/ 19 July 2008

Lulu ‘overstepped her powers’

The mystery of why Cabinet rescinded a decision to hand a ”damning” forensic report on the Land Bank to the police has been solved: Land and Agriculture Minister Lulu Xingwana had no authority to order such an investigation in the first place.

Documents in the Mail & Guardian‘s possession show how Xingwana also meddled in other matters over which she had no power. In one instance she wrote to former Land Bank CEO Alan Mukoki saying he should have informed her of all farms sold by the bank since her appointment as minister on May 31 2006.

These revelations follow a dramatic week in which authority over the Land Bank was taken away from Xingwana by President Thabo Mbeki and given to Finance Minister Trevor Manuel.

Manuel was expected to attend a crisis meeting of the bank on Friday after Mbeki gave him the task of fixing the institution, which has been plagued by allegations of corruption and maladministration for the past three years.

It was expected that sacked chairperson Themba Langa and two other board members who resigned on Xingwana’s watch, Joe Mthimunye and Modise Motloba, would be reinstated to the board on Friday.

National treasury spokesperson Thoraya Pandy confirmed the meeting and added that Manuel would start by making an ”assessment” of the bank and would consult with the board before administering any medicine to the ailing institution.

One of the unsolved mysteries of Xingwana’s term as political head of the Land Bank was why Cabinet rescinded its decision to refer a forensic report prepared by Deloitte to the police and prosecuting authorities in December 2007.

Cabinet had decided to refer the report for criminal investigation a month earlier. The report alleges that top Land Bank executives siphoned off more than R2-billion to fund non-agricultural businesses, including luxury golf estates, residential developments and a sugar mill.

The M&G has established that the main reason for Cabinet’s U-turn was provided by two legal opinions obtained by the Land Bank board that showed Xingwana had no authority to order the investigation.

If challenged in a court of law, the report could have been dismissed on these technicalities, a source close to the investigation told the M&G this week.

”The conclusion is that the minister has no power to enter into contracts on behalf of the bank,” attorney Mokhele Matsau wrote to the bank in response to a question from its legal department about her authority.

Xingwana, however, believed she was ”duly authorised” to enter into an agreement with Deloitte.

Her spokesperson, Godfrey Mdhluli, reiterated this, saying Xingwana had sought legal opinion on the matter. He declined to provide the M&G with this ”legal advice” or reveal which law firm or advocate advised Xingwana on the issue.

The M&G has learned from Land Bank sources that in March last year Xingwana tabled a memo in a Cabinet meeting alleging serious financial mismanagement at the bank.

The report was considered a ”pre-emptive strike” against members of the board and executives as none of those named had been informed of the allegations against them.

She allegedly told Cabinet that the allegations referred to the period 2004 to 2006 – a time span covering the employment tenure of Mukoki and recently fired chief financial officer Xolile Ncame.

Mukoki this week declined to comment on the investigation.

”This memo [alleging financial mismanagement] was sent to Cabinet without any prior consultation with the board of the Land Bank. Note that in terms of the Land Bank Act the board is in charge of the operations of the bank, not the minister, nor Cabinet,” a Land Bank source said.

The move raised the ire of Land Bank board members as complaints about financial mismanagement, according to law, are reported to the Auditor General.

Xingwana subsequently told the board that Cabinet had passed a resolution authorising a forensic audit of the bank’s affairs. The board asked Xingwana to provide more details and a memo from Cabinet authorising the audit.

According to a former board member Xingwana refused and the board, in turn, refused to grant permission for the audit to proceed, pointing out that the Auditor General had given the Land Bank a clean bill of health.

Xingwana, however, went ahead and ordered the Deloitte investigation. The cost of the probe has allegedly escalated from R2,5-million to R7-million.

A letter from Deloitte’s Tommy Prins to the Land Bank board shows that Xingwana instructed the audit firm to report to her about the audit and not to the board.