Public Protector Busisiwe Mkhwebane has found Public Enterprises Minister Pravin Gordhan guilty of "improper conduct" over his approval of then-deputy SA Revenue Services Commissioner Ivan Pillay's early retirement and payout.
Mkhwebane made the announcement at a media briefing on Friday afternoon.
In her remedial findings, Mkhwebane urged President Cyril Ramaphosa to take appropriate disciplinary action against Gordhan for violating the Constitution.
She also says that steps need to be taken to recover the money.
In a six-page statement that she read out and shared with the media, Mkhwebane said that Gordhan should not have approved the early retirement with full pension benefits of Pillay in 2010 and his re-employment on a fixed term contract. Gordhan was finance minister at the time.
Gordhan has previously said that Pillay's retirement was "entirely above board".
The public protector subpoenaed Gordhan on April 8 this year to respond to 11 questions.
Most of the questions were related to the creation of the so-called SARS 'rogue unit'. She did not touch on this part of the investigation on Friday. One of the 11 questions in the subpoena related to the appointment of Pillay as deputy commissioner of the tax agency.
It is unclear if was referring to this investigation on Friday when she announced her remedial action.
Her report into Pillay's retirement and benefits, published after her media statement on Friday, states that she interviewed Gordhan on November 14, 2018, four month before she sent her latest subpoena to the minister of public enterprises.
However in a statement on Friday Werksmans Attorneys, acting for Pillay, noted that Gordhan had submittted a "detailed rebuttal" in the past few days. It said Mkhwebane rejected it out of hand.
In a statement released on Friday evening, Gordhan said he was advised by his senior legal counsel that the Public Protector's findings, were "totally wrong both in fact and in law".
"In light of the most recent judgment in relation to the Vrede Dairy Project, Minister Gordhan is of the view that the Public Protector has once again erred in her findings and proposed remedial action," Gordhan's spokesperson Adrian Lackay said.
In early April Gordhan's spokesperson, Adrian Lackay, told Fin24 that the April subpoena amounted to an "abuse of office" by Mkhwebane. The public protector, meanwhile, said she was investigating Gordhan to help "clear his name"."We are investigating him to clear his name. We want him to assist us to do that," she said in late April.
Lawyers for Gordhan, meanwhile, plan to institute immediate review proceedings against the Public Protector's report and findings, including the proposed remedial action.
* This article was updated at 08:00 on Saturday May 25 to clarify that she interviewed Gordhan on November 14, 2018, and has been updated to include responses from lawyers for Pillay and Gordhan.