Reserve Bank governor Lesetja Kganyago. (Waldo Swiegers/Bloomberg via Getty Images)
The South African Reserve Bank’s investigation into possible exchange control regulations in the Phala Phala controversy was conducted without fear or favour, governor Lesetja Kganyago on Wednesday insisted as opposition parties charged that it was a political cover-up that would damage the image of the central bank.
“With the deputy governors, we kept an arm’s length from the investigation. We allowed our investigators latitude. We availed them massive resources, both internally and externally,” Kganyago said after hearing out MPs who railed at the bank’s handling of the matter for hours.
“They sought external legal resources. We availed those … They tabled the report to us as the executives of the bank, and we accepted it. We sought outside legal counsel on the report, we asked questions and we got satisfied that our team acted professionally, with integrity, and they acted independently and without fear, favour or prejudice.
“That is what we expected them to do, they did that.”
The governor was officially briefing parliament’s standing committee on finance on the Reserve Bank’s annual report but the subject was overshadowed by members’ questions and reservations on the outcome of the investigation.
The Reserve Bank last week cleared President Cyril Ramaphosa of allegations of breaking foreign exchange rules related to a stash of dollars worth more than R10 million at current conversion rates millions of rands that was stolen from his Phala Phala game farm on 9 February 2020.
The bank said in a brief statement that it reached this conclusion because, on the available facts, the transaction that saw a Sudanese buyer pay $580 000 to the Ntaba Nyoni Estates, which owns the farm and of which the president is the sole director, had not been completed, hence the obligation to report the forex within a set timeframe had not arisen.
“On the facts available to it, the Sarb [South African Reserve Bank] finds that there was no perfected transaction and thus the Sarb cannot conclude that there was any contravention of the Exchange Control Regulations … by Ntaba Nyoni Estates CC (the entity involved) or for that matter by the president,” it said.
The investigation had stretched over 12 months and involved interviewing key figures in the deal.
According to Kganyago, these included Ramaphosa, farm manager Hendrik von Wielligh and the caretaker, Silvester Ndlovu, who is said to have stashed the money inside a sofa from where it was subsequently stolen.
The fact that this transpired was revealed by Arthur Fraser, the former Zuma-era director of the State Security Agency, triggering the worst crisis of Ramaphosa’s political career and spawning a number of investigations, as well as a preliminary inquiry as to whether he should face impeachment by parliament. So far, Ramaphosa has escaped unscathed.
The report of the section 89 panel headed by former chief justice Sandile Ngcobo, which concluded that he should be subjected to an impeachment process, was rejected by the National Assembly thanks to the ANC’s majority in the chamber.
And in June, the public protector cleared the president of wrongdoing. Her remit, like that of the Reserve Bank, was narrow. It concerned mainly whether Ramaphosa had breached the Executive Ethics Code and the Constitution by doing paid work outside his official responsibilities and thus exposed himself to the risk of conflict of interest, and whether he had duly reported the crime.
Kganyago did add some detail to the summary contained in last week’s statement, notably that the money paid by Hazim Mustafa was a security deposit, not the sum total, for the buffalo he wanted to purchase.
The conditions precedent for concluding the deal included confirming the final sale price for each of the animals, which was tentatively set at R400 000. Thereafter, steps needed to be taken to arrange for their export, including testing by the state vet and obtaining a permit from the department of agriculture.
“The financial surveillance department identified core evidence which remained undisturbed and signalled that Ntaba Nyoni Estates, on the available evidence, did not become entitled to the foreign currency that it received from Mr Hazim.”
The central bank last week said it could not release its full findings because of legal constraints, terming it a “private and internal report”. That decision, or at least the stilted language in which the rationale for it was phrased, drew some criticism from legal quarters.
But on Wednesday, Kganyago pointed critics to section 33 of the South African Reserve Bank Act, noting that it prevents disclosure of, among others, any information relating to the affairs of the bank and any information acquired by directors, officers or employees of the bank in the course of their participation in the affairs of the bank.
These restrictions applied unless disclosure is required before, or compelled by, a court of law, Kganyago stressed, adding that he would be breaking the law if the central bank were to release the report unless told to do so by the courts.
“Transgression of section 33 is a criminal offence. So if you are asking me to avail the report, you are asking me to commit a criminal offence, which I am not prepared to do.”
In response to a question from Democratic Alliance (DA) MP Dion George, Kganyago said the report had not been sent to the president or to the minister of finance.
To criticism from MPs that the scope of the investigation was narrow, he said this indeed was the case as the Reserve Bank’s remit was confined to answering one question: was there any violation of section 6.1 of the exchange control regulations.
It reads: “Every person resident in the republic who becomes entitled to sell or to procure the sale of any foreign currency, shall within 30 days after becoming so entitled, make or cause to be made, a declaration in writing of such foreign currency to the treasury or to an authorised dealer.”
Contravening the regulation carries a fine of up to R250 000 or a prison term not exceeding five years.
“Yes, we were,” Kganyago said, “but when we say we were narrow in the scope it is because we focused on the laws that we administer,” he said, hence the question of whether it should have expanded the scope of its inquiry does not arise.
The central bank does not administer the Customs Act, he added. Therefore Economic Freedom Fighters (EFF) chief whip Floyd Shivambu’s question as to which port of entry the money that was ostensibly used to pay for buffalo from the president’s farm came through, was not for the Reserve Bank to answer.
“We are not responsible for the ports of entry …That is not the responsibility of the reserve bank and we are not going there.
“It might feel like we should have done something broader. No, we do not have the power that the customs officials have and so we cannot be there.”
Kganyago said neither could he assist Mzwanele Manyi, the spokesman for the Jacob Zuma Foundation and of late a member of the EFF, by way of an assurance that the money was not the proceeds of a crime. Manyi had suggested that the disclosure that the president kept a large sum of undeclared foreign currency at his farm pointed to money-laundering.
“We were not investigating a crime. We were investigating the possible violation of exchange control regulations. There are institutions in our society tasked with the responsibility to investigate crime. The Reserve Bank is not such.”
If there had been financial wrongdoing and money-laundering, it was a matter for the Financial Intelligence Centre and the Directorate for Priority Crimes Investigation to take further.
As a follow-up question, Manyi asked why the central bank did not take it upon itself to alert those institutions that a suspicion of money-laundering arose because the money was paid to the president’s farm for buffalo in hard cash, without ever entering the banking system.
He suggested that all the authorities who have investigated the matter, including the Reserve Bank and the South African Revenue Service, have lent themselves to a cover-up of wrongdoing by restricting their investigations to the information at their disposal within the banking system, and not inquiring into what was termed “undetected transactions”.
“The authorities are aware of it but they are basically giving it the whitewash. Why are they looking at the system when the money is not in the system, it is in the sofa? They are looking in the wrong place,” he said.
“If the money is in the sofa, why is the Reserve Bank even pronouncing on 6.1 as if the money is in the system when the money is in the sofa, you know?”
Manyi said if the bank had evidence that money was brought into the country but was not declared to customs, it was plain that it was brought in illegally.
“Why are you so indifferent about this?”
Kganyago replied that none of the institutions accused by Manyi of deliberately investigating the matter narrowly could act beyond their powers as defined in the law.
“We are applying the law as passed by this parliament, and the regulations attendant to it.”
The EFF, DA and the United Democratic Movement all indicated that they are likely to challenge the central bank’s report in court. The African Transformation Movement has launched a legal challenge of the public protector’s report.