The Public Protector in her own words on the Bankorp/Absa matter

19 Jun 2017
Public Protector Busisiwe Mkhwebane update: Reports from 11 investigation

Public Protector Busisiwe Mkhwebane has found that the South African government acted improperly by failing to recover a bailout of R1.2 billion from Absa Bank. This is money which was given to Bankorp (which evolved into Absa bank) during the apartheid era.

The public protector has ruled that the matter be referred to the Special Investigative Unit. She also found against the South African Reserve Bank and recommended the bank’s constitutional mandate must be amended to cater for meaningful socioeconomic transformation.

Here follows her own words on the matter:

CIEX I investigated allegations that CIEX, a covert UK based asset recovery agency headed by Mr Michael Oatley was contracted by the South African Government to assist in investigating and recovering misappropriated public funds and assets allegedly committed during the apartheid regime.

The Complainant, Adv. Paul Hoffmann, alleged that a memorandum of agreement was signed by Mr Billy Masetlha on behalf of Government of the Republic of South Africa and Mr Michael Oatley on behalf of CIEX on 06 October 1997 allowing CIEX to investigate and recover public funds on behalf of Government.

He also alleged that what is of concern is part of the CIEX report that deals with the “lifeboat’’ allegedly afforded by way of an illegal gift, by the South African Reserve Bank (herein called the SARB) to Bankorp Limited, now ABSA Bank, during the apartheid regime. The Complainant alleges that, the Government of the Republic of South Africa and the SARB failed to implement the CIEX report and to recover misappropriated money from Bankorp Limited without providing any reasons to that effect.

Having considered the evidence uncovered during the investigation against the relevant regulatory framework, the Public Protector makes the following findings:

Whether the South African Government improperly failed to implement the CIEX report, dealing with alleged stolen state funds, after commissioning and duly paying for same:

(a) The allegation whether the South African Government improperly failed to implement the CIEX report, dealing with alleged stolen state funds, after commissioning and duly paying for same is substantiated;

(b) CIEX Ltd. was paid 600 000 British Pounds for services which were never used by the South African Government. No evidence could be found that any action was taken specifically in pursuit of the CIEX report;

(c) Failure by the South African Government was inconsistent with duties imposed by section 195 of the Constitution requiring a high standard of professional ethics;

(d) The failure was also inconsistent with section 231 of the Constitution that requires that all Constitutional obligations must be performed diligently and without delay;

(e) In addition the conduct was contrary to the Batho Pele Principles in that there was no value for money; and

(f) The failure by the South African Government and constitutes improper conduct as envisaged in section 182(1) of the Constitution and maladministration as envisaged in section 6 of the Public Protector Act. 2. Whether the South African Government and the South African Reserve Bank improperly failed to recover from Bankorp Limited/ABSA Bank an amount of R3.2 billion, cited in the CIEX report, owed as a result of an illegal gift given to Bankorp Limited/ABSA Bank:

(a) The allegation whether the South African Government and the South African Reserve Bank improperly failed to recover from Bankorp Limited/ABSA Bank an amount of R3.2 billion cited in the CIEX report, owed as a result of an illegal gift given to Bankorp Limited/ABSA Bank between 1986 and 1995 is substantiated;

(b) The correct amount of the illegal gift granted to Bankorp Limited/ABSA Bank is in the amount of R1.125 billion;

(c) Two investigations into the matter established that the financial aid given to Bankorp Limited/ABSA Bank was irregular;

(d) The South African Reserve Bank in granting the financial aid failed to comply with section 10(1)(f) and (s) of the South African Reserve Bank Act No. 90 of 1989. The Ministry of Finance had a duty as obliged by section 37 of the South African Reserve Act of 1989 to ensure compliance of the Act by the South African Reserve Bank. The Ministry failed to comply with the obligation;

(e) The South African Government failed to adhere to section 195 of the Constitution by failing to promote efficient and effective public administration; and

(f) In the circumstances the conduct of the South African Government and the South African Reserve Bank constitutes improper conduct as envisaged in section 182(1) of the Constitution and maladministration as envisaged in section 6 of the Public Protector Act.

Whether the South African public was prejudiced by the conduct of the Government of South Africa and the South African Reserve Bank and if so, what would it take to ensure justice:

(a) The allegations whether the South African public was prejudiced by the conduct of the Government of South Africa and the South African Reserve Bank is substantiated;

(b) The South African Government wasted an amount of 600 000 British Pounds on services which were never used;

(c) The amount given to Bankorp Limited/ABSA Bank belonged to the people of South Africa. Failure to recover the “gift” resulted in prejudice to the people of South Africa as the public funds could have benefitted the broader society instead of a handful of shareholders of Bankorp Limited/ABSA Bank;

(d) The conduct of the South African Government and the South African Reserve Bank goes against the ethos laid in the preamble of the Constitution and section 195 of the Constitution in respect of redressing social injustices and promoting efficiency;

(e) The conduct further is contrary to the Batho Pele Principles that requires redress and the view held in the Khumalo case requires a public functionary to arrest reported irregularities; and

(f) The conduct of the South African Government and the South African Reserve Bank constitutes improper conduct as envisaged in section 182(1) of the Constitution and maladministration as envisaged in section 6 of the Public Protector Act.

(i) The appropriate remedial action that the Public Protector is taking in terms of section 182(1) (c) of the Constitution is the following:

(1) The Special Investigating Unit:

(a) The Public Protector refers the matter to the Special Investigating Unit in terms of section 6(4)(c)(ii) of the Public Protector Act to approach the President in terms of section 2 of the Special Investigating Units and Special Tribunals Act No. 74 of 1996, to:

(aa) Re-open and amend Proclamation R47 of 1998 published in the Government Gazette dated 7 May 1998 in order to recover misappropriated public funds unlawfully given to ABSA Bank in the amount of R1.125 billion; and

(bb) Re-open and amend Proclamation R47 of 1998 published in the Government Gazette dated 7 May 1998 in order to investigate alleged misappropriated public funds given to various institutions as mentioned in the CIEX report.

(b) The South African Reserve Bank must cooperate fully with the Special Investigating Unit and also assist the Special Investigating Unit in the recovery of misappropriated public funds mentioned in (aa) and (bb).

(2) The Portfolio Committee on Justice and Correctional Services: (a) The Chairperson of the Portfolio Committee on Justice and Correctional Services must initiate a process that will result in the amendment of section 224 of the Constitution, in pursuit of improving socio-economic conditions of the citizens of the Republic, by introducing a motion in terms of section 73(2) of the Constitution in the National Assembly and thereafter deal with matter in terms of section 74(5) and (6) of the Constitution.

Section 224 of the Constitution should thus read:

(1) The primary object of the South African Reserve Bank is to promote balanced and sustainable economic growth in the Republic, while ensuring that the socio-economic well-being of the citizens are protected.

(2) The South African Reserve Bank, in pursuit of its primary object, must perform its functions independently and without fear, favour or prejudice, while ensuring that there must be regular consultation between the Bank and Parliament to achieve meaningful socio-economic transformation.

info@probonomatters.co.za

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