Legal battle deepens pitting Pityana, Absa and SARB
IN A WHIRLWIND of corporate intrigue, recent events surrounding the South African Reserve Bank (SARB), Absa, and its former director Sipho Pityana have brought to light allegations of impropriety, regulatory overreach, and governance failures.
At the centre of these controversies stands Sipho Pityana, a prominent figure challenging the status quo within these institutions.
As the saga unfolds, a narrative of power struggles, boardroom battles, and systemic failures emerges, prompting questions about the integrity of corporate governance in South Africa.
In an exclusive interview with Pityana, he stated categorically that his case was not about reviewing or setting aside the appointment of the Absa chairman.
Pityana said: “I am asking the court to declare that the SARB exceeded its powers and the role assigned to it in terms of Section 60 of the Banks Act in the appointment of directors and/ or public officers (including chairman of a board). I’m also asking the court to declare that SARB’S conduct was unlawful.”
According to Pityana, the boards of banks, like all publicly listed private sector entities, are elected by shareholders who are the true owners of the business and whose capital is risked through a decision to invest in the enterprise.
He said the board’s responsibility was to act in the best interests of the business – even when this was not what a dominant shareholder may require – hence the emphasis on an independent board of directors.
“Even though the Banks Act recognises and underscores this authority for the board, it also provides for a limited role for the (SARB) Prudential Authority (PA) to satisfy itself that a candidate so nominated is ‘a fit and proper’ person. When it is not satisfied, the SARB may object to a nomination and give reasons for its decision, but its objection is not the final word on the matter.
“If the board and/or the affected person/candidate are not persuaded by the reasons for the SARB’S objection, they may take the matter to an independent arbitrator. These are strict guardrails not only to ensure that each party to these processes stays in their lane but also to prevent arbitrary exercise of power to the detriment of the public, the bank, and/or the affected (candidate) person,” Pityana said.
He further said that separately, and additionally, the Financial Services
Regulations Act (FSRA) allows the SARB’S PA to interact with banks and other financial services businesses on a range of matters including matters relating to board and executive leadership succession. In the exercise of these powers, FSRA states that the PA should do so without fear, favour, or prejudice.
Interestingly and less known, Absa, through one of these interactions with the PA, had shared its succession plans in which Pityana was the only director identified as the potential successor to the then-incumbent Wendy Lucas Bull.
These engagements were separate and independent of the formal leadership selection process envisaged in the banks act.
These legal frameworks, together with others, are designed to ensure good corporate governance, fairness, avoid arbitrary and irrational conduct and critically protect these institutions from manipulation for ulterior purposes.
Pityana said the success of this application would go beyond the clarification of the respective authority of the PA and bank boards in respect of the appointment of directors and other public officers but importantly the broad range of other governance matters. “It is certainly my experience that the PA has a propensity to overreach in a way that encroaches on the authority of the board.”
He said the risk for society that was posed by such overreach was that in the event of adverse consequences for customers and investors arising from decisions therefrom, the public would not be able to count on an independent regulator as the PA would have been compromised.
“As a result of the success of the application, the PA would know to resist the temptation to position itself as a ‘cadre deployment committee’ in the financial services sector,” Pityana said.
On how the saga may have affected his professional life, Pityana said: “An objection or what the PA calls an expression of ‘a concern’ on one’s suitability to chair a board of a bank without ever having heard your side of the story is being condemned without any due process.
“One couldn’t challenge this without it becoming public. To not challenge it would be no guarantee that it wouldn’t reach my professional circles through rumour and innuendo. The SARB was aware of the intended impact of their unlawful conduct but counted on me walking away from the battle.”
He said the PA’S conduct had caused
his family and himself great pain and tremendous grief. “Our constitutionalism inclines us to instinctively place trust in what we consider independent institutions of governance. The SARB is certainly an important one of those.
“It has cast a shadow on my professional standing. I have had to provide an explanation, not only on boards on which I remained, I had to do the same to the market, local and international business associates and organisations. I lost some of the board positions and in some cases had to withdraw from selection processes for directorships.
“The reputational harm has been the biggest impact for me. Not surprisingly, the loss of income and the ongoing costs of the litigation. It is the mantra of the family that our greatest endowment is our name and when under attack, there can be no price too big to pay to restore it.”
On the question of whether issues of poor corporate governance at SARB extended to other financial institutions, Pityana said it would be hard for him to imagine that his experience at Absa was peculiar or unique to that institution. He said a number of people called him to share experiences not too dissimilar to what he went through.
“There seems to be an unwritten rule among the leadership of financial services institutions that you do not challenge the SARB. This is a particularly queer culture given the regular challenges against the decisions of the president, ministers, and the various state statutory bodies. My removal from the board was about the preservation of that culture,” Pityana said.
The conflict, rooted in Pityana’s bid to obtain documents pertaining to his departure from Absa and the bank’s chair succession process, has taken contentious turns in recent court proceedings.
Pityana alleges that the PA unlawfully impeded his nomination for the Absa chair role. Despite initial legal wins, which included gaining access to Absa’s decision on his removal from the board, Pityana’s recent attempts to procure additional documents were met with disappointment as the court ruled them irrelevant to his litigation.
Absa subsequently removed Pityana from its board, citing his decision to sue the Prudential Authority as a breach of duty. This move has intensified the rift between Pityana and the bank. Absa maintains that Pityana’s legal actions were detrimental to its interests, justifying his removal from the board.
The Prudential Authority’s alleged interference in the Absa board’s decision-making process has added complexity to the dispute. Pityana contends that the authority’s actions deprived him of a fair chance at the chair position, leading to the ongoing legal battle involving Absa, the Prudential Authority, and himself.
Despite setbacks, Pityana scored a significant legal victory when the North Gauteng High Court dismissed Absa’s attempt to delegitimise his request for a judicial review of the bank’s board decision. The court ordered Absa to cover Pityana’s legal expenses and grant him access to crucial records of Absa board meetings relevant to his dismissal.
This legal triumph represents a crucial milestone for Pityana in his quest for justice and the restoration of his reputation.
It underscores his determination to challenge his removal from Absa and holds implications for his future endeavours in the financial sector.
As the legal battles continue to unfold, the repercussions of this conflict resonate throughout South Africa’s banking industry, shedding light on governance issues and the delicate balance of power between financial institutions and regulatory authorities.