Where there’s smoke but no fire

Public interest suffers at hands of expedient journalists

THE South African media have a very interesting relationship with South Africans. As citizens, we are generally happy to criticise them when they get things wrong, but we hardly appreciate it when they get things right. We easily forget that the various matters we discuss over dinner were first unearthed on the front pages of a Sunday newspaper, all in the “public interest”.

But there are times when the courageous work done by diligent journalists is undermined by lazy, negligent counterparts.

I took interest in a report last weekend where the now famous, or perhaps infamous, VBS Mutual Bank was accused of granting a loan of R136-million to a company owned by its chief operating officer and chairman.

The politically aware South African public should have expected, and perhaps demanded, more scrutiny into this small Venda bank that funded our troubled president’s Nkandla debt.

Many are still bewildered by how exactly VBS managed to approve a R7.8-million property finance deal for a 74-year-old.

Perhaps it was arbitrage. Perhaps the Venda bank issued yet another “Permission to Occupy” land loan to a guy who needed to raise funds to pay off a rather large, urgent debt.

With client-confidentiality clauses firmly entrenched, especially in banking relationships, we may never know the full details of the president’s loan. But this is no excuse for journalists to fabricate stories based on “sources”.

According to the newspaper report, a loan was granted to Vele Investments to acquire a 54% stake in Afric Oil, and this constituted a conflict of interest as the COO and chairman of the bank were directors and shareholders of Vele.

By all accounts, this would have been a valid story and in the public interest, had it been true.

On the Monday following the reports, bank CEO Andile Ramavhunga confirmed that the bank had not advanced a loan to Vele, and he was not even aware of an application for such a loan.

He further explained that, given its balance sheet and regulation over capital adequacy, the bank would not have been able to extend a R136-million loan in any case.

So, on what basis did the reporter write a story that claimed a loan was extended? Wait for it: his source told him so. Really? The reporter admits that he did not confirm if a loan was extended. Instead, he shifted the argument to the fact that the bank’s office bearers ought to have disclosed their interests in Vele — notwithstanding that the bank had not done business with Vele.

It is indeed good corporate governance for directors to disclose their interests upfront to avoid the risk of being accused of not acting in the best interests of the company.

It turns out that the bank’s COO was not actually the bank’s COO.

He confirmed that he was an independent consultant to the bank, and indeed a director and Vele shareholder. Did the consultant have a duty to disclose his interest? Yes, if there was a requirement. In this case, that requirement would have been necessitated by his company, Vele, applying for funding from the bank he was consulting to. But it seems that never happened.

It also turns out that the bank’s chairman is also a Vele shareholder. As a VBS director, he ought to have disclosed his business interests, including his Vele shareholding.

However, it is important to note that failure to disclose an interest, as opposed to a conflict of interest, is not, on its own, a breach of the law.

I submit that the chairman would have fallen foul of his fiduciary duty to the company had the bank approved a loan to a company in which he had an interest without disclosing such an interest.

To my media colleagues — I suspect public interest would have been served had we interrogated and explained how the loan to the president was made in the first place, as opposed to clutching at straws to discredit the bank.

Khumalo is chief investment officer of MSG Afrika Group, and presents “Power Business” on Power 98.7 at 5pm, Monday to Thursday

But this is no excuse for journalists to fabricate stories based on ‘sources’