ABSA's 5 key arguments on Public Protector report

Cape Town - ABSA reiterated that the Public Protector's report stating that it allegedly owes R1.125bn to the SA Reserve Bank is baseless, unfair and prejudicial.

On Thursday the bank announced that it submitted an application in the North Gauteng High Court in Pretoria to challenge the report, which will also give South Africans an opportunity to hear the facts and watch them being interrogated.

"We look forward to this case being brought to court," the bank said."The years of baseless accusations have been unfair and prejudicial to ABSA."

READ: ABSA challenges Public Protector’s report

ABSA said as part of their application, they are also requesting the record of all documents that served before the Public Protector in doing her report.  

"Once we have the record, we will supplement our application as may be necessary. Given the level of public interest and discussion of this matter, we believe the public has a right to have access to this information so this matter can be dealt with and concluded in a transparent manner."

Public Protector Busisiwe Mkwhebane in June ordered ABSA to pay R1.125bn that the SARB granted to Bankorp - which was later bought by ABSA - during Apartheid.

Mkhwebane said two investigations into the matter established that the financial aid given to Bankorp was irregular. She found that in granting the financial aid to Bankorp the SARB failed to comply with the South African Reserve Bank Act. Furthermore, she said the Ministry of Finance had a duty in terms of the act to ensure compliance by SARB, something she claims it failed to do.

The Public Protector also found that the government failed to adhere to section 195 of the Constitution by failing to promote efficient and effective public administration.

Her report also ordered Parliament to amend the Constitution to change the SARB’s mandate of inflation targeting to one that is more pro-growth.

READ: SARB: Billions at risk over 'damaging' actions by Public Protector

The SARB filed court papers to take Mkhwebane’s report on review. At the time, ABSA filed an urgent application in support of the SARB's application. Mkhwebane indicated that she will not oppose the aspect of her report proposing to have the Reserve Bank’s constitutional mandate changed.

Finance Minister Malusi Gigaba and Parliament are also taking the report on review.

ABSA highlighted 5 key points that it will challenge in court:

Fair value for Bankorp

ABSA said the price paid to purchase Bankorp took into account the assistance from the SARB.

"The eventual price paid for Bankorp by ABSA was R1.23 billion and the net asset value of Bankorp was R1.222 billion (calculated including the total net yield payable under the financial assistance programme to Bankorp). ABSA was therefore not enriched."

The Public Protector’s conclusion, that the SARB assistance to Bankorp was not in the public interest, is not proven, argued the bank.

"On the contrary both the Davis Panel and Heath investigation, the two statutory investigations on the matter, found that the assistance was warranted to protect the financial system of South Africa. The unlawfulness, the investigations found, was in the manner in which the SARB extended the support."

ABSA said the facts found by the Davis Panel were corroborated in the evidence ABSA and SARB placed before the Public Protector.  

READ: Absa: No obligation to pay R1.125bn bailout

"There was no evidence to contradict those facts. The Public Protector was selective in which aspects of the various reports put before her she would use. As a result, the report fails to explain why the Davis Panel (as well as ABSA, the SARB and the Treasury) was wrong in its analysis of the agreement of sale between ABSA and Bankorp."

ABSA also said the CIEX  investigation offered no reasoning whatsoever for its conclusion that ABSA was liable for R3.2bn. "It was merely advice from CIEX that the government should coerce ABSA into paying."

The 52-page report was drawn up in the late 1990s by former British operative and founder of CIEX, Michael Oatlely.

It outlined how the new South African government could recoup monies that were lost because of alleged apartheid era looting or illicit activities. However, the administration under former president Thabo Mbeki decided not to act on the CIEX report.

Procedural unfairness

ABSA claimed that the Public Protector violated the bank’s right to procedural fairness in the manner in which she imposed the remedial action.

“Firstly, she refused to provide ABSA with documents upon which she relied to make her findings both in the Provisional and Final Report, thus denying ABSA the opportunity to properly appreciate and respond to the case it had to meet.

“Secondly, she relied heavily on the CIEX document which in turn made adverse findings against ABSA.”

ABSA stated that the CIEX probe never afforded it an opportunity to make representations thereby completely disregarding its basic right to a fair hearing.
Debt prescribed

ABSA further maintains that it has met all obligations relating to the SARB assistance in October 1995.
“However, it is worth noting that any claim, valid or not, would be subject to the law of prescription. The alleged debt would have prescribed 3 years after it was due. More than 21 years have passed since it was allegedly due.”  

It added that the Public Protector’s views on prescription appear to rest on a flawed understanding of the role played by the law of prescription.

“There is no dispute that the debt has prescribed. The Public Protector clearly believes that the law should be different, but this view on the law of prescription cannot alter that law.”  


ABSA also argues that the Public Protector misapplied the principle of jurisdiction by embarking upon an investigation and imposing remedial action which fundamentally related to events which occurred before the establishment of her office and the coming into effect of the Public Protector Act.

READ: Gigaba takes Public Protector's ABSA report on review

“In the final report, the Public Protector correctly states that: ‘It should be noted that the Public Protector has no jurisdiction to investigate matters that took place before the coming into effect of the Public Protector Act or the establishment of Public Protector Office in 1995. It would be in contravention of the Public Protector Act for this office to investigate matters that took place before the coming into effect of the Public Protector Act or the establishment of this office in October 1995.’”

ABSA noted that the CIEX document concerns transactions which occurred before the coming into effect of the Public Protector Act and the establishment of the Office of the Public Protector.

“By relying on the CIEX report, the Public Protector is in truth, imposing recovery mechanisms in respect of debts allegedly incurred before the establishment of the Office and the coming into operation of the Public Protector Act.”

'Remedial action is substantively unlawful'

ABSA is of the view that the remedial action prescribed by the Public Protector is substantially unlawful.

Mkhwebane referred the matter to the Special Investigating Unit (SIU) in terms of the Public Protector Act to reopen and amend Proclamation R47 of 1998 published in the Government Gazette dated May 7 1998, in order to recover the R1.125bn.

She also wants the SIU to reopen and amend Proclamation R47 of 1998 published in the Government Gazette dated May 7 1998 in order to investigate alleged misappropriated public funds given to various institutions as mentioned in the CIEX report.

Mkhwebane said SARB must cooperate fully with the SIU and also assist the SIU in the recovery of what she found to be misappropriated public funds.

READ: ABSA files papers against Public Protector, Ramos warns of downgrade

“Firstly, no such amount is owing at all. Secondly, to require the Special Investigating Unit (SIU) to approach the President to re-open an investigation which has already been concluded would be unlawful because the very matter has already been investigated and the issue closed,” said ABSA.

“By prescribing the remedial action in a manner that compels the SIU and the President to act as directed, the Public Protector has exceeded her own powers and usurped the powers of the SIU and the President.”

ABSA added that since the debt has prescribed, the remedial action requires the SIU and the President to embark upon a process which it believes is entirely irrational in the circumstances.

The Office of the Public Protector is yet to receive ABSA's court papers, said spokesperson Cleopatra Mosana.

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