Autocrats, Kleptocrats and Populists

Lord Hain Excerpts

Thursday 3rd February 2022 Grand Committee

[Lord Hain (Lab)]

My Lords, Bain & Company presents itself as a reputable global consultancy operating across the world, with an office in London and recent contracts worth £55 million with the Cabinet Office alone. Yet in South Africa, Bain brazenly assisted former President Jacob Zuma to organise his decade of shameless looting and corruption, with the company earning fat fees estimated at £100 million—or 2 billion rand—from state institutions.

South Africa’s State Capture Commission, a judicial inquiry headed by Deputy Chief Justice Zondo, indicted Bain’s work with the South African Revenue Service as “unlawful” and recommended that all its South African public sector contracts be re-examined with a view to prosecution. At the time, Bain South Africa’s work was endorsed by both its London office and its US headquarters in Boston. Bain has also been disgracefully smearing Mr Athol Williams, a key whistle-blower praised by the Zondo commission who recently had to flee to the UK for his safety.

Given the scandalous collusion of Bain UK and Bain USA. I am asking that the UK Government and the US Government immediately suspend all government contracts with Bain. I wrote three weeks ago to the Prime Minister requesting this, and he has just replied stating that the Cabinet Office will

“look into this matter with urgency”

and the Chancellor of the Duchy of Lancaster wrote to me yesterday saying that the Government will be contacting Bain. I hope that those contracts will be suspended and that that is the case for all public sector contracts in the UK.

However, Bain’s shamefully shady behaviour is just the tip of the iceberg. The prodigious looting, corruption and money laundering under former President Zuma would not have been possible without the complicity of Bain, KPMG, McKinsey, SAP, Hogan Lovells and the banks HSBC, Standard Chartered and Bank of Baroda. Those fee-clutching global corporates and turn-a-blind-eye Governments from London and Washington to Dubai, Delhi and Beijing helped to rob South African taxpayers, contributing to a catastrophic loss of South Africa’s GDP of around one-fifth. Economists estimate the full cost of the Zuma state capture to be a monumental £750 million or 1.5 trillion rand. The Government’s total annual expenditure is just 2 trillion rand annually. These global corporates all obtained sweetheart state contracts, which helped Zuma’s business associates, the Gupta brothers, to loot the state. Global banks such as HSBC, Standard Chartered and Baroda transferred this looted money through their digital pipelines to less regulated jurisdictions such as Dubai and Hong Kong, or British Overseas Territories in the Caribbean, to then clean the money by mingling it with other funds, disguising its origins and enabling it to be more easily spent.

Lawyers and accountants assisted the Guptas to set up complex shell, or front, companies, hiding their true owners—the Guptas or their associates—and enabling money to be moved to a country where there is low transparency. Dishonest audits left suspicious transactions hidden. Estate agents received laundered money during Gupta property purchases. Global brand names from KPMG to McKinsey, from HSBC to Standard Chartered, all profited while the Guptas hid and spent their stolen funds that could otherwise have been destined for essential South African public services, job creation or infrastructure, leaving South Africa’s public finances near-bankrupted and its growth stalled.

I therefore find it completely unacceptable that Bain is licensed to operate commercially in the UK, the USA or anywhere else in the world—at least until it has repaid all its fees earned from the South African state during the Zuma-Gupta years and answered charges in the courts there. Unless the UK, US, Chinese, Indian and UAE Governments co-operate with each other, state capture will happen again, either in South Africa or other countries.

The truth is that international criminals continue to loot and money-launder with impunity through centres such as London, New York, Hong Kong, Delhi and Dubai. Ministers talk the talk on corruption but refuse to take the necessary tough action against guilty big corporations to stop it. Meanwhile, financial crime is estimated by the United Nations Office on Drugs and Crime, to be worth around 5% of global GDP, or $2 trillion, each and every year.