/ 28 February 2018

A case for Mkhwebane’s removal

'Thuli Modonsela
'Thuli Modonsela

Between 1985 and 1991 the South African Reserve Bank provided financial assistance (a “lifeboat”) to Bankorp, which was in serious financial difficulty. The assistance consisted of R1.25-billion, of which R300-million was set at an interest rate of 3% a year and the balance at 16% interest a year.

Part of the agreement was that Bankorp would invest R400-million in the Reserve Bank, and R600-million would be invested at 15% interest a year, which would be used to buy government bonds to serve as security for the loans.

On April 1 1992 Absa Bank acquired Bankorp for R1.23-billion. The acquisition was conditional on the existing financial assistance arrangements between the Reserve Bank and Bankorp being extended to Absa. The agreement between Absa and the Reserve Bank was subsequently terminated.

Two inquiries, one headed by Judge Willem Heath and another by Judge Dennis Davis, found that the assistance rendered by the Reserve Bank was illegal. Yet Heath found that, were Absa ordered to repay the benefit of R1.25-billion, it could trigger a “run on South African banks”.

Davis determined that the seller of the Bankorp shares, Sanlam, had been the beneficiary: the only value left in Bankorp at the time of the Absa acquisition was the loan from the Reserve Bank, which had constituted the basis of the purchase price.

Because Sanlam had demutualised, however, it would be extremely difficult to recover the proceeds from Sanlam’s individual policy holders, who had enjoyed the benefits of the sale.

A number of years passed before advocate Paul Hoffman, relying on no more than a proposal from an asset recovery centre called Ciex to recover the money from Absa, lodged a complaint with the public protector, notwithstanding that the Ciex document was as unsubstantiated as a Mills & Boon novel.

Thuli Modonsela, then the public protector, was cautious about producing a report on this issue, her successor, Busiswe Mkhwebane, appeared to leap at the opportunity.

On June 19 last year, Mkhwebane issued a report in which she held that Absa must pay back the R1.25-billion and, further, that the treasury and the Reserve Bank must — apart from ensuring a change to the Constitution — put in place systems, regulations and policies to prevent “this anomaly in providing loans/lifeboats to banks in future”.

This decision triggered a comprehensive application by the treasury, the Reserve Bank and Absa that challenged all the components of the remedial action in the report.

The judgment of a full Bench of three judges of the high court in Pretoria did not need to traverse the substantive arguments about the lack of rationality of the contents of Mkhwebane’s report, given the manner in which the public protector had comported herself in the compilation of the report. For example, it transpired that she had twice met Jacob Zuma, then the president, before finalising her report and, further, that she had not told the court about the second meeting.

The affected parties found out about this meeting only when a handwritten note was found in the record. Small wonder that the court said: “The public protector did not conduct herself in a manner which should be expected from a person occupying the office of the public protector. In these proceedings and the Reserve Bank’s submissions in this regard are warranted. She did not have regard thereto that her office requires her to be objective, honest and to deal with matters according to the law and that a higher standard is expected from her. She failed to explain her actions adequately.”

In setting aside her ill-conceived report, the court went on to hold that “it transpired that the public protector does not fully understand her constitutional duty to be impartial and to perform her functions without fear, favour or prejudice. She failed to disclose in her report that she had a meeting with the presidency on April 25 2017 and again on June 7 2017. As we have already pointed out above, it was only in her answering affidavit that she admitted the meeting on April 25 2017, but she was totally silent on the second meeting, which took place on June 7 2017. She failed to realise the importance of explaining her actions in this regard, more particularly the last meeting she had with the presidency. This last meeting is also veiled in obscurity if one takes into account that no transcripts or any minutes thereof have been made available. This all took place under circumstances where she failed to afford the reviewing parties a similar opportunity to meet with her.”

Based on this finding, the court ordered Mkhwebane to pay 15% of the costs in her personal capacity.

This represents a devastating set of conclusions. It constitutes a judicial confirmation of sustained public suspicion that Mkhwebane was a Zuma appointment sent to this critical office to ensure that it would not disturb the Republic of Zuptas — in contrast to her predecessor.

In a political climate in which corruption has to be fought, and the constitutional principle of accountability of public institutions restored, there is surely no place for the present incumbent of the public protector’s office.

Parliament has the opportunity to show its newfound commitment to constitutional values by moving expeditiously to remove her. The court judgment surely leaves it no choice.