success and wealth and hard
work. Her performance was part testimony, part business plan and part sermon. She told us how at the
beginning of the previous December she was very sceptical and not very active in this scheme. But then
she heard people talking about how they can make money from only R20: “You think that R20 will give
me a cellphone! And can give me such a lot of money like this?”
3
Her name is either very ironical or a joke as it is the same name or alias used by the consumer rights journalist/columnist
writing in Sunday World newspaper. But in fact this is not an isolated incident: in April 2010 a pyramid scheme from Durban
was busted operating from an address in Crooked Lane. In 2009 the Financial Services Board suspended a dodgy insurance
provider operating from Scam Lane.....And who knows whether CAG is a play on the UK-based Consumer Action Group?
Unlike TVI Express, Canadian Diamonds and other global schemes, CAG seems to have no ‘international footprint’.
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She told us how she recruited her first six people and how she went to FNB (First National Bank) and
deposited the R120. She then placed the deposit slip on the form Amanda had provided and faxed it to
CAG. “Immediately after that, same day, I received my airtime” she boasted. After making such a
deposit, she said, Amanda will fax you your ‘downline’. Then she spoke of helping the first six people
she had recruited so they could recruit more people because “I am rushing for that fourth level’ (you get
your first cash payout on this level; R6110-R2500=R3610). When she got to the third level, Diana
explained, she got R260 airtime. And when she got to level four she got her first cash with which she
bought a new phone. At this point she was waving around her new phone as evidence and Amanda was
interjecting loudly: “Ask what she has received so far!” The Diana fiddled with her phone to find a text
message which she then showed to those in the audience closest to her. I also stretched my neck out to
see it so she passed it around the audience so we could all read the message she had gotten from
Standard Bank informing her that she had received a deposit from CAG Solutions (I read it and was not
convinced it really came from Standard Bank). And this is only the beginning, she promised. With that
initial R20 you can get a monthly salary, with phones, laptops, property, cars and even a R6000 petrol
allowance. All of that for only R20! What a great business opportunity, she exclaimed, inviting members
of the audience to invite her to make presentations to their savings and burial clubs and any other
meeting. Ma Beth was a bit restless sitting next to me, whispering a comment about Diana into my ear
every now and then, trying to ensure that I will join her ‘downline’ and not Diana’s. At the end of it all,
Diana ended her presentation on a wrong note. She had told the audience about how she went to Kagiso
the week before and how she had ‘made a presentation’ at one of the schools there. “The whole school,
the children, are joining because they say yooo we are going to get money from this work”, she
broadcasted.
One the way back with all three of us in my motor car, Oscar and Diana agreed that it was not right to
try and sell such a scheme to children. They are vulnerable and still young. During a later interview Ma
Beth told us a story of a woman from Bronkhorstspruit who tried to recruit her into a multilevel
marketing business which was selling medicine. Ma Beth told her: “Look Helen, you know what, yes, I
need money, but I don’t want to take medicine to people because of money...Not for money but yes,
they can buy the medication but it must have an impact on their diseases, their sicknesses...as much as
we need money but with sick people I don’t want to take an advantage, Detlev. Ek soek nie daai ding.
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Ek will nie ryk word nie, ek is oud and die Here sal my weg jaag. Next week ek gaan dood en die Here
sal sê, ‘Kyk hierso, jy het mense se geld gevat vir medisyne wat nie werk nie’ [I am not looking for that.
I don’t want to become rich, I am old and the Lord will chase me away. Next week I will die and the
Lord will say: Look here, you took people’s money for medicine which does not work. I don’t want that.
I must limit my sins, isn’t it?] That was the closest Ma Beth ever got to admitting that some question
mark was hanging over this ‘push-push’ business. A few weeks later, CAG Airtime Scheme had
collapsed and Ma Beth told me to focus on Direct Advantage.
This rather long ethnographic introduction raises a number of questions. Are such companies and their
business strategies and practices new or have they been around for a while? If they are new, do their
very organisation, practices and popularity say something about present-day city life and society,
religious and economic discourses and perhaps even South African capitalism? What is the profile of the
‘market’ for these ‘push-push’ schemes? Why has ‘multi-level recruitment’ become such an important
part of how (legal and illegal) businesses are hoping to grow their number of clients and how they
market their products? Why do so many informants and ‘victims’ of such schemes talk about ‘investing’
their monies in these schemes as ‘gambling’, as ‘trying their luck’ while criticising state officials for
their corrupt practices and BEE deals for ‘benefitting only a few’? Why do many of them talk about the
uncertainty of their present-day lives and sometimes express a nostalgic longing for the days of
apartheid? Is a financial investment or a share (or airtime or cash) a ‘product’ in terms of consumer
legislation, given that legislation differentiates between multilevel marketing companies and ponzischemes on the basis of having a product to sell or not (and thus between legality and illegality)? Before
I attempt to weave all of these questions into a narrative and interpretation here, let me first sketch
something about the social, political and economic character of urban Johannesburg and Soweto in postapartheid South Africa as I view these to be constitutive to the narrative I am constructing here.
Economic inequality, state dependency and financialisation in post-apartheid urban society
It is widely accepted that economic inequality in South Africa has widened since the negotiated
settlement and the introduction of constitutional democracy. Income inequality within the black
population has widened dramatically and is manifested in the growing numbers of households that are
said to belong to the Black Elite and the Black Middle Class. Concomitantly, we have seen a growth in
the number of (urban) households who are said to constitute a Black Underclass (Seekings & Nattrass
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2000; Terreblanche 2002). This gap between rich and poor households has become especially large in
the context of metropolitan areas as urbanisation and migration to cities continue unabated in the context
of the shrinking of rural economies (Posel 2006).4 Such visible inequality has given rise to heated
debates in the media about the conspicuous consumption among the Black Elite, the ‘demonisation of
black wealth’, and a near perpetual moral panic about the over-indebtedness of the poor and emerging
black middle class. Some argue that the root cause of this widening gap between poor and rich black
citizens has been the impact of affirmative action and black economic empowerment policies. Others
point to the impact of neo-liberal macro-economic policies which has resulted in large outflows of
capital, ‘jobless growth’,5 high salaries for manager but low wages for workers, and the outsourcing of
water and electricity provision by city authorities – all of which have negatively impacted on poor
households already struggling with low wages and the impact of HIV/AIDS (Bond 2004, 2007). Others
have challenged this label of the South African state as neo-liberal while pointing out the considerable
amount of money it is spending on social security.
One result of this widening inequality and deepening poverty has been the growth of issue-based urban
social movements such as the Anti –Privatisation Forum, Soweto Electricity Crisis Committee,
Treatment Action Campaign and various shack dwellers movements which have sought to resist some of
the state’s (neo-liberal) policies around housing, HIV/AIDS (Robbins 2006), the introduction of cost
4
In Soweto, for example, the Gini-coeficient (a measure of inequality between poorer and richer residents) are estimated to
be 51,3 while the South African figure is 58,4 (Piazza-Georgi 2002). However this study not only used a relative small
sample but it was also conducted before the consumer boom took full effect – in other words, the inequality is likely to be
even wider at present. The survey conducted by in Soweto during 1999 - with a final sample of 908 households and 1 186
respondents - reported that despite being below the national average, “only 14 countries of 90 have higher Gini coefficients
than Soweto. The percentage share in expenditure of the top 10 per cent of the sample households is 40,3 per cent; this figure
is again lower than that for South Africa as a whole (47,3 per cent) and leaves Soweto in exactly the same rank globally as its
Gini coefficient, 15th of 90. South Africa as a whole is in fifth place with regard to its Gini coefficient, and in third place
with regard to the share of the top 10 per cent of the population” Piazza-Georgi (2002:622).
The SAIRR writes that “high levels of unemployment are therefore set to remain a defining characteristic of South Africa in
the period to 2020. While StatsSA puts the official unemployment rate at under 25% their definition requires that
unemployed South Africans actively look for work in order to be classified as unemployed. The proportion of Africans who
want to work but cannot find a job, or make no effort to find one, is closer to 45%. As a result poverty and state dependency
are two features of South Africa that will feature prominently in the period to 2020. Statistics show that the proportion of
South Africans living on less than R3 000 per annum has fallen from just over 50% to just over 40% over roughly a decade.
In large part the rollout of perhaps the biggest social welfare programme in the developing world must get the credit for this.
Today three out of ten African households get their single largest source of income from the state while a quarter of all South
Africans receive social welfare. Many of these welfare recipients have become heavily dependent on the Government”
(SAIRR 2009).
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recovery mechanisms and privatisation of water and electricity provision utilities (Bond 2004; Ngwane
2003; McDonald & Pape 2002) and the new forms of governmentality that arises from the introduction
of such policies (Hart 2005; Ruiters 2007). The roots of the growing middle class and of greater
inequality must however also be traced back to the ‘Era of Reform’ which the apartheid government
introduced after the 1976 Student Uprisings. In order to appease the black middle class the then state
offered reforms which included the lifting of trading restrictions in the townships, the introduction of
new property regimes (lease-hold on council houses) and so forth. Even before the Era of Reform, the
‘geography of class’ in the public housing complexes and freehold areas meant that middle class
households were living side by side with poor households (Crankshaw 2005). In other words while
economic inequality and social differentiation are not post-apartheid phenomena they have increased
drastically (and visibly so) since the early 1990s.
In the context of jobless growth, high unemployment rates, the availability of cheap and undocumented
labour and the informalisation of work and labour, the sad reality is that most of the unemployed urban
underclass will never work in the formal sector again. But this does not always translate into
diminishing expectations on behalf of citizens who keep hoping and maintaining their desire to
participate in circuits of wealth-creation, especially in the seemingly ever-expanding and massively rich
financial services sector. But when this does not occur, a new form of dependency on the state emerges,
over and above dependency on state welfare grants. In the words of the SACP’s Blade Nzimande in a
recent address to a National Union of Mineworkers’ central committee meeting: “If you have less and
less opportunity to accumulate wealth in the broader private sector, then people target the state”.6 But
when the state is increasingly corporatized and incapacitated through a system of outsourcing of tenders,
a culture of ‘easy money’ is fermented and possibilities for deception and fraud multiply.
The SACP has been advocating for years now a return to the “developmental state” in response to the
neo-liberal agenda of the “lean and mean” state, embodied in South Africa by the “1996 Class Project”.
The SACP and COSATO have been very vocal in their struggle against the intensification of corruption
and “patronage networks in the public sector, and between the public and private sectors”.7 Their 2009
Johwa, Wilson. 2010. ‘Tenderpreneurs’ a symptom of failed BEE, says Nzimande. Business Day, 17 May 2010. URL:
http://www.businessday.co.za/articles/Content.aspx?id=109060
6
7
SACP. 2009. Building working class hegemony on the terrain of a National Democratic struggle. Discussion document
prepared for the 2nd Special National Congress. URL: http://www.sacp.org.za/docs/docs/2009/internal_cc_sept09.pdf
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discussion document (in which they coined the term ‘tenderpreneur’ which has taken to media by
storm), the SACP noted some of the major elements of corruption in the public service, including the
extensive corporatisation of the state; the “tenderisation” of the state procurement processes; and the
consequent emergence of “tenderpreneurs”.8 The document note that while corporatisation in itself does
not equal corruption, it does open up “huge potential spaces for corruption, especially given the
increased intersection between government and business interests fostered by the 1996 class project.
(This is an intersection that is now being deepened everywhere with the increasing dependency of
national capital on national states for rescue packages, stimulus packages, buy-outs, etc., in the current
global recession)”. The system of outsourcing and tenderisation on every level of government lies at the
heart of the newer forms of dependence on the state. And it has multiplied opportunities for fraud,
deception, the establishment of patronage networks and rent-seeking. Thus it is that Cronin (2005) has
lamented that “established and emerging capital have succeeded in exerting considerable dominance
over the state”. He has warned that the state might become the slave of narrow capital interests as BEE
policy effectively disguises the cultivation of patronage relationships between officials and
‘entrepreneurs’. He no doubts worries that “SA is following the road of some other post-colonial states
in which liberation movement elites have thrown off colonial oppression only themselves to become
parasites looting state resources” (Butler n.d.).
Another part of our post-apartheid trajectory that somehow feeds into what I described above is captured
by the concept of financialisation. Employed mainly by Merenskian macro economists and in the fields
of International Political Economy and Cultural Political Economy (Epstein 2005; Foster 2007), the
They include here the use of citizens in particular public offices in the state to “throw the javelin” – “i.e. to ‘throw’ public
resources into a network of friends, family and other connections so that a comfortable personal transit can be made from the
public sector to the private – where the ‘javelin’, or at least a share of it, can then be personally retrieved”. Lund Troye gives
us a sense of the scale: “Zuma's own Cabinet has significant business interests. Around 42% have business interests
registered with the Companies and Intellectual Property Registration Office (Cipro) when they came into office last year.
When it comes to national MPs, the auditor general's 2009 estimates were that 45% held directorships in private companies.
And between 33% and 50% of all provincial political representatives (MPLs) have outside business interests, including
directorships. In Mpumalanga, where police are investigating a hit list linked to provincial government tenders, a staggering
72% of all MPLs in the provincial legislature are also directors of companies.When it comes to bureaucrats…the Public
Service Commission (PSC) estimates between 45% and 72% of all senior managers in the public service are involved in
directorships and partnerships that ‘could result in conflicts of interest’…. Auditor general Terence Nombembe recently drew
attention to the fact not all is above board with public servants' business interests. In a report tabled in Parliament last year, he
revealed how he'd tracked 2 000 public servants between 2005 and 2007 who had cashed in (without the necessary
permission and/or without following proper tender procedures) on tenders worth R610m. See Lund, Troye. 2010.
Tenderpreneurs: Theft and fraud? 12 March 2010. URL: http://www.leader.co.za/article.aspx?s=1&f=1&a=1882
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concept financialisation9 has been used as a replacement for the rather general concepts ‘globalisation’
and ‘financial globalisation’ and has tended to emphasise the global structural architecture of financial
capitalism. Epstein (2005:3) for example writes that “some writers use the term ‘financialization’ to
mean the ascendancy of ‘shareholder value’ as a mode of corporate governance; some use it to refer to
the growing dominance of capital market financial systems over bank-based financial systems; some
follow Hilferding’s lead and use the term ‘financialization’ to refer to the increasing political and
economic power of a particular class grouping: the rentier class; for some financialization represents the
explosion of financial trading with a myriad of new financial instruments; finally, for Krippner herself,
the term refers to a ‘pattern of accumulation in which profit making occurs increasingly through
financial channels rather than through trade and commodity production’ (Krippner 2004: 14)10. Since the
mid- to late 1970s or early 1980s, Epstein (2005:4) argues that “structural shifts of dramatic proportions
took place in a number of countries that led to significant increases in financial transactions, real interest
rates, the profitability of financial firms, and the shares of national income accruing to the holders of
financial assets. This set of phenomena reflects the processes of financialization in the world economy”.
Other scholars such as Martin (2002) and Langley (2007) have used the concept and applied it to
everyday life and how the proliferation of financial instruments, financial companies, intermediaries and
legislation effectively call forth new ‘financial subjects’ who have to individualise risk management,
deal with overindebtedness as a result of ‘deficits of the will’ while citizens are being re-framed from
passive savers to active investors through the ‘democratisation of finance’.
9
The other word used in the context of the sub-prime crisis and the subsequent global recession has been the concept of
securitisation: simplified, securitisation is the bundling together of debt owed by people to one institution that is in turn sold
in pieces to investors.
10
As an example, Epstein notes that the Bank for International Settlements reports that the daily volume of foreign exchange
transactions amounted to more than 1.9 trillion dollars each day in 2004. In 1989 this was 570 billion per day in 1989
(www.bis.org/press/p040928.htm; www.bis.org/publ/rpfx02t.pdf). Other sources indicate that funds raised on international
financial markets as a percentage of world exports rose from .5 per cent in 1950 to over 20 per cent in 1996 (Epstein 2005:4).
For many OECD countries the share of national income coming from financial institutions and holders of financial wealth
(the ‘rentier share’) was significantly higher in the 1980s and 1990s than it had been in the 1970s. Nai’n (200:134) notes that
the Global Financial System has ballooned over the last 20 years from US$6.8 trillion in 1990 to US% 19.9 in 2004. This has
occurred because of a growth of complexity in the financial system together with the opening and deregulation of financial
sectors and the greater linking up between domestic financial sectors. Moreover, new technologies have lowered transaction
costs and made linkages easier while the abandoning of exchange controls have facilitated a massive increase in the exchange
of currencies.
12
How relevant is the concept of financialisation to South Africa? Patrick Bond has coupled the
financialisation of the South African economy with deindustrialisation. He argues that the present-day
economy is much more integrated with the global financial economy and much more “oriented to profittaking from financial markets than production of real products” (Bond 2008). As a result, SA’s two most
successful major sectors from 1994-2004 were communications (12.2% growth per year) and finance
(7.6%), while labour-intensive sectors such as textiles, footwear and gold mining shrunk by 1-5% per
year, and overall, manufacturing as a percentage of GDP also declined. Some of the policies that made
the financialisation of the economy possible include the removal of impediments to free flow of capital,
giving primacy to price stability, fiscal restraint. Ben Fine has argued that “the idea that finance
efficiently mobilises and allocates resources on behalf of the real economy borders on the ridiculous”
(Fine n.d.). In South Africa, he argues, the financial services sector has indeed been the fasted growing
sector since the overthrow of apartheid and now contributes 20% of GDP, more than the mining sector
and the agricultural sector. But, he warns, 40% of the population do not have access to most financial
services. For Fine this means that financialisation in South Africa has “been deployed to financialise and
globalise the operations of previously internationally constrained, highly concentrated, domestic
conglomerates – that is to export domestic capital and surplus generated within the economy.
Effectively, far from contributing 20% of GDP, finance has appropriated a quarter of it, claiming this to
be a contribution to what has been produced.”
While this may be an accurate statement of the role of financial services on a macro level, it does not
address or capture the pervasive (if not insidious) influence of the financial and auditing sector and the
logics of finance on the ‘tenderisation’ of state procurement practices, the creation of new forms of state
dependence, new forms of deception to capture flows of informal flows of monies and simulate formal
finance, and the very nature of Black Economic Empowerment deals that are debt-financed. It also
prevents us from seeing the influence of ‘finance in general’ on advertising, public representations of
and narratives about wealth, upward mobility and ‘the good life’. It does not capture the influence and
even mainstreaming of the logic of high finance – particularly risk-taking and speculation (and social
arbitrage11) - into economic and social behaviour. Newspapers are filled with advertisements from
commercial banks, insurance companies and telecommunication companies. These same companies
See for example Keith Ferrazzi’s post on ‘How to Win Friends and Influence People by Practicing Social Arbitrage’
(August 27th, 2009). URL: http://www.keithferrazzi.com/relationship-development-skills/how-to-win-friends-and-influencepeople-by-practicing-social-arbitrage
11
13
dominate sponsorships of rugby, soccer and cricket teams. They are consistently voted the most known
company brands in South Africa. Billboards on the roads, railways and in airports proclaim their latest
products as ‘financial innovations’ while insurance companies and banks’ capital divisions are building
new mansions or renovating mansions that a hundred years ago were built by the Randlords. Airtime has
become a currency. Banks and cellular phone companies now run daily lotteries as a part of their core
business. National art festivals and environmental awards are sponsored by commercial banks. The
presence and power of corporate finance and telecommunication is ubiquitous. While financialisation
may not run that deep on a macro level in the national economy as say the UK, we can make a strong
argument for the financialisation of everyday life (Martin 2002) in how it shapes financial subjectivities,
citizens’ expectations and public discourse.
What makes the idea of financialisation of everyday life an appropriate concept is, inter alia, the
increasing role of finance in the lives of both the Black Elite and the Black Underclass. For some
members of the Black Elite it is debt-funded BEE deals financed by commercial banks and other vendor
companies which propelled them into the category in the first place.12 In the case of the Black
Underclass, the state has been more active in putting pressure on banks to get the unbanked ‘banked’
than they have in creating actual jobs. The state discourses on empowerment thus complement the logic
of financialisation though framing financial exclusion as a product of histories of racial exploitation and
linking access to a bank account as economic freedom. The fact that the state now pays social welfare
grants through bank accounts has also increased the importance of having a bank account for the Black
In the first phase of BEE in the mid 1990s, BEE deals were in the main financed through ‘special purpose vehicles’
(SPVs). These SPVs were established only for the purpose of facilitating the buying of equity in an established company.
Butler (n.d.) writes that SPVs “used shares as collateral against loans, and the 1998 emerging market crisis saw the banks
rapidly wind most of them up. In this way, the emerging market crisis exposed the unsustainable financial structuring of most
BEE deals and drastically reduced black ownership on the JSE. The 1998 crash reduced BEE ownership of total JSE market
capitalization from 7 percent to perhaps 2.2 percent”. Since the 1998 crash banks have become more reluctant to finance
empowerment deals. After the 2001 BEE Commission, thus, the shortage of black capital remains a key obstacle to
successful BEE. In order for such deals to materialise, black businesspeople have to borrow it from third parties, and often at
high cost. As Butler puts is, such black businesspeople “acquire high-risk equity using financial structuring that leaves them
vulnerable in the event of economic downturn”. Since 2001 banks have returned to the BEE lending market “but they now
refuse to carry significant risks”. As a result, so-called “vendor companies” increasingly “facilitate” BEE transactions by
providing loan guarantees, price discounts, or internal vendor financing at below market rates. So while BEE has been part of
a political project of the deracialisation of the economy, its architecture is rooted in the logic of financialisation: BEE deals
are reliant on the appreciation of target companies’ share prices; debt-obligations and debt-service requirements are often
obscured by the references to “financial innovations”; earnings from shares often do not cover the high costs of debt-financed
deals (interest and capital repayments) which means that BEE companies often have to sell shares at the end of the locked-in
term. In addition, BEE is likely to have caused an explosion of “fronting” (Butler n.d.) and thus furthered a growing sense of
deception among those who do not understand these ‘complex’ and ‘innovative’ financial debt-deals.
12
14
Underclass, while it has allows for large-scale fraud through payments of grants to ‘ghost accounts’.13 In
the same way that political freedom and democracy has come to stand for the right to consume (Posel
2005), so the right to access financial services has come to stand for participation in the formal and
global economy. All of this has happened in the context of shocking low levels of financial literacyiii as
well as a history of weak financial consumer activism.
Growing uncertainty and insecurity as conductors for deception and speculation
The speculative streak and risk-appetite that runs through finance capital has found an enabling
environment in post-apartheid South Africa. This enabling environment includes the legalisation of
gambling, growing personal and social uncertainty, financial illiteracy that breeds bewilderment, the
growth of millenarian-like prosperity churches and the importance of a culture of outsourcing and
deception in what is becoming a ‘rentier economy’. The removal of the last remnants of a normative,
Left discourse emanating from the ANC about the relationship between society, state and economy signalled most brutally by former Secretary General Smuts Ngomyana’s comments that “I did not
struggle to be poor”- has effectively legitimised the growing ‘get-rich-quick’ public culture. The
Comaroffs (1999, 2000) have argued that the rise of ‘occult economies’ in former revolutionary
societies are closely tied up to the ‘changing fortunes of gambling’ from a pariah practice to mainstream
economic practice. But they fail to mention that this narrative should be accompanied by other structural
narratives about the growth in uncertainty and insecurity in post-apartheid South Africa. In other words,
the growth in gambling and speculation amidst the contemporary ‘get-rich-quick’ public culture needs to
be put in some historical context.
I grew up in a small, mainly Afrikaans university town in apartheid South Africa where the closest thing
to any gambling action was a lottery that was staged by the local church bazaar every year in the town
hall. The word lottery was of course never used by the Calvinist organisers – they called it after the
Italian name for a community lottery: dombola. During the course of the one-day event, anyone (white,
of course) could buy at a table where a few of the older church women were sitting for a few cents a
dombola ticket with a number written on it. At the end of the day, a draw would take place, and
someone's number would be picked. The winner would walk away with a new Bible or perhaps a yearly
13
SAPA. 2010. Government to plug social grants leaks. The Times, 23 April 2010. URL:
http://www.timeslive.co.za/local/article417293.ece/Government-to-plug-social-grants-leaks
15
subscription to a Christian magazine. In those days most forms of gambling were outlawed by national
legislation except for the high-toned sport of horse-racing. The Dutch Reformed Church was, naturally,
closely aligned with the ruling Nationalist Party of the time and the Church’s lobbying ensured that
gambling was not only outlawed in apartheid South Africa but regarded as deeply sinful. The very idea
of chance playing a role in determining one’s life outcomes (or in the fortunes of neatly bounded
cultures and nations) were antithetical to some of the key moral-ideological building-blocks of the
Calvinist morality that underpinned the public culture of white, Afrikaans, nationalist South Africa.
Take the idea of the ‘the chosen nation’ - the religious-cultural belief that Afrikaners were chosen by
their God to arrive in the southern-most point of Africa to bring The Message of Light and Civilization
to the Dark Continent. Their arrival and journey was no accident but predetermined. Or take the
Calvinist dogma of preordained selection: the mind-twisting theological position that an unknown select
few were chosen by God to enter the pearly gates. Even if you could never be certain as to whether you
were selected or not, you should live in faith, as if you were chosen. And even if that renders carrying
out the Ten Commandments redundant, you should live as if your good works could influence your
passage pass those gates. No room for doubt and uncertainty; only certainty and order.
The prohibition against gambling and games of chance in apartheid South Africa was not only a logical
outflow of the religious worldview of the Afrikaner political and cultural elites. It was also closely tied
up to the material and political effort to establish Order on all fronts within the Republic. Order must be
maintained between distinct races through legislation, penalties and incarceration for miscegenation,
residential and spatial segregation, job reservation, etc. Order must be maintained between the urban and
the rural through different forms of taxation, the establishment of homelands, controlling the movement
of black people from rural areas to urban areas through the pass system and influx control. Order and
distance between social classes was to be created through the prohibition of unions, the celebration of a
narrow meritocracy, dealing with the problem of poor whites, the regulation of the consumption of
alcohol and other class-defining pleasures and pastimes. Order in the economy was fantasised about
through flirting with national-socialism, regulatory boards, tariff protection, direct subsidies, state
research support, sticking to the Gold Standard and the Financial Rand, a highly regulated migrant
labour system, an ethnic of hard work and explicit condemnation of get-rich-schemes. Public order was
sought after through the deployment of a notoriously vicious police force and the stigmatisation and
prosecution of loiterers while order between the Republic and its neighbouring (independent, black and
16
red) states was maintained through investing heavily in the Defence Forces, high-tech weaponry
including nuclear capability, farms commandoes and maintaining and patrolling national borders. In
other words, a utopia of order was central to the political imagination of the architects of apartheid. And
this rationalist utopia of order had little space for (or actively suppressed) the magical workings of
chance, indeterminacy, speculation and chance.14
The point I am trying to make is that despite the inhumane, exploitative and paternalistic system that
was apartheid, it produced a society in which order was both valued (and not only by Afrikaners), and
often achieved. South African historiography and sociological analyses have tended to overstate
instability and disorder (at least on the level of everyday life) because the theories they used to make
sense of apartheid, and which they used to destabilise the system, emphasised conflict, contradictions,
exploitation and brute extraction. In the process, they represented black life and communities under
apartheid as ‘torn apart’, ‘broken down’, ‘alienated’, ‘divided’, ‘unstable’ and ‘ruptured’. Apartheid
most definitely produced these conditions or ‘symptoms’ of racialised capitalism, but at the same time it
produced an order of sorts. However repugnant and immoral this order was, it created a system in which
people were relative certain about their roles, the role of the state and the role of business. Even if
apartheid was a beast, black people of that generation knew the nature of the beast. There was a certain
degree of certainty, despite (or because of) the upheavals, uprisings, detentions, police brutality and so
forth. In other words, it is the certainty about people’s roles and the nature of the system which
prevailed under apartheid which I want to highlight here. And contrast with the views expressed by
informants about present-day South Africa. Because it seems to me that my informants tend to agree that
it is the uncertainty of their roles and the nature of the system today which is of great concern to them.
Thus they talk about uncertainty regarding employment, personal and social security due to higher
1414
The (Freudian) backdrop to this desire for Order and Civilization was of course the magicality, irrationality, chaos and
sexuality they and many Westerners associated Africa and African cultures with. When so much gets invested in producing
order in any system, political stability and strict morality, borders take on special material and symbolic significance. And
they become spaces where all sorts of marginal and oppositional ideas and practices flourish. It is not surprising then that the
underground in South Africa - especially border areas, township shebeen culture, rebel music and banned writing - paid much
attention to the themes of uncertainty, doubt, speculation, racial mixing and sexual adventures. In apartheid South Africa, the
borders between the Republic and its ‘independent’ homelands became peripheral spaces characterised by the smuggling of
people and goods across these pseudo-borders, the evasion of taxes, and racial mixing through border trade and curiosity that
was often not possible in the metropoles. These were the niches that entrepreneur Sol Kerzner exploited when he built his
casinos and hotels in the homelands, a stone’s throw away from the moral Republic. White South Africans flocked to the
homeland casinos over weekends to play the slot machines and drool over the roulette tables, unleashing their pent-up desire
for some speculation and some quick bucks. With time, the border practices became mainstream.
17
crime levels, bewilderment as to how exactly HIV/AIDS works, and confusion as to how some people
got to where they are today. In this context many people feel deceived and believe that everyone else is
somehow engaging in the dark business of deception (which is not explicitly linked to witchcraft, but
which may feed off the same social logic).
Deception has become (and to some extend has been) an important part of daily life in Johannesburg.
Bribing Metro Police and SAP officers for example have always been a rather common practice.15 But it
seems that the new dependency on the state has created new forms of deception in which the state is
central to how for example financial fraud is committed. Nowadays, ‘criminal entrepreneurs’ have taken
to buying stolen SAP and Metro Police uniforms with the famous ‘Blue Light Gang’ pulling motorists
off the road and then robbing them of their vehicles16. The partly privatised power utility City Power
regularly puts out ads in local newspaper warning residents not to open their doors to people wearing
City Power uniforms who may in fact be criminals. Telecommunications parastatal Telkom often warns
citizens to be on the lookout for scams and fraudsters. In one scam a fraudster pretends to be Telkom’s
CEO and phones customers telling them Telkom’s banking details had changed. He then asks customers
to deposit their account payments into an alternative bank account. Such payment is then followed up by
faxes on fake Telkom letterheads and faxes ostensibly from the National Prosecuting Authority. 17 Nearly
everyone knows where or someone from whom you can purchase state documents such as Identity
Documents, Passports and Driver’s Licences. Fake (fong kong) goods are frequently confiscated by the
police while fraudulent companies are operating in the executive recruitment and many other industries.
My local Pick ‘n Pay has a sign at the till telling consumers that they won’t accept R200 notes anymore
because so many fake R200 notes are in circulation.18 Recently it was reported in The Star that the
Johannesburg Property Company (JPC), a city-owned “business unit” tasked with managing the
property portfolio of the City and the sole agent legally mandated to release and sell council owned
15
Remember, ‘kak en betaal is the Wet van Transvaal”
16
iWitness. 2010. Five hijacked by fake cops in Pretoria. 2010/02/15 URL: http://www.ewn.co.za/articleprog.aspx?id=32651
17
SAPA. 2009. Telkom warns against scams. 15 December 2009. URL: http://www.fin24.com/Business/Telkom-warnsagainst-scams-20091215
The South African Reserve Bank has urged the public to return all their old series R200 notes in exchange for the “new
upgraded notes” at any retail bank until May 31. See
http://www.moneyweb.co.za/mw/view/mw/en/page295023?oid=485462&sn=2009+Detail&pid=66578
18
18
property, had realised that 33 parcels of land which include areas zoned as Public Open Spaces and
Road Reserves had been fraudulently transferred out of the city’s asset register and sold to third
parties.19 Apparently the ‘proof of transfer’ documents are fraudulent which suggests that someone
inside the Deed’s Office participated in the fraud as “the properties are being transferred at an abnormal
fast pace and in some cases, properties are transferred overnight in the Deeds Office”. Anna Cox has
written in The Star how syndicates that have hijacked 1200 buildings and 1500 houses in the inner city
suburbs have on their payroll attorneys, agents, staff at the Deeds Office and SARS, police officers, city
officials and bank staff members.20 The syndicates produce false auction papers and false eviction
papers with faked and authentic High Court stamps.
Similarly the practice of fronting too has become widespread, even though it did occur under apartheid.
By ‘fronting’, Reg Rumney writes, “is generally meant falsely claiming to be a majority black-owned
company, having black economic empowerment ownership in your company, or having black staff
occupying top management positions. This is done to win government business, or to get a higher price
for goods and services. The government allows an explicit “rent” of 10% to 20% for buying from blackempowered companies”.21 A more serious example of ‘rent-taking’ is when a black-owned company
wins a contract and outsources the work to a white firm at a slightly lower cost and pockets the
difference – in such a scenario no skills transfer or skills development take place there thus further
undermining the intentions of BEE. Some argue that this is a direct result of ‘preferential procurement’22
while others point to the system of ‘tenderisation’ of state procurement, outsourcing and the (neoliberal) influence of auditing and consultancy firms. Bobby Godsell has called it a form of ‘economic
terrorism’. Jack Bloom, DA MPL in the Gauteng Legislature, writes: “I have a friend whose family was
classified as Indian under the laws of apartheid. They run a successful transport company. In the old
days they had to employ a white person to get government business. He was paid well, and was their
front when dealing with government agencies or conservative whites in large companies. Nowadays,
19
See http://www.iol.co.za/index.php?set_id=1&click_id=124&art_id=vn20100507110429344C944713&singlepage=1 and
http://www.politicsweb.co.za/politicsweb/view/politicsweb/en/page72308?oid=175988&sn=Marketingweb%20detail
20
Cox, Anna. 2010. Welcome to Joburg – the highjacked city. The Star, 4 May 2010, p. 6.
21
Rumney, Reg. 2008. Fronting = BEE? http://www.thoughtleader.co.za/regrumney/2008/02/28/fronting-bee/
22
Derek Schultze. 2010. Preferential procurement breeds 'tenderpreneurs'. Mar 4, 2010. URL:
http://www.timeslive.co.za/opinion/letters/article339001.ece/Preferential-procurement-breeds-tenderpreneurs?service=print
19
they have a BEE shareholding and use a black person to assist in winning government tenders. In both
cases, there is deception and an extra cost that is passed on to customers…There are plenty of other
examples where domestic workers or gardeners are dressed up as ‘empowerment partners’ only to be
dumped once the contract has been won. Larger companies have complex schemes whereby black
partners may only come to own a share after many years of dividend payments or a rise in the share
price that may not happen. The recent economic downturn exposed the financial weakness of many of
these debt-funded schemes. President Jacob Zuma recently bemoaned the ‘unintended consequence of
fronting’, but it was entirely foreseeable just as white fronts were used by black businessmen under
apartheid.”23
One of the most remarkable instances of deception, which is particularly relevant to this paper, is the
reported high-jacking of entire businesses or companies. I became interested in the Companies and
Intellectual Property Registration Office (CIPRO) during the course of checking up on the legality of
some of the schemes I was researching. At the same time last year several stories started appearing in
the media about various forms of fraud within CIPRO. Now CIPRO is the state’s ‘one-stop office’ for
anyone wanting to do business in South Africa: it registers new companies and co-operatives as well as
registering and maintaining patent and intellectual property rights. In other words, it is the backbone of
the capitalist system in South Africa. The reports have it that CIRPO, over the past three years, have
facilitated “hundreds if not thousands of scams which have hit the South African Revenue Service, a
number of prominent companies, and hundreds of smaller private businesses”.24One way in which
people working inside CIPRO has gone about their ‘business’ is to register duplicate companies, set up
bank accounts in these counterfeit companies’ names, and then divert tax refunds from SARS, due to the
legitimate companies, into the counterfeit’s accounts. Victims of this scam included Sun Microsystems
South Africa Pty Ltd and SBC International Management Services who were defrauded of a total of
R51m. Also, CIPRO officials have been removing directors of several prominent companies and
replacing them with new ones, while deregistering other companies. In this manner, between 2007 and
2009, one “‘Michael Thembinkosi Mahlaba’ - in reality a tractor driver living and working near Howick,
23
See http://www.politicsweb.co.za/politicsweb/view/politicsweb/en/page72308?oid=175220&sn=Marketingweb%20detail
24
See http://www.politicsweb.co.za/politicsweb/view/politicsweb/en/page71619?oid=138904&sn=Detail. For a list of 114
companies which were ‘duplicated’ see
http://www.politicsweb.co.za/politicsweb/view/politicsweb/en/page71619?oid=138906&sn=Detail.
20
KwaZulu Natal - was inserted as the director of Hellermanntyton, Renold Crofts and MacSteel Tube and
Pipe”.iv While the high-jacking of companies (based in Cayman) was also a strategy used by apartheidera chemical warfare expert Wouter Basson to launder payments to foreigners who supplied the
apartheid government with arms and drugs25, it seems that the scale of this form of fraud and deception
has increased substantially. Anna Cox reported how one building hijacker tapped into the CIPRO system
and changed the names of 26 companies which enabled him to highjack 26 high-rise buildings in
Hillbrow and Berea by nominating himself as director and then selling the buildings.26
In the eyes of my informants, the story about the ‘changing fortunes of gambling’ (Comaroff &
Comaroff 1999) and the increase in forms of deception around the state is closely linked to a feeling of
deep uncertainty which an older generation juxtapose with the relative ‘order’ and certainty’ which they
associate with apartheid. Several other tropes feature often in their narratives about present-day
uncertainty: our porous borders to the north which as always well patrolled but now allows foreigners to
enter our land and steal our jobs; that upward social mobility and economic empowerment is no longer
about ‘what you know but who you know’; and that the fear of increased violent crime.27 The
combination of a culture of secrecy around employment (where people work and how mush they earn)
coupled with financial illiteracy and incredible upward social mobility for a few people ‘not very unlike
us’, make for a potent mix of bewilderment. There is a sort of desperate ‘free for all’: and if we don’t try
something now (a BEE deal, a 2010 tender, an investment scheme, a Lotto ticket, a friend of a friend)
then we will miss the boat (again). Hence the sentiment expressed by Ma Beth that we must not lose
hope: we must try, again and again. It is in this context that I heard pensioners wonder about how long
the world will survive. And inevitably such discussions about ‘the end of time’ were filled with
metaphors from the Bible and references to pastors preaching wealth and prosperity amidst our ‘final
days on earth’. It is not surprising that many of the pensioners I interview attend new churches such as
25
See Sapa, 2001. I hijacked companies for SADF, says Basson. 24 July 2001.
http://www.iol.co.za/index.php?sf=136&set_id=1&click_id=13&art_id=qw995988064162B263
26
Cox, Anna. 2010. Welcome to Joburg – the highjacked city. The Star, 4 May 2010, p. 6.
The SAIRR writes that “Crime is expected to maintain levels out of all proportion with the country’s history or present
social and economic conditions. You are 50 times more likely to be murdered in South Africa than in Germany...South Africa
would need to see a 95% drop in violent crime levels for its criminal justice indicators to begin matching international, or for
that matter, African norms.” (SAIRR 2009). In my view this same sense that ‘things are spinning out of control’ is used by
the new Police General in his violent talk about ‘fighting crime with crime’ and the reported increases in police brutality.
27
21
Christ Embassy, run by the famous Pastor Chris form Nigeria and the same church in which Sibusiso
Radebe worked before he left under a cloud. The rise in new churches over the past twenty years in
South Africa has been dramatic. Anthony Egan (2007:451) shows in his analysis of census data that the
African Initiated Churches (Ethiopian, Zionist and ZCC) together with Pentecostal/Charismatic
churches, are now in effect the mainline churches of South Africa in that they have the most members.
Egan suggests that this “charismatic-expressive shifts might be rooted in a general concern for healing in
a time of AIDS, and – for the AICs – function as part of a renewed discovery of an African identity
among newly liberated South Africans”. But surely it also has to do with the current neoliberal moment
and the growth in network marketing in South Africa.
Peter Cahn has written about the arrival of multilevel marketing and direct selling in Mexico after the
Mexican government adopted, in response to the financial crises in the 1980s, a neoliberal economic
reform programme. He argues that the “rising popularity of multilevel marketing companies in Mexico,
which glorify consumption and celebrate the possibilities of entrepreneurship, demonstrates the appeal
of neoliberalism to citizens fearful of diminished purchasing power. By tying consumption to globalized
free markets, neoliberalism does not need coercion to win acceptance”. Cahn notes that business
analysts agree that multilevel marketing companies’ fortunes run counter to economic cycles because it
tends to expand in places where the economy contracts. And because becoming a direct seller requires
no previous experience, no formal education, and little start-up capital, it is very attractive in a context
of scarce employment. Moreover, multilevel and marketing companies emphasise an “anticorporate
style by empowering workers to be their own bosses and set their own hours” while using “rhetoric of
entrepreneurship and decentralization” which resonates with the logic of the neoliberal reform.
His findings resonate with my own research on pyramid and recruitment schemes in Gauteng. As
consumption is the “invisible hand, or the Gucci-gloved fist, that animates the political impulses, the
material imperatives, and the social forms … of capitalism in its neoliberal, global manifestation”
(Comaroff and Comaroff 2000:294), multilevel marketing finds receptive audiences wherever upward
social mobility has become a value in itself. But some cultural values and social logics also play a role in
this context: for example, Ma Beth’s skilful manipulation of cultural conventions. Several other cultural
agreements are also enacted by agents such as the reluctance of people to question kin when they are
recruiting you into a network (whether this is social or commercial). The concepts of levels and
downlines and uplines which features in the language of multilevel marketing also feed off existing and
22
favourable attitudes toward hierarchy and meritocracy. The idea of ‘network’ was prominent in the
voices of many of my informants, together with oft-repeated statements of the power and effectiveness
of passing on information by “word of mouth”. And, of course, the legal cousin of pyramid schemes,
multilevel marketing (MLM), is a marketing strategy based on the recruitment of members through
utilising informal and formal networks of relations (see the graphic depictions and various forms of
networks). In fact, for a number of reasons, multilevel network marketing (as pioneered by pyramid
schemes) is a perfect strategy to tap into the unbanked yet considerable pools of money that are
circulating among black, township communities (reported about often in the media through the Finscope
or black diamond studies). Together these create the conditions under which multilevel network
marketing do indeed flourish; in the way that pyramid schemes did a decade ago before the highly
publicised case of Miracle 2000. No wonder then that we find a massive growth in multilevel marketing
companies in contemporary South Africa - these MLM companies have learnt that there are huge
‘profits’ to be made by exploiting the informal networks that exist among black communities. In this
second wave of MLM, they have surpassed the illegal pyramid scheme of a decade ago, but retained the
same networks of agents and marketing strategies. Pyramid schemes such as Miracle 2000 have been
more successful than the major financial institutions at harvesting the savings of black communities.
Undoubtedly financial institutions at the time of the arrest of Miracle 2000 ‘mastermind’ Sibusiso
Radebe in July 2000 were asking themselves how a single man could have mobilised millions of Rands
in black communities without the army of experts and researchers and marketers that are at the disposal
of formal financial institutions. Many of these companies had learnt their lesson and are now utilising
the very same discourses and strategies of pyramid schemes such as Miracle 2000 in order to tap into
these networks.
Concluding remarks
During his May 2010 Budget Vote Speech, Minister of Finance Pravin Gordhan made three points that
are particularly relevant to this article.28 First, he thanked the trade unions and other organisations for
their continued public struggle against corruption and the ‘culture of easy money’. He said that, as
citizens, we must be able to say: “I’ve worked hard, done creative things, saved and invested, and this
made money!” In other words, he was calling for a culture of hard work and savings amidst an existing
28
See http://www.politicsweb.co.za/politicsweb/view/politicsweb/en/page72308?oid=175447&sn=Marketingweb%20detail
23
‘get-rich-quick’ culture and the many opportunities for ‘easy money’. However he was silent about the
role the system of outsourcing of state services play in creating the conditions for the rise of
tenderpreneurs. Second, the Minister reported that collaboration between various tax and policing
agencies are growing. As an example he reported that SARS investigators and officers from the SAP
that very morning “clamped down on a company listed on the Johannesburg Alternative Stock
Exchange, suspected to be involved in another multi-million rand suspected fraudulent investment
scheme involving the abuse of trust of vulnerable citizens - this time the product is a so-called ‘immune
booster pack for HIV/Aids sufferers’. What he failed to admit is that for too long out regulatory
authorities and law enforcement agencies have been ‘sweeping in front of their own doors’ – there has
been no coordinated approach.v As a result, possible fraudulent schemes are only investigated once a
formal complaint has been laid. 29 This is why Charles Pillay, Ombudsman for Financial Services, said
as far back as 2006 that “We have the laws aimed at preventing these personal and systemic catastrophes
[of pyramid schemes], but do we have regulators and courts to eliminate this kind of fraud which robs
people of their dreams and destroys lives?”30 He called for urgent cooperative action by regulators and
law-enforcement agencies. Clamping down on these schemes is also important in terms of attracting
foreign investment: “People who invest here must be confident that we have systems that work. We
must be considered safe by entities that lend us financial support such as the World Bank and
International Monetary Fund”. Third, the Minister reported that the Financial Intelligence Centre, in its
fight against commercial crime, money laundering and the financing of terrorism, in this past year
identified R66.1 billion in suspicious transaction passed through bank accounts in South Africa. Of these
at least R128 million was frozen by the Centre for being funds suspected of being the proceeds of crime
relating to fraud, various commercial crimes and narcotics trafficking.
During 2006 for example more than 40 schemes which failed were investigated by the South African Reserve Bank’s
banking supervision division. These schemes included ones that offer massive profits in property development or bridging
capital. In December 2006 it was reported that South Africans had lost billions of Rands since 2000. These include R1.5
billion in Krion, R85m in Chinza, R250m in PSC guaranteed Growth, R300m in Leaderguard, and R260m in Jean Multi
Management. See Van Zyl, Adri. 2007. 40 skemas wat groot opbrengs beloof, het misluk. Rapport, p. 8, 1 July 2007 and Van
Zyl, Adri. 2006. Lemme is stomp vir geldskemas. Rapport, p.1. 3 December 2006.
29
30
I-Net Bridge. 2006. ‘Enforce the rulings’. Daily Dispatch, p. 10, 9 October 2009.
24
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i
At the previous presentation we learnt that Travel Venture International is a company based in London (in Bryanston
Street!!) and that the company is new to South Africa. Not only does it operate in Johannesburg but it also has offices in
Pretoria and Durban. The presenter, a thirty-something man from Mozambique told us the company is meant for people who
feel “something is missing in your life”. As the presentation will show, he told us, this company has caused “millions of
people [to have] have benefited”. Working rather amateurishly through a PowerPoint presentation on his laptop, with Oscar
and myself sitting next to him as the projector is used at another presentation, the young man told us that this is a “network
business system” which helps you “building our income” because “people want change; they are tired of their jobs”. Your
participation in TVI is flexible as you can “work full or part time” and it will “free you from the 9-5 job”. Moreover, this
company can “take you another high level so you can achieve your dreams” and achieve “financial independence”. The
vision of this company, he read to us from a slide, is enterprise that is “providing opportunities”, “instilling leadership”,
“making millions” and “touching billions of hearts”. He then presented statistics to us to show that there are three ‘megatrends’ occurring in business the world over: (1) growth in travel & tourism; (2) growth in the internet; and (3) growth in the
home based business (HBB) phenomenon which is now a $427 billion a year industry. Other statistics he cited included that
83% of people are tired with the corporate rat race; that workplace transformation in the US has ‘no sign of slowing down”;
there are more self-made millionaires in this HBB industry that ever before as factories are closing down; and 60% of new
businesses are being started from home. He showed us photographs which included the Sydney Opera House, Egyptian
Pyramids, Eiffel Tower in Paris and Statute of Liberty in New York. By no it became clear that this was about travel and
leisure and he started throwing around phrases such as “touching lives globally”, that you can “live your dream life” by
having “world class holidays” and vacations in “exotic locations”. References were also made to ‘quotes’ by Stephen R.
Covey, Donald Trump and the author of best-selling Rich Dad Poor Dad, Robert Kiyosaki. These quotes were used to
legitimise network marketing as a concept and industry. Then be moved to the importance of recruitment in this company.
Recruitment, he said, means “moving up the ladder” so that they “business can expand” as it must keep growing “for there to
be a trickle down growth”. Then the multi-level marketing vocabulary kicked in: cycles, pushing, another level, exit,
upwards, downlines, sample movements, follow the leader, spillover system, jump over, legacy income, incentives, the
science of leverages, and pre-launch extravaganza. It also sounded like a blend of academic analysis, science fiction and a
strategy simulation computer game. The various levels one can achieved included (1) Gold Associate; (2) Diamond
Associate; (3) Intermediate Diamond; (4) Platinum Associate; and (5) Presidential Associate. The Leadership Ranks which
each participant gets are not ‘privileges’ but “more like chips on a uniform after having been to war”. The presenter
continued by saying that ‘The most important thing is for you to join the system and start enjoying it” and that “this money
you will be getting is for lifetime....This pays until infinity. No ceiling. No capping. No cutoffs”. “Incentives”, he said, “are
based upon a very simple concept of people helping people”. By now we were exhausted and struggling to concentrate and or
mouths were dry. I figured he realised this so he skipped a few slides so as to answer the simply yet all-important question:
What do you get? Rewards and Benefits once you get to level four include “a fully sponsored European Trip with you and
your family” (8 people maximum we learnt later). But before you get there 25 people on level one can win luxury motor
26
vehicles (Audi, BMW, and Mercedes), 50 people on level two will get a “Splendid Villa” while 100 people on level four will
walk way with a private jet or yacht. There is a promotion at the moment, which runs until 30 June 2009, so I suggest you
join today! And how much does it cost? Travel membership is a once off $250 with which you will receive that “6 night / 7
day stay at a 3-5 star hotel or resort at the location of your choice” while also having the opportunity to earn “$250 and
$10,000 just for referring two people to the membership and those two doing the same”. You can view the international
website of TVI Express at http://www.tviexpress.com where you learn that the company has moved from London and is now
registered and based in the town of Limassol in Cyprus. Unsurprisingly, Cyprus was rated in 2008 by leading international
auditing firm KPMG as “one of the most attractive offshore tax havens in Europe”
(http://www.shelteroffshore.com/index.php/offshore/more/cyprus-attractive-offshore-tax-haven).
ii
Direct Advantage....
See for example the results of the annual Finscope survey conducted by FinMark Trust and TNS Research Surveys which
point out “high levels of misunderstanding - or no knowledge at all - of key financial terms”. See FinMarkTrust press release:
‘A picture of the financial industry for 2008’, January 2009. Stable URL: http://www.tnsresearchsurveys.co.za/newscente/pdf/Fin08-Summary-Jan2009.pdf. See also M. Fisher-French, ‘Big spenders, small savers’, Mail & Guardian, 28 July
2009. Based on 3 885 face-to-face interviews, FinScope 2005 revealed several trends on financial usage and behaviour in
South Africa. On the theme of banking in the formal financial sector, the survey found that 46.5% of the adult population has
a bank account and that of those who do not have a bank account, 41% have never been banked while 12%) were previously
banked. Between 2004 and 2005, the number of South Africans with a bank account rose by approximately 550,000 (or 4%),
which translated in a percentage increase of only 1,1% because of an increase in the adult population (30,7m, up 450,000 or
1% as against 2004). With regards to general and financial literacy, FinScope 2005 found that 61% of the adult population
(16+) have not matriculated and that 20% have received no high school education. Of those interviewed, 71% of have never
heard of anyone being under debt administration. It found that “There is no understanding of consumer protection or
legislative issues” and “half the population know what a credit card is and understand what a service fee is”. Virtually no one,
the survey reported, “knows what an ombudsman and underwriter are”. For more information: http://www.finscope.co.za/
iii
James Myburgh whites: “One of the most prevalent scams involves the registration of duplicate or counterfeit companies.
These are companies which almost the same name as the real company. For instance, Avusa Media is a well known media
company. In terms of proper procedure CIPRO is not allowed to register companies with a similar name. However, in
October 2008, officials at CIPRO fraudulently approved the reservation of the name Avusa Media (Gauteng), and shortly
afterwards a company of that name was established. Its sole director is one ‘P.M. Masondo' of Leyds Street Pretoria. Once
the company has been registered the fraudsters - who operate using stolen identities - then attempt to establish bank accounts
in the name of the counterfeit company. If the bank officials are honest and alert the real company will be contacted and the
fraud nipped in the bud. But all too often an account is successfully set up. This is then used to facilitate fraud against the
legitimate company, its clients and suppliers, and innocent third parties. Clients are sometimes contacted and informed that
the banking details of the real company have been changed (to that of the counterfeit.) ‘Overpayments' may be made using
the counterfeit company’s cheques to the legitimate company's suppliers and the fraudsters will ask for a refund. In many
cases cheques are intercepted at the South African Post Office. Companies with similar names to the recipients of the cheque
are then fraudulently registered through CIPRO. Bank accounts are established in that company's name, the cheques are
cashed, and the money removed. Usually, the counterfeit company uses the same name with a word (such as Gauteng) or a
number (usually 01) added to the end. If need be, the fraudster can simply add the "01" to the named beneficiary on the stolen
cheque, and it can then be deposited into their account…. Once the counterfeited (or hijacked) company has been registered
and a bank account opened it becomes very difficult for the police to solve subsequent frauds. The new directors usually use
forged or stolen identities. A common practice is for the fraudsters to use stolen identity documents and scan and
electronically alter proof of residence documents in order to meet FICA requirements. Unless the fraudsters are caught in the
act, or with the false IDs in their possession, it is almost impossible to successfully nail them. Moreover, those caught are
usually just runners. They would often rather go to prison for a few years than put their families at risk by fingering the
syndicate bosses masterminding the scams (often Pakistanis and Nigerians).
iv
v
In the USA the Securities Exchange Commission keeps watch over newspapers and investigates companies when
something looks like a pyramid scheme. In South Africa this is not done. Moreover, the existing legislation means that
27
companies are able to exploit the non-cooperation between different regulators. Moneyskills, for example, took money from
investors and use this as bridging capital. The money is raised by selling shares and debenture bonds to the public which
offers fantastic profits but which are not sustainable in the long run. In addition, extensive network marketing is used to
recruit new investors. Network marketing falls under the supervision of the Department of Trade and Industry and after an
investigation they could not find anything illegal. A company selling shares on the other hand is regulated by the Companies
Act and the Registrar of Companies. The taking in of debenture bonds falls under the jurisdiction of the Reserve Bank. On
top of this the situation is the agents who sell debenture bonds in their own companies are not regulated by the Financial
Advisory and Intermediary Services Act.
28