/ 6 September 2023

DA asks high court to set aside Reserve Bank report that clears Ramaphosa

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Decisions: The coalitions the ANC choose to form seem likely to shape which way the South African economy will go. (Waldo Swiegers/Bloomberg via Getty Images)

The Democratic Alliance (DA) has filed an application for legal review of the South African Reserve Bank’s report which concluded that President Cyril Ramaphosa did not breach exchange control regulations in the Phala Phala controversy.

In a founding affidavit to the Pretoria high court, DA MP Dion George argues that the central bank’s reasoning for the finding was flawed.

The Reserve Bank, in a summary of the report compiled after a year-long investigation, said an obligation to declare foreign currency received from a Sudanese livestock buyer did not arise because the money was paid as a security deposit.

The sale contract was subject to suspensive conditions, which were never met, and therefore section 6.1 of the exchange control regime did not apply.

This provision 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.” 

In a briefing to parliament’s standing committee on finance last week, Reserve Bank governor Lesetja Kganyago reiterated that, on the available evidence, the president did not become entitled to sell the$580,000 (about R10 million at current conversion rates) received from businessman Hazim Mustafa because the sale was not complete. Therefore, he was not obliged to declare the forex.

Kganyago said the parties had yet to agree on a final sale price for 20 buffalo Mustafa had selected on Christmas Day in 2019. 

Instead the money, which was stolen in a burglary at the president’s estate 46 days later, on 9 February 2020, was the sum of a tentative price of R400 000 for each of the animals.

Once a price had been set, 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.

George submitted that the fact that these conditions needed to be met did not mean that the president did not become entitled to money Mustafa paid to management at this farm, because “a security deposit is a complete transaction”.

This meant that should the sale fall through, the seller forfeits the sum, and is one of four fundamental problems with the rationale given by the bank, according to the DA’s application.

“First … The evidence before the SARB [South African Reserve Bank], on the SARB’s version, is that the deposit was a ‘security deposit’,” George said.

“A security deposit provides the depositee with an unconditional entitlement to that deposit. So the president should have declared it.”

Second, he said, the Reserve Bank seemingly failed to establish whether the deposit was refundable.

“If the deposit was non-refundable, then obviously the president was entitled to the funds. The SARB apparently assumed that the deposit was refundable, without inquiring with witnesses if this was the case.”

The brief summary released by the central bank is silent on this detail. Kganyago did tell MPs that its investigators interviewed, among others, 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 stolen.

He responded to charges of a cover-up from MPs by pointing them to section 33 of the South African Reserve Bank Act, which prohibits disclosure of, inter alia, any information acquired by directors, officers or employees of the bank in the course of their participation in the affairs of the bank. 

“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,” said the governor, who added that a copy of the report had not been sent to the president.

The affidavit notes that the DA wrote to Kganyago to request a copy of the report and that he refused for the above reason. It insists that the Reserve Bank provides the court with its record of decision-making under rule 53 of the uniform rules of court.

The Reserve Bank Act allows this, George said, because it stipulates that disclosure is prohibited unless it is “required before a court of law” or under any law.

Insight into the record was necessary to establish whether the central bank did a “sensible and thorough” investigation, he added, noting that according to Kganyago it reached its conclusion without having a copy of a sale contract, and made do with handwritten invoice for the dollars in question.

On the face of it, the DA argues, the Reserve Bank not only failed to consider whether the deposit was refundable but whether the sale conditions suspended the president’s entitlement to it, or only his obligation to deliver the buffalo to the buyer.

“Third, even if the deposit and the sale were subject to suspensive conditions, the existence of such suspensive conditions did not without more preclude an entitlement to the cash,” he said.

“Fourth, even if the president’s entitlement to the cash was suspended, section 6.1 requires a declaration of contingent entitlements to foreign currency. The SARB’s contrary conclusion is a material error of law,”

This rendered the Reserve Bank’s decision irrational, he said, and hence it fell foul of section 172(1)(a) of the Constitution and must be declared invalid.

The DA submitted a complaint to the Reserve Bank after the burglary at Ramaphosa’s farm came to light courtesy of former intelligence chief and Jacob Zuma’s ally, Arthur Fraser, some six months before the ANC’s elective conference at the end of 2022.

Ramaphosa survived an impeachment motion days before the conference when the National Assembly rejected an advisory report by a panel headed by former chief justice Sandile Ngcobo. It had recommended that he should face a section 89 inquiry because his version of what transpired at his farm left several questions answered.

The public protector also investigated the matter, and cleared Ramaphosa of wrongdoing in a report released in June. But of all the investigations spawned by the scandal, that of the Reserve Bank was always considered to pose the biggest risk to the president.

Opposition parties have argued that the outcome and the unanswered questions it leaves posed a threat to the reputation of the central bank.

“We must protect and ensure that the South African Reserve Bank is acting with integrity and that it is not being politically interfered with,” George told the Mail & Guardian on Wednesday. 

“If we look around us, to all the other institutions that are fundamental to our democracy, they are being eroded.”