Alec Hogg, Absa’s earnest public relations boss, did the explaining during a regular staff broadcast throughout the group. Absa is smarting from publicity over former executive Bob Aldworth who returned home to face fraud charges two weeks ago and who has joined forces with former Tollgate chairman Julian Askin against the mighty banking group.
Absa also had to endure allegations about its role in Tollgate Holdings when former CEO Hennie Diedericks gave evidence in a special hearing in terms of the Companies Act in Cape Town last week. When Diedericks first went to London last year to tell his story to fugitive entrepreneur Askin, there was a communication gulf between two men from such different
Neither Askin nor his solicitors were able to get to grips with the story Diedericks wanted to tell so badly, to clear his name, he said. So Askin telephoned journalist Martin Welz and invited him to go to London to record, check, cross-check and pull together Diedericks’s version of the Tollgate affair. Welz’s work on this trip formed the basis of Diedericks’s extensive affidavit which was handed in to the special hearing last week. The affidavit was also used in extensive reports on Tollgate in Millenium magazine last year.
The TrustBank saga featured heavily in Diedericks’s disclosures. He accused the Reserve Bank of secretly bailing out TrustBank to the tune of at least R1-billion. But the bank’s financial fortunes were mired in treacherous political waters two decades ago in the boardroom wars between the National Party’s heavyweights.
Award-winning investigative journalist MARTIN WELZ has been tracking and writing the Absa story in his ascerbic publication noseWEEK for years. He recounts TrustBank’s first financial disaster from which it never recovered.
The origins of the current controversy surrounding Absa can be traced back to the tensions between northern and southern factions of the National Party in the 1960s and 1970s and to the founding of TrustBank and its involvement more than 20 years ago with a township developer called Bill Mitchell.
When Mitchell was buried last year, the Hout Bay church was filled with thousands of imported blooms, and the Cape papers ran columns of fond farewells. What most mourners did not know was that 10 years earlier he had been party to a secret court settlement which sought to cover up a scandal that would nevertheless ripple on.
Based in the Cape, Jan S Marais’s TrustBank was the first serious attempt by Afrikaners to look to non-Afrikaners for business. It aimed to do this by adopting a decidedly un-volksy, secular image: modern steel and glass buildings manned by men of the world and mini-skirted blondes with red rosebuds between their teeth. (This was probably as close to the traditional Afrikaner’s image of Sodom and Gomorrah as they could imagine.) Marais even publicly announced his resignation from the Broederbond to make it more convincing.
It took Bill Mitchell, a lovable Cockney hardware salesman with a barrow-boy style and great ambition, to see that the only people they were likely to fool and corrupt were themselves – and to see in this circus the potential for a giant-size rip-off of his own.
At about this time Mitchell had accidentally acquired a derelict piece of farm land on the Cape coast not far from Hermanus. On a moment’s inspiration he hired a bulldozer to gouge out a farm dam on the hillside, and cut up the farm into hundreds of unserviced seaside plots. He was amazed when they sold like hot cakes and turned a bad debt (owed, embarrassingly, by Henning Klopper, the NP speaker of Parliament) into a R1-million profit almost overnight.
The thought immediately occurred to him: If you can do it once, why not do it several times? The only problem was just then the administrator of the Cape announced a total freeze on the declaration of new holiday townships on the Cape coast. There was, he said, a vast oversupply of holiday plots, and many of these townships were underdeveloped, uneconomic and a serious blight on the
Imagine everyone’s surprise, therefore, when not a year later it was discovered the self-same administrator had used his special powers to secretly approve seven new seaside townships. All seven just happened to be controlled by our friend Bill Mitchell. Most people over 40 will remember Wavecrest, near Jeffreys Bay. Nature lovers will remember Mitchell’s rape of Betty’s Bay. It was not too difficult to work out that all Mitchell had needed to do was offer ‘incentives’ to half the Cape National Party establishment to get such special treatment. And as for the glut of seaside plots on the market? Well, that’s where the new TrustBank came into the picture.
Mitchell had offered shares in his township business to some top TrustBank executives, including the financial director, George Home, and general manager Sonny Shar. Which explains why he had no difficulty persuading TrustBank to market its plots through its branches. Branch bank managers were encouraged to give their clients overdrafts with which to pay the deposit on a seaside plot, and to sign deeds of sale committing them to monthly payments for the balance, by the simple expedient of offering prizes to the managers who sold most plots. The prizes included Mercedes Benz motor cars and holidays in Hong Kong.
Ordinary civil servants who would never have dreamt of owning a house at the seaside, or of raising an overdraft, were told that the rich of Sandton would rush to buy the plots from them at a huge profit … more than likely before the monthly payment became due. Then came Mitchell’s master stroke: before this paper pyramid came crashing down – as it inevitably had to – he sold, or ceded, all those pathetic deeds of sale to the TrustBank at a small discount.
The bank paid him and his partners many millions in hard cash, and filled its safes with largely worthless deeds of sale for seaside plots that nobody really wanted. Within weeks hundreds of civil servants began defaulting on their monthly payments as they despaired of the millionaires of Sandton. Others who went looking for their plot at the sea found their land on the tops of drifting sand dunes with no roads or services in sight. At this stage general manager Sonny Shar decided it was time to emigrate to America. Mitchell and his partners hired the country’s top lawyers to advise and defend them. TrustBank was bankrupt and a nasty scandal was about to rip the Cape National Party apart.
The crisis this precipitated in Broederbond ranks would also cause the first serious cracks to appear in a ‘friendly alliance’ that had existed since 1954 between Volkskas, with its power base in the Transvaal, and Sanlam, with its power base in the Cape. Peace was maintained between north and south by Volkskas undertaking to stay out of the insurance business, and Sanlam undertaking to stay out of banking. In 1977 the pact was finally to be put to the test: the Broederbond agreed the Nats could not afford TrustBank going bankrupt and the risk of exposure this entailed. Since Sanlam, according to the established rule, could not go into banking, it was logical, they thought, that Volkskas should carry the can of TrustBank’s debts. What they did not take into account was the reality of party politics in the year of the Connie Mulder and PW Botha wars.
The Cape, said the Transvaal Nats, was pushing its luck too far by expecting the Tranvalers to pay for the Cape Nats’s sins. Sanlam, they said, was the Cape National Party’s piggy bank. If the Cape needed rescuing, Sanlam should pay. So Volkskas simply refused. Next day the business press announced an exciting new development: Sanlam was taking over TrustBank and going into banking. What they did not realise was that the north-south deal was off. Hostilities had resumed.
From then on Sanlam found itself having to cover for and keep afloat a profoundly rotten bank. Moreover, Sanlam was determined to take its revenge on Volkskas by making TrustBank grow at any cost. Sanlam chairman Andreas Wassenaar told me so himself in a long interview a few years later. The war became most evident in the press battle that ensued. Sanlam-controlled Nasionale Pers moved into hitherto forbidden Transvaal territory to start up Beeld and Rapport. One after the other, Volkskas-backed Dagbreek, Die Vaderland and Die Transvaler were driven to the wall.
With Sanlam in banking, Volksas now also went into competition with Sanlam in insurance, starting up Legal and General Insurance in partnership with Rembrandt. Volkskas, too, now increasingly succumbed to the temptations of the city, recklessly funding any number of friends with schemes. By the end of the 1980s the battle was over. Volkskas, brought to its knees by bad debt and mismanagement, surrendered control to the mighty Sanlam (with Rembrandt as minority partner).
But the new, grandly named Bankorp group, was hardly a triumph. With two rotten banks instead of one, it was a disaster. The search was on for blood to feed the insatiable appetite of this new monster. Could the makers of Little Shop of Horrors have had Bankorp in mind? Rembrandt’s Anton Rupert took a seat on the board of the Reserve Bank – ‘The Bank’ – in Pretoria. Encouraged by the men at the Reserve Bank, Sanlam’s men offered United Building Society’s Piet Badenhorst an empire. The ensuing deal enabled them to tap the lake of a million black people’s savings in the faithful old UBS.
According to Diedericks and Aldworth, they also secretly diverted a billion or two from ‘The Bank’ in Pretoria. Twenty years after a cockney immigrant saw the profound weakness in the Afrikaner facade, the men at Absa are still battling to preserve the myth of Afrikaner morality. As Hennie Diedericks threatens to tell his tale, and Bob Aldworth threatens to tell his, the question is: will the `boys’ (as the Broeders of old prefer to be called these days) at Absa and ‘The Bank’ come clean and take the rap? Or are the citizens of South Africa really to be expected to pay the price of Afrikaner venality – without any embarrassing questions being asked?