Stals speaks out on lifeboat to Bankorp
• Former governor disputes claims attributed to him • Drafters may have misunderstood
The public protector’s draft report on the South African Reserve Bank’s lifeboat to Bankorp hit serious credibility issues on Tuesday, as former Bank governor Chris Stals said that claims attributed to him in the report were wrong.
The office of the public protector also confirmed it had sent out the provisional report in error.
One of the key findings of the report, which was initially researched by Thuli Madonsela and completed by her successor Busi Mkhwebane, was that evidence presented by Stals suggested the Bank had an agreement with Absa to repay both the capital amount and the interest, on which it later reneged, repaying only the capital amount.
It is this finding that led Mkhwebane to recommend that the Bank and the Treasury pursue Absa for the outstanding interest of R1,225bn, plus interest accrued since then.
Stals said that the finding, drawn from his interview with Madonsela, was either wilfully incorrect or showed a lack of understanding of how the lifeboat worked.
“I made it very clear to her in my interview that there [is] no way the Bank can claim anything from Absa. Absa settled all its obligations in 1995 and to think that a successful claim against it can now be made is naïve,” he said in an interview on Tuesday.
He would wait for the final report and if it remained the same, he would pursue the matter in court, he said.
The Bank and the Treasury have said they will not respond until the final report is issued. Absa has said it has made submissions to the public protector to correct several factual and legal inaccuracies.
Stals said, however, it was possible that there was an easy explanation and that the drafters of the report had misunderstood what was meant by the interest on the capital amount.
The Bank made three loans to Bankorp amounting to R1.5bn at interest rates between 0% and 2%. Bankorp then used the cash to buy government bonds with a yield of 16%.
It was the difference between the yield on the bonds and the interest rate that formed the assistance to Bankorp in the form of a revenue stream.
“The contract amount for the loan would have been around 1%, which was repaid,” Stals said.
It is the difference between the two interest rates that constituted the real lifeboat, which Judge Dennis Davis and his panel of experts later found to have been illicit.
The Davis panel objected to the form of support to Bankorp, that was continuous and went on for years, and that by its nature, protected shareholders rather than depositors.
While both Davis and Judge Willem Heath, who also investigated the Bankorp lifeboat, found it to be illegal, Stals insists that it was above board and the best solution at the time as it would have been inappropriate
R1.2bn is the interest that the protector is being led to recommend for Absa to pay
for the Bank, which was also the regulator, to take an equity stake in return for its assistance.
Current international best practice would usually entail that the central bank take an equity stake in a bank to which it provides assistance so that it is
shareholders that bear the brunt of the bank’s poor performance.
Mkhwebane also came under fire on Tuesday from the complainant in the matter, lobbyist Paul Hoffman, who said she was “up to … mischief”.
Hoffman requested the investigation in 2011 after becoming aware of a report by a private British intelligence consultant Michael Oatley written in 1998, urging the recovery of looted government money under apartheid, in return for a commission. Part of the money, Oatley claimed in the now infamous “CIEX report” was the Bankorp lifeboat.
As the complainant, Hoffman should also have received a provisional report in December when Mkhwebane sent these to Absa, the Treasury and the Bank, but he was never sent one.
On writing to Mkhwebane to query this last week, Hoffman was told the provisional report “did not exist”. Shown evidence of the report and a covering letter that she had signed, Mkhwebane then said she had been mistaken. Segalwe said on Tuesday in response to questions from Business Day, the provisional report was “sent to parties in error. The sender was supposed to send only the Section 7(9) notices [under the Public Protector Act], which are meant to grant implicated parties an opportunity to comment on the public protector’s provisional findings”.
Hoffman says he has asked Parliament’s portfolio committee on justice to investigate Mkhwebane’s conduct.