OPINION: Public protector’s report fails to make a case against Absa

The sustained degradation of key institutions such as the police service, the Hawks and the National Prosecuting Authority has reached so desperate a state that it is now almost impossible to conduct a rational conversation on any matter in which public accountability is the subject.

Hence it is not surprising that the office of the public protector is also in the firing line of warring political factions. Those who applauded the leaked provisional report on the Bankorp/Absa “lifeboat” and the implications of the Ciex report are, by and large, the same people who assailed the public protector’s report on state capture by the Gupta family. Conversely, the supporters of that report are among the fiercest critics of the leaked Absa report and, by extension, of the current public protector, Busisiwe Mkhwebane.

How then to make legal sense of the latest developments?

It appears to be common cause among the public protector and the chairs of two previous commissions that produced reports, judges Willem Heath and Dennis Davis, that the Reserve Bank, under the leadership at the time of Dr Gerhard de Kock, acted illegally in providing easy finance to Bankorp. The simulated transactions that injected much-needed funds into Bankorp’s coffers were based on loans that carried a negligible rate of interest and were not supported by the law, even as it was at that time

In 1997, Ciex, a British-based company headed by retired MI6 agent Michael Oatley, which seems to have conducted business as a bounty hunter, approached the South African government with information that, in its view, could lead to the recovery of about R30-billion spent or moved overseas by the apartheid government. One of the items described in its report was the cost of the Bankorp lifeboat. Although the Mbeki administration seemingly cancelled the contract between Oatley and then spy chief Billy Masetlha on behalf of the government, it investigated the lifeboat saga by appointing Heath to provide a report and recommendations.

Shortly after he assumed office as governor of the Reserve Bank, Tito Mboweni commissioned a panel, chaired by Davis, to investigate the same issue.

Heath concluded that, even though Absa benefited from the lifeboat, it would place the banking sector in jeopardy if repayment was mandated. Davis took a different approach: although the lifeboat funding was clearly illegal, it was Sanlam, the shareholder of Bankorp, that was enriched. Because Bankorp without the lifeboat funding was of almost no value, the Davis panel found, the price paid to Sanlam for the shares was equal to the value of the bailout. Yet after the sale Sanlam was demutualised, so it would be hard to see how and from whom the money could legally be recovered.

In her provisional report, the public protector disagrees with both Heath and Davis. The problem is that there is not one word in her report that seeks to explain the basis of this disagreement. Both reports are cited correctly in support of the conclusion of illegality, but no mention is made of the legal basis by which Absa is found to be liable to repay the amount of the lifeboat plus interest.

This omission becomes even more curious when the Ciex report, which forms the basis of the public protector’s provisional report, claims that both Absa and its shareholder, Sanlam, are liable for restitution.

In a passage marked by a level of financial illiteracy that is breathtaking, given the subject matter of the report, it is argued that both Absa, who paid for the value of the lifeboat, and Sanlam, as the beneficial shareholder, should pay back the money. Absa should pay R3.2-billion, a figure never substantiated in the report, and Sanlam R3-billion to R6-billion. This alone should have triggered an inquiry from Mkhwebane as to how one party pays value but still benefits and a further benefit is received by the selling shareholder. Logic suggests, absent a coherent explanation that it had to be one or other of the two parties who benefited if, as in this case, the purchaser paid fair value for the lifeboat.

The provisional report goes much further. It attacks Thabo Mbeki, then the president, and Trevor Manuel, then the finance minister, for breach of their constitutional duties because they did not pursue Ciex’s recommendation that they seek to recoup the balance of the R30-billion referred to in the Ciex report.

The facts show, however, that both Mbeki and Mboweni inquired into the Absa lifeboat, and that both inquiries were made public. Beyond this, there is no indication in the report as to how the balance of the money was made up and what basis there was for the Ciex claim, save for bland assertions. No reasonable minister would have wasted taxpayers’ money on pursuing the claims on the basis of so amateurish and unsubstantiated a document as the Ciex report. Thus a case of constitutional dereliction of duty is not sustained by the public protector.

On the test laid down by the Constitutional Court in the Nkandla case, a successful review by any of the affected parties is likely to meet with success unless further and better evidence is produced in the public protector’s final report.

The fact that the Ciex report cannot be taken seriously by anyone seeking fairly to find both a lawful and practical way to recoup ill-gotten gains accrued by the apartheid regime does not mean an independent inquiry should not be conducted.

Ever since the murder in 1977 of Robert Smit, then the South African ambassador to the International Monetary Fund, there have been rumours of a government slush fund held offshore, which Smit had intended to disclose shortly before his murder – which, of course, was never solved.

Such an inquiry would be important but its justification has nothing to do with the Ciex report, which reads more like a sales document rather than a serious investigation.

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