South Africa

ANALYSIS

The curse of CIEX – Anatomy of the legal boomerang that came back to haunt Mkhwebane

Public Protector Busisiwe Mkhwebane. (Photo: Leila Dougan)

At the heart of Busisiwe Mkhwebane’s slow walk to accountability lies a boldly unconstitutional attempt in 2017 at capturing the South African Reserve Bank. This while commercial banks were shutting down Gupta-related accounts and the SA Reserve Bank fined the Bank of Baroda for doing business with former president Jacob Zuma’s key enablers.

Public Protector (PP) Busisiwe Mkhwebane has again approached the courts in an attempt to ward off a parliamentary impeachment hearing and from being suspended by President Cyril Ramaphosa in the meantime.

After lodging her complaint with the Western Cape High Court on 1 April, Mkhwebane, in media interviews, pinned the start of her “problems” on her “Reserve Bank/Bankorp” investigation and report. 

As a result, she claimed, she was being targeted for “going after the powerful and untouchables”.

In the real world, Mkhwebane’s order that the Constitution be amended to alter the mandate of the SA Reserve Bank (Sarb), thus nationalising it, has been thoroughly legally trashed all the way up to the Constitutional Court. 

A first-year law student could have seen through the crude attempt at usurping power through the back door even if it was dressed in legalese and RET indignation. 

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In late March 2017, bear in mind, Malusi Gigaba was appointed minister of finance after the dismissal of Pravin Gordhan.

The courts all ultimately found Mkhwebane had acted in “bad faith” and had exceeded the boundaries of her “potential indemnification” under the Public Protector Act.

It is this same “Reserve Bank” report that now sees Mkhwebane facing three charges of perjury as she was found to have lied about clandestine meetings with Jacob Zuma and the State Security Agency (SSA) prior to releasing her report.

Not only that, but Mkhwebane had also copied and pasted, or let’s rather say “inserted”, word for word, a paragraph given to her on 6 June 2017 by Maiendra Moodley, a State Security Agency (SSA) official. 

That Moodley dictated the wording to the PP was confirmed by Tebogo Kekana, a senior investigator with the PP’s office. 

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Kekana was in the room when Mkhwebane instructed him to insert the recommendation to alter the mandate of Sarb. 

Mkhwebane had also lied to the courts about Moodley’s role, claiming he was an “economist” when he was, in fact, a computer systems expert seconded to the SSA during Arthur Fraser’s tenure as director-general between 2016 and 2017.

Mkhwebane published her “final” report on 19 June 2017, the same month in which Sarb fined the Bank of Baroda R11-million, a penalty for a truckload of ethical transgressions.

The most notable was the bank’s financing of the purchase of a fitting home for president Jacob Zuma’s fourth wife, Bongi Ngema-Zuma, paid for by the Gupta family through Bank of Baroda accounts.

Mkhwebane’s current fate was sealed when, shortly after her appointment in 2016, she came across her predecessor, Thuli Madonsela’s abandoned investigation initiated after a complaint in 2011 by advocate Paul Hoffman, the chair of the Institute for Accountability in Southern Africa (Ifaisa). 

Mkhwebane resuscitated the semi-cold case, mulled it over, consulted and must have come to the conclusion, or was advised, that the complaint by Hoffman could be legally weaponised and moulded in a once-off opportunity to clip the wings of the too-independent Sarb before it was too late.

Hoffman’s original complaint had sought an investigation into a government agreement with CIEX, a covert investigative body in the UK in relation to its 1997 investigation into the Reserve Bank’s 1992 R1.2-billion bailout of Bankorp.

The complaint back then was against the SSA for its wasteful expenditure and not “a complaint against Bankorp or the Reserve Bank”, Hoffman later reminded the PP.

During Madonsela’s tenure, an intern had worked on the matter, then resigned, and the half-completed probe – for six long years – lay on a forgotten heap or unopened in a folder in a computer until 2017.

Already in 2016, four South African banks cut ties with the Gupta family and their “enterprises”, so the heat was on.

In January 2017 a series of emails began to bounce between Hoffman and the PP, beginning on 9 January when Accountability Now (as Ifaisa is now known) began receiving media inquiries about a “provisional report” Mkhwebane had completed and had handed to then president Jacob Zuma without communicating with Hoffman or his organisation, the actual complainants.

It was Accountability Now that also later lodged perjury charges against Mkhwebane after the courts had found she had lied.

The National Prosecuting Authority has now charged her with lying under oath in November 2016, April 2018 and June 2018 in deposing affidavits in filing papers to appeal against adverse findings made against her office in the High Court in Pretoria.

On 13 January, two days after receiving calls from the media with regard to a “provisional report”, Hoffman says he received a report from Mkhwebane. 

What followed were emails between the two where Hoffman, as the original complainant, set out 13 questions with regard to Mkhwebane’s investigation, procedures and the right to confidentiality and reply.

Hoffman also asked about Mkhwebane’s signature on the 2016 “provisional report” as well as a covering letter addressed to Zuma. Mkhwebane had initially denied that any such “provisional report” existed.

When no reply was forthcoming and Hoffman threatened to report her conduct to the Justice Portfolio Committee, Mkhwebane replied on 14 January, “Go ahead and report the matter to the National Assembly since I am accountable to them I can’t investigate myself.”

On 11 April 2022 Hoffman wrote to Ramaphosa copying in the thread of emails addressed to the PP and the Justice Portfolio Committee and requesting him to take this “into account when you consider the representations made to you by the Public Protector concerning her suspension”.

With regard to Mkhwebane’s claim that Ramaphosa was “too conflicted” to suspend her as her office was in the process of conducting various investigations into the President, Hoffman drew attention to the provisions of sections 96(2)(b) and 90 (1) of the Constitution. 

“Should there be ‘the risk of a conflict’ [no actual conflict need arise as was decided by the ConCourt in the Nkandla matter] then you are ‘unable to fulfil’ the duty to suspend and the Deputy President can act in your place. If there is no such risk you are constitutionally empowered to suspend, which we urge you to do.” 

Mkhwebane, whose term of office ends in 2023, has said she had no issue with the Deputy President being delegated to do the task, but she asked: “What’s the rush?”

Mkhwebane said she intended to remain in office until her term ends. DM

The Sarb/Bankorp complaint and report that caused all the trouble

In 2000 an expert panel led by Judge Dennis Davis investigated Sarb’s role in the financial bailout of the ailing Bankorp Group (including Trust Bank, Senbank and Bankfin) between 1985 and 1991 and amounting to some R1.1-billion.

While the “lifeboat”, the Davis panel found, had been given in breach of the banking laws of the time, it concluded that “considering the economic climate of the time [1985 onwards], it was justified in the interest of protecting the stability of the domestic banking system”.

When Absa acquired Bankorp in 1992 Sarb “lifeboat” was transferred and continued until 1995. 

The “too big to fail” phenomenon, in other words.

Way back in 2000, the Davis panel found that the flaws in Sarb’s “methods of assistance to Bankorp/Absa were of a serious nature” and had been illegal. That is one thing Mkhwebane got right in her report in 2017.

The Davis panel added that in its opinion, “The provision of a grant, using a simulated transaction, implies that the Reserve Bank acted outside its statutory powers, for, judged by international standards as required by section 10(1)(s) of the SA Reserve Bank Act of 1989, that action meant that the function being carried out was not such as central banks customarily may perform.”

What Sarb’s bailout had accomplished, said the panel, was the “conferring of benefits” to Sanlam’s policyholders and pension fund beneficiaries and the minority shareholders of Bankorp.

That meant thousands or hundreds of thousands of individual beneficiaries who were going to prove impossible to locate to scrape back the R1.1-billion. Technically and practically a nightmare.

“It is the view of the panel that, in principle, restitution from the beneficiaries may be sought, but that it may well be difficult and extremely costly to achieve through litigation, because of the difficulty of determining the exact class of beneficiaries, apportioning the enrichment and the fact that duly appointed officials of the Reserve Bank made the key decisions.”

Public perceptions, said Davis in the executive summary of the panel, had “incorrectly asserted that major benefits were received by the shareholders of Absa”.

In 2017, the PP was of a different opinion.

Unbeknownst to Davis and the panel at the time, he told Cape Talk in 2017, the South African government had, in 1997, employed the UK firm CIEX to investigate the bailout. 

It was only in 2011, 11 years after the Davis panel’s finding and 14 years after the CIEX report was commissioned by the government that advocate Paul Hoffman of Accountability Now lodged a complaint with the then Public Protector, Thuli Madonsela. Hoffman’s complaint was only about the SSA’s expenditure on the CIEX report.

It was this complaint that Mkhwebane picked up as the key to her 2017 investigation into the bailout and her subsequent report which recommended that the Special Investigating Unit recover from Absa the R1.1-billion.

Sarb and Absa did not take the PP’s decree lying down and took Mkhwebane to court.

Mkhwebane later made public in affidavits her meetings with “an economist” who turned out to be the SSA agent Maiendra Moodley under Arthur Fraser’s wing. It was Moodley who was responsible for the wording of the paragraph scrapping the Sarb mandate.

In the end, Mkhwebane shot herself in both stilettoed feet when she chose this legal strategy. It was risky but she still clearly believes it was worth it.

Mkhwebane also failed to mention secret meetings with Zuma prior to publishing the report as well as her meeting with the former president to share her excellent work. 

This was in 2016, way before anyone, including the original complainant, had had sight of a single shred of research or evidence.

As far as the Davis panel and the experts who unpicked the mess go, the R1.1-billion bailout had been repaid by Absa when it bought Bankorp. DM

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