Why the public protector’s Absa billions report should be binned according to SARB

The South African Reserve Bank (SARB) tore into Public Protector Busisiwe Mkhwebane’s report on the Absa-Bankorp lifeboat, in a new court application lodged on Thursday.

In its application to review Mkhwebane’s report the Reserve Bank listed what it calls a number of “evidential factual inaccuracies” contained in it.

The bank’s latest filing, it said in a statement, is separate from the application heard in the Gauteng North High Court earlier this week, which sought an urgent review of Mkhwebane’s specific remedial action directing parliament to change the constitution in order to amend the reserve bank’s mandate.

This time round the bank is also asking the court to review and set aside Mkhwebane’s other remedial actions.

These include the reopening of proclamations directing the Special Investigation Unit (SIU) to recover over R1-billion from Absa; and the reopening of investigations into the alleged misappropriation of funds by other institutions mentioned in the CIEX report.

The Public Protector intends to oppose the application and will give her reasons in her answering affidavit, spokesperson Cleopatra Mosana said.

The CIEX report formed the genesis of the Public Protectors investigation into the ABSA lifeboat. The Bankorp group of banks – which was later bought by Absa – ran into substantial financial trouble in the 1980s. It was granted a series of bailouts by the Reserve Bank, the terms of which, in the view of the Public Protector, amounted to an “illegal gift” benefiting Absa and Bankorp.

The government commissioned CIEX in 1997– a UK based asset recovery agency – to help investigate and recover government funds allegedly misappropriated under apartheid.

But included in the grounds for a review the bank cites the “irrational investigation of the CIEX report”.

The Reserve Bank’s general counsel Johann De Jager argued in the papers that the CIEX report was little more than “a bounty hunters tender”. The firm’s findings lacked “methodological discipline” and made sweeping claims about money that could be recovered from people and institutions,including an unnamed apartheid minister and company’s that no longer exist such as Volkskas Bank – without setting out the basis of these claims. The firm also stood to gain substantial commission on any amounts recovered De Jager noted.

De Jager argued that the further investigation of the CIEX report was irrational.

It targeted entities that no longer exist, advised the recovery of funds from foreign states such as Germany and Switzerland and related to debts that arose more than twenty years ago and has since prescribed, De Jager said.

“There was no rational basis on which public money should be used to fund an SIU investigation into the alleged misappropriation of funds by entities that no longer exist and foreign governments,” De Jager said.

“There is even less rationality in using public money to investigate debts, which even if they were misappropriations, have been extinguished by prescription.”

Other grounds for review includes procedural unfairness by the public protector during the investigation, argued the bank.

After the parties involved, provided their comments on a preliminary report, the public protector interviewed a further two entities – the department of state security and Stephen Goodson. The Bank was not given the opportunity to comment on the input of these interviewees, said De Jager.

“This is a material gap in the process because, at least in so far as Mr Goodson is concerned his views on central banking and the Reserve Bank itself are maverick and ill-informed,” De Jager noted.

It was “very concerning” that his views were reflected in the report as Goodson has argued, among other things “the anti-apartheid struggle was little more than a grotesque hoax used to seduce South Africa into the clutches of the international bankers’ New World Order”.

The Mail & Guardian has previously reported on Goodson’s denial of the holocaust and his association with the Gupta-linked Black First Land First movement.

Goodson’s views appear to have substantially influenced the findings and remedial actions of the report, De Jager argued. Yet the bank was given “no opportunity to explain to the public protector that Mr Goodson’s theories have been debunked by decades of literature on sound monetary policy.

The SARB is also asking that the transcripts of the interviews held with Goodson and the department of state security be entered in the court record.

The bank also argued that Mkhwebane fundamentally misunderstood its role as the “lender of last resort” and why it extended lifeboat to the distressed Bankorp – which was eventually bought by ABSA.

“If Bankorp had failed at the time, a run on the banks was a real risk which could have had serious detrimental effects on the financial system as a whole,” De Jager said.

Furthermore Mkhwebane’s remedial action, to recover the money from Absa, was despite a previous SIU investigation into the matter which found that any recovery would have “likely have dire consequences for the economy and would not be in the public interest”, the bank said.

An attempt to recover the money would potentially require the bank to step in again to prevent a run on the banks and may require another bailout “of much greater proportion”.

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Lynley Donnelly
Lynley Donnelly
Lynley is a senior business reporter at the Mail & Guardian. But she has covered everything from social justice to general news to parliament - with the occasional segue into fashion and arts. She keeps coming to work because she loves stories, especially the kind that help people make sense of their world.

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