'Protector used dodgy evidence'

Payback: Members of labour federation Cosatu marched to Absa’s head office in April to demand that it reimburse the funds its predecessor Bankorp got from the Reserve Bank in the 1980s. (Hanna Brunlöf, M&G)

Payback: Members of labour federation Cosatu marched to Absa’s head office in April to demand that it reimburse the funds its predecessor Bankorp got from the Reserve Bank in the 1980s. (Hanna Brunlöf, M&G)

Public protector Busisiwe Mkhwebane ignored evidence that did not suit her, apparently accepted fake evidence that did suit her and, when she was challenged, denied access to the evidence she had used, banking group Absa said on Thursday.

In reaching her conclusion that Absa owed the state R1.125-billion, Mkhwebane “picks and chooses aspects of various reports before her, deliberately ignoring facts and findings that do not suit her conclusion”, the bank’s chief executive, Maria Ramos, told the high court.

The application kicks off Absa’s legal challenge to the public protector’s report into “alleged failure to recover misappropriated funds” gifted as a lifeboat to the Bankorp group in the 1980s and early 1990s.

Mkhwebane found that the government had been duty-bound to “implement” a report by British intelligence firm Ciex into the Bankorp bailout, and that it had been prejudiced both by bailing out Bankorp and then failing to claw back the money.

Absa wants the court to overturn Mkhwebane’s findings on five grounds ranging from “errors in fact” to procedural unfairness.

Although the bank is fighting to save itself a large sum of money, its most damaging claims about Mkhwebane’s conduct mirror those made by Finance Minister Malusi Gigaba as well as his predecessor Pravin Gordhan.

In a separate legal challenge to the Bankorp report instituted last week (likely to be consolidated with Absa’s challenge), Gigaba said Mkhwebane had “disregarded” evidence presented by the treasury. Gigaba attached a treasury report – submitted on Gordhan’s watch – that complained that Mkhwebane had denied it access to evidence and had been unwilling to listen to its side.

Like Absa, Gigaba wants Mkhwebane’s “findings, conclusions and remedial action” overturned. That would effectively amount to a finding that Mkhwebane’s first major report as public protector was unlawful.

This week Mkhwebane herself admitted that she had stepped outside her powers when she drafted an amendment to the Constitution and then ordered it to be implemented, but insisted her only mistake had been her choice of just four words.

Mkhwebane said on Monday she would not oppose the court order sought by the Reserve Bank, which would undo her remedial action to strip currency protection from the Bank’s mandate under the Constitution.

When she said that a committee of Parliament “must” start a process “that will result” in changing the Constitution’s provisions on the Reserve Bank, she had actually meant something else, Mkhwebane told the high court. Those four words had been “inconsistent with an intention to merely recommend a review of the constitutional mandate of the [South African Reserve Bank].”

For “only” that reason, she said – underlining the word “only” – she would not oppose her accidental command being set aside.

The Reserve Bank, like Absa and Gigaba, is nonetheless asking the courts to overturn the entire report.

In her affidavit, she seemed to suggest that she had wanted the Constitution changed because of four intertwined layers of opinion.

It “appeared” to her that an apartheid-era bailout for Bankorp had been based on a fear of a run on banks, she said. It was “not evident” that alternative uses of the bailout money, such as creating jobs, had been considered. That presumed failure was “probably enabled” by the Reserve Bank’s narrow mandate to guard against inflation. If so, leaving that mandate unchanged “could continue” to make future bad decisions by the Reserve Bank possible.

There were no such qualifications when it came to her proposed solution. Her version of the Constitution “would provide a long-term effective remedy”, Mkhwebane said.

On Thursday Ramos did not take issue with Mkhwebane’s now-abandoned constitutional amendment, but criticised virtually every other portion of her report and findings.

Ramos argued that Mkhwebane’s disregard for the law held dangerous implications for the vulnerable people about whom she claims to be most concerned.

The supposed R1.125-billion debt Mkhwebane wants to recover is more than 20 years old, Absa said. There is some uncertainty as to whether the period after which this debt should be prescribed is the normal three years or the 15 that applies to debt to the state, but, either way, the time has long since passed.

In her report Mkhwebane says it would not serve “social justice” to take prescription into account, because the state can put money recovered from Absa to good use in uplifting the disadvantaged.

Absa strongly disagreed.

“Contrary to the implication of the public protector’s opinions, it is poor and vulnerable people who also benefit from prescription,” Ramos said. “Without a protective prescription mechanism, poor and vulnerable people who lack the resources to defend themselves would be liable to creditors – whether private or public – for an indefinite period after the transaction giving rise to the debt.”

In addition, if bank bailouts were to be excluded from prescription, Ramos said, the resulting uncertainty “would nullify the very purpose of a bailout and would result in further systemic risk”.

Mkhwebane believed that such bailouts benefit only “a few,” apparently referring to bank shareholders.

The Reserve Bank and treasury disagreed. So did Absa.

To keep afloat the troubled Bankorp, which Absa later bought, the state provided R1.125-billion in what Mkhwebane called “a gift” and Absa calls “assistance”. But in the end Bankorp’s bad loans amounted to R1.9-billion, Absa said, so it – and its shareholders – made a loss of about R775-million. Thus there was no enrichment to reclaim.

In 2002 a high-powered panel headed by Judge Dennis Davis suggested that the ultimate beneficiaries of the state money had been policyholders with Sanlam, then a mutual society that owned much of Bankorp. Without the bailout Sanlam would not have been able to sell the bank to Absa for as much as it had, Davis said. But tracking down the many thousands of policyholders and making them accountable was just not workable, Davis said in 2002.

In her report Mkhwebane misrepresented this finding, Absa said, instead claiming Davis had found the money had accrued to Absa. At the same time she apparently accepted wild and untested claims by Ciex, and so “tacitly” lent these credence.

Ciex claimed that various foreign governments as well as the Dutch Reformed Church owed South Africa large sums of money. It recommended various forms of coercion to collect that money.

Absa has also argued that Mkhwebane went beyond her jurisdiction, and unlawfully usurped the powers of the president and the Special Investigating Unit by ordering the SIU to ask the president to let it recover the money from Absa, without any apparent opportunity for either to apply their minds to the instruction.

Mkhwebane has indicated that, other than the constitutional amendment she directed, she intends to oppose all the challenges to the report.

‘Capture probe must go ahead without Zuma’

Just because he wants to explore a technical legal point does not mean President Jacob Zuma should delay a judicial commission of inquiry into state capture, public protector Busisiwe Mkhwebane told the high court in Pretoria this week.

Zuma, the Democratic Alliance, and now Mkhwebane, are involved in legal action about when and how an inquiry should be set up. The commission was directed in the State of Capture report by former public protector Thuli Madonsela in November last year.

“Every day the media reveal further allegations, many of which are cause for serious concern. It is in the public interest that the truth of these allegations be swiftly investigated and tested, urgently,” Mkhwebane said. “The public interest is harmed by continuing allegations of state capture without an appropriate investigating being instituted.”

In the dying days of her term in office, Madonsela directed Zuma to institute a judicial inquiry, saying she had lacked the time and resources to do a proper investigation. But because Zuma is implicated, she said, he should not be allowed to decide who will chair the inquiry, and should instead take his lead from the chief justice.

Zuma has challenged that order.

In public, though, Zuma and the ANC have made it clear that they strongly support such an inquiry, Mkhwebane said in an affidavit, filed on Tuesday.

Mkhwebane said Zuma’s legal arguments about being ordered precisely how to exercise his powers (while remaining responsible for doing so) could be sorted out later. The inquiry could go ahead in the meanwhile, because there was simply no way Zuma would be allowed to select the judge to head the inquiry or write its terms of reference.

“It would not be permissible for the president to retain control over these aspects of the commission, Mkhwebane said. “He is precluded from doing so because he is personally implicated in the allegations to be investigated by the commission.”

Phillip de Wet

Phillip de Wet

Phillip de Wet writes about politics, society, economics, and the areas where these collide. He has never been anything other than a journalist, though he has been involved in starting new newspapers, magazines and websites, a suspiciously large percentage of which are no longer in business. PGP fingerprint: CF74 7B0F F037 ACB9 779C 902B 793C 8781 4548 D165 Read more from Phillip de Wet

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