Mohamed (2026): A Heterodox Developmental Economics Understanding of Systemic Corruption in South Africa

Summary

Seeraj Mohamed — Deputy Director for Economics at South Africa's Parliamentary Budget Office and adjunct professor at the University of the Western Cape — applies a heterodox development-economics framework to corruption and state capture in post-apartheid South Africa. His thesis, stated in the article's abstract: "corruption and state capture in South Africa should not be understood primarily as the cause of economic decline, but rather as symptoms of a broader systemic corruption rooted in an extractive political-economic structure" (p. 45). Drawing on Mushtaq Khan's rent-seeking framework and Alice Amsden's account of the South Korean developmental state, Mohamed contends that the post-apartheid government never built a state capable of disciplining corporate power or making access to rents conditional on productive investment — and that both the country's poor growth performance and its most visible corruption scandals follow from that single failure.

The Core Argument

Mohamed opens from Khan's definition of rent: an income above "the minimum which an individual or firm would have accepted given alternative opportunities" (Khan 2000, 5, quoted p. 46). For Mohamed, following Khan, the existence of rents is not itself the problem mainstream "good governance" analysis takes it to be — Khan's target is a neoliberal view of the state that assumes "the market is sufficient to ensure rapid development" once property rights and low transaction costs are secured (Khan 2004, 3, quoted p. 46). The heterodox question Mohamed poses instead is: "not the existence of rents themselves, but whether states can discipline rent-seeking behaviour and direct rents toward productive developmental outcomes" (p. 46).

Mohamed's benchmark case, via Amsden, is Park Chung Hee's South Korea: by conventional definitions its subsidies and tariff protection to favoured firms would count as corrupt, but Amsden reads them as rents granted with "strong reciprocal and disciplinary performance standards" — access conditional on firms achieving export competitiveness within a set period (p. 46). Mohamed contrasts this with Latin American experience under 1980s–90s financial liberalisation, where Amsden found capitalists extracting profits and rents rather than investing productively, and with South Africa itself, which the Cambridge economist Gabriel Palma has described as "an honorary Latin American economy, because of the similarities with the rent-seeking, extractive elites in several of those countries" (p. 48).

Mohamed traces the South African case through Ben Fine and Zavareh Rustomjee's minerals-energy complex (MEC) — the racial-capitalist system of accumulation built around cheap Black migrant labour, mining, and the national electricity grid — which Mohamed, drawing on Fine's 2026 update, now describes as a minerals-energy and finance complex (MEFC) as the economy has financialised. On his account, the post-apartheid state inherited this concentrated structure and never restructured it: the 1996 Growth, Employment and Redistribution (GEAR) programme locked in fiscal austerity, trade and financial liberalisation, and privatisation in place of an industrial strategy with reciprocal conditions. With co-author Fiona Khan (Khan and Mohamed 2023), Mohamed argues that large-corporation elites — the "old elite" of conglomerates identified by Fine and Rustomjee's "six axes of capital" — shaped economic policy through the transition and absorbed a small number of politically influential Black individuals into their ranks, while a separate "aspiring elite" of politically connected outsiders, denied access to that old elite, turned to corruption and state capture within government departments and state-owned enterprises to secure a share of the economy.

Eskom is Mohamed's central state-owned-enterprise case: built to supply cheap electricity to the MEC's mining and industrial corporations, it was never transformed into a developmental institution and instead became, in his account, increasingly vulnerable to political interference, procurement manipulation, corruption and state capture, citing Bhorat et al. (2017) (p. 48–49) — a crisis he argues reflects the deeper failure to restructure state–finance–corporate relations, not simply corruption in the Zuma years. He reads the Zuma-era state-capture literature (Bhorat et al. 2017) — the "constitutional transformers" of the Mbeki years giving way to "radical reformers" who built "a symbiotic relationship between the constitutional state and shadow state" (p. 49) — as documenting a symptom of the same underlying failure rather than a separate, self-contained scandal.

His final case is the South African Renewable Energy Independent Power Producer Procurement Programme (REI4P), which he reads through Daniela Gabor and Benjamin Braun's Critical Macro Finance account of state derisking: Mohamed describes it as "a macrofinancial derisking regime where the state has loose discipline over private capital, however, uses its balance sheet, increased contingent liabilities and public funds to derisk projects to make them attractive to private institutional finance" (p. 50). Under REI4P, National Treasury guarantees winning bidders' twenty-year, inflation-indexed power purchase agreements with Eskom at 100%; a World Bank account of the programme's early years found its Independent Power Producer Office team so aligned with private-sector counterparts that "the unit did not start out with the level of mistrust of private business that sometimes characterizes other government agencies in South Africa" (Eberhard, Kolker and Leigland 2014, 9, quoted p. 51). By 2024 Treasury's own Deputy Director-General for Asset and Liability Management was warning that "the contingent liability on the state's books for these IPPs is no longer sustainable" (Lekhethe 2024, quoted p. 51); Mohamed reports, citing the National Treasury's 2026 Budget Review, that the contingent liability to independent power producers had risen to ZAR 303.1 billion, with exposure at ZAR 244.3 billion (p. 51). He concludes that the government's response to state failure has been to intensify, not reverse, this pattern — treating renewed neoliberal reform and private-sector derisking as the fix for a crisis his framework reads as neoliberal policy's own product.

Relation to the Georgist Case

Mohamed's frame is Khan's, set out on the rent-seeking page: rents are not automatically damaging; the question is whether a state can discipline the elites who hold them and tie continued access to productive investment. Land rent is the case Khan's own framework does not rescue — a return to a fixed, unproduced asset with no learning or investment condition attached — and Mohamed's South African material supplies an unusually clean illustration of that limiting case. The MEC/MEFC he describes is built on mineral and land rents specifically: the minerals-energy complex accumulated around access to the land beneath South Africa's gold and platinum fields, and Mohamed's own account of GEAR-era policy shows the state channelling subsidised electricity and tax incentives to capital-intensive extraction without the reciprocal performance conditions Amsden's Korea attached to the rents it granted.

This is an interpretation added to Mohamed's argument, not a claim Mohamed himself makes: he does not discuss land-value taxation or site-value rating anywhere in the article. But the pairing is suggestive. South Africa already has, as the South Africa page records, one of the longer-running municipal site-value-rating traditions in the world — a century of Transvaal-ordinance practice that taxed land value while exempting buildings, before the 2004 Municipal Property Rates Act folded it into a combined land-and-improvements base. Read alongside Mohamed's diagnosis, that history reads as an untried instrument sitting next to the problem it could address: a state that struggled to discipline rent-seeking around minerals and land had, in its own municipal law, a mechanism designed to capture exactly that class of rent for public use rather than private extraction, and let it lapse rather than extend it.

Nuances and Limits

This is an interpretive, secondary-literature synthesis, not a primary empirical study: Mohamed states his method as applying an existing heterodox development-economics framework to South African material he and others (notably Khan and Mohamed 2023, and Bhorat et al. 2017) have written about elsewhere, not new data collection or causal estimation. His central claims — that state capture is a "symptom" rather than a primary cause, that the MEC/MEFC explains both corruption and poor growth — are his argued reading of that literature, not findings independently confirmed here. The REI4P contingent-liability figures (ZAR 303.1bn / ZAR 244.3bn) are Mohamed's citation of an official source, the National Treasury's 2026 Budget Review, rather than his own estimate. Several of the sources his argument leans on most heavily — Bhorat et al. (2017), Khan and Mohamed (2023), Fine (2026) — are cited here only as Mohamed characterizes them in this article; their own texts have not been separately read for this page. Mushtaq Khan's rent framework, by contrast, is drawn from Khan's own 2000 and 2004 texts as quoted in Mohamed's article and is consistent with the fuller reading of Khan already on the rent-seeking page.

Bears On

• Concept: Rent-Seeking — extends the Khan "Development-Economics Qualification" already on that page with a detailed national case where a state failed the discipline test.
• Place: South Africa — supplies the political-economy account of why the country's minerals and land rents went uncaptured, alongside that page's own site-value-rating history.

See Also

• Rent-Seeking — Mushtaq Khan's rent typology, already on the wiki
• South Africa — the site-value-rating and Katz Commission history
• Gaffney: Rent-Seeking and Global Conflict — a Georgist rent-seeking argument at the scale of the state itself
• The Colonial Origins of Comparative Development (Acemoglu, Johnson & Robinson) — the extractive-versus-inclusive-institutions framework Mohamed's argument parallels
• Resource Rents — the resource-curse mechanism operating alongside the minerals-energy complex Mohamed describes

Sources

1. Seeraj Mohamed (2026), "A Heterodox Developmental Economics Understanding of Systemic Corruption: The Case of South Africa," Strategic Review for Southern Africa 48(1): 45–53, DOI 10.35293/srsa.v48i1.7468 — read in full (9 pages) — used for all claims and quotations on this page, including the abstract thesis (p. 45), the Khan rent and discipline framing (p. 46), the Amsden/South Korea and Palma "honorary Latin American economy" comparisons (pp. 46–48), the MEC/MEFC, GEAR and Eskom account (pp. 48–49), the Bhorat et al. state-capture reading (p. 49), and the REI4P derisking case including the Eberhard/Kolker/Leigland, Lekhethe, and National Treasury 2026 Budget Review figures (pp. 50–51) (B-claim; a single-author interpretive synthesis of secondary heterodox-development literature applied to a national case, not primary empirical research — see Nuances and Limits above).