Absa today issued its application to the High Court for the review and setting aside of the findings and remedial action of the Public Protector’s report on the financial assistance provided by the South African Reserve Bank to Bankorp, which was later bought by Absa.
We look forward to this case being brought to court. The years of baseless accusations have been unfair and prejudicial to Absa. Because 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:
- The Report’s findings and remedial action are based on material errors of fact, including that Absa benefited from SARB financial support and that the SARB assistance did not benefit the general public. There is no debt owed by Absa.
- The Public Protector’s process was procedurally flawed and unfair to Absa.
- The debt that is alleged to be due had prescribed and is therefore not recoverable.
- The Public Protector has no jurisdiction to investigate the matter.
Absa paid fair value for Bankorp
In reaching her finding that Absa benefitted from the SARB financial support, the Public Protector appears to have impermissibly ignored facts and disregarded evidence provided to her.
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. 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.
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.
In stark contrast, the Ciex investigation offered no reasoning whatsoever for its conclusion that Absa was liable for R3.2 billion. It was merely advice from Ciex that the government should coerce Absa into paying.
The finding that the assistance by the SARB did not benefit the South African public is equally irrational. The Public Protector did not contest, but rather accepted that Bankorp used the “lifeboat” to set-off the bad debts of its customers and that this served to avert a systemic crisis of the banking sector. It is therefore illogical to then conclude that the South African public received no benefit at all.
The Public Protector violated Absa’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. This violates Absa’s basic right to procedural fairness.
Secondly, she relied heavily on the Ciex document which in turn made adverse findings against Absa. During its “investigation”, Ciex never afforded Absa an opportunity to make representations and to provide any relevant evidence, completely disregarding ABSA’s basic right to a fair hearing.
Absa 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.
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.
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.”
The Public Protector therefore, 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. 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
The remedial action prescribed by the Public Protector, which is designed to ensure recovery of R1.125 billion allegedly owed by Absa to SARB is substantially unlawful. 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. 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.
Furthermore, since the debt has prescribed, the remedial action requires the SIU and the President to embark upon a process which is entirely irrational in the circumstances.
As part of our application, we are also requesting the “Rule 53” record – which is 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.