Mkhwebane finds Absa should pay back the money

Public Protector Busisiwe Mkhwebane has found that government acted improperly by failing to act on a report by a United Kingdom-based asset recovery agency, CIEX, which was contracted 20 years ago to recover public funds and assets allegedly misappropriated during apartheid.

She criticised government and the SA Reserve Bank (Sarb) for failing to recover more than R1 billion rand from Bankorp Limited/Absa Bank billions advanced as an “illegal gift” to the Bankorp group, which was bought by Absa in the early 1990s.

Addressing the media in Pretoria on Monday morning, Mkhwebane said Absa bank and its predecessor Bankorp unduly benefited from an SA Reserve Bank (Sarb) bailout to the value of R1.125 billion and recommended the Special Investigating Unit (SIU) should recover the funds.

“The allegation whether the South African government and the Reserve Bank improperly failed to recover from Bankorp Limited/ABSA Bank an amount of R3.2 billion cited on the CIEX report, owed as a result of an illegal gift given to Bankorp Limited/ABSA Bank between 1986 and 1995 is substantiated,” Mkhwebane told a media briefing in Pretoria.

“The correct amount of the illegal gift granted to Bankorp Limited/ABSA Bank is in the amount of R1.125 billion.”

Mkhwebane says the failure by government to recover misappropriated public funds as recommended in the CIEX report, known as Project Spear, was inconsistent with duties imposed by section 195 of the Constitution, which requires high standards of professional ethics.

Mkhwebane added that the South African populace had been prejudiced by government’s failure to recoup those huge sums of money.

It is alleged that from 1985 to 1995 the apartheid government, through Sarb, 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.

In 1999 when CIEX suggested that Sarb should recover the billions from Bankorp, the government apparently failed to implement Project Spear, despite footing the bill for CIEX’s investigations.

“The amount given to Bankorp Limited/ABSA Bank belonged to the people of South Africa. 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,” she said.

“The conduct of the South African government and the South African Reserve Bank goes against the ethos laid out in the preamble of the Constitution and section 195 of the Constitution in respect of redressing social injustices and promoting efficiency.”

Mkhwebane said the conduct of government and the SARB constitutes “improper conduct and maladministration”.

For remedial action, Mkhwebane has referred the matter to the Special Investigating Unit, which must in turn approach President Jacob Zuma to reopen the presidential proclamation R47 of 1998 “in order to recover the misappropriated public funds unlawfully given to Absa Bank in the amount of R1.125 billion”.

The Public Protector has 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 reign of the apartheid regime.

“The allegation whether the South African government improperly failed to implement the CIEX report … after commissioning and duly paying for same is substantiated. CIEX Limited was paid 600,000 British pounds for services which were never used by the South African government. No evidence could be found that any action was taken specifically in pursuit of the CIEX report,” said Mkhwebane.

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