Absa could be forced to pay R2.25-billion for an unlawful apartheid-era bank bailout.
COMMENT
That the public protector’s finding on Absa is going to become a terrible political mess is inevitable. And it has been inevitable for a quarter of a century, from as soon as the state bailed out the part of Absa that was then still Bankorp, because that bailout was born in sin.
But we can try to fix the future.
In the late 1980s and early 1990s, authorities, governments and central banks around the world fervently declared that secrecy was everything. If they told the public they were bailing out a bank then the public would panic and make a run on all the banks, and then the public would ruin the glorious banking system that their superiors (the central bankers and governments) had built for them. So the public had to be protected from themselves, even if it meant telling lies and using front companies and constructing Byzantine financial structures – all of which were features of the Bankorp scheme.
The trouble caused by that bit of stupid paternalism has been coming and going ever since, growing larger with every return.
Now it threatens to poison an important debate about dealing with apartheid-era economic hangovers generally.
It took years for any solid details to emerge about the R1.125-billion gift (now worth R2.25-billion with interest) the state gave Bankorp to buy its way out of bad debts on its books until 1995. By that point, conspiracy theories were plentiful and some were almost certainly true. Did the deal structure, peculiar even by comparison of others at the time, point to more than the normal amount of corruption and mutual back-scratching? Did the Broederbond have a more than usual hand in setting it up? Was the intention to bail out not only Bankorp but to allow some of the affected clients, who had debts set off against the bailout, to walk away unscathed? Was money effectively stolen from every black citizen and passed to a smaller but still large group of white citizens?
The nature of these (eminently fair) questions made the entire matter one of politics rather than justice or economics for the new government, and the remnants of the old it was taking over from.
Into this flammable political atmosphere erupted Michael Oatley, a former high-ranking British spy with a rich and varied history, in 1997. Oatley told the new government exactly what it wanted to hear. Vast sums of money, literally tens of billions, had been stolen during the dying days of apartheid, he said. He knew where some of it was, and how to track down the rest, and how to recover it, he said. He’d even draw up the entire plan of attack for doing so. All the government had to do was say yes.
The government said yes.
What Oatley eventually delivered in what became known as the Ciex Report, or Project Spear was, in the words of one former very high-ranking official this week, “a piss-poor approximation of an intelligence report that wouldn’t even be published as a novel”.
Oatley boldly claimed that the government could, technically and legally, claim back somewhere between R3-billion and as much as R15-billion from Absa alone, because of Absa’s 1992 acquisition of Bankorp. This could be achieved by forcing Absa to “volunteer” a payment schedule stretching over a number of years, Oatley said. He even provided the outline of a script that would make Absa comply.
Of fairness, justice, and economics, there was little in Oatley’s work. It took no cognisance of niceties such as fairness, justice, or economics. There was no analysis of whether it was Absa shareholders who had actually benefited, nor how many of those shareholders had since been replaced by new and clearly blameless black shareholders, for instance. Nor was there the crucial calculation about the net profit the state could turn after deducting the effect of, among others, probably reduced foreign investment when potential investors were spooked by the prospect of being caught up in other apartheid reparations.
The government, in a decision the public protector now says in her provisional report breached the Constitution, treated Oatley’s report as the secret intelligence matter it was, and shelved it indefinitely.
Whatever the quality of the Ciex work, however, it was clear that there had been dodgy dealings. Doing nothing would have been untenable. So the matter was lifted out of the realm of pure intelligence with a probe by the Special Investigating Unit (SIU), then headed by Judge Willem Heath.
The Heath investigation overlapped with the Oatley one chronologically, and in other ways too, depending on who you believe. By a later Oatley-constructed account, Heath was something of a public face being used to launder secrets. By barely, but only barely, more believable accounts at the time, Heath was manipulated by Thabo Mbeki for his own unfathomable political ends.
Whatever the reason, the Heath probe ended in perhaps the worst possible kind of failure. Laws had been broken, he later told the public, and people should by rights be prosecuted. But because of the fragility of the economy, doing so would be too dangerous.
Put another way: the greater good dictated that apartheid thieves had to be allowed to make their getaway.
Any benefit from the somewhat public nature of the SIU investigation was more than offset by the stench of such an odious idea.
Arguably the first (and to date only) unquestionably good set of decisions made in the whole saga came in the early 2000s. Then Reserve Bank governor Tito Mboweni transparently commissioned a panel to look into the Bankorp matter, headed by judge Dennis Davis. The panel was made up of independent heavy-hitters it would be hard to suspect of grand conspiracy. The panel did its work with admirable rigour. And when it reached a conclusion, it presented its findings in a blaze of publicity.
The Davis panel report remains the only honest-to-goodness public document about the whole matter, and it is by far the most boring. In it you will find nothing of the stories of spies and lies and easy answers spun by Oatley. Nor does it contain the clear delineation between good guys and bad guys Heath intimated in public. Instead, it comes down to a bunch of economists struggling mightily with a problem and coming to a singularly unsatisfying conclusion: it’s complicated.
Put in far less precise terms than the Davis panel used, it found that free money was indeed handed out to people, but that they could not be said to have stolen it because they were passive parties. They were also long gone; in some cases in the most literal sense as beneficiary pensioners died.
Economic wrong had been done, the Davis panel found, but undoing it would be impossibly complicated and expensive.
It is not the kind of conclusion that satisfies a thirst for justice, nor one that a political party can turn into a slogan. But it was one that was carefully and dispassionately considered, and properly accepted.
The findings of the provisional report of the public protector that the Mail & Guardian revealed this week takes us back to a pre-Davis in all too many senses.
The protector’s blunt, if still draft, demand that legal action be instituted against Absa to repay a vast sum of money discards entirely the difficult task of weighing up justice and benefit in favour of an approach Michael Oatley would approve of: find a party you can hold to account and squeeze.
But worse than that is the veil of secrecy that has again been drawn around the whole matter. By the time the M&G learnt the contents of the public protector’s preliminary report it had already spread far and wide — though not into public view. All too many questions remain unanswered around the making of the report, such as why it took six years but was rushed at the end. Even more questions arise from lacunas in the report itself, such as why it almost entirely dismissed the Davis findings but accepts without question what the less salubrious Oatley said.
Then there is the political environment into which the Bankorp epic is now being reborn. Vast swathes of the nation deeply distrust President Jacob Zuma. Different ANC factions are looking for advantage. Opposition political parties are looking for ways to grab attention. Misinformation and distraction campaigns with race and monopoly capital at their core swirl through the ether. A big-money, conspiracy-laden, apartheid-era issue like Bankorp is not so much fuel to fire as rocket fuel to the inferno.
Which makes this an excellent time to consider the original sin from which it all stemmed. The secrecy around the Bankorp bailout has haunted South Africa for 25 years. This week every individual and institution involved in its latest resurrection pleaded a need for secrecy, or remained silent, for a variety of seemingly good and solid reasons.
Those who birthed the problem also had excellent reasons to remain quiet, to not air their laundry in public, to neither feed nor heed debate. Perhaps it is time to learn from that history.