17/01/2017 16:32 SAST | Updated 18/01/2017 15:16 SAST

The Public Protector's Report: Absa Should Be Held Liable

It might be a provisional report, but Busisiwe Mkhwebane is pretty clear: the country's biggest bank owes the fiscus money.

Pieter du Toit

The Public Protector's Report: "Alleged failure by government to recover funds borrowed from Absa."

What is it?
The Public Protector was in 2011 asked by advocate Paul Hoffman to investigate why government did not act on the Ciex Report. This report of 62 pages is provisional and was forwarded for comment to all the affected parties, including the Presidency, the National Treasury and Absa.

What does it say?
It recommends that Treasury and the South African Reserve Bank (SARB) sue Absa in order to recover interest on the so-called lifeboat the SARB extended to the erstwhile Bankorp, which Absa bought in the early 1990s. It says government contravened various laws in not acting on the Ciex Report and that Absa was liable to pay annual interest on a loan amount of R1.5 billion granted to it and Bankorp between 1985 and 1990.

How far back does the Public Protector go?
The provisional report sets out the background to the deal between the SARB, Bankorp and later Absa, based on historical documents, news coverage and reports by the Davis Inquiry and the investigation by the Heath Special Investigation Unit. It also explains the mandate of the SARB during the time of the lifeboat and sketches the political situation at the time.

Is Absa's version of events included in the report?
According to the Public Protector, Absa denies that it was aware of the loan agreement between Bankorp and the SARB, but that evidence presented to it by Chris Stals, who was governor of the SARB at the time, suggests otherwise. The Public Protector further states evidence obtained by the office contradicts the findings of the Davis and Heath investigations, with the Public Protector saying the loan "was not repaid".

Why did the post-apartheid government not act?
According to interviews the public protectors did with former President Thabo Mbeki and his then-Minister of Finance, Trevor Manuel, there were fears that the systemic risk to the economy was too great and that pursuing reparations was not worth it. It is however common cause in the report that the original deal between the SARB and Bankorp/Absa was illegal and irregular.

How much then should be paid back?
The Public Protector says Absa owes the fiscus R1.125 billion plus interest, not exceeding the capital amount, which is a total of R2.250 billion. It argues the loan agreement included a stipulation that it would be paid back at 16% annual interest.

And the Ciex Report?
The Public Protector relies quite heavily on the Ciex Report, stating that the president should consider a commission of inquiry to investigate alleged apartheid corruption as outlined in a report by Michael Oatley, one of the British ex-spies tasked with creating the full report. It also sets out the possible terms of reference for such a commission, adding the basis could be the preamble to the Constitution that demands redress "for injustices of the past".

What now?
The report is provisional and is yet to be finalised. The respondents have until Feb. 28 to reply to the Public Protector's findings.