David Gleason
The Heath commission is in possession of extraordinary documents from a secret arbitration that could throw light on the propriety of the R1,5-billion Absa lifeboat.
The commission confirmed this week that it is aware of the secret arbitration, presided over by former chief justice Pierre Rabie, which was related to the Reserve Bank’s bailout of the Cape Investment Bank (CIB)in 1991. Papers from the 1992 hearing show that the Reserve Bank donated money to the cash-strapped CIB in what was dubbed a “simulated transaction”.
The CIB hearing is significant because of the close parallels between the R15- million CIB rescue package and the lifeboat afforded to Absa the following year. The CIB package, which is effectively the same as the Absa one, is described in the papers as a gift dressed up as a loan. The documents could therefore make it difficult for Reserve Bank governor Chris Stals – who is soon to be summonsed to appear before a special tribunal – to convince his interrogators that the lifeboat was merely a large loan in line with international banking practices.
“We are fully aware of that case and also the judgment by Rabie and the evidence given by Stals,” Judge Willem Heath said of the CIB case this week.
During the secret hearing, Stals told Rabie that unlike “Father Christmas” the Reserve Bank cannot give money to any institution it chooses. Rabie concluded that the CIBgift had been a “simulated transaction” dressed up to look like a loan. Therefore, it was a gift and Stals never intended to make a loan.
The Reserve Bank’s legal department has previously admitted that the Absa and CIB transactions were, in principle, the same. But Stals and others have publicly described the higher-profile Absa package as a loan.
The linkage between the CIB then and the Absa lifeboat now is all too obvious. It revolves around the method used to inject the moneys required and the nature of the transactions. In Absa’s case, Stals has already stated that he “deemed” the loan repaid, so converting it into a donation of some kind, an action clearly, and by his own admission to the Rabie commission, outside the Reserve Bank’s powers.
In Absa’s case, the Reserve Bank’s intervention appears to have been a loan, subsequently converted to a donation. In the CIB’s case, the donation was a gift made to look like something else.
Some chickens do actually come home to roost …