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In The News South Africa

Public Protector will not oppose Sarb court application

JOHANNESBURG, July 11 – Public Protector Busisiwe Mkhwebane has decided not to oppose the SA Reserve Bank’s review application, following her report in which she directed Parliament to effect a Constitutional amendment to Sarb’s powers, her office said on Monday.

“Having considered the legal advice from the senior counsel, which advice she accepted, the Public Protector, Advocate Busisiwe Mkhwebane, has decided not to oppose Sarb’s review application,” her spokesperson Cleopatra Mosana said in a statement.

In her report titled “Alleged Failure to Recover misappropriated Funds”, released in June, Mkhwebane criticised government and Sarb for failing to recover an apartheid-era loan of R1.125 billion from Bankorp Limited/Absa Bank, advanced as an “illegal gift” to the Bankorp group. Mkhwebane also directed Parliament to effect a Constitutional amendment to Sarb’s powers.

In June, Mkhwebane released her final report regarding her investigation into the assistance provided by the Sarb to Bankorp between 1985 and 1995. Bankorp was acquired by Absa in 1992. Mkhwebane said the amount given to Bankorp Limited/Absa Bank belonged to the people of South Africa.

At the time, she said failure to recover the “gift” resulted in prejudice to the people of South Africa as the public funds could have benefited the broader society instead of a handful of shareholders of Bankorp Limited/Absa Bank.

On Monday, Mosana said that in her answering affidavit, Mkhwebane explained the reasons for arriving at the remedial action of recommending an amendment to the constitution stating that from the investigation it appeared that the major motivation for the “lifeboat” was the fear of a “run on the banks”, which could result in adverse financial impacts and uncertainty amongst local and international investors.

Her office said that it was not evident that the “socio-economic well-being of South Africans, including as regards the diversion of money that could have been used for job creation and other socio-economic objectives featured in the assessment of whether or not the “lifeboat” ought to have been extended”.

“In her view, such a failure to assess the other socio-economic objectives were probably enabled, and could continue to be enabled, by the narrowly stated mandate of the Sarb. If left unchanged or reviewed, this narrowly stated mandate could continue to enable decisions to be taken that prejudice the socio-economic interests of ordinary South Africans, including as to the realisation of full employment or job creation,” Mosana said.

“It was for this reason that the Public Protector considered that a possible review and broadening of the Sarb mandate would provide a long-term effective remedy to possible prejudicial decisions by the Sarb underpinned by the narrowness of its mandate.”

On July 5, Finance Minister Malusi Gigaba instructed legal counsel to institute judicial review proceedings in a bid to have Mkhwebane’s findings and remedial action on Absa Bank and the Sarb set aside.

“The basis for the review is that, the remedial action breaches the principle of legality and the findings of fact are not necessarily adequately connected to the evidence which was before the Public Protector,” Gigaba’s office said at the time.

Gigaba said the decision to seek judicial review was not taken lightly, but was done to protect the independence of the reserve bank. Gigaba has also instructed lawyers to challenge Mkhwebane’s directive that government should take steps, through the Special Investigating Unit, to recover the money from Absa.

Gigaba joins Absa and Sarb which has instituted review proceedings following the release of Mkhwebane’s report.

Absa said it was approaching the High Court due to numerous misrepresentations and factual inaccuracies which formed the basis of the Public Protector’s findings, and what the bank submits were the “irrational and unreasonable” legal conclusions in the report. Absa said the misconceptions and inaccuracies in the report were profound and damaging to its reputation.

“We have accordingly instructed our lawyers to immediately prepare an application to the High Court to have the report and its remedial actions set aside,” Absa said in June.

“We deny that Absa received R1.125 billion by way of unlawful assistance and we firmly maintain our position that all of Absa’s obligations to the South African Reserve Bank were met in full by October 1995.”

The Public Protector probed allegations that CIEX, a covert United Kingdom-based asset recovery agency headed by Michael Oatley, was contracted by Pretoria to assist in investigating and recovering misappropriated public funds and assets allegedly committed during the apartheid regime.

Mkhwebane said the South African government had failed to implement the CIEX report because she found no evidence that any action was taken to pursue the CIEX report after government had commissioned and duly paid for its investigation.


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