Busisiwe Mkhwebane said her performance 'speaks for itself', with her office finalising 21 176 out of 25 288 complaints in the year 2016/17 and 2017/18. (Madelene Cronje/M&G)
Public protector Busisiwe Mkhwebane has found that the government and the South African Reserve Bank failed to uphold their constitutional duties by not acting on the Ciex report that public funds for an apartheid-era bailout of Absa be recovered.
Mkhwebane released the Ciex report, along with three other reports on various spheres of government, on Monday during a press briefing. Absent, however, were any reports based on investigations into the Gupta family, the president, politicians and heads of parastatal boards.
In her findings on the report by Ciex, a covert asset recovery agency in the United Kingdom, Mkhwebane said the conduct of the Reserve Bank and the government regarding the Absa bailout, which included a number of banks in the Bankorp group receiving unlawful funds during the apartheid era, were inconsistent with various sections of the Constitution.
The Public Protector also found that Absa had “unduly benefited” from the bailout.
The three main findings are:
- The government and the Reserve Bank “improperly failed to recover R3.2-billion from Absa as a result of an “illegal gift” given to Absa between 1986 and 1995;
- The public was prejudiced by the conduct of the government and the Reserve Bank because of the failure to recover the “gift” despite spending £600 000 for services “which were used”; and
- The government “improperly failed” to implement the Ciex report after commissioning and paying for it.
The finance ministry is also found to have failed to comply with its legal obligation to ensure that the Reserve Bank complies with the South African Reserve Bank Act.
The findings Mkhwebane released differ vastly from a preliminary report that the public protector’s office compiled last year, and which the Mail & Guardian reported on in January this year .
The preliminary report found that Absa – which took up ownership of the Bankorp group of banks – could be forced to pay back R2.25-billion to the fiscus after an unlawful apartheid-era bailout of banks in the Bankorp group.
Mkhwebane said the changes in the final report were made as a result of responses from parties who were implicated in the report – including the treasury, the presidency, the Reserve Bank and Absa. At the time the preliminary report was compiled, these parties had not yet responded to investigators at the public protector’s office.
“Therefore, on receiving the responses of all those who were implicated … that’s why the report is totally changed from what was originally leaked to the media,” Mkhwebane said.
Remedial action
Absa received R1.25-billion from the apartheid government. Instead of directing that the money be recovered with interest, Mkhwebane has now instructed the Special Investigating Unit (SIU) to reopen a probe into the matter.
The SIU now has the task of investigating the bailout and recovering public funds paid to Absa. Mkhwebane said Absa has paid some of the money back, but not the two decades’ worth of interest that has accumulated.
“R1.25-billion was paid back by Absa, the recovery relates to the interest the banks accumulated over two decades,” Mkhwebane said, adding that while Absa was charged 1% interest, they “benefitted” from another 15% in government bonds.
Mkhwebane has also directed the portfolio committee on justice and correctional services to initiate a process to amend the Constitution. Sections in the Constitution on the Reserve Bank must be changed to say its primary objective is to “promote balanced and sustainable economic growth” and to ensure citizens’ “socio-economic well-being” is protected. Another amendment to be included will add that the Reserve Bank will pursue this objective “without fear, favour or prejudice” and that there must be regular engagements between the bank and Parliament.
How the Ciex probe began
In 1997, Ciex began investigating the Absa bailout at the behest of the government. The request was made through the South African Secret Service.
Ciex released a report soon after, titled Project Spear, which investigated how banks in the Bankorp group were offered R1.5-billion by the apartheid government as a “lifeboat” to offset bad loans.
Former public protector Thuli Madonsela launched a probe into the “lifeboat” after a complaint was laid by advocate Paul Hoffman in 2010. A preliminary report was completed in December 2016. In the preliminary, Absa is found to have banked R1.25-billion plus interest over two decades.
It will now be up to the SIU to uncover the public funds which were “unlawfully given” to Absa, as Mkhwebane has found.