Former spy boss says the reason for not paying apartheid-era loans was a ruse

The former head of the country’s secret service has changed his mind and now believes the government’s reason for not recovering the R2.25-billion interest on the loan used to bail out Absa bank was a ruse.

Public protector Busisiwe Mkhwebane’s preliminary report on why Absa could be liable for billions in interest from an apartheid government loan, states that spy boss Billy Masetlha said the justification at the time for not recovering the money was to protect the economy but now believes otherwise.

The report – which could still change “drastically” – found that the government breached the Constitution in failing to recover the money for a SA Reserve Bank (SARB) bail-out to Bankorp, now Absa, in the early 1990s.

Absa and the Reserve Bank have both said that there are errors in the report.

According to the report, Masetlha signed a memorandum of agreement on behalf of government with Michael Oatley, the owner of covert UK-based asset recovery company CIEX, to start investigating what happened.


The report states that president Thabo Mbeki and finance minister Trevor Manuel, president and finance minister at the time, contended that one reason the money was never recovered had to do with the economy, which had to be protected.

“The issue of systemic impact on the rand and the economy was used by government and SARB to avoid recovering the 16% interest accumulated over a period of five years…plus interest to which belongs to the public,” reads the report.

But according to the public protector report, Masetlha, who was the co-ordinator of the investigation by CIEX, now “conceded that he was the main co-ordinator. He stated that he was persuaded by systemic impact then but now believes it was a ruse and that the money could have been recovered”.

Masethla could not be immediately reached for comment.

The preliminary report also refers to current Finance Minister Pravin Gordhan, who stated that he had nothing to do with the CIEX report.

But when he was interviewed – “as minister of justice” according to the report – he confirmed that at the time of the CIEX report there was a systemic threat to the economy posed by recovering the monies. Gordhan said that there is still a threat, according to the report.

Gordhan was not listed as somebody interviewed in the public protector’s investigation under the secion The Key Sources of Information. 

“He argued that the shareholders who had benefited had long cashed out and new shareholders would be punished for a debt or risk that was never disclosed or apparent at time of investing,” reads the report.

Mkhwebane is scathing about the decisions made at the time, stating that the monies and government bonds belong to the people of South Africa and which were under the stewardship of the treasury and SARB. 

“Failure to recover the interest on the capital loan amount to a loss to the public and government but as well benefited few individuals who are shareholders of Absa at the expense of the public.”

Furthermore the public protector stated in the report that there was evidence that Absa signed a contract with SARB that stipulated how much the bank would pay back.

This contract was confirmed by the reserve bank governor at the time Dr Chris Stals, who, according to the report, had left with important evidence when he left the bank.

“It transpired during a meeting we had with him (Dr Chris Stals former governor of the reserve bank) on 8 September 2016 that he had left with curial original information from the bank which could have been useful and helpful from the commencement of this investigation a decision which contributed to the delay in the finalisation of this investigation,” reads the report.

Stals submitted that Absa knew and was “party to an extension of the loan agreement when it acquired Bankorp in 1992 and that it was part of the deal”.

“He stated that the final party that should have paid the loan is Absa instead of Bankorp by virtue of it having acquired Bakorp’s assets and liabilities in 1992,” reads the report.

But Absa says in its statement on Friday that it had acquired Bankorp in April of 1992 at fair value.

“All the obligations pertaining to the SA Reserve Bank’s assistance were discharged in full by October 1995,” reads the statement.

Stals said he would not comment on a report he had not seen yet.

This article has been altered for grammar and clarifications.

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Athandiwe Saba
Athandiwe Saba

Athandiwe Saba is a multi award-winning journalist who is passionate about data, human interest issues, governance and everything that isn’t on social media. She is an author, an avid reader and trying to find the answer to the perfect balance between investigative journalism, online audiences and the decline in newspaper sales. It’s a rough world and a rewarding profession.

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