A preliminary report by the office of the public protector has reportedly found that Absa benefited from an apartheid-era bailout that was in breach of the country’s constitution and the Public Finance Management Act.
The mega-bank could be forced to fork out R2.25 billion to the national fiscus if the draft report compiled by Public Protector Busisiwe Mkhwebane remains unchanged, the Mail & Guardian reported on Friday.
The weekly says that the report, seen by the paper, recommends that President Jacob Zuma should consider establishing a commission of inquiry into apartheid-era looting of the state. The document has been sent to Absa, the SA Reserve Bank (Sarb) and National Treasury.
Mkhwebane told the paper that the report was provisional and she was awaiting a response from the implicated parties, which could change the final status of the report “drastically”.
The implicated parties had until Monday to make submissions as to why the damning findings should not be changed. However, they have requested an extension and the date was changed to February 28 to make submissions.
From where does the probe originate?
The report comes mainly from a 1997 investigation by a covert United Kingdom-based asset recovery agency called Ciex. It was headed by former UK intelligence official Michael Oatley, who approached the SA government to investigate and recover public funds and assets misappropriated during the apartheid-era.
The government and the SA secret service were reportedly represented at the time by Billy Masetlha, a former head of the SA National Intelligence Agency, and contracted Ciex to probe allegations of large-scale looting of the state under the apartheid government.
Ciex’s report into the allegation, known as Project Spear, apparently investigated how R1.5 billion was offered to the Bankorp group of banks disguised as a bank “lifeboat”.
According to M&G, Ciex also investigated R100 million given to Nedbank and several billions allegedly siphoned offshore illegally.
From 1985 to 1992, the apartheid government, through Sarb, reportedly provided Bankorp with a series of bailouts to offset bad loans that threatened the bank’s survival. One of the bailouts included R225 million a year for a period of five years.
“It was implemented in a very complex series of transactions, described as simulated transactions. According to one investigation, these were deliberately engineered for secrecy, in one case using what amounted to a front company.” M&G reported.
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It was in 1999 that Ciex suggested that Sarb should recover the billions from Bankorp, which had been taken over by Absa. But according to Mkhwebane’s preliminary report, the government has failed to implement Project Spear, despite footing the bill for Ciex’s investigations.
The asset recovery agency was paid for a period 0f six months, amounting to 600 000 pounds, the equivalent of about R10 million in today’s terms
Absa has described the draft report as containing “several factual and legal inaccuracies”. The bank said it perpetuated an incorrect view that it had benefited from the bailout in question, reported the M&G.
It also said it was “regrettable” that the preliminary report had been leaked to the media.