Absa challenges Public Protector’s report

Cape Town - Absa has launched an application in the North Gauteng High Court in Pretoria to review and set aside the Public Protector’s Bankorp report, the bank announced on Thursday.

Public Protector Busisiwe Mkwhebane in June ordered Absa to pay back a bailout of R1.125bn that the SA Reserve Bank (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 released in June also ordered Parliament to amend the Constitution to change the SARB’s mandate of inflation targeting to one that is more pro-growth.

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.

On Thursday Absa issued a separate application to the high court. "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."

Absa said since the business of the courts is conducted in the open, South Africans will get an opportunity to hear the facts and watch them being interrogated, in order for this matter to be put to rest.
Absa is challenging the Public Protector’s report on several grounds, namely:
1. The Report’s findings and remedial action are based on material errors of fact, including that Absa benefitted from SARB financial support and that the SARB assistance did not benefit the general public. There is no debt owed by Absa, it insisted.  
2. The Public Protector’s process was procedurally flawed and unfair to Absa.
3. The debt that is alleged to be due had prescribed and is therefore not recoverable.
4. The Public Protector has no jurisdiction to investigate the matter.

Absa is of the view that the Public Protector appears to have ignored facts and disregarded evidence provided to her.

It 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."

It further argues that the Public Protector’s conclusion, that the SARB assistance to Bankorp was not in the public interest, is not proven.

"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.  

"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."

Commenting on the CIEX Report, Absa said the 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 CIEX Report, which was put together in the late 1990s, outlined how the new South African government could recoup monies that were lost because of alleged apartheid era looting or illicit activities.

The 52-page report was drawn up by former British operative and founder of CIEX, Michael Oatlely. CIEX is based in the UK and specialises in recoveries.

However, the administration under former president Thabo Mbeki decided not to act on the CIEX report.

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