< tL gee PEASE not ibe SOUTH AFRICAN RESERVE BANK Applicant and * PUBLIC PROTECTOR Fitst Respondent SPEANER.OF PARLIAMENT \ Je Respondent CHAIRPERSON OF THE PORTFOLIO COMMUTES! SUSTICE AND CORRECTIONAL SERVICES: Thiré Respondent SPECIAL INVESTIGATING UNIT Fourth Respondent ABSA SAHK LIMITED Fifth Respondent NATIONAL TREASURY Sixth Respondent NOTICE OF MOTION ‘TAKE NOTICE that the applicant, the South African Reserve Bank, intends to make application to this cout on Fuesday, 4 August 2017 at {0h00 or so soon thereat: as counsel may ba heard fer an order in the tollowing terns. 1 dispensing with the forms and service provided for in the Rules of Court and cirecting that the matter b2 heard as an urgent epplicetion in terms of Rule 6{12) of the Uniform Rules of Gout;2 reviewing anc setting eskie the remedial action in paragraph 7.2 of the Public Protectors Report § of 2017/1018 into the Alleged Failure to Recover Misappropiiated Funds {ihe Repori) which was issued on 18 June 2017; 3 reviewing and setting aside the olaligation placed on the Chairperson of the Portfolio Committee on Justice and Correctional Services and the South African Reserve Sank under paragraph 8.1 of the Report to submit an action plan to the Public Protector in relation to the feredial action in paragraph 7.2 of the Report, 4 directing any respondent who opposes this application fo pay the costs of this application, including the costs of three counsel, jointly and severally, the one paying the other to be absolved: 6 further or alternative relief. TAKE NOTICE further that the accompanying affidavit of LESETJA KGANYAGO will be used in support hereof. TAKE NOTICE further that the applicant has appointed the under mentioned address of WERKSIMANS ATTORNEYS, at which it will accept notice and service of all process in these proceedings. TAKE NOTICE further that if any of the respondents intend to oppose the relief sought in this notice of motion, such responcents are required:~z (@} to notify the applicant's attorney in writing on or before Friday, 30 June 2017 and tn such notes to appoint an adcress within 8 kilometres of the office of the Registrar of this Honourable Gourt at which the respondents will accepi netice and service of all process in these proceedings; and tb} to fie their enswering affdavits on or before Friday, 7 July 2017. TAKE NOTICE further thal the applicent shall file its replying affidavit on or before Friday, 44 duly 2017. TAKE NOTICE further that the applicant shall approach the Deputy Judge Prasicent of the Court to seek a special allocation of this matter before @ Full Bench of the Court in the week of Tuesday, 1 August 2017 and shail propose that the parties file their heads of argument in the: matier as follows: (©) The applicant shall file its heacis of argument on or bofere Wodnesday, 19 July 2017. (@ Ary respondents who have opposed the application shall file their heads of argument on or before Wednesday. 26 July 2017. KINDLY ENROL THE MATTER FOR HEARING ACCORDINGLY.VOL LS "ATTORNEYS (Applicant's Attorneys 155 - Sth Street Sandown, Sandton Tek (011) $35 8145 Email: cnanake@werksmans com emoratis@werksmans com Ref: Mr G Manaka / Mr C Moraitis Ref: SOUT3267.62 {0 MABUELA INCORPORATED Charter House, 178 Bosman Street Pretoria Central Pretoria Tel 012 3253968 Email: mabuela@tiscali.co.ze To: THE REGISTRAR OF THE ABOVE HONOURABLE COURT. PRETORIA AND TO: THE PUBLIC PROTECTOR First Respondent Attention: Advocate Mkhwebane 175 Lunnon Street Hillcrest Office Park: Pretoria 0083 Tet: 012 366 7108 Fax 012 302 8916/3473/3203 Received on this day of June 2017AND TC: SPEAKER OF PARLIAMENT Second Respondent ‘Attention: Honoutable Baleka Mote Parliament Suilding, Room E118 Parliament Street Cape Town Tel: 021 403 2695 Fax: 021 461 962/021 4038219 Received on this AND TO: CHAIRPERSON OF THE PORTFOLIO COMMITTEE ON JUSTICE AND CORRECTIONAL SERVICES Third Respondent Attention: Honourable Dr Mathole Motshekga Parllament of the Republic of South Africa Cape Town 3000 Tel: 021 403 3089 Fax 021 403-8219 Received on this AND TO: SPECIAL INVESTIGATING UNIT Fourth Respondent Rontmeester Bullding, 2nd Floor 74 Watermeyer Street Watermeyer Park Pretoria Fax. (012) 843 0118 Received on this day cf June 2017 day of June 2017 day of June 2017AND TO: ABSA BANK LIMITED Fifth Respondent Head Office 7th Floor, Barclays Towers Wast 15 Troye Street Johannesburg 200% iO WEBBER WENTZEL ATTORNEYS Attention; Dario Milo 90 Rivonia Road Sandton Johannesburg 2196 AND 70: NATIONAL TREASURY Sixth Respondent 40 Church Square Pretoria Central Pretoria Fax: 012 316 5126/ 012.328 5145, Recsived onthis day cf June 2017 Received onthis day of June 2017IN THE HIGH COURT OF SGUTH AFRICA GAUTENG DIVISION, PRETORIA In te mater between ; SOUTH AFRIGAN RESERVE BANK and PUBLIC PROTECTOR SPEAKER OF PARLIAMENT CHAIRPERSON OF THE PORTFOLIO COMMITTEE ON JUSTICE AND CORRECTIONAL SERVICES SPECIAL INVESTIGATING UNIT ABSA BANK LIMITED NATIONAL TREASURY FOUNDING AFFIDAVIT CASE NO Applicant, First Respondent Second Respondent Third Respondent Fourth Respondent Fith Respondent Sixth RespondentTABLE OF GONTENTS: | Introduction. The Parties “The Report and the remedial action Grounds of review ... No pawor to amend the Constituian . . wef The remedial action breaches the separation of POWCTS....su.ncwe nese pone dA i Na pewer fa propase an amendment to the Constifittior... ienenenninanee DA teveaticrval. soir pose dieaneerviee 16 | Pioocdurady unfair L Conelusion Urgency and Harm.|, the undersigned, LESETJA KGANYAGO do hereby make the following statements under oath: | am ihe Governor of the South Affican Reseive Bark. 1am duly atthorised to represent the applicant in this «pplication and to depose lo this affidavit on its behalt, The facts to whish I depose are within my persons! knowledge oxcopt whore it is apparent from the context that thay are not The submissions of law | make in this affidavit are made on the advice of the Reserve Bank's lawyers, Introduction This is an urgent application fo raview and sot aside the remedial action in peragraph 7.2 of tha Puble Protectr’s Report 8 of 2017/2018 inlo the Alleged Failure to Recover Misapproptiated Funds (the Repor!) that was issued on 18 June 2047. A copy of the report is attached as "LK1" In the impugned remedial action, the Puble Protector instructs Parliament to amend the Constitution fe strip the Reserve Bank ot I! primary function —to protect th value of the 3currency. The Public Protector has na power to amend the Consthution, let alone to insttuct Parliament to do so. Her actions had damaging and immediate consequences for the country in ters of investor confidence, Shortly affer the Publis Protector's pross conference on Monday, 13 dune 2017, - the Rand daprewated by 2.05%, from R1Z.78 at 12:30 to K1.06 al 14n49, against the USD. > R4,3 dillon werth of South African government Londs were sold by non-resident investors. Altrouga some of these sales nave subsequently been reversed, they were ati significant, The day's net sales, by non-resident investors, of R1,3 bition rank amongst the biggest over the last three months, - Banking sector shares were also immediately hit by the release of the remedial action, They were among the worst performing seclors on the day, with sales eslinated at R365 mifion, ABSA and Stendard Sank accounted for three quarters (75%) of tho not salo ammount Cn 20 June 2017, Standard & Poor Global Ratings warned that Sovth Attica’s credit rating could be dawngraded further f government were to act on the Public Protector's remedial action, After this warning, the Rand depreciated by 19¢ against tho USD to 813.12.10 1 12 fe The ratings agencies have been clear that tha independance of the Reserve Bank and its policy framework is ore cf the strongest pillars sugporting the South African economy and underpinning thelr rating assessment, This confidence in the Bank stems directly from the role it plays in achieving and maintaining price stability, The Public Protector's remedial action must be set aside. From the moment if was announced, It has nad a serious and detrimental effect on the economy and for 2s forg as it veinains in place, it holds the sisk of causing further Rend depreciation, further ratings downgrades and significant cepicel outflows. This gross everreach by a Chapter Ning institution must be stopped in its tracks so sat certainty and pradictablily about the Reserve Bank's role in uur constitutional denocracy is alfinned ‘The Constitution defines the Reserve Bank's primary object as protecting the value of the ureensy, in the Interest of balanced and sustainable economic growth. This key functon of central banks was recognised worldwide by the last quarter of the twenfeth century because there was general consensus that stable and low inflation provides the foundation for high, sustainable seal growth, and that this is a goal central banks can reasonably be expected to achieve. Most jurisdictions, inckiding our own, have given {their cettval banks an autonomous role in protecting the value of the currency because this form of long term prize stabillly may, al times, come into contlict with a government's shorler-tenn goals, Our Constitution has therefore entrenched the Reserve Bank's independence in protecting the value of the currency. o13 14 4é The Pubic Protector wants to change all this. Her remedial action, if implemented, will take this core function of central banks oway from the Resarve Bunk. Changing the primary oiject of the Reserve Bank In this way threatens to undermine the oriticat contribution that the Reserve Bank makes to the stability of our financial system, whieh Is central fo sustainable growth and covciopment, Job creation, the reduction of inequality and poverty alleviation, The Reserve Bank therefore brings ths application to reviaw and sot aside the impugned reniediat acton in order to ensure continued stabiity to the financial system. With every day that passes without ihis overrsach being put right, uncertainty pervades the markets and the South African ecanomy suffers. The remainder of this affidavits structured as folows: 15.4 First, ! doscribe the parties io tho application, 482 Gecondly, | set out the nalure of the Public Protector’s Repot and analyse the impugned ramecial action 45.2 Thirdly, | set ou! the grounds on which the impugned remedial action should be reviewed and set aside. 15.4 Finally, | aderess urgency and explain the immediate and on-going hamm that has bean dune te the economy since the release of the Report on 19 June 2017is ‘The Perties 18 18 ‘The appiicant #s the SOUTH AFRIGAN RESERVE BANK, the central bank of the Republic of South Africa. It wets established in terms of section &(1) of the Currency and Banking Act 31 of 1920, confirmed as the cental bank of the Republic af South Afiica in terms of section 223 of the Constitution and is governed ty the South African Reserve Rank Act SO of 1989. Its head office is at 370 Helen Joseph Street, Pretoda, The Reserve Bank is responsible for, amongst other things, the protection of the vaiue of the ‘ourrency of the Republic In the interest of balancad and sustainable economis giowth The Reserve Bank executes monetary poliey end plays a role in the formulation and implementation of macro-economic policy and informs the South African public about South Aftican monetary polcy and the South African economics situation, The first respondent is tho PUBLIG PROTECTOR, a Ghapter Nine institution established in forms of section 181(1)(a) of the Constitution read With section 1A(1) of tha Public Dretector Act 23 of 1994. Tho first respondent's principal place of businass is situated at 478 Lunnon Street, Millerast Olfice Park, Pretaris. The second respondent is the SPEAKER Of THE NATIONAL ASSEMBLY elected in terms of section §2 (1) of the Gorstitution as the presiding officer of the National ‘Acoembly, The Speaker is cted in her official capacity as Speaker and as nominal respondent on behalf of the National Assombly in terms of section 23 of the Powers, Privileges and immunities of Parligient and Provincial Legislatures Act of 2004, read ith seclion 2 of the State Liability Act 20 of 1967, with her offices situated at Parliament Buiing, Reoin E118, Pariament Street, Cape Town,419 20 a 2 /4e The third respondent is THE CHAIRPERSON OF THE PORTFOLIO COMMITTEE ON JUSTICE AND CORRECTIONAL SERVICES, Dr Mathole Motshekga, whose official place of business is situated at Parliament of the Republic of South Africa, Parliament Building, Parliament Sect, Cape Town, The Chairperson has an interest in this matter because the Public Protector's remedial soticn requires that he initiats @ process that will rosull in the amendmant of section 224 of the Constitution ‘The fourth respondent is the SPECIAL INVESTIGATING UNIT ('SIU") which is established [hn lerms of section 2 of the Special Investigating Units and Special Tribunals fot No. 74 of 1006 and cituatod at 74 Wotermeyer Strast, Watermoyer Park, Pretoria ‘The SIU is tiled because the Public Protector requires that Practamation R47 of 1938 published fa the Goverment Gazette dated 7 May 1996 Is re-opened and amended In order to recover “misappropriated pubfie funds uniawully given lo ABSA Bank in the aimiount of R1.125 bition The fillh respondent is ABSA BANK LIMITED, ("ABSA") a public company with registration number 1986/004794/06 and duly incorporated in accordance with the company laws of the Republic of South Africa, carrying on the business of a registered pank throughout South Airisa with its head office at 15 Troye Street, Johannesburg ABSA is cited for such inlerest as it may have in these proceedings ‘The sixth respondent is the NATIONAL TREASURY created in terms of section 276(3) of the Constitution and which is established in terms of section § of tha Public Finance Management Act ("PFMA") and situated at 40 Chureh Square, Pretoria Central, Pretoria, Sf!23 24 [5 The address for service far the second, third and sixth respondents ie care of the State Altornay at 258 Francis Baard Streat, Pretoria. No rallef is sought against the second to sixth respondents, except an otder for costs in the event thet they oppose the application The Report and the remedial action 25 26 The Report is the product of an investigation that the Public Protector concucted after receiving 9 complaint from Mr Paul Hoffman in November 2010. The complainant aleged Lnot the government had felled to implement the recommendations cf a covert UK based assat recovery agency calied CIEX. GIEX hati been contracted by the Soulh Afrisar goverment 19 assist in investigating end recavering alleged misappropriated public funds. The complaint also alleged that CIEX produced e repert for government in which t found that the Reserve Bank's financial assistuiee to Rankerp dieing the apartheid cogime was unlawfut and recommended recovery of the amount owed, To the extent that Mr Ho‘iman's complaint related to the Reserve Bank, itwas coneorned with the quesiion whather the Reserve Bank had recovered what was owed to it under the terms of the financial assistance packaye. ‘The CIEX report was wrong to conclude thet there was any amount sil owing to the Reserve Bank after the repayment of the financial assistance. All amounts dive and owing to it wete fully pai up before the Office: of the Public Protector was even creeled, Al of this was made clesr to the Puble Protector dung the course of her investigation through interviews and the Reserve Bank’s submissions on the Public Protector's prefiminary report that was distributed for if7 28 23 46 comment in December 2015. A copy of the Reserve Bank's submissions to the Public Protector is attached as "LIK2". Despila these submissions, the Public Piolector's final report that was issued on 18 June 2047, inexplicably found that there was silll money t recover from ABSA, This is a glaring error but itis rot tie fools of this application, This application is concerned only with the remecial action ‘hat instructs Parliament to amend the Constitution to remove the Reserve Banks function to protect the value of the currency. ‘That remedial action must be set aside as a matter of urgency because every day thal the required amendment to the Constitution remains in piace it urdermiags the stebilily of our economy. The Reserve Bank will, In due course, address the other errors in the Report. In eo far ac the impugnod remecial aclion is concerned, nowaere in the Report does the Pubic Protector indicate that Mr Hollinan’s complaint was concerned with the primary object anc mandate of ihe Reseive Bank. The primary object of the Reserve Bark is set out in section 224 of the Constitution. Its primary object is te protect the value of Lhe cunency, in the interest of balanced and sustainabla growth. The Report makes no in reference fo @ complaint abou, oF an investigation into, tha Reserve Bank's conduy pursuing its primary objective. The Report also makes no findings ebout the primary object of the Reserve Bank. The findings re: contained in section 6 of the report. Net ane of the ndings relates to the Reserve Bank's function in protecting the valus of the curreney. These orrissions from the Report are not surprising because the day after it was released, Mr Hoffman ~ zhe cornpleinant —went on national radio and confirmed thal his 1931 33. ie complaint had notiting st al to do with the primary object of the Reserve Bank, A copy of the transciipt of his comments on Radio702 on Tuesday 20 June 2017 fs attached as "LK" The Public Pretecto’s Investigation was not concerned with the Reserve Bank's constitutionally entrenched powers, Nor cauld it be. The Pubtic Protector has no mandate br power to investigate the Constitution's allasetion of powers to different organs of state Despite this, Ihe Pubic Protector has taken remedizt action requiring the Chairperson of the Portiolio Committee on Justice and Correctional Services to ‘initiate @ process that wat) ut in the amendment of section 224 of the Constitution’ (emphasis added). The rernedial action stipulates the new toxt for section 226 of the Censtitution. The Public tion 224 ef the Gorstitution fo be amended to read: Protector requiras si “(1) The primary object of the South Afficart Reserve Bank is fo pramots balanced end sustainable grovdh in the Republic while ensuring thet the socio. economia voll-baing of the citizens are protected (2) Ine South African Reserve Bank, in pursutt of As primary objenl must perfonn its furciions independently and without fear, favour er prejudice, wine ensuring thal there must ha regular consultation helween the Bank and Pariamont fo achieve meaningful sccio-coonomie iransfonnation’, ‘Sse paragraph 7.2 of the Report There are three changes to the section.34 ‘ 23.1 First, the amended section will remove the primary object of the Bank, As section 224 curtently stands, ihe piiinery object of the Reserve Bank Is to protect the value of the ourtency. Ii he Public Protactor’s amendmant were to be effected, this primary object would be removed 38.2 Secondly, the primary object of the Reserve Bank would he changed ta promoting balanced and custainable growth in the Republic whi'e ensuring that lhe soto- economic well-being af the citizens are protected, 23.3 Thirdly, the Reserve Bank would be required to exercise these powers in consuation with Parliament for the purpose of achieving sneaningiul socior econe:nis transformation. These shangen ate material, Thay fundamentally alter he primary focus of the Reserve Bank from price stability io general socio-economic development and transformation. This is not the role of ceniral banks. it is the role of the elected representatives of the people, And yet, by an act akin to legislative fiat, the Publie Protector intends to transform tha Reserve Bank Into a socio-economic well-being organisation The Public Protector also requires the Chair of the Portfallo Canimites and the Reserve Bank to submit an action plan to her within 60 days of the repert on the initiatives taken in regard fo the remedial ection (ses paragraph 6.1 of the Report), Those 60 days expire on 18 August 2017. 12Grounds of review 38 3r | am advised that the Public Protector's remedial action in the Report is aciministrative action and therefore any leview of it must be brought in terms of the Promotion of Administrative Justice Act 3 of 2000 (FAJA). In the altemative, even iF the remedial action is not administrative action, itis the exercise of public power and must camply wit the requirements of the principle of fsgality This review of the inpugsed remedial action is therefore brought bath in terms of PAJA and the principle of legality under section i} of the Constitution No power lo amens the Constitation 38 39 The impugned remedial action is unlawful. in paragraph 7.2 of the Report the Public Protector instructs the Chair of ihe Poilfollo Committee to initiete a process that wil resutt fy an amendment fo section 224 of the Constitution, The Public Protector hes no power to instruct the Chelr of the Porifolia Commities to sacure a constitutional amendment. The Canstitution prescribes the concitions for its own amendment. Section 224 can only be amended with a supporting vate of at least two thirds of the memibers af the National Assembly (see section 74(3)(a} of the Constitution). The Constitution leaves the power to amend the Constitution in the hands of the elected representatives ot the people who are members of the National Assembly. 13#O 40 tt docs not empower the Public Protector fo amend the Constitution, The impugned remedial action shauld be set asics on this basis alone under either section 6(2)ia)() of PAJA or section 1(¢} of tha Constitution. The remedial action breaches the separation of powers 41 [tis a prince of our constitutional scheme thet institutions of ihe state respect the separation of powers, This requires each institution to respect the coalhes of its own powers and not to intrude into !he domain of others. 49, ‘The impugned remedial action violates this principle. It intrudes into the lagistative domain and instructs Parliament to pass a constitutional amandment that has been selected by an unelected funetionary 43 The remedial action is unlawful and cught to be set aside under section €(2)a)(). E(2NE)LD, 8(2X1) of PAIA oF section 1(6) of tha Conefilution. No power fo propesa an emendment to the Constitution 44 Since the release of her report, the Public Protector has been interviewed on radio art & number of cecasions, In those interviews, she has said that the impugned remedial action Is merely a proposal to Panlament to be "deliberated on’, A transeript of her interview with Eusebius McXaiser on Redio7 (2 is attached as “LK 1445 aT 48 49 ed} There is no suppor for this interpretation of the impugned remedial action, The Report says that the Chair of the Portfafio Committe: must initiate @ process that wi result In = constitutional anendment in the terms presotbed by the Public Protector The Public Protector is therefore tncorract to claim that all that she has done ia to direct thot a process for amendirg the Censtiution commence without! any instruction as ‘6 its outcome. She has directed its outcatre. In the event that this court adopts a aliferert interpretation of the impugned remedial aciicn and finds that it merely iniliaies @ process to deliberate on a constitutional amendment, the remedial action is nonethelces unlawiul. Scetion 182(4) of the Constitution empowers the Public Protector ta investigate any conduct in state affairs that (S alleged or suspected fo be improper or te result in any inptopnety of prejudice, to repert on that conduct and to take appropriate remedial action. ‘The Public Protector’s remediat actor Is constrained by the conduct she investigates. Her remedial action © appropriaie when it is linked te her investigations. She has no power to take remedial action on metters that she has not investigated The investigation that produced the Report nad nothing te do with the Reserve Benk’'s powers under section 224 of the Constitution, The Publis Protector therafore had no power to take any remedial action ditected at tho Reserve Sark’s powers under this section of the Constiution, Thus, even if the impugned remedial action §s interpreted to 15ad be confined jo inifating a Parliamentary process for 2 constliuitonal amendment, 11 wes sti beyond the Public Protector's powers. 51 ought, accordingly, to be set axides under section S(2Ka\i) of PAJA or section 1(c) of the Constitution : rational i 52 Given that the impugned rernedial action cid net flow from any espect of the Public Protector’s investigation, it is ditticuk to discern the rationale for the remediat action from ihe Report 53 There are, however, a few paragraphs embedded in the Reporl thal give an inking of what was behind the Public Protector’s decision Lo require 2 constitutional amendment. i G4 Inthe ocurse of the Report, he Public Protector opines that Leading autiors advocating and promoting the ideology of staic banks and : nationalization of monetary currency believe that the notion of the lenders of last resort's stetus that is inherent to central hanks intemationally would cease 40 exist if governments take sole power in ereating money through the astablishment of stale banks" (paragraph 5.3.24 of the Reperb. “once ihe state takes contre! of creating money and credit, numerous bonenits aimed ot alleviating economic ais of ordinary coonemicaily isadventagod 16people may be achieves, unfke our current purely commercial transaction system which only seeks lo iraprove 8 particular franca! socter (parsaraph 6.2.25 of the Report). “The debate on nationalisation of monetary currency anu creation of stato banks is one that nes found ts way inte our democratic society and is a debate which mus! r9ach Rs conclusion by the peoplo of South Atrio {paragraph 8.3.26 of the Repori) “The Renublic has an obligation In terms of the Constitution ancl intorationel instruments (0 fmprove the sucio-esonomia conditions of ite citizens througin legislative end other mensures to alleviate poverty and ensuite sociel justice for al Tho South Affican Govemment must realise economic niaits to its people (paragraph 5.3.27 of the Rear!) On the same day thal the Public Protector released her report, | addressed the CEEF Aftiua Annual Benguet, | dealt with the topic of sustainable eccnomic growth and the Reserve Bank's role in achieving this. | explained that the Reserve Bank's fundamental constilutional mandate is to protect the value of the currency in the interests of batenced. andi sustainable growth. Balanced growlit is about seeing fo it that the value of the currency allows both exporters and importers to engage precuslively in the econamy. It algo means that the eosnomy’s growth is sustainable, that imbalances are neither generated that cause crises through over-heating nor throw Ihe economy into savere downturns,a4 56 | aid that the Reserve Bonk implements this mandate ‘rough a flexible inflation targeting framework, | tackled the objection that targeting inflation is had for growth. | explained that low inflation is actually the ally of development, There are several reasons Ter this. Low inflation helps mai (gin the value of the money in your pocket. This is good for all South Africans but eapectally the marginalsed and the poor — those without the information or the pewer fo protect themselves from inflation. Lew inflation also helps maintain the competitiveness of Sculh Atiean goods and sowices in foreign and domestic markets, by moderating real exchenge rate appreciation. Furthennere, low inrlation produces lower interest rales. There is no iong-tenn trade-off between growth and infation. Keeping inflation low, protecting the value of the currency, is supportive of gromth. A copy of my full speech is attached as "LKS” 87 The Public Protector's remedial action seeks to remove this core function of inflation targeting from the Reserve Bank. The only reasons she provides for this drastic move ave to impreve the socio-economic conditions of South Alricans and to ensure thal all South Atricane benefit fom monetary policy. Bul, as my speech to the CEFF Banguet rm sustainaile mace plain, inflation targeting is an essential tool in ensuring long development and is in the interasts of all South Africans, particularly Lhe disadvantaged and the poor. 68 Ths Public Protestors remedial action is accordingly irational, She directs an amendment to the Constitution to improve the scclo-econgmis conditions of South Afticans but takes away the very powers from the Reserve Bank that are designed fo achieve this. 185a The remedial action ought, accordingly, ta be set aside under section 6(2))(ti(aa) of PAJA or section 1(6} of the Constitution. Prosedurally unfair eo The remedial action ought aise to ba set oricle bacause it was not tha product of a procedurally fair process. In December 2016, the Public Protecter called for comment on a preliminary version of her report. A copy of har preliminary report Is altachest as "LI" ‘As | set out above, the Reserve Bank submitted a tesponsc to the preliminary roport at the end of Hebruary 2017, Nowhere in the preliminary report did the Public Protector disclose that she was considering remedial aston that woukt amend the Gonatitution. Given the drastic nature of this action anc the material impact that it would have on the Reserve Bank and the stability of the financial sector, it was incambont upon the Public Protector te have given notice fe the Reactve Bank of this infended action and called for ils comment on ff. ‘The Public Protector also failed to give effect fo en agreement arrived at with the Public Protector, as far back as September 2012, when she agreed that the final report woute be mate available to the Reserve Bank five days before ils release. Had it boen afforded ‘an opportunity to address this remedial action, the Reserve Bank would have been able to saplain te the Public Hrolestor, as | have above, that the Reserve Bank's mandate 10 ensure price stability is an integral part of sustainable and balanced econamis growth and is in the interests af all South Afneans. rTaE 62 Tha Reserve Bank was denied this opportunity and the ronulting remedial action is il- informed and reckless. The remedial scfien ought therefore In be set side on the basis that it was preceded by a procedurally unfair process under section 6(2)(c) of PAJA. It is also procedurally irrational and trerefore reviewable under section 1(¢) of the Constitution. Conclusion 83 The impugned remedial action ought to be ee aside on any ane of the following grounds: 63.1 63.2 633 634 63.5 the Public Protector has no powor to anand the Constitution, “The remadial action breaches the separation of powers because it encroaches on the exclusive domain of Parliament. ‘The remedial action goes beyond the ambit of the Public Protectore investigation, The remedial action is rational because it is taken wih the chiect oF promoting scolo-econoinie development but removes one of te key toals thal the Reserve Bank uses Lo achiove this The remedial action was preceded by a procedurally unfair process because the Reseie Bank was not given an opportunity to comment on the required constitutional amendment. 20Urgency and Harm a4 66 87 The Public Protestor held & press conferenos un Monday, 19 June 2017 which commenced ai approximately 14430 at which she announead the findings and remedial ction of tho Report, She commenced with her findings on this Report at about noon. Ghe did not send a copy of the report to the Reserve Bank before the press announcentent, Het Office refused, in faci, to send the repart to the Reserve Bank's attorneys of recard when they requested @ copy of the report at 12h08, on behalf of the Reserve Bank. Copies of the correspondence in this ragare are attached as "LK" and confirmatory affidavit of Mr Christos Morais is attached as “LKB”. ‘Acopy cf the Report was forwarded to she Reserve Bank later on the Monday afternoon, Even before the Reserve Bank received a copy of the Report, the impact on the econamy had been felt. {have dealt aboye wth the immediate and negative impact teat the rclease af tho Report had on the value of the Rand. The Rand depreciated in intraday trade by 2,05% Financia market analysists contacted the Resorve Bank's Peputy Governor, Daniel Mininele, after news of the Report hit the media, seeking clafficaton regarding the mandate of the Reserve Bank and how this could possibly be changed. A confirmatory affidavit ftom Deputy Governor Mminete is attached as "LHS" |n the hours after the Report was retcased, tne Reserve Bank was seflousy concemed about the impact of the rameciat action on the stabtity of aur financial markets and se cenvensd an urgent meeting with ils legal team on the evening of Monday, 19 June 2017, At that meeting, it resolver To inetiluie hese urgent review procaadings fo assure at “\ ,6B 89 28 the market that staps would be taken to set aside this direct threat 10 its powers and independence, The Rand depreciated further on 20 June 2017 when S&P Global warned that South Africa’s credit rating could be downgraded further f government acted on the Public Pratector’s remedial action to change the consttutional mandate of the Reserve Bank. S&P Global said that it considered it critical thet the operational independenge of the Ressive Bank remained untouched in onder to avoid woaksning policy flexibifty in monelaty affairs, S&P Global had already downgrarled South Africa's loreign currency long-term dobt eredit rating te sub-invaslinent grade following the femaval of Pravin Gordhan as Minister of Finance in March 2017. At the time end notwithstanding the downgrade S&P Global indated that they considered South Afrisa's monetary flewbilty, ‘and ifs lrack record in achieving price stabtlty, to ke an important crecit strength. A copy of an allicle on 20 June 2 |, detailing S&P Global's warring ta downgiade South Afrize’s credit rating, is attached as "LK10" On 21 June 2017, Gardner Rusike Irom S&P Global requestsd a masting with the Bank fo discuss the Public Protestor’s Report, the Bank’s intended approach to the matter and ils timelines for acfion. On 22 June 2017, | was ost of the country and sa a team trom the Reserve Bank led by Deputy Govemor, Frans is Groape, had a call with the team from £8 Global and addressed ‘heir queries and the approach the Reserve Bank was taking to the remedial action of the Public Protector. A copy of the correspondence between representatives ftom the Reserve Bank and SBP Global, when they requested the meeting, is attached as “LKA2”, A confirmatory affidavit rom Deputy Governor Groepe is attached ao "LK12" 2270 n 3 14 £9 The threat of a further downgrade of the cournty's fong ker currency rating cannot be overstated. Financia! stability in any country hinges on its sovereign rating which reflects its credit worthiness, There ar a number of channels through which a further ratings downgrade could seriously aifeat cantidence in, and the stability of, the South African financial system, The first and most immediate channel would be South Aftica's expulsion frem the major global bond indices. Currently, South AVrican government bones are included in various financial market bord indices, against whic global fund managers manage their parfolios. Passive tind managers Have to replicate the composition of these indives, which creates a natural demand for the bonds included in the index Hence, the county's inctusion in these indices fies hean greatly denafictal for South African govemment bonds: the demand created for South African goverment bonds have inoreased their prices, thus lowering the barrowing costs of the government. However, these indices specify certain inclusion etiteria, Ifa country dees not moat the recfaired inclusion enteria, they will be expelled frora the indices. The major global bond ind’ces In which South Aftican bonds are currently included ae Citigroup World Government Bond Index, the Barclays Global Aggregate Bond Index and various JP Morgan bond indices. Outstending Rand denominated South African government debt constitutes 60% of debt and forsign cuttency denominated debl is at 10% in Apiil this year, Fitch Investment downgraded South Afiica’s local curreney rating to sub-investment grade. As a result of this downgrade, South Africa was expelled from two 23 Ei)7 76 SO of the JP Morgan investment gtade-only bond indices on 28 April 20t7 and St May 2017. If either of the othe: ratings ayenciss were to downgrade South Africa's local currency rating further, South Aftica would no lenger moot the inclusion criteria for the Barclays Croup Index and it would be expelled from that index. This would have an immediato disinvestment impact on South African bonds of approximately R39 hillon. If both Moody's Investors Services and S&P Global were to cowngrade Lhe local currency rating further, South Affiea woul ne longer meet the fuclusion rlieria for the Citi Bank World Index. This could have an immediate disinvestment impact on South African bonds of approximately R400 billion South Africa's current account defiel Is largely tinanced by non-resident portfotio flows. IF these two further downgrades were ta occur, and South ica was expellad frore both the Barclays Group Index end the Citi Rank Werld index, approximately R439 bitlon would be immediately disinvasted ftom South Atrica That amount signiticantiy exceeds South Affica’s current-encount daft for 2017, which currently sits at 21.5 billon Downgrades to subnvestment grade would also have currancy effects, Sustained! Rent weakness generally leads te higher inflation, whieh translates into higher interest rates, leading to reduced purchasing power of househalds and hence higher household debt and defaults. Adcitionally, the government, banks anc other institutions (e.g. state-owned enterprises, insurance, cension funds, and nen-finansial corporates) weuld alee face higher borrowing costs, weaker balance sheets, lower profitabiity and higher defaults “The impact of further downgrades is felt throughout the economy. Downgrades raise borrowing costs, undermine, Investor confidence [inchiging fixed investment and econciric growin), feduse the attracliveness of South African bonds st auctions, and so 24 te78 73 Tf negatwely impact South Africa's case of borrowing and cost of funding, ‘This, in turn, has a negalive impact on South Afiica’s government finances. Higher debt service casts reduea government spending and revenue and divert funds from kay goverment programmes, Thasa negative effects can result in a downward spiral that is vevy diffcut fo turn around. The outcome ie a permanent demaging impact on confidence and growth in the So! African economy, The prospect of these vary real and damaging effects on the stability of the Seuth African economy has prompted the Reserve Bank to appioach this court urgently to review aind sef aside the impugned remedial action. it has nioved with all reascnable speed after recelving the Report on Monday, 19 June 20°17 to launch this application, Despite the critical urgency cf the matter, the Reserve Bank has endeavoured to give me respondents a reasonable amount of time to enswer the appicalion, The Reserve Bank seeks fo have the matter heard in the week of § August 2017 or shorliy thereafter, This is Just before the deadline imposed in the Report for an anfion plan to be submitted to the Public. Protestor on the stops taker to implement her remedial action It is essential [hat a court seis aside the impugned remectial action before that uation plan is dug. Our aconomy simply cannot sustain the impact of any further step being taker ta implement the Public Protector’s groas ovorraach af power. WHEREFORE, the Reserve Bank secks an order in terms af the notice of motion io which this affidavit is attached 2B32 | hereby cenlify that the deponent has acknowledged that he knews and understands the contonta of this affidavit, which was signed ard swarn fo boforo mmo, Cornrniosioner of Oaths, aie A Eetpie, (caer! on this the Je"* day of Ze =. 2017 the requlations contained in Government Notice No Ri258 of 24 July 1972, as amended, and Governgnant-Notice Ne 1048 of 19 August 1977, as amended, having been compligd with fie x FULL NAMES, ind Secretary Adinia Toso feaide ain ADDRESS x77 Pigs tity nates? Peers FX OFFICIO. al Seu” ME Fivae Sher? 28LAY REPORT OF THE PUBLIG PROTECTOR Ik TERWS QF SECTION 162(1)(0) OF THE | CONSTITETION OF THE REPUBLIC OF SOUTH AFRICE, 1886 AND SECTION 8(1) | OF THE PUBLIC PROTECTOR AGY NG, 23 OF 1994 ' PUBL PROTECICOR SCOUTA FFRICH Report te. 8 OF 2007/2018 ISIE: 9YE4-428908-28-4 2) FAILURE TO RECOVER MISAPPROPRIATED FUNDS REPORT OW AN THVESTIOATION INTO ALLEGATIONS OF MALAGHINISTRA TION, CORRUPTION, HiQ2PPROPRIATION OF PUBLIC FURDS AND FAILURE BY THE SOUTH AFRICAN SOVERNMENT TO IMPLEMENT THE GIEX REPORT 4ND TO RECOVER PUBLIC FUNDS FROM ABSA BANK.Allogedt Hailure to Recover Missopropriated Fuuncis ANDEX, Executive Sunmnary IEFRODUCTION TH COMPLAINT POWERS AND JURISDICTION OF THE PUBLIC PROTECTOR THE RIVESTIGATION THE DETERMINATION GF THE ISSUPS IN RELATION TO THE EVIDENGE OBTAINED AND CONCLUSIONS MADE WITH REGARD TO THE APPLIGABLE LAW AND PRESCIFTS FINDINGS REMEDIAL ACTION MONITORING 8 2 26 a 54 36 z[PageAlleged! Faltie fo Recover Meagpropsiated Funds - Ba Sxecative Summary Fone of the eruclai sfements of our consttutional vision Is to make a decisive break irom the uachacked abuse of State pawer and rescarces trad was virtually insittutionatised during tho aparihetd era, To achiove tls geal, we adopted accusstability, the rule of fav and the supremacy of the Constiuation as veltes of due constitutional damberaey. Por fils reason, public office-bearare ignore their ronssturional obligations at deit pert. This is 30 because constitutionalism, necountabiltly and the rule of fave constitute the sharp and mighty oword thet stands ready to chup the ugly bead of impunity off its stiffened neck” Eeonemic Freedom fighters v Spoaker of tie National Assembly 6 offers: Democratic Affanae ¥ Spester of the National Assembly & others [2014] ZACG # at persutaah 4. () This is the Pudte Proteolor's repor Issued tn terme of section 182(2}fb) of the Constiution of the Repibie of South Afisa, 1996, and sectlon 8 {4} of the Publ Protector Act No, 230i 7934, ih The report reiates te an investigation imo alleged maladministratior,, comupfors, misappropriation vf public funds and ‘alate by the South African Government to iinglemert the CIEX report. Fotowing a complaint ledged by M41 Paul rioffman, ‘he Director of the Institute far Ancountabiity In Southam Africa on 10 Novemibar 7010. (i) tthe main, In his compleint to my vifice the Complainant alleged that CIEX Hd (noreto referred to ag GIEX), 9 covert UK based assot recovery agency hecrled by Mr Mchrel Gatley vas contracted by the Scuth Atrisan Government io assist misappropstated pablic funds and assets allegedly fa Investigating and rezov comtilted during the aparthaid regime, “The Complainant alleges thai ¢ inemorandum of agreement was signed by Mr Dily Masethe on betall of Government of the Republic of South Ara etd Mr Michae! Oatey on behalf of CIEX on 03 October 1987 aflovang CIEX to imestigete and recaver publie funds on gehait of Government sue ageAlloyed Failure to Rosover Misuppreptisted Funds My w ov) a) fe) wy by The Complainant atlagas that what ig of caneetn is part of tha CIEX repost that deals with the Sifeboat” allegedly afforded by Way ofan fleaal aft, by the South Aftican Reserve Glank (hotain called the SARS) fo Banktop Limited, now ABSA Bank, during the spartheld regime. The Couplainent alleges ‘hat, the Governnent of the Republic of South Africa and the SARE fafed ioimplement the CIEX report and to recowsr rifsaporopriated fing any masons ts that effect nroney from Henkorp Limlted without previ On analysis cf the complaint the fallawing issues wort ilentifer and investigated: Uid the South Aivican Goverment hnpropelly fait to implersent the CIEX report, dealing with alleged sicton state fonds, affet comulssionng and daly paying fer annie, Did the Sauth African Government and the South Aftisan Reserve Bank Improperly Zaft fo recover irom Benkorp Limited/ABSA Bank an amoumtt of F.2 billion, cited in (he CIEX report, owed a5 3 resuit of an egal gift to Bankorp Limiéed/ABSA Bank? Was the South African public prejudiced by tite conduct of the Govemment ‘of South Africa and the Soull African Reserve Bank and foo, what would Ietake to ensure justice The Investigation proves included Inter eva meeiinys, Interviews 2nd correspondence with the Complainant 2s vel as Inspection of ll relevant documents and analysis ead appllcetion of all relevant Jaws, paildes and related prescrints. Key laws und policies taken into account to determine if there had been maladministration of proper cornfut by ihe Souin Aftican Gaveinntent and the 4) Page HyAlleged Faitare fo Recover Misepproprtated Funds @ 5 | 4) snare South African Resovve Bank were principally those imapasing administrative standards thot shold have been compiied with by the stale organs os aTelals, ‘Those are the fotiowing: @ Section 198 of tha Cenatiution which requires that earialn besie standards of Putffe aximrilottaton should be adheted {9 by all public functionaries, such as accountability and fronsparorey, 1b The White Paper on Transiorming Pubio Sewies Delivery, Government Gazette Ne.18240 of 4907 provides for the Batho Pele Penciples. The Pr ‘semicas by improving efflciancy ant accountability te the publi ples oaak to strengthen the quaftyy and cossibility of goverment & Secilon 275 of the Cunstitutior witch deals wih wes establishment of the South Afrinan Reserve Bank, its primary cbjectvss, powers and functions. d. Section 10 and $/ of the South African Reserv Bank Act No, 80 of 1988 which provides fer powers of the South Afican Reserve Bankcand the Minister of Finance's outy in regiarc to enforcement of nor-cempliaiice 10 the Act Having considered the evidence uncovered during the investigation agelhat the relevant seguiatery framowors the Public Protector makes the fatowing findings: : VWihether the South Afriean Government improporty tailod to imploment the CIEX report, dleuling wit alloged stolen stato fonds, aftor eonvnissioning and duly paying for vamer {a) The allegaton whether the South Altican Government improperly failed to Implement the CIEX report, deating with allaged stolen stata funds, afier commisstaring and duly paying for came is eubstantated; RiPageAileged Faitire to Recover Misapproprlates Funds (b) GHEX Lig. was paid G00 OCD British Pounds for services whisk were never ‘used by the South Aincan Guverment. No evidence could ba feud that any aolon was taken specifieally In pursuit ef the CH=EX nepert: (6) Faiture by the South Atican Goverment was Incorsisient with duties imposed by section 195 of the Constitution requiring @ high stancare of professiona! etries, (A) The fete was also inconsistent with seetion 231 of the Contitation fiat Tequires that af Constitutional obligations must he performed diigently and vwithout delay: e} In addition the conduct was contrary ta tho athe Pele Principles in that there was no value fer monoy! and (The falure by the Sour Aificon Government etd constutes proper conduct as crvisayed in section 102(1) of the Gonstitutlon aul mmalacinintsitetion as envisayed In section 6 of the Public Protector Act, Whether (he South African Goverment and the South Atrican Reserve Bank improperly faitsd tv recover from Bunkorp LavilawASSA Bank an amount of RAZ billisn, cited in the GIEX report, owed as a regu of en itlegsi gift given te Bankorp LimitedIABSA Barks (0) The allogation whether the SoultyAlvicen Government ard the Sauth Aftican Resetve Dank improperly felled te recover from Bankarg LimieWABSA Bank ah amount oF 2.2 bilion citod in the GIL report, owed ao @ result of an iltegal gf given to Benkorp LinltewWADGA Garis befwean 1926 and 1995 Is substantiated; {b} The correct annount of the Megal gift granted to Bankorp Limied/ABSA Bank. te In the atount of 1.126 bition; a)FaAleged! Fatture to Recover Misappropriated Funds {c) Tao investigations Into the matter estabiished that the frrancéal aid diven to Bankor LimitediABSA Bank was Integillar {d) The South African Reserve Bank in granting the financial aid tailed ta comply with section 70(5}(0 and (s} of te South Afican Reserve Bank Aet No. SO of 1889. Tha Ministry of Finance had 4 uly as abliged by section 37 of the South Afican Reserve Act af 1929 in ensure compliance af the Act by the South Affican Reseiva Bask The Ministry felicd fo comply with the obfigation: {e) The South African Goverment failed to adhere to section 195 of ‘he Corstiution by taiingto promo’ efiicientand effective pubic administration; and {fy In the circumstances the conduct of the Suth Attioan Government and the South African Reserva Bank constitutes improper cansuct az envisaged in section T82(1) of te Gonetitulon and meladmnistiaton a8 crvsaged In section 6 of the Pubic Protenicr Att 3. Whather the Sout Afmican gublte was prejudiced by tha conduct of the Governtnent of South Afvlea and the South African Resorve Bank and if so, vehat wand IF lakes 10 ensure justice: fa) ‘The afegations whether the South African publlc was preiualiced oy fe conduct of the Govesinent of South Altica and the South African Resenee Bank is substantiated, fb) The South Afican Goverment wasted an amount of 600 096 Eriten Pounds on services which were never used: {c} The amount giveh to Hankarp LimtediA@SA Bank belonged f0 ths peosle of South Afiioa, Felts to recover the “gif resufted I prejustoe to tha people of Scuth Aivica as the public funds could have benefited the broader 4yPageAlleged Failure to Recover Misuppropitated Funds gS ose soviely instead of a hardiul of shereholiers of Gankory LimtewABSA Bank; (@) The conduct of the South Afican Gavernmert and the South African Reserve Bank coes against the ethos faid in the preamble of Whe Constitution a7d section 195 of the Consiittifon in respect of redressing social injustices and promoting efficiency, The conduct turthet Is contary to ihe Bathe Pelé Principles that requires redress and the view held intne Afjumaio quae requires a pybiictunntionary to arrest reported imeguiarites, and @® The conduct of the Scuth Afican Government and the South African Reserve Bark constitutes improper conduct as envisaged in gection 182(1) of the Consitstion and malactrinstratiun as envisaged in section 8 af the Public Protectsy at (2) The appropiate remodial action that the Public Protector is tating in kms of saction 182(1) (e) of the Constitution is she folowing: (1) The Spactat tvestigating Uri (4) The Public Protector refers the matter to the Special Investigating Unit in terns of section 6(4){6)¢H) of the Public Protector Act to approach ihe Presidentin terms: of section 2 of the Spacial Investigating Units ard Soectal Tribunals Act No 74 bf 1298, to: (a4) Reopen and amend Predamation R47 of 1998 published in the Governont Gezetle gator 7 May 1985 In oder to recover ‘Misappropriated public funds unlewtully given to ABSA Barkin tte amount Of 4.125 bilan; and (ob) Reopen and amend Prodamation RAT of 1988 published in the Government Gazelle dated 7 Mey 1968 ir order to inveatigate alognd aifage YO!oe 4/ 8 Alleged Failure to Rovcver Miseppropriaied Punts Bee “Pens misappropriated ptibile funds piven to vatieus inetitudans as rrentioned an the GHEX report, (b) The Seth Attica Reserve Bank must cooperate fly wiin the Special {awvestigating Unit aid elso assist the Special investigating Unit in tha rocevery {misappropriated nubile fends mentioned in taza) and (bb), (2) The Portfolio Cormittes on Justiey anid Correctional Services: (@) The Chairperson ofthe Partfotia Comrritiee on Justice anc Convections! Services must insta @ prosass that wa resull (r the amendment of section 224 of the ‘Consiitulfon, in purstit of mpreving soni sconamic concittons of lhe ciiézens of the Republis, ty Invoducing 4 motion in tet of section 73(2} of tie Coneétution in the Nalonet Assomby and thoeatter deal with matter in terns of section 74(5) and (6) of he Gonetitstion, ‘Secilon 224 of the Constiution sirould thus read; 224, (1) The prinvary abject of the South Amican Reserva Bank is to promete balanced and sustainable econemfe groves in the Repubife, while ensuting that the sogioeronemle weikneing of the citizens are protector. @) Tha South Afficin Reserve Bach, ir pursitlt of its primary object, mmsst perform: As fonctions independently and without tex, favour or eeejedice, vtile onsuiteg that tere must be regula’ consultation between the Back and Peiliament (0 achieve meaninghil sucto- econamie transformation. 5IPeo a | Alleged Faiture to Resaver Misspproprisied Funds a | oe HEPGRT ON AN INVESTIGATION INTO ALLEGATIONS OF MALANMINISTRATION, CORKUPTION, BISAPPROPRIATION OF PUBLIC FUNDS ANG FAILURE BY THE SOUTH APRICAN GOVERNMENT TG MAPLEMENT THE GIEX REPORT AND TO. S#ECOVER PUBLIC FUNDS FROR ABSA BANK. 4. INTRODUCTION 1.1 This 1s the Pubic Protectors report in terms of section 162/7}(0) of the Constit:¥on of the Reppin of South Atice, 1696 (the Consttution} and section ‘a¢1) of the Public Protectot Act No. 23 of 1984 (Ihe Pubile Protector Ast. 1.2. The report is submitted to the tolorsing persons: 1.2.1 Hig Excellency Prestoent Jacob Zuma, The Fresiden: ef Me Republic cf South Aires; 1.22 The Hon. David M Mahioao, the Minister of State Security; 1.2.3 — Governor Mr Lesetje & Kgsnyage, South African Reverva Baris Governor; 1.2.4 The Hun. Malusf @igaba the Mister af Finances; 1.2.5 Me Maria Ramos, Grup Chief Execute Officer Rarclays Africa, 4.26 The Hon, Dr Mathoie Mcishekga. Chairparson af tre Portfolio on Justes and Correctional Sericos; amd 1.2.7 ‘The Han, Ms Baiske Mbefe, Spesker of the tational Assembly, 1.4 Acopy of the report is also provided to the Complamant. Mr Paul Hoffman, in torms of saction 8({) of the Public Projector Act and 5 1.4 Acopy ofthe report Is further provided fo Black First land Fitst, in tetmns of section. (1) of tha Public Protector ActAllegud Paflurs io Recover Misappropriated Funds 1 24 22 23 25 26 The report relates $0 er Investigation into allegations of maladminisiralion, oruption, misappropitation of public tands and falture by the South Aftiesn government to implement the CIEX repart and to éecaver public funds from Gankorp LimiteW/AHGA Bank, THE COMPLAINT Gn November 2010, Mr. Pat Hoffman on hehaif of the Institute for Acecuntablity in douth Affice (curently known as Accountebltly Now} lodged # complaint at the Public Protector wherein he allaged that the Goverment af Ihe Repwaic of South ‘Aiea (or allure to action im regard to mattars raised In the GIEX report. CIEX LD, a covert UK based assat rerovery agency headed by Mr. Michaet by the South African Government ta assist in invastisating Oatley wes contract and tecovering alleged mmisarproprlated publle funds, The Complainant alleges that a memorandam of agreement was concluded! beiwecn Mr, Bily Masettha on behaft of the Republic Of South Africa ard Mr. Michael Outley cu bahalk of CIEX Ltd Of partioular concem to fhe Complainant was thal the CIEX revort deat will! Iifehost afforded by way of an Megal git. by the Reserve Gani to banks whic acy Ioan pairt of ASSA dung the ile of the opartheld regime. Furthermore the Complainant aleges thatthe CiEX report states thal ABSArmade ‘contingent provision for the repayment of funds unised 2s @ lifeboat in the reasonable expeciatisn that the post-apartheid governmerk would seek a proper ‘accounting and repayment with terest, han ABSA. ‘Tha Complainant sleges that itis unciesr wny tre contract between CLEX und thee Goverment of the Republic of South Afra Was sisyended, naris itin the public domain and whether tha matiers raised In the GRX repor, hove ever boon addressed by Government, BlPeosAleged Fairs to Recavor Misapproptiatad Punds 2.7 The Compieinant further alleged that @ considerable amount of public money stand to be recovered, wil serve ottr country well ft times of austerity 2.8 Rackground to the “|Keboat” given fo Hankor: Liritsd/ALSA Banke 2.8.4 (14985 Rankorp tinted thew ABSA Dank) experienced financial cfficulies ancl enprnached the South Affinen Reserve Bank for iinarcial ald. 2.82 The Seuih Africsn Rese-ve Bank granted a toan of R209 mmillien ata interest oF 2% to Benkorp Limilee, ‘he foan was repayable on arbefore 31 May 1950. 2.8.3. The loan was extended by the Soulth African Resatve Bank on 18 Apri (988 by F400 milion on the same terres and conditions, The sum of REGU million was to be repaid in three cqudl instalments of R100 milfion per annura, but this was, amended te create fiva ecual Instatments of REO millon commencing on 1 April 4830 and terminating on 1 Apifl 1905 2.8.4 On 19 March 1990 the Saulh Afican Reserve Bank and Bankorp | imited agreed. to extend the ropayment of the first mstamen tTor: 7 April 1899 to 1 August 1980. When the frei instalment beceme due, Hankorp Linétos informed the Gouih ASican Reserve Bank that twas lnable to pay Ine frst instalment cf REO miion. 2.8. O14 August 1990 a resting was held bstween Hankorp Limited; Sanikerp and or Sanlary (Sankcarp and Sanlam wore majorly shareholders in Bankerp Limtlec} with the South Alrioan Reserve Baris, At the aforesald meeting Ranikorp Linited requested the South Affican Reserve Bark elther incease thetr evting loan by further R750 milfan or declare Trust Bank, @ subsidiary in the Barskorp Group, ‘gsolvent 2.8 As a resuit the South Aflcan Reserve ank, Bankorp Limited and ite major shayohalders enlored inig a fuslher agreement av 3 Auguat 1600, Tha following ‘was agreed 10Sebel Bes : Afaged Failure to Resaver Wisappropriatad Funds & | ya 2.0.0.1 The [oan oF ROO milion: together with an sadtional R8O0 million would be made available by the Eouth Atiemt Roverve Bank to Bankorp Limited to puronase Goverment Bond Stocks in tha Lotal amcunt of REDO milion, The | R500 mifon alroady advanced had to te ured to purchase Government Bond Stoske, 2.8.6.2 Afurther RACO million would be provides Ly the South Aftoan Reserve Bank te Bankorp Linited, which amount weuld be scinvested with the Seath Afioan Resnive Senk at an jatoroat rate of 10% per annum, 2.46.3 The ROO million worlh Government Bond Siecks and the R40 milion Investment would yield a guaranteed 15% intavest par annum, bat in tenes of the agreement only 1% interest on the loan was payable to the South African Rozerve Bani. 2.8.6.4 Both abeve amounts would act pkysleally end up with Barkers Limited, but : tomained with the Sauh African Reserve Bank 2s securty. 2.88.5 On 5 Saptmber 1991 a further amount cf RSUD milian was provided to | Bankorp Linted ny tite South Affican Reseive Bank, aso not physically patd to Henkorp Limited. ‘The parfies acreed thet this woud ba Ustized to buy Government Stocks on the same tenes a8 the RAQO millon 2.8.5.8 “This meant That an amount of RLS billan was loaned to Barkorp Limited at 41%; inter est whilst the same amount was invested ether ir) Government Bond i Stocks or an ‘nvestment af the Reserve Bank yleding 16% per annum, In aan practice unintercst differential of 18% on the amount of R15 killin, an aratah i O26 milion, was made avallable to Bankomp Limited. This connotes that | Bankorp Limited unduly berefited from ihe 16% interest | \ 286.7 ‘The agreement with the sesigtance would last for five: (6) years cesulticg ins li 1.125 bilfon being made available to Sankorp Limited. These annual wirege 'ss wor Misanpiopnatsd Fumes: ola Sane Aleged Failure to Fee 2868 2.8.6.9 poyrrents of RO2S mifien were made avallable fo ABSA Henk after ABSA Bank icok ever of Bankorp Lanited, ‘After the fie (8) year petied the Government Stocks and the inveestinent with tha South Affcan Reaorve Bank would ba utlized fa repay the R16 billion advanoad but the R1.425 billon interest differential made available to Bankorp Linrttod was not repayebie. In 1992 ABSA Bank took over afl assels and listaiftics af Bankory Limited and a new agreamant wae entered into with the South Aficens Reserve Bank vihersin ABSA replaced Bankoep Limited. ‘The falinwing Packages itusirates the fwe agraements 2.8.6.0. Package A 2.B0.8.1.1 On May 1598 South Mirican Resaive Bank granted assistance to Hanbol Ply Lid. fm the ernount oF 3200 milion at an interest of 3% per apm to assiet Baniorp Limited, Repayment had fo be completed by $1 May 1960 2.8.38.1.2 A condition was that Saniam (the majority sharehotder at the time} had to cede Gavernment Bends to the South African Reserve Bank #3 securlly for the Inn. 2.8.5.94.3 On Apri 1098 the South Afican Resese Bank increased the financial aid by a fiather R10 raion, on the same terms as abave. 2A6.0.14 Ikwas agreed that the toial sum of R300 midion would be repaid in three equal instatmente af R100 milfan per annum, payable trom 1 uty 189s nti the fuit amount of the assistance had been repald an ar before 31 May 960. TireeeAlleged Faitare #3 Recover Miseppropriated Funds 286815 2.8.6.9.1.6 uring 41967 te Soull: Afican Reserve: Bank agreed to amend the ferme far the (oan and 4 became repayeble in five equel instalments of REQ miion, commenoiag on 1 April 4990. During 1980 the South African Resene Bank agreed to extend the repayment dale from 1 Apsll 1980 te 1 August 1890. 2.8.6.8.2 Package B 2.8.6.9.2.1 28.8.9.2.2 230824 ‘On 3 Augtis! 4990 a furtior agreement wae tsachad by Bankorp, Sarkorp and the Scuth African Reserve Bark. The South Afican Resewve Hank advanced R300 miftion. A further R700 tnifion would be provided and Bankorp had to invest the iofal etcount of Ri bition with the South Atisan Reserve Rank in cash ('o the exient of R400 inillion) and in Government Bonds {to the exient ot 600 mitfon) for a period of five yonts ata yield of {6% on toth investments. These served as secuily for the toon. ‘The loa of R¢ billion incurrad an Interest of 13%, 1895 accrued to Baniorp swoule be far ts bene 2.8.0.9.3 Package O 2B6934 286922 266933 tho agreement! was conduded in 4994 with retrospective erect to 1 Apel 41902, followed by the acquisticn of Bankorp by ABSA, ABSA raplaced Bankorp as the henchlery. In 1995 a furiher agrenmant was concluded to amend the 1991 acd 1954 agreements. qa|Page 7 aa BeseAltered Failure fo Becaver Misuppropitated Furats 4 & ean 2.8.65.54 This was due to the tact that the Government Bonds thatservad as secunty forthe Stuth African Reserve Barik’s Ioan io BaakoiABSA would mature before the lermination of thee aoréemen? 266.835 ‘the South Aftinan Reserve Sank gurchasad the Government Bands orn ABSA and required ABSA ta deposit tne procasds of H 1.1 vitor: with it ahd sede tre deposit la the South African Resotve Bank as secuttly for he loan exiensed to ABSA, REBCEE ABSAwould ean Iniorestan ke dencst at a rate execily equal te the rate of krierest it would have recelved on che Government Bonds, 2,86.03.7 The agraement terminated an 23 October 1998 when Ine accumciated a4 32. @ in terns of Package 8 and torat of fnancial assistance generat amounted to 4,125 billion, POWERS AND JURISDICTION OF THE PUBLIC PROTECTOR he Pulle Protector 's an Indepandeat: constitutional institution established in eama of sediion 181(1)f2) of the Constitution te atreagthon cenetiiutional democracy though Investigating and redressing improper conduct in state affairs, Section 182(() of the Cors‘tution provides tat “Tira Pubic Protector has the power, 5s raguibied by naonal iegstation- fo) to invostigata, as sayy conduct related Jo stato afaie, ar pubite sation in eny sphere of goverment, that is oMleged ar suspocted adh 4b bo improper or that would result in any iapiepriely or prejudice: {b) to report on that conduct, (0) and take appropriate remedial cation. “*Allagest Failure lo Recaver Misaporopdated Funds 3.8 38 a7 Seotion 102(2) direate that tho Public Protector has addiional powers and fenctions proveribad by national legitlaiior. In tho Eocnomle Freecom Fighters w Speaker of the National Assembly ant thors: Domoeratia Atlancs v Speaker of the Nationa! Assembly ancd Others the Constitutional Cou per Moguang CJ helé that the remediei action teken by the Pabile Protector hes & hiring effect. The Constitutional Caurt further hetd that: “bon romodial action is bineing, compliance is rat optfona, wielever recowations the slfectod patty might have ehout is fairiess, spproaratencss or laviuinoss. For this reason, tha reinedtial action taken against those under invostigation cannot be ignored wihou# any legaf vonsequencss.” Tha Public Protectors powers are regulated and empiified by the Public Protector ‘Agi, 23 of 1994 whieh siates, amongst others, that the Publis Protacter has: the pamor to Investigate and sedcess malacirinistration and raliced mproprieties 'n the conduct of state affairs, The Publ: Protector Act aise confers powers to resolve the disputes throuch conciiatior, medistion, negotiations or any other appropriate dispute resolution mechanism as well 26 fo subpoeti@ persons and information fram any person Ih the rapublls for the purpase of an investigation The Goversment of the Republle ef South Africa is an organ of siale established In terme of sector 238 of the Constitulion and the complzint iodsed aazinst Netionsi Government, Hational Treasury and the South Afican Reserve Bank relatos to maladministration, corruption, misagpronriation ef public funds and allure by ike South Affioan goverment to implement the CIEX Renoft ana to secover public funde owed hy Absa hank: as e result this matter fags within the jusiesletlon of tho Public Profactor ‘The South African Reseive Bunk is an institution exercising put tancion tn ters of section 789 of the Corstilution ottd its established in terms of section 9 of the Currency and Blanking Act No. 31 of 1920 (Act No 34 of £826} and 1s governed by line South African Reserva Bank Act No.t) of 1988 (Ack No £0 of 41989), as amended, as a resutt to Scuth AtHean Reserve Bank fats within the |urlediction of the Public Protector WaiPageAliogad Failure to Recover Misappropristed Funds 38 39 3.10 att B12 343 sna The National Treastiy is an organ o/ state estabiishod in terms af section 216 (1) of the Coristiution and saction § of the Public Finance Management Act as, 29 yf 1999, responsible for financial matters in slate affairs. *he Fudllc Protector tas juriscicton over the Hational Treasury. Tho furiediction of the Public Pimector te Investigate wes nat disputed by the Presidency sxcepi for objecting ‘4 the inlanded remedial ection, for the Prasklency to appsint a Cornmission. of Inguiry in terms of section 84 of the Constitition The judsdioton of tho Publis Protector to investigete was disputad by South Airitan Reserve Ben, they submitted thatthe Publi Protector has no lurisciction to Investigate the me‘fer st occured! more tran wo years ago, out afthe alloned Lime frame to rveotigate tha matior and further tht thesald transactinn tock alace ‘before the Publis Protester Covth Africa was established, The South Afoan Rosenre Bank slated the! the special ciroumstancesallawing the Rubles Provector to investigate the mslter were not justiiod. The South African: Reserve Ben submitted that there in nothing to investigale in relation 0 ABSA because Danko Limited and ABSA Benk’s Tabiflies to the South Amiean Reserva Bank under various agrosmenta wore fully dlechargied. The Scull Affican Reserve Bank stated the Reserve Bank is a créature of stetute fhat functions independently in terms of the Cansiitution, read with the Scuth “Afiican Reserve Barik Aat No, 99 of 1989, {tls nether oarl of Goverment uct of the National Treasury, and! In the normal caurse of business net a furetioaary nor representative of either ‘Tho Notional Treasury did nat eispule junedicton exeopt to suomit thal the complaint does not merit an fhvesiigation as the mater wes investigated and concluded by lhe Speciat Invastigative Unit and the Reserve Bask Governor's: Panel of Experts S| PageAliaged Failure ic recover Miseppropeiated Funds wi 448 B47 3.8 ABSA Bank disputed jurisdiction of the Public Profaeter by subrniting that the subject matter ecctured before the offcs of the Public Protector carne into existence, ABEA Bank submitted that the Public Protector was not in existance piior fo 1924 end hes no juriedlstion to make findings on everts thet ouLured betore the commeneemart of the Pubfic Protector Act and bafnee the Public Feotector cevne io being. Thus alleged that the Public Protector has exceaded: the lms of furisdition. ABSA Benk submitted thal the Public Protector can only Investigate conduct Brat occured an oF atter 1 Qciober 1995 vinen the office of tho Puble Protector was established, iN addition stoted thet at mast the Pubfio Freiector can enly Investigate conduct Inal ocurred aller 25 Revember 1094 when the Public Protector Ae: came into force. ABSA Bank contends that tte Publle Protector dos not have any retrospective powers to conduat the investigation, Sootion 222 of the Constitution establishes the South Affiean Reserve Bank at the Rapublie, Secton 274 af tie Constitufion provides that the primary abject of tne SARG is lo protect ihe valu of the currency in the mlerest of balanced and austainable econtemic grmsth fn the Republic, It rust perfoom ts functions independently anc without fear, favour or prejudice, but there must be regular nar responsible for national consutialion betwen tho Fank and Cabinet fnarciat matters. Section 239 the Gonstitéian statos that an organ of slate means amy other functicnary of institution exerote/ng a power or performing a functien in tems ot te Consttlution, oxercising a public pawar ar pesforming a publ function In terms ‘The South Afican Reserva Bank (s @ slate ortan envisaged In cf any leglsiation, the Censtiutien. Inthe matter of the South Airican Reserve Bunk v Barit and Others (8857072014) 12016] ZAGPPHG Itxas confimed that tho South Afican Reserve Bank derives its eunnerty and status ftom the provisions of saction 223 of tho Genstituticn, Eurteamore itwas confirmed that itis en oxgun af state 2s defined in section 23¢ WiresAlloged Failure in Recaver Misapproprieted Furs & oe 3.20 aot 322, 3.28 io 2 of Uh South and it is ingrained with juriatic parzonalty as staled in sect Aifican Reserve Bank Act No. 86 of 1958, In the Minister of Eoucation, Westem Cape and olhens v Governing Bady Miko Primary Sehach 2008 (1) SA 1 (SGA) ‘twas pointed out that any lastilion: exertising @ public power or per formicg a public function brterms of eny legistation is an organ of tate, ‘The Puble Protector thus has jurisclation over the South Altea the National Treasury and the South Aftican Government mpresarited by the Rosove Bank, Presidency, “The Investigation is undoriaken tn ferms of secilon 6 (6) of the Public Protector ‘AgtNo. 23 of 1984 which staies shat“Except whiere the Public Protector in special creumstences, wilhin his or ber discretion, so permits, 8 complaint of matter referred to the Public Protector shell of be entoitainnd untoss itis reported to the Public Protector within two years fram the occurence Of fire incident oF matter concemed’, The section gives the Hublic Protector che discretion te decide on whotherto Invesiigate a maiter reporlad to the Pubic Fratertar's office ever if it into being of the fs something that happens: after the establishment or ceming Puolic Protester office. The CIEX reporl was commissioned on 18 October 4927 et the time when the cifize of tha Puble Provector was already ostablished. Whether thernatfer was reported to the Public Protecior on 10 November 201 $8 ro @ Jurlsdelonal question but one regevding whether there ate competing circumstances te warrant the Publo Protector’s discretionaty power e investigate alleged! Improper conduct reported :a hehe smore thar two (2} years aller such conduct occured. The Public Protector applad its discretion ond concluded that special circumstances do exist tor necessitating 2 tll investigation. The matter has been ‘nthe public domein for sarne tine, and itwae in the bast interest of the people of ‘he Republis the: thig cnatter be investigated and adjieniec tbon. 4 | Page= Alleged Fature to Recover Misappropriaied Funds WZ ERR 3.28 In The Public Protector v Mall & Gusrdisn Lid and Others 2044 (a) SA 420 (SCA) (OTH) TASCA 168; 329/90 tos: staked thal *The Pubsfic Protector must uct only discover the intl bt must alse inspire ceniidance that the trust hos been discovered. Its a0 lass important for fhe public fo be ex sated that there has been na malfeasance or finproprialy in pubis ff malfeasance and inpropriety in be exposed where H extsis" if there hes not been, as if is for 3.26 The abovementioned sage further states that “Tha Rination oF the Puble Protector Js a5 much about putlie confidence that the uth neo boon discovered as i fe about discovering tha truth". 2.27 Furhammore tha Judge sleted in tne abovertentioned case that “..cnguly Wes directed ig tne propristy of the conversion of monty trom punts fo pavete money. J cannot see how the Groumstences of tat sonversion could be proporly Investigated wit cunsideretion to unly aue slo of tre fansactior, wanly fo onsure inet re pleces fel bo plsue. &f tre sunducl of lie receiver oF the money was fnobed beyond Ine mandate of Public Protector, ha’ did net make the receivor immune: torn foraisting infomation refevant fo en investigation ef the conduct of the payar, To erect a wall helwcen payment ancl receipt, ead investigate only pert Of the hansaction, winieh is Wiel the Public Protecior dl, was wheilly aritistal (1 other words ihe Publle Protector fs mandated to follow publia maney wherever it may ie and fully investigate with an eneiting mind, 3.28 it should be sted that the Publis Protector has no Jurisélcticn to Investigate matters that taok alace before the coming in etfectof the Public Protector Act or the establishment of te Public Protector offtce i 1988. ff would we In contravention of tha Public Protector Act for this office ta investigate matters that fok piace before me coming into affect of the Public Protector Act or the estabilshmant of tfls office in Octcber 1998, 2.29 The Pibile Prntecier etjeys a discrallon te Investigate matlers which occurred afer 7205 more especially If the preudize caused is sill In exfsterres and In addition the insurmountable pubic interest in the matte.Alleged Fallure lo Recaver Miseppropnaiod Funds 4. at alt 442 413 » A2A AAD 423 THE INVESTIGATION Wethodology “The investigation was conductec in terms ef recon 182 of lhe Consfitston of the Republic of South Atica, 1994, ard seciions 6 and 7 of the Publis Protector Act No. 28 of 1994, The Public Protector Act conters on the Pubic Protector’ the sole diserotion to determine how te resolve a dsgute of aleged Ueprnper conduct or metadministration. Section 6 of the Pt:blio Protector Act gives the Public Protector Ihe authority to Investigate and report ner findings regarding any complaint fodged he Public Protector had Inkielly rejected {o itivestigate the rratter due to lack of evidence unc unavallability of resources, after furtier suiomission fam the Complainant, the Public Protector was persuaded that the matter daseives (0 be locked ai as iteast Lnesrlainty on the infogtty of the Government ot Sautk Africa, the South African Resarve Bank and the Ahaneist services sevtos. “Tha Public Protector could nat find evidence indicating the basis within waiah thts agreement wos reached, this wae not the siject of the investizetion. In adation the Public Protestor did not investigate reasons conceded by the Goverrarent ot Seuth Arica in torminathyg te agreement wh CIEX Ltd. ‘Approach to the Investigation Line every Fublic Protector investigation, the Investigation was approached using an enquiry proness thatsceks to tind out: ‘What beppened? Whal should have happened? weiPageAlleged Failure t9 Reauver Misappropriatsd Hurds 428 » ART 429 |s there a discrepancy between what happened! and what ehould nave happened and if there ie deviatlon does that deviation amount to iniprozer vonduct or maladministration, In the event of improper conduct or maleciministration what would it tke +9 remecly the wrong orto place the Complainent as clese as passiblé Lo where they have been but‘or the maiachministralicn or Improper conduct? ‘The question regarding what happened fs resulved tough 4 fac-val investigation relying on tne evidence provided by the parties and Indepersterily sourced duing the Investigation and making 2 determination based on kalance of probablies. in hs vartloular ones, the factual engeity principle fecused on whether the South Afcan Government wid South Afican Reserve Banik fatiod to recover public Turd owed to goverament hy the ABGA Bank. the enquiry regarding what should have Aappened, focuses on the laWy or rulos that wegutate ihe standard that should have been mei by the government or argan of state fh prevent maizchinistration ard prejudice, ‘he erqutry regarding the remedy or remedial Seton soaks to explore apifons for conecting maledministaiion and recressing its consequences. Where a Complainant has suffered preluales, the idea fs wo place hii or her as close as possible to whare they would have been had the Government of South Afiics and the South Afiean Reserve Bank or oman of state had coniplivd wih the regulaiory framework sctiing the applicable standards for good adminbskiation. “Tho substartiva scope of the Investioafion focused on comptiance win the faw and proseripls regarding a decision not to recover misappropriated funds sllegesty owed by Bankoro Linited, now Abs2 Gartk, § any by the Government of the Republle of South Affica and the South Afican Reserve Bank th reistar lo what was reported in the GIEX roport. 42:10 The report in the oiroumstanene seaks also to look inte raform of the Republic's monetary syatom in ordarta reise government's comment inimpravine socio economic incqualiies in soclaty and solicit an amendment te the Constitutlen in 55 ||Altoged Fats fo Recover litsoppicprialsd Funds 43 4A2 4a 44s 441 144 444 44d AAA aspect of the Soulfl Affinan Reserve Bank fo at fo the peuple of the Kepubfic. 8 Inclusive eoonemia benefits Gn analysis of the compliing the following ecuer wars considered ane investigated: Whetaar the South Affoan Government improperly fated tn firplement the CIES rego, dealing with alleged s:clen siate funds, ater commissioning ane duly paying fer arm Whelher tha South Alcan Government ard the Suurh Atficon Reserve Henk anpropedy fallad te recover fram Sarkorp Limied/ABSA Bank an amount RS. bilfon, ched hr tha CREX sopori, cwed 262 result of an fagal gittgiven to Banko Limitsd/ARSA Hank betwean 1986 and (488; Whelter the South African putlie was orejuciced by the canduei of the Goverment ot South Aiea sind the South Atican Resomve Bank and if 80, what seal it ake to enaure [uetlaoy The Key Sourosa of infoswintion Comrasponnence sont and recstved | Corespencance fun the Complainant to the Fubli¢ Hroicctor, dated 19 November 2010; 2 Gomrespondence between the Public Prctector and the Complaint 3 Correspondence betwenn the Public Frutecior and he Presidency of the Repubiicof South Attica; 4 Correspondence bebycun the Publle Protector and fre Seulth Afloan Reserve Bank: nthe Public Frotactor and the Natienal Treasury, 5 Garespendesce bate ayesae$86 AAAS 4 ANG lure ta Recover Misaporopitated Funes: Comesportiene Lelwean te Puble Protector and ABSA Bank; Correspondence between the Punlie Protector und the Sous Alliean Revense Senvices: Comeapandence betweeis the Public Pratactor ar the Department of State Securltyt Correspundenoe between the Pubfe Protector are Michael Calley; anc Correspondents betwaen the PUMe Proestar and Mifchae Durr. 44.2 Documents BALA 4AAD 4428 444 4A28 4A28 44a2T A copy of CIEX Ruport filed “Operetions on behalf of the South African Goveinrnient, August 1987-Decamber 4999", Bundles of docurents suismitted by Mr Mice! Oartey, Legal opinion by Ady & Barielsnans SC dalze 18 January 1997; ‘Supplementary iegal opinion by Adv & Rartelamiarn dated January 1098; Second supplementary jagal opinion by Aev E Lertetsnarn dated January 1398: Logal opinion by Adv Pia lb ® dis Vit dated Fabry 20 83: A Momorand.rn of Agrrement butwnen the Republie of South Africa and CIEX Ltd, axed 6 October 1997 mirageAlleged Feilere & Recover Misspropricted Funds SAZ8 AA2B 44.210 44211 44243 AA 234 442.45 44248 BALIT AALS BAAS 4as re Report on the Governor's Panel of Experts to iivestigate the Reserve Bank's roe with regard fo the finencial aesistance packoge 10 Beritarp | imited, Spectal investigating (Unit Oficial Stetement on the ‘Lifeboat case, datsd 1 Novernber 1999 and Proelanvation RAT of 1886; A Memorandum (rom Judge Deneis Bavis; Gopies of the iunsactions baiweon tha Seutr Aftlean Reserve Bank and Bankorp LimitecARSA Gants: of assets hobweer Barkorp Linited end ABSA Rank dato 14 July Asinupl fitanoial otatarnants of tie South A‘fican Reserve Bank: Annual teancia! statements of ABSA Banks boat; Various media erticies pertaining to Dankorp Limited/ABSA Ba ck Submission by [ir Ct Stals to the section 41/ Commission of Eneuity inte affairs of Tolga leldings Lirited, Submission by the lacie Prst Lond Firat; Sulrnission by the Honeumale lr Mlucle G R Obrianl-Arabressini fo the Natioral Planning Commiissiou; and auth African Law Retorm Commission. Discussion Paper 126 Project 125 Prescription Periods July 2014 Inferviews conducted and meetings feld “BipaaeAlleged Failure to Recaver Minaoprogidated Fudas AAS 44.32 443 AGaA 2ASS 4A AABT 4438 443.8 A meoting itetd with Mis Maiie Ramos aphuaring a& both Group Chiet Execuiive Officer of Barclays Attica ati Former [2recior General of Nalloral Yreosity on 24 May 2016: Amucting held with Beverena Frank Chikara; former bitector Gensral I the Prevideney on 30 May 2016; A meettig tele with Ar Trevor Manuel; fermer Fineaen Master on 34 ly zal: A meating held wit Me Thaha Iceki, tormer Presiaant of tho Repisvte: of South Africa on 42 May 2658: Amsoting with held with the Deparment of State Securiiy on 3 March 201 /; ‘Ameeting hia with Me Stephan Mitford Gaodeon or 23 April 2017; Amaeting held wih Black fist Land First on Aupust 2016, Armeating held with Dr Casta Stale, former Governor of the South Alricae Reserve Bank on 8 Sepleratier 2075, Ameeting helewitn Judge Dennis Davis oa 22 July 2043; 443.10 Aconsullation mesting held wih Judge Hemth on 24 January 2045; 4.4.3.4 Anieoting hele win former Saul Afdsen Resetve Gans Governors, Mr Tite Nboweni and Ms Gill Marcus 06 02 Seplamber 2019: 4.2.3,42 Aconsuitaton macting held with Adv Witiem Heath on 24 January 2013: a4. 4444 44az Legislation and other Preserints of Sout Afica, 1996 the: Constlution}, The Constiuticn of the Reaut Ratho Pale Principles; BTPegsAtleged Failure t Recover Misanproprieted Funcis aes Aas 4A. 44b2 4A53 4st AAS 4484 Saber Tho Gade of Conduator Public Sewen's; Promotion of Acmibistative histiee Act 3.07 2006; South Altican Reserve Bank Act No, 24 of 1820; South Aftisan Racorwe Bank Act No, 20 of 494¢; South Aititan Reserve Bank Act No. 90 of 1989, Barks Act No. 94 0! 1969; Syesial hnvestigaing Units and Spactal Tribumeis No. Act 74 of 1996; and Intemational Covenant en Esonami, Socia aad Cultural Rights Untied Nalions 4887, Case Law | Economic Fressdom tights v Spouker of tre NeHlorial Assembly aot Others: { omocsalle Wiance-v Speaker of tha Notional Assembly and CRves, : Tha Publis Protasier y Mell & Guerdisn Léa ancl Cthsrs 2041 {4} 84.420 (SGA) {2011} ZASCA 108 422410; Khumata v MEG for Edhscation KZN [2079] ZA0C, Sovih Atrizan Reserve Bank v Barit snct Othens (836/0/2074) {2044} ZAGPPHC 850; are Minister of Cducation, Westam Cape: and Others v Guverning Geoy Mikro Primary Schioo! 2096 (1) SA 4 (SCA). Inspection fn face ‘nsgceticn ir ieee ou usted on 16 February 2916 »t Wettner entzel ofices, Sancton,Aleged Fate to Rasever Mssppropnatod Funds Bee $4.0 Wensitas SATA worn:publichertinginattute.org, THE DETFRIINATION Gi THE ISSUES IN RELATION TO THE EVIDENSE OBTAINED AND CONCLUSIONS MADE WITH REGARD TQ THE APPLICABLE LAW OND PRESCRICTS 8.4 Winothar the South Atticari Goverment inpeuperty failed te implement the CIEX report, dealing with atuged stelen alate funds, efter commissioning and duty paying for same: Sit it is common cause thal the South Attiean Government agtered into on agiasment will CIEX Ltd. on 6 Oatober 1897, 2. The ooniract had the following essential terms. “ERORANDUM OF AGHEERENT BETWEEN THE REPUBLIC OF SOUTH AFRICA AND CIES LIMITED 4 PARTIES Lz This egromeatit entared into bebyoon CIEX a campuny incomoraleitht snd undor tho laws af the United Hingdem...ond tha Repunlis of South Afiica APPOINTHIENT AMD DURATION 2 GIEX Is horaty appointed tp provide consutting services (0 ine RSA 2s desorbed dotow.~fehen- 4.2. CIEX heresy urvderisbess tow as Alleged Falure to Recover Miseoprogriatcd Finds be sare 2.2 This agreement shell be desried to have commenced with the result by CIEX of fre first agreed payment sxid abysl) coutinen In force Until leaninated ay etihee party. 24 This agrooment shal bo rovkiwod monthly. Verinetion wil bo by other panty... nly, ihe BSA sill be feao fa forminate this agracmant Inimedisioly without forthor payinen! and wilkiout eoasone piven. DEVECI AVES, TASIONG, SUPERWSION AND REPORTING B.ICIEX wait woriefo cuppoit and onhenos the afforte of line 28.4 and its designated ofiet to aetiress the mations described in parajyaph four (4) balou. A.2CIEX will work in close sollaboration with and under the quidanos of designetoct officials af the RSA, LEX will roport fuly on its oetivitien CONSULTANCY SESWUOKS TO BE PROVIDED BY CHEN 5 bas! endeavors fo provide dataligsenioe Gn the Jono of evidenne to suprart antion ty the REA} and advise (desimed te assist eniitylng and assessing the eptous for such acfiou) in relation Ie tho felloeing jesves and any others whist may by agreement, he added: 1 Obtaining such restitution 28 (s precficatte tor ioual sub versions araviced oy ts SARS ta ABSA sud otter iastitsitons; i. Stopping such iegalifes, end improving control of ino SARS and ihe banking system in gonerel Ui. Renovering méseparonviatad public monies ar assets;Aiieged Mallure la Rocover Miveppropstatad Funds iv. Negotiating with the Swiss and oiber guvemiments and banking aulnonlies Zor i help fa the recovery of junds and pasitlve support thr RSA bovrowing paquiiemments: ¥. Hevelyping Javerage with raion commercial interes's in RSA willy a view to attaining greater support for government sneief economic orogrennities; 5 CONFIDENTIALITY ot. 8 SAOPERTY i 1 PAYMENT RSA undertakes (© pay fo CIEX, fn retin for praacr certarmanee of its servicas uniter fe terms of this agreement, aft iactusive scm of UP 102,000 por month (© cover fees end expenses, payable monthly in advance, the Tirmt payment being ovo rern the siguihg Of tis agreemunl snd simesquert aaymonls deing due at monday intencats fom dete ofthis agraceseut's taking offoot TirThe RSA undertatas to pay CiLX a commdlssior| on ellawance monies and assets essfully rcoveret, acceding to fhe festewing eer: fa) A commission of 10% will be pelthon the first LIS$ 160m, (oh A Commission of 7.5% wil bc pai on any eubssquont creney seecvered & — DOMICILIA AND NOTICES:Altegad Failure te Recovar Mlsapproprated Funds at. JURISDICTION 9.1 This agreemsnt shall be guvemod by, suhjeet lo, interrcated and eniorcad th allowance respects in accodence with laws oF RSA..." 5.1.8 Ht lg not cisputed that CIEX Lid submited @ report fo the Sout African Goveinnent cn 28 Novernbrs: 1007 and proviriad surteequent reports thereto and advised the Soul: Mféean Government haw it cectd lawfully recover stras of inigapprogrlated publ funds. 5.1.4 ‘The report eubivitted by CIEX Ld, alerted the South Afisen Government on 2 billon allegedy offered 10 mivapprogrtation of funda end included the F: Tankorp Lintedih@SA Ranks 4 ¢Meboatard several fitians of rane siphonest ‘offshore fn init Coals, 5.4.8 CIEX Ltd cdbvised on 2 Husprint for the recovary of the pubife finds front ABSA Bank, whlch captured amengetatrces the fellow: 41.5.1 That ABA Banks able 9 pay: SA.2 Thet f ABSA Bank ‘winteers? repayment, In ant agroed suhedule ‘which ie eviderily concioientwith the bank's abity to pay thers gan be ne question ork tothe bank tsaff and fhe idea of 2 systemic risk alse falls away, 4.5.8 Thet Government accents Judge Heaths ruling tretite “lfebaat”was an logs! gifeand ANSA Bank is lable to repayment; 5:1.S4 The Gout African Reconde Berk has a uty 19 erisure that barice are managed ad persons, That sume digecturs of ARGA Tonk made fige only by properly fi personel profs ffom Inset Trading, using thelr tnowledee of Ue “ATeboat” secret eubvention: 29|Page EaAMlloged Fullure lo Recover sisapnropristed bards 5.1.8.5 Thal the directors of ABSA Panik ero parsonally liable to criminal charges tor fraud ns welt ao far breaches of the Companies Act and further that the Seath Aftoan Rasatve Bent has the autholty 10 dactara ditectars of ABSA Bana unitto a; end 6.1.6.6 Tha individuals contoling the sack must ke given a choise rilher to Le deprived 54.5 oar § President Wb of tiinir postions, and belng punust parsenally with criminal charges amd cainayon suit oF arrariging a vouintaly resiayraont plan which will enagace thalt parsonal preatiye and shatof the bark sf feguen ing President Thay Mbeki subrrtied that CILX Lid, id mot estover any arciiey bacause the agreement was thet CIEX Ltd, would lecate the mony, tring ftback ‘andl then ebtain eamiission an Sat mney that thoy wouls nave brought back. Prosident Mbek further sutrritied that af some point a decision was teken to terminate the sorviecs of CIFX Ld. dve to the failure of CIEX Lia. to yecaiver public funds 2s per the Memoranclurs of Agreemort ated that the sqraenen: wets not that GIEX Lid. wast iekentify and ropari ta Goverment, twas to secaver the moray thats all, He emphseised thal, if did nat mattar how mun Work GiEX Ltd, dif fo toanly bie publi kings, thele took wes to recover he money on tne basis thal they woule Wisi be paid & commission, He further submitted tht on the basis of CIEX Le failure and ths amount of menoy fhat Was paid, i was better to termitiate the services af CIEX te lie Pubilo Protector as noted that despte President Mbeli's assertian, the agrecment with CIEX Lid aso provides at paragraph 4.1() ef the Memerendam of Agreement pravines frat GIEX Lid was also tasked t provide Intoligarce and- ae 66 4 ely Allanad Failure to Recovar Wisaoproprated Funds ae eae advite in relation to obtaining restituver: as fs practiceble for ttegal subversions provided by the Gouth Afican Ressive Bank to ABSA Bank, 54.8 Thetoiore in tenny of paragraph 4.1() of the Memorandum of Agreerient, ClEX Lid was not only obliged ta recuver the public finds but could also provide Urtoligence and estvise on hoty suck public funds coud be iecoverse, 5.1.9 Prosidenl Mbok! did net provitis cogent reasons as lu why the Sou Amoan Govaminant id not imploment ti CIEX report inthe fight of parageagh 4.44) of the Mernerandum of Agreement of thet Aaplis favent lave SAHoving established that C\GX [7c submited © report to the Soulh African Government on 26 Novernbor 1987, advising fliaw il sould lawfully recover sums. of miseppropristed public fence and alse hoving: established thet euch lopor! vas rover implemented hy the South Mfrisan Government the qileshon that had te be dotermined wes whether the failure fe implarmont the CIEX report wes impe ins the cireumstarces, 5.1.41 Scetlon 195(%)(b} of the Constiution provides that public adminlatrasion must by Hovaned by the democratit vatuas and principles enchritned in the Constitution, which inelude that efficient, escnomic and effective use of resources must be promoted, The South Afffcan Goverment had a constiutiens! obligetion <0 ensire that in ts daatings with C/EX Lhd, it promoted the effciant, ecormunle sed effeciive use of slate resuurces, 5.1.42 The consuet ofthe South Affican Governmentin entering Inte an agreement with CIEX Lid to recover alleged sums of misappropiséed publie funds aid fetting to impoment the CIEX Ud regortin that regard afer having paid CIEX Lie a sum ef 690 000 Erifsh Polnds did not promote the effider, econcmis end eifective of state resources.Aliged Failure i» Recover Miseporopriatas Puncis S.L.13 lhe payment of 69 000 Griisn Pounds to CIEX Lis by the South Aitican 5.1 147he ‘ala to tayplement tae CIEX Governmentwas contraty to Principle 8 of the Patho Pele Principles as caplured inthe Bathe Pefa White Paper of 1997, which diotates {nat public services should be provided econam cally and afficienly in uderto give oliver the bes! poeslute Value far money, 7 18 of uimost Importance that Geverminent does rol waste euaree resources and that semvices detivered or cbiainad ave cosi-afieciive and etficient es possiale. Conese st by tine inconsletent with he duties sel aul in section 125(1)(0) of the Conetuior, requiring the efficient, economic abt! elfeniive vec of stale resources and was, morefore linproper South Airfean Geverrment was: b.LA5 The South Alfican Govermeni bad a esponsibility fo proasas tho ClEX repor! by vittus of 1b having been the ore thet commissioned! the investigation into nisaoprepsated pute funds, The South Africa Covacnment had ar obligation to ensure [nat the CEX report is processed though formal structures within a findings wilt government aad take 4 decision to either ausepl or reject its 4 cugent reusens, 5.2.16 In the clsumstances tho South Aflean Governments faiture to implement fre BE CLEX repurt was impropac, Whether the South African Government and the South Afflesn Reserve Ban Improperly foiled to recover fram Bankorp Limited/ABSA Bank an amount bf R32 billion, cited in tho CIEK repert, owed as a result of an Ment gift givon te Bankerp LimitndiABSA Bank between 1988 and 1995: Common saves issvoeAtieged Haitare to Racover Misappropated Minnis 524 B22 2 5.2.8 2. lis not disputed that tie South African Gowertunens fel report ae lel la iraplemant the CIEX inated in the evidenes rixctissed above, tis aleo not in dispute that the South Aiican Reserve Bank anlesed [nto 2 lout agreement wth Rankorp Hnited/ABSA Hank in theamourt of RA.Sbivion whersin fa Milfebeat" wes granted tc Renkorp Limted/ABSA Bank, Dr Cinrs Sols, formar geweinior of the South Affe: Reserve Bark, submitied that the Shuth Aftlcan Renerve Bank male a ver to Bankorp it; she amount of EES biion in 1980, He indicaicd that in order for Bankorp fo provide collateral to the: lean, Barkeep wes required fo bury Governmreant Sinck Brads wilh the amount cf FEL.S kéllon, which worl yet at the ime 46% Interest rata, Or Sluls indicated that Banker was reauited to pay 2% Interest on theloan wich, was reduced tn 1% af a later stage, He submitted that 16% ‘aterest rate yreldert bby the Govammient Stock Bends would be samed hy Sankoep. Dr Sials submited thal he inferost earned by Bankorp, i the emit ot 225 milion 2 year. would then be used hy Rankoip to write offtts bad debts, Ho further submitted thet loa agreanent wes payable alter a period oF Ave yusrs hon Rankorp wil be eble fo sel the Government Stock Fonds or when (he Government Stock Bonds come to maturity. The Government Slock Benes were ceded lo the South African Resolve Bank, but they bclorged te Bankaxp. Bankory ‘would earn the full Interest on thar as they were Ine owness of Ie Government Stack Bonds. Wie indicated thal Et tha end of five yeers either Bankoatg would aive the South Attican Resarve Rank fhe permission t use lhe cession ard sel the tones or Bankorp would take the Givernireait Stack Bends and sell them. He submited that Bankorp nad to pay (he 1.5 billiot laanad at the ene of the five years. Dr Stals subrutted that the Gauth Atrosn Reserve Bank charged Barkorp 2%, {ater 1%, on the Wan and Bankora camed 18% on the Government Slock Bonds wyregeAlleged Falture ta Recover Misapproprinted Funds 4.2.8. In response to tre twice th "Sims of section 7 (8) of te Public Peateclor Act, she South Atrigen Reserve Bank corarmed that indecd! i dié provide financial aasistenoe ts Bankerp LimledW/ABSA Bank in the amount of R16 biion. Tho Suith AMean Reserve Rath further confirmed Liat Barisore Liailst/ABSA Denke was obliged to repay the Isert and the 1% interest to which meant peyment in a form of the dittcrontial uetwasn Wie 16% inlerestoa the Gaverament Stock Bones at Bankorp LimtesAG'SA Bank earned on the Governineat Slock Bands. Thus thls meant ABSA Bark ewned 15% on ihe interest of lhe Gavernment Stock Bonds. The Seum Afisan Rescive Benk slated that the diffzrertial In tho Iniorest yas ine “repaat” and It wos kised t0 discharge Bankorp | frited’s bad Book. 5.2.9 Ht ls cemsnon cause that GIEX Lid. didl not recover erty misapproprinted public funds But only selvised the South Ainge Government nn fav the maney could pe recovered 52-10 Cie not in dispute tra tha Souln Afrigan Government through a Proclamation Ne. Ra? of 199B aulhurised the Special investigative Unit conduct an investigation Inte tae followires 5.10.1 iivestiqate serious neladministration in comescion with ine affairs ct Iho Soulh Alinan Roserve Bart, 5.212 investigate irmpoper of Unfawful conduct by employees of the South African Fioserve Dank, 5.2.10. lavestigaic unlawful avpropriatian ar oxpenditure of pubtls money oF prGperty; S2104 investigate ublavtul, ‘regular ur unapproved! aoquisitive eel, ‘ansaotor, Measure of prectas having « bearing ypor: steve property, 2.10.2 Investigate intentions! or negligent less of public money er damage fo public property; ardna Allogant Vaiturs to Recuier Miseppropriated Fund's 2g sare 5.2.70.6 investigate unlawtul or improper condiscl by any person which has caused or mey cause serious harmo the diterests ot public or any gategory thereof woh has taken place between 1 January 1985 and 31 December 1995, 5.2.11 Ibis not disputed thet the Special tm conelucted in sursuit of the CIEX report whieh the South Attican Gevernment pate ‘an ameunt of 600 OU Untish Poures tor. gating Unk’s investigation, was never £.2.7211 is ¢omvnon cause that in ihe year 2090 the Govesnar of the Sauth Akican Reserve Bark appointed s Pal of Experts tb savestigate fs south Atrcon Reserve Bank's role with regard to tie Hoar) a dhe Panel), The purpase wis t© aetermine the feltowing: nana package te Banko 2,124 Whether the Soutn African Reseo2 Bank, proviting linancial assistance to Bankorp, hee cantavened the piuvisions of the South Afican Reserve Bank Ack No, 90 of 1988, or any other Ast; 6.2.12:2 Whether the thancat policies end praceciires oi the South Aitican Reserve Bank with sagard to tinanaial ase Hank's assisiznre to Banker; ‘ances have been achered to in che ease of lhe 5.2.12.3 Wheties the South Alrigan Reserva Besik's conduel in the provisiot of thranclat dance whh internationally xeneptod principles assistance to Bankorp was in a Df best practing, 5.2.42-4 Guidelines and beul practice with regard to possible future conduct ef the South: African Reserve Bank with regard to banks in distress; end 6.2,125 ta tha event of 4 fndiig by the Panel that the assistance fo Bankarp ty the South Afrcen Reserve Rank was ulve viras the power of the Bank the consideration ef whether reaillation ean he cialmed, and fsa, the marmer thereat, wiPFageie -. 41 2 sgn Faso o Recover Msppraquntes Funds Se aR 6.2.18 Thu Panel Interpreted the shove fers to include the agreement betwean the South Afloat: Reserve Bank und ABSA Rank, conciuded in| 4694 a5 a fasult of the actuisition of Rankorp Lintted by ABBA Bank i 1992, 5.2.1Altis notin fispate thut obove Panel was not canstiuted to conde an investigation in pursuit of the CICX report dssues in disputes 10+ Civis Seals diepated that Hackorp | imited/ABSA Bank owed the South Atican Roserve Dantas AQSA Sank made peymtentoftre lomed annaurtt at R1.$ tillon in 4968 te the South Aftican Reconie Rank S.2.48The termer Gaverior of $16 South Alrean Heserve Bank, Mr Tio Moowent, subrnittad that te Governors Executive Corrinitiee, ook a dectstan that as far as the South Aliaan Reserve Bark is conc 5.9.47Ms Gili Marcus, anoitier former Governor of the Seuth Ameant Reserve Batik, submitted thet the Governors Fxeoutive Committee adopiod the Pranal’s report 1 wes never invealved with she CIEX with bs recommendesiane amd (nat te repo. 5.9.18 The Sout Afiean Reserve Bunk ti'tner subrited ial by October 4985, all the nuns ving Unee be financial assistance had been paid ta the South Aticon Reserve Bank. The Souh Alrican Rescive Bank insisted that all Gankorp LimitediABSA Bark’s cbigatons ‘othe Souls Afican Reserve Bank were discharged, 8.49 The South Aliean Reserve Bank further subraitied that it had nothing ta do with wn it Further that the Soutiy the CIFX report ein! ied 10 obligations at African Reserve Sank had no rok in obtalhinig the GIEX yeporl 8.2.20ln response “9 the PublicPetector's section 7{0):wtice dated 20 Brcomiser 2018, National Trossry submitted that hace was nothing in the CIEX :opevt that ean he soPageAlieged Paaro ta Recover thisanpropiated! Farels wales regarded ag a tim weverrmendation te Government, te Inetruct tha Nations! ‘Treasury fe recover funds fom ASBA Bank. 2.21 The Matlenal Treasury (urlher suberitted ‘het there are no grounds, Based on the South objectively eslabiisiied facts, to support tao recommendation the Airigon Reserve Bank take steps lo recover the mooied R32 bilfon of R126 billan flam ABSA Bank 5.2.22In addiien the National Treasury subinitied fat no calphlity aan be waksly Inst ABSA Danke plucesi on the Nuloral Treasury for net sursuing the matter of anyorre else 5.7 477e National Treasury indioated thot thore was en lagef duty on Gavernment and of the Majfonal Treasury %0 conskier, deeept and impiswient the CHEX report 6.2.25Ms Moria Hamoy, Group Chief Execute Officer - Barctays Attica Group, submitied that sires hor tenure with ABSA in 2008, they do nat Have a erovtsion cn thes: books for the zepayment of the loan $12.20 ABSA Bank submited that fe South Afica Reserve Bank assisanaa consisted cha loan which was provided to Bankorp (interest on this loan was 1¥ persainun, which amount was psd), that loan was ynmiodictely used to purchase Government Steck Bonds from the Sous Afican Reserve Bank, and the yield ore those onde (46% por annum) iss the 1% inferest an the joan woute bo eniy De used to Sebo oorlatn had debts cwed by customers ta Bankap (inltes. The Public Pratoslar made an inspection in {ncn af the said bud dats depicting te Snancial atuio of oftaire of Bankorr Lined, 6.2.27 ADGA Bank contended that in October 1996 the joan amovnt was “epald in Full, and tho proseeds ftom the Govemmert Sick Bonds yields and interest on the deposit with the Sauth African Resewe Bank hac: been used to sot olf the specitod tred cabts,Alleged Falta to Recover Misogproprintad Funcs 5.2.28 ABSA Bank angled that i paid fair velua when i aenulied Rankerp: ited, which value was raitifated to take into accourt the South Afflean Resetve Bank assisixnen in that ABSA Bunk paid Yor the South African Reserve Sank assistance: te Ranknip Limited and eid aot aenelit therefrom, 5.2.90A888 Ban ‘ihr submited that it elid not make 9 provision in is accounts for the repayment of the interest on the South Affican Reserve Bank torn to Sankorp Limited ecatise no such lability to ropay interest existed. ABSA Berk submited that the recovery of he debt, alaged'y due, has lorg age prescribed in aw. ARSA, Bank denied any debt is due or payable by it 5.230408 Bank submited that the \ecorenerdations oF CHEX Ld, 26 shey appear rom the CHEX report are mainly motivated Sy commercial J2in which proposes coertina us @ methodoloay. 5.2.41 The argument teised by Dy Stals and Ms Remos on potvalf of fhe Sau Afican Resore Rank and AGSA Bank, spectively, ceric be sustained 3s two investigations oy dv Special Investigating Untt and the Panel into the: mater eestatlished that the itierest of 15% in Ihe arcunt ot R1.125 bilion aoousd to Bankorp [Irsitedi2OSA Bank on the Govemtnent Stoo’ Bonds was an untawful ait. 5.2.32 The Special twestigsting Unit stbsequant to Investigation ef he mater, found that although # believed ther there ts 9 legal basis 1 allack tw vabelly of the Afehoat” contred, there are ether campaliing reasons not wo proceed with igation In pursuit of recovery. 5.2.35 The Special Investigailng Unit found lhose competing reasons to insiude the following: 5.2.38.1 A fear of “un on the banks", where @ snonbaling of withdrawls by invesiors can have erlang results for the banking eommounity 98 (PegsAlleged ature to Rescver Misappropiated Funds 5.2.35.9 The adverse financial Impact on Saniara end ATS Rank 2.89.2 Uncertainty amongs focal 2ad Internaticnal inwestors and depasibars 5 2.33.4 I Higation cose be fengthy 8.2.44 The Sueeial Investigating Lint futher fous "hat if the tr fis ia be set asin, the okticalion to repay the bertefit wotdd rostwitt Sartam, whe as the major shareholier in Bankorp Livited, benefited from the “abuse” when Bankorp Limited waa taken over by ABS4 Bunk, alternatively # Sanlarn is four not le bet liabte, thon ABSA Bank weurd be lable as tho final vacipient of the *ittebow!™, 5.2.38 Ils wise not disputed that the Special Investigating Unit formed a view that the 4tifebcat” amounted lo ddonalien of RVA28 billion, which donation was simulated to appear tafe @ Joan and that such liansacion was act authorised by the South Affican Resurve Bunk Act Ro, 90 vf 1859, a8 secton 10 empowered the South Afican Resarve Bank to rake [o2ne but net durations, $.2.86 On the ether hand tho repert of the Govemor's panel ef experls apposite investigate tho Reserve Genk’s role with TegeTa to the Rnehciel assistance puckaue to Barkers tented, exammed instances wners the Sou:k African Resarve Gank assisted distresseri bangs trat occurrestnefore or during the period in syhich assistance was piven to Rankorp LimitewABSA Hank and in several cases the structure and forin of me South Afican Reserve Dani's ase'sance had featuros Sima’ to those of the aselstartce atforced lo Bankorp Limited but vaken a5 a wha, the abeintance to Wankorp tLknited was efferent in tral ithad festures which fogsitiorwere notpresentin any olher single cast, 5.2.87 The Panel Was of & view thal tie ¢ffoulies portsining to te quantification ofthe envichmicnt ard the {conlly of he benciiciries render the prosecution of an entiennant dain preakematic.Allegon Faiure to Renover Misspproorited Funds 5.2.38 The Panel farther held a view that dee to the: canaplex nature oF te inggact that tho various packayos “night have af capital lnvestad In Bentorp Limited, # ia dificult (@ assecs with accuracy the quantum of bereits deived by Benkorp charcholders. 5.2.38 Having actatiched that tha "lifeboat" constiulad 16% of inerest uniatlly scented to Bankorp Limited/ABSA Bank on Government Steck Bonds bought by the South Afican Resarve Banic in favour af Esnkorp LinitediASSA Bank, which were pledged ae caliztaral to a lean that was granted by the South Aican Reser Bank, the fue romans to be Hetermived Is whether tne faire by the South Afican Govetmrert ant the Sort Aficat Resecie Rank to secover tho arroniré ef P1125 bilion, whic’ eonslilales he faba ws Empsoper 5.2.81) Section 495(()(b) of the Constitution provides that poblis adirinistration rust be governed fy the democratic values and principles enshrined in the Constitution, hich include frat effciont, esonamie and eifoctive uste of iescues must be promoted. The Scuth Mitcan Goverment and the Seuth African Reserve Bank hd a eonstitutonal abligetinn duty aot ransact with private entities in a meter that does not prominte the efficient, economic and effective ise of roscutces. Section 237 of the Constitution further provides that all canstibtienal obligations ‘smust be performed diligersly. £2.41 The Souh Ajiican Goverment and the South Affican Reserve Rank also had a duly in terms of Frinciple B of the Batho Pele Princypiss, which dictates thet pudiic suivices should be provided esonomiicaly ane e'ticlent'y In onter to ule ertzans the best nossible value fermioney. §.2.42it then iolows that the unawted gitt to Sankorp LImiing/ABSA Bank by We South Aifran Reserve Bank it a form of a “Hifeboat” diel nal constitute value for eroney us envisaged in Pendgle 8 of the Betho Pele Principles. aj vage ae oneAlleges BAS 52.44 5.245 5.246. 0 Faluro to Recover Misappropriaied Funds In Khumala v MBC for Education KZN [2013] 2800, the court nald thet a public funefonary who is aleded to an ineguiarty er impending iregulanly has a responsiblity to take action to arrest such irregularity, Therefore Ihe South Afinan Governmentand the South Afioat: Reserve Bank has af obligation te recaver the untawial gift from Bankorn LirriteWABSA fark since it flas been estabished that the “ifaboat” was uniswful Within the meaning of section 27, the Ministry of Finance upon being aware of the “iffeboat” should have investigated the South African Raserve Bank financial statements forthe relevent periods submitted ir terme of section 32 ef the Act and would have had ar opperturity fo conceive an apinion that fre Bank has failed to comply with any provision of the Act, Consequently he/she may have by sauce In writing required the board to make goad or remedy the default wilhin a specified time. Ifthe board felled fa comply, he Minlstty Wold have applies to tne Supreme ‘Court for an order compelling the Roard torectify the defauit, std the Court woul have mede anvo:derwhich it deemed fit Therefore in the loht of the legal princisles extrapolated above, the National ‘Treasury's contention that these are no grounds, based on objectvely estabilshed facts, 19 support the recommendation that the South Atloan Resarve Bank take steps 10 recover the mooted R3.2 bition oF R426 bilinn fom ABSA Bank is misconsrued. Although ABSA Bank submitted thal the metter has prescilted, the Public Protector is parsuaded by the view expressed by South Africen Lew Reiorm Commission Discussian Paper 126 Project 125 Presailptlon Periods duly 2041, in that alsiation dealiag aith prescription. “must endeavour to include all sosiments of society and pay pariowier head tote suclaly and economically disadvantaged. To the oxtant that fl deas not, tis would fave lo be considered 28 @ retovant Faster in evalvating whether exclesion is teasnnabls in an opan ard democrats soclaly besad on feumnan digeity, eqrelly and freedorn”.FF 5.2.87 Although the view was expressed in refation to prescrigion in a diferent ccntaxt, His equally relevant in the present circumstances. The question la be answered Is whether th ciroumstences ofthe case, cresciintion Is reasorabla in ari oper and democratic society based on human dignity. In this regard the Publis Protector is guided ty the founding principles @f the Constitution whietl presuppose sociai jtistice and the imprevernant of the quality oflife of alt otizens. Accordingly t woule rot be equitable and Justto exclude such a ciaim basett on prescription es it would deprive society in the improvement of ving standards, 5.2.48 Prescription must aritvécs societal needs, especially cf mose wro are impoverished or eccnaraicaly disadvantaged. To exclude scofetal reeds on the asis of prescfintlon would be unreasonable, 5.249 The Special Investigating Unk m relation fo the wfetoat found that the circumstances, rrechanios 216 lack of saleg saris to ensure seving (he siting bark by this partiouar "#teboat” emounted to an act nol customarily performed by central banks and was notautnorised By the South Afican Reserve Bank Act No. $0 of 198, Section 10(i)(s} provides that tne bank may pesform other functions of bankers and financia! agents a consi banks cuviornatily nay perform. The SIU opined that the tansaction amounted ts a daratéon which was simulated to appear tp be a loan and that Such transaation was net authorised by the Sauth Aflican Reserve Bank Act, as seclicn 20 smpowcred lhe South Afioan Reserve Bank 10 mate loans nat donations. 62.60 The Souih Affican Reserve Bank Act No. 90 of 1980 sete out in section 10 the powers and! iuntlons of the Seuth Affcan Recerve Rank. Soofon #0(H proviees that the bank may grant leans and advances against security. tt then follows that inst security vain the the iffeboal was not @ Jaan or an advance granted agé Ineaning ef section 10(f] and wes therefore unfawiul 62.61 The Special Investigaling Units contention net fo reaver based on the fearof the nan of the hanks” fs not sustained. Tho following could have heen considered by 4aiPagefelt oa the Seocist Investigating Unit to avoid the “un of the barks” In light of the recovery: 5.2.54.4 Payments in instalerts trom ABSA Bank over an extended period of time: end 5.2.54.2 ABSA Bank repay the amount of 21.125 bilon (ineliaing the associated interest charges), which represents the exent to which it unfally benefited from the cerrangament throtigh ‘ransferting the scuivatent value in ts shares to the Souin African Government, based on the average share price. Dividends declared 33 2 result of the teanefar of these eltareé to the South Afficun Gavernment shall be : peid Info the Nefional Revenue Fund, es previded for im secton 218 of the Genstitufon. 5.2.82 On theatrerhand ihe Panel after comparing the assistance provides by the: South African Reserve Bank to cihet banks in simular sftuetions around that tive, found ‘hat In the case of Bankorp LimitedABSA Gank such assistance differad rraterialy n the followina respect! 5.2.52. Mismaragement was aot corrested early 52.52.2 The assistance protacted iinarests ef shareholders and depositors. 5252.3 The assistance in packages B and G dad nut take in form of a liquid advance, but ina form of savency support, 5.2.82.4 Glfestive remedial sotion was not pursucd for some years. 5.2.57.5 There was ro effective exit provided for the South African Reserve Bank ‘Aeauision by ARSA Bank was neither anticipated ner instigated by the South : Atrican Reserve Bank. 6.2.83 the Panel found that intervention with the objective ef averting a systemic orisis atthe banking sector was jusilfied, however ty the standards of imemstionsl best agjPageAlloged Fallure to Recover sfsappropseted Favets practice tha methods were flawed. The Savin Aioan Raserve Bank's melhods In providing assistance did nal conforth lo internationally steaped principles for deating with distressed benks. 52.84 The Panst Viewed the assislance by the Souh Afican Resarve Bank was flawed hy international etancards in the fotowing manner 6254.1 The potiod of the assistance was extremely long. 52542 The South African Reserve Bark accopted suonesstve requests by Bankorn Limited 2.54.2 The South Aftican Reserve Banik dic not awestigate the problems of Bankorp. 5256.4 The South Afican Reserve Bank did not require Bankorp to reduse Its balance shest timely. 5.2.6 The Panel held that the agreements concluded trom 1880 onwards between the South African Reserve Bank and Bankorp Limited and thereafter ABSA Berk ‘were legally inva in that the South Aifoan Reserve Bank acted outside the scope af its statutory powers. 5.257 The Panel established that He assisiance was flawed in thal thors wes an absence of measures (o protect tre interests of the Sous: Aftican Reserve Bai securing © share of the equity of Bankoep Limited inn exchange for the capitat conrbullon mave as a grant, 6.2.69 Based on the legal framework set ont above itis undeniable tral the “Hfebost? given to Bankoro LUmlted/ABSA was unlawful end contravened standard mothess and processes 1eguisling financial assistance fe distressed banks, Conctusion, eae BRAlleged Faiture to Recover lsappropitated Hunds ee) i £.2.50'The South Atican Govemment and the South Afican Reserve Bonk fafod to recover misappropriated pubic funds trem Baqkorp Limites/ABSA aiter I was advised to do so by the CIEX report 52.80 No evidence could ae found that the South Afican Governeneni und the South Afican Reserve Hank had fo recover an amount of R32 bifllon fram Bankerp tlmited/ABSA Bank 5.2.81 Evidence suggests thal the amount to e recovered in the CIEX report from Bankerp Limited/ARSA Rank was incoirec!, instead of R32 billian, the earect amoant should have been R4.125 bilion. 5.2.87 Evidenne furthar indicates that the South African Reserve Sank loaned an ameunt of RLS sillor: to Bankorp Limitec/ABSA Bank and thet Bankorp Limted/ABSA Bank unduly benefitted from the interest on the Goverment Gond Stocks, the “febout”, in Bye amount of 1.125 bilan, The “#fehoat? was an ilegal afftin a guise of a loan, 5.2.63 ABSA Bank did make payment of R15 billion te the South Attican Reserve Bani in October 4995. 5.2.54 The Special trvestigation Unit and the Pane! undertook through invesiigaton of the matter and concluded that the “iveboat” in the amountof R1.125 illon that ° was granted to Bankom LimteWABSA Bank by the South Alcan Reserve Bank was not authorised by the South Afican Reserve Bank No. 80 of (989, that the financial aes'stance was flawed and that Bankorp Limited/ABSA Bank benstitted Irom financial assistance tet wes irregular. 5.2.68 The Special Investigative Unil and the Fanci lalled to recover the misappreprlated public funds trom Benkorp LimiteWABSA Bers. 5.2.86'The South African Reserve Bank was nol authorsed in terms of the Solsh Afnoen. Reserve Bank Act Ne. 90 of 1369 and Inlomational custom and standards of aePageAlteged Failure ta Rocwvet Misaperopreted Fonds worlds cenival banks to make gifts lo privats barks, The greatest gore should have bean taken to protect the South African Resorve Bank enainst ess of public funds it appiied towards the aseistance. 5.2.87 The Mirisiry of Finance failed to discharge their duties in torme of section 47 of the South A‘fican Reserve Rank Act 1989 te enforce compliancs in respact of the, Ad 5.2.68 The finantiat ssh nothing to protect the South Afican Resarve Bank against. deteriorating Armmciat postion, requting a1 aver hipher ered incrazsingly risky fel of assistance, A “"iifebaat” is meant to buy tima for a recovery, it Is net an instance to fund fence prolacted the lender, the Squih African Reserve Bank did engoing nad increasing deterlaration. 9 The South Affican Reserva Bank hud a responsioiity w apply puublie funding to, the benefit of the South Afficsn economy and thereby its people The non recovery of any repayment of the “Wfabaar" was imegular and uniist. Consequently the South African Reserve Bankand the South Aftican Government have ¢ duty to recaver publis funds which ware misappropriated, 52 Whether the South African public was preludieed by the conduct of the Government of South Airica and tha South African Reserve Bank nd ifso, what would it teke to ensure justice: (Sormon cause tssubs 5.3.1 The “lifeboat” thet was otfercd to Bankorp Limted/ABSA Bank Selonged to the people of Scuth Airica as it was in 3 fornt of publtc ‘ands Imegctany advenced fo Banvorp Limitec/ABSA Bank, 5.4.2. Is pot dispute tra! failure to recaver the “Afeieat” amounted Io a foss by the public, as the “ffeboat™ benefited a few individuals who were sharehelders of 4epPageES “Afeyed Pulluro fo Recover Misenptmprieted Funds & a | “Sra Rankarp Lirited/ABSA Bank, of funds whlen could have been usad for the batiarment cf society. 5.33 The CIRX report was never deliberated apan on either by Cebiriet, the South African Reserve Bani or any other legitimate structure and, thet the said strusiure look a decision not fo proczed oF implement the report with rational reasons recorded for auch declsian. The South Atican Gavemment should have properly processed the GIEX report and made & dacision on it as [t was alerted of the imegular financiai aid by the CLEX report 53.4 Consequently it is nat in dlgaute thal the South Ariusn Gevernraent spent €00 000 Brtish Pounds in racerd to the Investigation by Cl&X Ltd, of which mere was ino volue for money In he exeraise. 4.3.8 No attempts were made to testthe speculation whether there woud have been @ ! systemic economic impact with regard {9 the recovery of the *Weboat™ by the ! ‘South African Government. 5.36 lis not in dispute that tha South Affean Goveinment and the Soulh Afician i Haserve Hank dit) co: rescver from Rankorp LiiteWABSA Bark the ifegal "Yifeooat, whick: consisted of pubic funds, glven to Bankorp Linted’Ai3SA Bank Jssyes in cispurs 53.7 The South Alcan Reserve Bank indicated that te South Aftioan public were not proludised in any way because no adéilional ammount was due by ABSA Bank to the South Afican Reserve Bank. The Gouth African Government anc public got the tenet of the finance provided through the wale af lls bonds and paid the market related interest Uue ené paysble en tho bonds, Furthermore that the ganerai public erjoyed! lhe Lenefits of a stable banking eysiem as @ result of tho “itfeboat”.a Alleged Faftue to Recever Misapproprated Funds a 5.3.8 ‘The South Aivcan Reserve Bank futher submitted that the Reserve Rank is favolved In sysieinie isk management increased market volailty offen resutta 1 financial instabiily which cat: resull in instkudonal distress, increased creditrisks and inccoased insolvencies. Thus the Reserve Bank has thereto acted as tender of last resert on @ number of occasions since its Incorporation, BY providing this ansfatance, contral banks aim to sesiore confidence and theisby re-astabllah credibility i the falling bank's, Tie assistance is previdad wihen central banks fest thata loss of ceniidance ft a particular nsdtullon enulel prompt systems faire in the banking aystern. 6.3.6 The National Trosetry submited Ihat it did not suffer any financiai seas 2 resut of the arrangement, I wes stl required to pay Interest on iis bonds as with any other bondholder, added thet there was ne eilence that the South Aftcan Publia was projudiced by the scnduot of Gevernmentor lve National Treasury. 5.3.10 Th National Treaoury Further submitted that due to the financial cises Gwe county wat experiencing in 193 to 1989, the tepcrting systams of the South Afgan Resarve Bank at the fimo were Inedogunte, They stated thal the “shock of adjusting te intemaional anté-apartigd sanctions” and te Geverament’s “fota! straiegy” againet ant! apartheid forces, was a material factor swayed the grant by the South Attian Reseive Bank of financial eesistane te Hankorp Limitedi4BSA Bank, 8.8.41 The National Treasury stated lnat the South Affiean Reserve Bank holds the stalus.of the fender of fastrosorl, whieh status used © achieve the objective af protecting the value of ihe currency in tho interest of halanced and! eustainable growth, They furiher atuded to an oxample in recent timas where the Soulh Alfican Reserve Bank placed measures In place when the Aflean Benk was placed under puraiorsi 53.472 ABSA Bark submitted ‘hat any laans advanced to ABSA Bani by he South African Reserve Bank wore pald In ful. In addition that ail their chiqations ware: edinguishéd as all obigations were oischarged in ful a8 [PageAllogad Failure fo Recover Misaporopriaied Funds oeivin 5.8.13! ia eonterafed thet the views e¢pressed by the abovementioned parties is not ‘substantiated as it Has been estabilshed that the Hifetoat” advanced to Bankomp Limite@ABSA Benk was a git not sanctioned hy any legal freunework and furiher that the git wiven to Bankorp LimiteW/ABSA Bark wae miseppropriated public funds. Aatcation of she 6.3.14 The preamble to the Constitution states that the peogle of South Attica recognise the Inlustices af the pest, honour those wne suffered so as fo heal the divisions of tha pas! and establish @ seciely vased on democratic values; socal jus Improve the quality of ie of al! citzens ard free the patential of each person. The South Affican publ were daprited of esseniia! publle furels that could have eHievleted ther suain econa mie conditions, re and 58.18Secllon 186 of ihe Consthution presoriogs certain basie standards of publle administration, such a8 a high slandard of professional cities that is efficent econoinic and effeciive use of resources, The Government of South Attica failed agrere t0 Wiis duty by paying for a service which had oo Value for money and Jacked the effectiveness of the use of resources. 5.3.16 In addition to above in Kinunals v MEC for Eoucatun KZM (2013) ZACT it was stated that @ pubic funotlonary who fs alerted co an irtegutarity or impending irregularly has a resporsioily to fake action to arrest suc tirequiarty. The South Afiican Government znd the Ministry of Finarice failed to take adequate measures addressing the jrogulatilies periaining bo the “Wifetroat”, 5.3.17 The Batho Pele principles indicate that when people do not get what they are entitled fo front the puisic seiviog, they have @ fight fo redress. In addition the Frincples stato that It 1s very important that public servente do not waste the scarce resaurces of government and fhal they deliver @ service that fs as cost dejvaga~ 8 4 Alleged Failte fo Recaver Misaporopiialed Funds se yl effective and efficent as possible, Payment ef 600 090 Bntish Pounds to CIEX Ud, was not justifiable in the circumstances, $3.18 The South Affcan Gavammment has a yenerel obligaiion interns of aris 2[4) of ‘tho Intemational Covenant on Econamic, Social and Cultural Rights of the Uitiked Natong 1967, ta take steps through intemational asclelance ane co-operation, especially economic and tecinical, lo the maiimurn af ts available resources, with a view to achieving progressively the ful realization of the rights recagrized In tha Covenant ay all appronriate means, inctuding particulary the udopliun of -egislative neasures. 53.19 spenite obligation by the Covensnt sets out that the Republic must recagnize the rignt of evaryone io an adequate standard of living. including attacquate food, @otring and housing, and to the continuous smprovement of living conditions, Parties to the Covenani must take appropriate stops to ensure the realization of this tiga. §.3.20The South Affican Govemment and the South Afean Reserve Bank did not protect the Interest of the public in regard ta the iteauiar and untewi! “tifebaat” granted to Bankarp LimliaW/ARSA Bark. 5.8.21 The Minisuy of Finance fated to exercise thelr obligation in tems ofsection 37 of the South Afican Reserve Bank Act of 1985 by ensuring that there is compilance ot the Act by the South Afican Reserve Bank, 5.8.22Evderce indidates thal the South Anan Reserve Bank and the South African Reserve Bank had an opovrlunily to recover but decided! not to, 5.3.25Itis evident that the staius of the South Airican Reserve Bark as the lender of last rosort haa commerclel benefits only In respect ofthe Financlat sastor market, The benefit which Involves vast amounts of public mneney does not zmprove the sosia 80|Pego beAllaged Fatlure to Recover Misspproprtated Funds Bo economic conditions of ardnary chiens of the Republic but of = particular finavicial sector. 53.24 Leading authors advorating and promoting tho Kdeology of atete banks and Nationalization of monetary curency beliave tha the notion of the Lender of last resor!’s Stakus thal is inherantto eertral banke intumationally would cease w exist 4 goveroments take sole pawer In cranting money through the establishment of stale banks. 3.3.25 tn this betel that ones the stata tates conlrel of ereatng monay end credit, numemus benefits aimed at sliaviating economic ails of ordinary economlcelly disadvantaged people may be achieved, unlike our current puraly commercial Fenseaten system which only seeks ta Improve « particular fnancisl aecter. 5.3.26 The debate on nalicnalizstion of mensfary currency anc creation of stats hanke is one that has found its way in to cur cemecratte society and is a detate whlch Musireach is condlusion by the people of South Abica. 8.3.27 The Republic fas er obligation in lerms of the Constitution and intaretional instruments to improve gece economic conditions of its efizens threugh 'egisiaiive and other measures io alleviste poverty and ensure sozial justice for all The South African Government must realise economic rights to ifs people, 5,3,28 The decision not tc recover sevousiy prejudiser! the people of South Aftiaa, in particular the poor who would have benetied through social devebrment programs, 6. FINDINGS Having considered the evidence uncovered during the Investigation against the relevant reguiatory framework, the Punlic Pratector makes tie followlng fcings: SHIPageAlleged Faltire to Recover Misappropriaiod Funds bt 413 ara B45 6.16 62 Whether the South Africa Gavernment improperly failed to implement tho GIEX report, dealing with allaged stoter state tands, after commissioning and duly paying for same: ‘The elisgation wheter the Soult African Government imnpraperty felled to implement the CIEX vapor, deeling with allegad stolen. state tunds, afer commissioning and duly paylng tor sams is substantaied; CIBK Lid, was paid 800 009 Bitish Pounds for seivices which were never used by the South African Government. No @uldence could be found that ary action was taken spacificelly in pursiiL of the GIEX report; Failura by the South fica Coveramant wes inconsistent with dutles inposed by seotian 15 of the Constitution requiring & high standard of professionat ethics; ‘the fature was also Inconsfotent with secton 257 of te Conshitution mat requires thet all Consiffutonal obfigations must be pertamrad dfigantly and witout delay: i addition the conduciwes contiayy to the Batho Pele Princ no value for money, and in that there was The failure by the South Afican Goverment aonstiaites improper conduct as envisaged in section 182(1) of the Constintion and malachministiaiion as envisaged in vacton 6 of tha Public Protector Ack Whether tho South Airican Government and the South Afiican Reserve Bank Improperly fallod to recover from Bankerp Linited/ABSA Bank an amavnt of R3.2 billfan, cltod in the GIEX report, ewed as a result of anillagal gift given to Bankorp Limitad/ABSA Bank botweon 1986 and 1995: 6.2.1 The allegation whether the South Aftican Government and the South Atcan Reestve Bank itnpropery falled to recover from Bankorp Limited/ABSA Banke an S2|eageAlleged Faitits tn Hecaver Misanprprinted Funds 6.2.2 6.28 825 628 Bat 632 amoun! of 3.2 billion cited in the CLEX report, owed as @ reeut of an Medal git given to Bankorp Liited/ABSA Bani bebwo2ri 1886 and 1980 is sUbstartlatect The correct amount cf the Hegel git granted to Bankorp Lintted/ABSA Bank Is in the amount of R1,125 blilony Two investigatione into the matier estebkshed that ths finanefal ala given to Bankorp Lmited/ABGA Bank was irregular Tho South Afjcar Reserva Bank in granting the financial aid falied lo comply with section 10({){f) and (9) of the Gouth Atrican Reserve Bank Ast of 1989, The Ministy of Finance. hod 2 dity a6 abligetod by section 37 of the South Afvican Revetve Bonk Act of 1889 to eneure compliance of ttle Act by the South Afican Reserve Bank, The Ministry falled ta comply witt the obligation; ‘The South African Government failed to adhoro to action 195 af the Constitution by falling te promote effictant ard offective public administration; and tn the clicumstances that tha conduct of the South /Afican Gaverntrent and the South airiean Reserve Bank constitutes improper conduct ag envisaged in section 482(1) of tre Constitution and maladministration as envisaged in section 8 of the Puble Protector Act Whather the South African puntic war prejudiced by the conduct of tho Government of South Africa and the South African Rasarve Bank and if sa, what would Ie take to ensure Justices: “The alfsgations whether the Saute Aidcan puiblle was prefudiced by tha conduct of the Govemment of South Attca and the South Afican Reserve Bani is substantiated, ‘Tha South African Gevemmenl wasted an emount of 69G G00 British Pourds en services which ware never used: 50 aAtloged Falluro to Resover MMisappropriated Funds snare 6.3.8 The amount given to Barkorp LimteWABBA Bank helonged ia the paople of ‘South Attica, Faure to secover ine illege! gift from Bankarp Linited/ABSA Bank Fesuited In prejutice to the people of South Attica as the public funds could have bereiitied the broader society instead of a Nandful of sharshodars of Banko LimitediABSA Bani, 8.3.4 The conduct af the South African Government anti the South Airisan Reserve Bank gaes against the atlas tzid tn the preamble of the Constitution and section 195 of the Consttutfon in respect et racressing social inusticas and promating stticieny, 6.3.5 The conduct furtier Is contrary ta the Batta Pele Prineipies that requires redress and the view he'd in the Khumato ease, mentionze above, that zequires @ public funevonary to arrest reported Inequiartties; and 6.3.6 Ths conduct ofthe South Alrican Gavernmant and the South African Reweive Bank constitutes improper condual as envisaged In section 182(1) ef the Cansitution and maladmiristretion es envisaged in section 6 of ine Public Pratscior Act, 7 REMEDIAL AGTION ‘The appropriate remevist action that the Public Protector is toking in pursuit oF section 182(1){o) of the Garsiilution, with = view of addressing the maledministration, is 89 follows: 7A “(he Special tavestigating Unit: 7.1.4. The Publo Protector refers the matter ts the Special investigating Uritin terms of section B(4)(o}(I) of the Public Protector Ast to approach the President in terms of sottion 2 of the Specie! Investigating Units and Special Tribunals Act No. 74 of 1996, to: ea iPege |Aliaged Falfure fo Recover Misejzuropelates Funes isi 71441 Re-epen and amend Proclemation R47 of 1698 published in ihe Government Garctie cated 7 May 1908 in order fo imsover misappropriated public funds uniavvuty of 1.125 blllon; and rte ABSA Bank in the amount 7442 Re-cpen and amend Proclamation R47 of 1998 published in the Governnient Gazette dated May 1938 In order to Investigate allegad miseppropriated public flrds given to various insttvtiore us mentioned in ‘the CIEX repatt. TAZ The South Affican Reserve Bank musi sooperate fully wi the Special Investigating Unit and sieo ascist the Sposial Investigating Unit in the recownry of ralsuppropriated sulbfe funds mentened in 7.441 and 7.44.2. 7.2 The Portfolio Commitiee en Justice and Cosruntional Sueviaes: 7.24. The Chairperson of the Porffolo Commitee on Justioe and Correationel Services Must infiate a process that wll rasull in the amendment of section 224 of the ‘Constitution, in pursuit of inyproving sacie-economis canditians of the oifizens of the Republic, by intmdising # mofian in ienns ef section 73(2) of tha Corsttutlon in the National Assembly. and thereafter deal with the wratter in tarms of eaction AIS} and (6) of the Consfifution Section 224 of the Constitution shout! thus read: 224, {3} The primary object of the South African fleserve Bank is to promote bafznced and sustainable economic growth in the Repubifz , wile ensuring that the sock-economic well-being of the cltizens are protected, (2) The Scuth African Reserve Banic, in pursuit of its primary vbject, inust perform its functions independently end without fear, favour or prejudice, white ensuring that these must be regular consultationAleged Failure fo Recover Misoppropriates Funds Re Lelwesn the Bark and Parliament to sehieve meaningful aocio- ecananils transtornation. 3, MONITORING 8.1 The Speolai Investigating Unit, the South African Reserve Bank ane the Chaimman of the Fertioio Committee on Justice and Correctional Serviess must subratt an action plan wilh 65 ¢ays ef this reporl on the fnifal remedial action above, pte aa Any BhSISrne MOMEBANE PUBLIG PROTECTOR OF THE REPUBLIC OF SOUTH AFRICA pate 14 Olas AOh Assisi hy: tdr Tebogo Kekans -. Senior fevestigatar Private Omee fee taken in regard fo tha a8/PageTHE SOUTH AFRICAN RESERVE BANK's RESPONSE TO THE PUBLIC PROTECTOR’s PRELIMINARY REPORT 12 OF 2016/2047TABLE OF CONTENTS INTRODUCTION... FACTUAL BACKGROUND... SCOPE OF THE NVESTICATION.. THE INCORREGT FAGTUAL FOUNDATION AURISDICTION. ROLES OF GOVERNMENT AND RESERVE BANK... REMEDIAL ACTION. oven CONCLUSION. - FURTHER AD SERIATINIRTRODUCTION 1 One pecamier 216, ne Reserve Hak mas afforced en unpuitiniy 19 cermmast or the Publis Proisoter's preliminary reporl 12 oF 2G1€/2017 ented “Alleged failure by Guvernmoni ta feenyer fares bowowed fe ABSA’, The Franny Report's Fur omy laviac is hryone! the Juried'iion of the Public peatnetor i is begat on incorrect Inetsy [t confuse the rules of government and tne Itezorve Bank, end the romadial act nil proposes is wonttutionaly Invalls L ite exrrent orm. The errors in ‘as a r2uut tn preliminary react shuctd note“ the seport ere so acvisus that they resin nthe final report, emoy wll ey bin ne Riserva ank to inetebi'y ta te South Alfani finance easkets and wll rosie taka brmediate exgont action in Ine courts to pravant zie eiplemeriation ofthe rerocFul acllon pending a ven af the Real renert 4f ‘The Reserve Bunk trorofooy welcortes ine eppertenty to oni oth greiner, report so that these eters ean be property Idsifed and wo! repseted inthe Anat repo traf approckios the cxlonsiog unl 28 Februsry 20717 to previ theee commen & Thesubmisslens axe structured in six parts sei FW, the octal buckgreund tn the repent are teractions wFts the PME Prelector are set out 1.2 Seconcdy, tha eaope of the investigation is ahaiysed.5.3 Thirdly, the Public Protectors |uiledicton ts adresses. 5.4 Pouthly, the roonsel factual feavdatlon of the renest is aeposad, 6.6 AMM, the roles of povarnmont ane the Reserva Benth sre delneater, 5.6 Finally, the unemstiadionalily ofthe remedial soton is addressed. FACTUAL BACKGROUNE: Staring in 1925, the Neperve Bank provided ho eostslanas ovehagas fo Sankerp aac then Ide! io ABSA. The eaclotanea was provided as par Gf the Flesorve Barks ditto sac! es lender of lest resort The vena e* “lence of fact reset” esas evietned lve fhe ec} wath the Pes Protactar ganzetning th yveptigation in Reserve Banik fet eng 2044 ine tte to tne Publ Sotseior an 36 August 2014, the Reserve Han axmInes ite role a follows Fhe Reserve Bank wat “et esabllehid 08 Souls Aficats cena bark in 7824 Isr ithe Cevaney ad Snide 8 of 1820, The pcs cbjetve ofthe Ressres Banke ‘a5, art remains, ta protect the value ofthe aumrency i tho Inlet of ralanced ard gurterabie eeonem:araath in Sauth Ave The Reeotve ark, ke athe cena ranks round the wore, save! in sistae SK MERNEgMEAL Tzwasee raat vals sn esas in fnanctatinatablily whian, turn, can result 7 etiatenal Ghiess Increased oreet res and inereesed Ineoivercies fn erctel Ths Reserve Banik, tke athe cantral banks ero the world, nas therefore aoled ae eater of est msiot 28 & rnin of aoceatous sinoe i earparetion aiasl 105 gears age10 “ ‘As lendot ef Inet resorl, sentra banks may be required lo provide aasistenca te supper banks facing liquidity defines in ordée to ornate enough base morey to cient the blic deste to suits cash ve Hime a thandaterisls, By voiding tals ssvistunce, nival barke en to mstera cont-denso ark! thereby -e-establish cresibity mn the falling park, The sasielance iz generayy provided when eonte! banks fear that « loss of roafdondain a astlcular istisitin coed prompt systamigcaherd ‘n the barkiag syste iLway in tite capacity ag lender of fast esort tak the exarva Rank provides finan si! axsifanca to Pantarp and then iaier ABSA. The assistance took snc form of Uo aceements. Trese aprocinantswars dosvited Ir detil to fie Mublia Protector bet in tho atorview with Br Slals, the fermer Govertor of tha Reserve Bark en 0 September 2016, in De Stak's wan scomiasion duting the soetion 447 Gurmiswea oF Erashy inte the atflis of Tellyaie Holdings Linked that wes provided te the Pubfr Protector affer the tate end fio was the Chiat Financial Oricer of the: 23m the alltault of Mr Feblancto, 20°6, fal wae provided to ths Pubfe Protector after Reserve Sek uni) Aug the Interiowy ait Stas Capine of ne sgroornent, 35 Well 28 ens Inthe Remsrve Barn Bonks of aacou were alse glven ¢o the Publis Proteotor afer the'nterview on & Semtemtet 20° Ab thie aviclonge showed that Bankarp had fis ebproeched the Keesrie Bank fp {1 9pu/U6 wath oquca for opactal eesblenes Io enable t to cops wih bad Investmentsond other non-garferméig sets i had ‘nheiled wher: ft look over Trao! Rants in 1077 and Moreutaml in 1004 The request seme at a time wien Ine South Af ‘sanking scotor was crlUaly exposed given tn inleroational srellors that al been imposed on South Aftca ln 1385. If Banko» had fatad at the time, @ ron ur the berks was 9 reat rok, # cttsls in the Lanking syolem thersfor nioeted ic be svoried. Tho solwvicy problems that otempted Bankorp ln approaer the Rescive Bank in 1986 werscend during the courge of ne aerislance being given, Lach of fre: thiow acreemeals ane tilelr sen! terms were éceeritud In datell in Mr Vs effet, He sate the foilonsey abou! tne recent Fecurane +e. Salient festures of [the fst agreement] were tat 8 soolmed frat the SARS nad feened an exrount of @1 bion ta BerbolBarkery of wich R6OG milion Hed ‘boat Used to purchase gevernmi bonds and R460 eiten Inuncted wh Ths GAA at an interest ra. of 13 per cent per nam. Bn elicnal arvount ef RECO snitfon was also Yoaned by ‘te SAR to Sankorp. which ameunt wes to de utliBeXd fntier nerchass gevemraeat bands in the name of Benoni the his of BankurnBenbelf ollthe govatrment bongs and the deposit wath fhe SARE wore coded to the SARE ae collerel for the loonie, Tae Jaenr Reewides oy the GARG wore ef an teres: raée of Aer cont per year en Bankorp, es over of the jovernnest ncn, wea enitae to the interes eamed rn che. bons He on the dunost which would not be rare oF Yess thar 8225 ralffon per @nmurn - being somne 18% Interest on 6, § lon), The total amount oF tne Heres Ws be earned R436 mifan, by Banlerp wes nowever oapoed a wil ettet ston 1 Apel 1992, regely 7. fm forma of tho [second agraementl / replaced Hanterp es @ perty and preverisiy stepped ino Ke shoes 2 3 8ppunterpainy to the SARE in che sload uf Fpoiorp. fi was aqein vanitr-ed that che otal urna of the 38 inkad to 125 oe provided by the SARE ,.. Wout b ustion and thai the agreement would terminate once chat amount had beer sexchod, On terininaiion oF he wstistence, [ths second agreement provided thal] ABSA noviled ta repay tre aencut of the loot aad Hs would occur by appIyLE seta In tespeet of ts Re09 millon deaosil neki with the SARD und hy seling te governniont bonds aul paying the preveds cer to ie SARB, tn the event that tne proceeds cf the yowsrnnerd honds rxcaeded R00 miflos, “he eA2ess woud be forthe hanafitet the SARE, 8, The Fie! agreesmand] provited for the SAR. with effet from 1 June 1885, by moans of seienfl fo anguite all the “hts to the RAG eettion degost from ARSA and ter the SAB (also by meane of esta) to parchace at the ASA/Bankore lemment bonds bok! by the SARB as secuiiy, al 2 pumhese wine of RVI bifon, The emourt of B1,1 bBlow was trencefaith 7 Be held on deposit ert oe SARS at an Interest fale of 1Opor cent payebte fo ABSA, uvtt fhe overall nanctat aoeislance fret of 1125 selllon was reavhed. +H1, Ones the GARE had bazerne she over ofthe governniest vents, fier ney had dean anquired by he SATE irom ABBA es exvchaged Inthe tind aarenmert they fowed pet of tha Bans he SARE) ot goad pertaleard wore deaP wth mh ihe norrnal ourse ot husirees “opother wth aor bands ovzted Fy 6 SARA. culations cane af the time stowed (nat a proft of FYzé O64 672 ert been realised on wan bonds and evs vis relented Inthe SAFES 99870 fronetel3 8 resitts, The terre Of lhe agrenmert specified t such excess aricant wes lo bo retuined by tho SARD sed wes nul payable to ABBA. The doposh of Rava rrilion constluing cain in “exour of ADGA, wos aleo by monne of sete expunged, Tus, fie total {san amovit af RTS ‘lllan previced by Ue Bank. eeiised a prof ck R24 G81 472 on the Bonds, ef jvoly rasceina soine cf te cost of the ges-stanne In the (orn of tha interest provided" ‘The upshot of thece thie agreeerents was thet besauee Ganon, etd lies ABSA, Was obliged la resey the ‘osm aad the 1% IMorast, tne fares! assivtance frem the Reserve tiark aoiualy come in the fern of the differents! beleean the 10% meres, erkorvASGA eatred on the coverrensit bens, ea vowpared win tne “Sh tterost iE lay required 29 repay te the: BARR fot tha Jaen, Tike einarertial m6 Imeveat was the sfetout’ andi 1 was usedio Ascharge Banker's bad Hook. “The bucks ef account pevidad fooler vith Mf Terbianane’s wildenll streed {otal arrount vf fa teen of 81,6 bition, pus the teforest of 49%, wes repakl tothe Resins jen ane the Reserve: Bank teased & prot on the nards of 24381 877 weich cttectivety enabled i to recuup seme af recnsts af the fay Qeiobor 1828, when the Pulls Probore ei Was esalshody af tuo eomals owing under tha three assistance soiemes hed Deon paid te Ihe Resarrs Sars tn er about 1907, the geveraeenteonirisslaned the Glexrepart The Rewerva Sank hes ing ¥ hes Only fatehy na unntiisdge of tne report at the tine ond ne hand Wr pre pecetey, In fet, sone a copy affe resolInthe s3chy 20U0s, membass ¢F the gubli¢ ‘alse! concern abeut the ABEA IFotoat. The Governor at the tie, Mr Tho bowen), thereon comiiissioned < panel of exper, nesdod by Jurige Covis Cus, to havestlgete tin matter, the ethar pane members were: Profosset |. Hanis @ dvsctor o! the Gerite fer Inancial snd Management Stuies ot SOAS, Universlly of Landen, Mr 2C Haysand, @ Finarotal Sor Aavisor al tne sc RWI Kg niematicna! Monetary waive Chaippsien cf MIN Lae, Chartated pcontanks, Mr RK Store, Chairporson of Helalle & Touche Cherrered Accountants ant Ms $ Ziwa, Chuiperson ol Ksorki Siewe Nisaluba, Chariered Accountarfs, Tne ganel vopared « report in Deigher 2604. Ittound the talon: STA though tie Mnendist ase'slance 16 Banton was justtiad im the inlerust of praiccting the stably ofthe domestic tatking oyster fs fon anc ctractirs pad an fa, 17.2 The SARS's assistenice conTerres Denefils on Sanlem patiny hekiers ac! pension fund wenstetarke ae wall as tha minority shareholders of Bankesp. TPis was coxtvary I the pulse pe-vuptlon pubiakot In the nsadta and the conclusions of the oats Speral lnvestytive Unt that the sajor bereficia'se of Whe aceetanoe were snaerolders of ABSA, 47 Dickies perltning 1a the quanticaton of Ue stems ane the Butt oF he enctisterles rouered the enforcement ot en enrlehrnent clrinsproblewvaic, je. ABSA hind paid far ha couknuse fnandiat assistance proviuad by The SARE (o sioncorp ane 20 ABSA cord rot be renardet! 3s the oenstedmny 2f the GARGS assistance package, ASSA Nad pald ‘lr volus for Bankarp18 40 a 17.8 The SARE'S rurent princes ond ptaciioe valuing xe dlstren 418. ‘tha panel's Iyatcation hed brought to Fight all the material discoverable facie ‘angernig tive GARD apelaiease to BankomtAHSA, Pulls dacicscre atthe “ent choad gal an end to the Unnercsinty este apeculotion acut she ruc faci vancaming the ifebost banks aud rotoms in rolated areas cf franciel arcritecuta wore soinparable to dhe Fisiieot “Alor the can| cansladed fis wor, tha Reserve Bank regaruse the rates 28 clases: cored ne Sndings of he panel ond sored that thors wan ne further scien tb taken -Taene wae na further mngegemnt win the panes report oF the Ueocat uni ey 20% cate the Resone Sable fest thrugh the meta that tke Pubke Protector offre intended to lunch 2 pustininary Invectgetion nf ti nares assitaroe Geovliec to Banter/ABSA, soutation (8 the “rhe Tesarve Finks wes trumedately eoncoraed abort the enpact oF media about the Wistris bateuk nd the effect tha ile way havo o7 finance) ASH Ihe tren Guvernor of the Pesere Bare, Ms Gill Wayeus, kheretore cemiesied ah User nating wih Une Public Proterter Tne Gevernors atiempls t conove 2 sreeting wih The PUbIE Fratesior Were snayccesat and ge In che glace af a inaetig. the Rasnive Bas proved 9 Puble pretentor teh fll dostior of alt rasa! vocumarts #18 possession 2 hs tire, ta2. a "Vhese ircludce Mareture about he 19° uf cantiel ganies az fencers cf last enor and tho importance of cenfilence in the fiaancfal system, and full copy of tho report of te avis panel othing mars hapoenedl for 2 year and fall, In Februsky 2013, Nownvet, te Feile Protector called for a meeting wlth she Geverrar of the Reserve Saatk There ware autmerous sifemts ts achodule this meoting win ike Public Froteutor but We nu evell. By ane 2018, the ing hee! alll nal baen convened end so the Govemor wrati 9 te PPubpe Prefontor te objaln further Internation Lau the sees of the Investigation, The Covemnor alze caked tha Bablits Proladior 1o expisin on whet basis She Ned Jurfscetion se investigale te matter. he Susie Protectan rosponded le say that the investigel.o0 wae oncerhes wth the peopviety of uevemrents actos rgarting he dosson net ts impo the Cle resort jn 409, When the Public Protector finally mat wih the Rosewe Bank fa Sxplember 2013, cha agala coef thal he foeus ofthe nvoaiation ve en fe Gi reer nt not the ABSA Iifecoet which ocaaried before tha Clie of the Pulsio Protector was egiablished, coving thie Guerin, The Flacerve ork explained Mail was no! Involved a all ir the Glee reper, H eto enplene tha cencsis of the Davy pal and the fect tt IF had ancepied hs fines: Ai the eondusion « ini ngetns the Palle Protestoe sedated snther proainory opaten ha eaves was near corpse ard tat the Reserva Donk cecould he efforts an opparunly fe conymant sn K dung October 2078, “478 2 2s The preliminary port was rot, rowaver, proxi to the Reserve Bank in Detober 2940 ‘atead, the matter went Gold for almost lnroe year, ‘or 4 August 2045, the Reserve unk received 9 request frum fhe Punk office to p-avide certain Information relating to Banikerp ene the senlsel deta cf former Reserve anle Gaverne-, Dr Stals, The Reserve Bank roaponded on ochell of Dr Stale ‘and plicated that bo wes hapay te moet with ehe Pubke Proiectar but needed [0 be adequately inforrual arout the nates ofthe formation requed fe: Me. On 10 Aucusl 2010, the Pobic Prniector reoponded lo lis request Ly cantining, yet again, teat she was cof Invesigating (ny Mepoe: hus rahe the goverainan falere to otoment the Slee spo, top Stale end ether sepresentatives of the Reserve Pr mat wih sha Subs Fratecior on 8 Segteriber 218, Ur Sia expisined the francis! esstanca proved ie Sekere/ ‘AESh h great deta erg this meeting. Mt tha ond of the nesedrg, the Resene Back undertook to pivide Se Fable Prefector wih confiratton thatthe erousts ewing 9 te FResene Sank under ine agslsiance paskage had bean repaid. ‘the Reserve Bonk provided this inoration shetty after the rraing, The infarrsiion Ineluded a copy of te 1886 agreement wth ABSA, Mr Terbianene’s atleast are eos irom fre irene eccrds athe sore Rank ot the me. Thode raeords stowed thet the Ul capa) anaunt gtts 1% inbrast an the loan had pen repaid to whe Reaee Bark on A Oelaber 2648, the Pile Prolector infermesd the Regere Penk tbat her etisinary ropurt youd be released an fast day forthe Barks comments, This &d mat 1"nontever, huppen. Aler writhg ta the Puble Protester fo emis on fe status oF the proiminay repon, it was then provided to the lieseive Bark for comment on 21 Useomber 2046. SCOPE OF THE INVEGTIGATION 3 ha spaye of the Suite Pravector's investigation i@ unclear Fom se preliminary reser In come places, the repr! speaks of an investigation imo che fave to implemen! the Cex report At other planes, the report refers te unsecoveied Ainds tet were payable 19 the Rogerve Tank, rannzee that she ‘The content of the prelinlaary report lea dfetsriatkedy fram the a5 esorve Bank wee given in fc dealings wh the Puble Protector sinoe mld-2013. i ide 2073, the Pubfe Piosestar sald 10 &e Reserve Bank that tha inveciission sencomed tre propriety of govemments amore regarding tre deosion wo: 1 aptoment he Cle reprl han the Reaave Beak fater mat wih Ite Fublle Pretselor In Seplemoer 2013, was gsi tng “nat the able Protector was net Invaulgatrg he ABSA Tebest aa tis nud ‘ceoutrod bofere tha cetablshrent of the Public Prolzetcre eflesin Gctober 1905, 1330 a4 26 resp tle clear indicator thal tho ievestiggtion was net cancemed with Bro ABSA Ileboat, the p-elminary report mekos tindings rain te the tfeboat anc fmposes somedist anton designed to rectver whet ellagetly stilewiag on tho Hifakoat! However, appears that meal submiesions im retation to the Livkaal were not bleines fem ABSA, Fat axanicle, athough tye PLD: Prolocior indlzstos that eh ws {big shot ABSA hec made provision for the Tepayment cf fhe loan i Iranclies, she doas not Finale thet she aver put His quction to ABSA, The enswes 6 aly avent, vould nave boon oaoy satabfich because ABSA'S (hensil staxemantb at 2 mater of pie enced, The report uke 19 eloreveo fe these nance! stems, Further, itis clear sha the Publle Proiact’ tall propesy to consider the svbmissiens fem the Rese Gank afar the mgeling with Dr Stale hx Septarnber 20° The *eport draws tho iasenieot sectualvoncksion fer thse doctmente thal raney was ll owe 9 thn Ravarwe Gan 28 a waslof the Lifeaost -gho Pubic Frteetar tnerefore Fale property te Frestlgte the Ufebast TNs ls unsvepsieing because it auver ropatiy formed part of fet meesigaton, AS she auuredt tho Renenyo fan 08 a number of excstone, her inventallor: sooernad the Clee rego, The scape of the Public Protects Yivestgation dotermines te Ss9he of sr rervediel aces, The Publle Preiss yaer “0 wie fenge nd tmeominendations uniier site gecio 1) of the Poblle Protector Act 22 of 1454 fo matters thal she fas invosiguted. Through-ou1 her enargaments wh the Resers> Bonk the Public Protector pretintnany report surge C2 pare S28made ft dear thal che wae nol twverliyating {re ABSA leboat, It Is dear trae the trelininary tapot set he! 70 proper inwesigation wae noncucked Ing te Leto, No cemoatoni ramedal action osnaeming the Lieboal cen therefore Tollew from she: inadequate arid incomplete Inwestigstion* YHE INCORRECT FACTUAL FOURDATION a7 Tha pratisisany report rocords that ie tne fret city 9f the Publis Protector {9 sahat happened’? The report tied at chs gtelinionry otyp eeate of a iisunder sinning uf ie terms of fhe assistance Parkenes, 40. waceoiion of ths prelnineryrepart ented fesves (on Uisaute! she Publ Proeorts sevords tha Lens tho edonce of tre Heserve Bank that altongh the otal area of a logn wita pot? Thie Is incocect. The exidance of the Inen wae repa‘d the nterast or ine Fleewive Bankves the opaoal, I tid the Pub Proto a Une evew wl Be siels ane in he eftenit of Mi Terblonche, that tho capital eenount ofthe pac aad the J ths inravect of 16% earned on inforeat due on tha ban was repald, It a#80 cxblaine ts she qovemmen: bore wee paver cis an ovng 1 he Reser Banks The ewes iho = yqme ereinng secon tthe euskal re. he pene TPT re es ecoed cio ho Rese Saks engepernett BN SS aa ie pode awe = aN othe pc ae UsSE CN 2H A FS sor so See Hera ber heal of he PaileP leds ae a nd ape st ae oor Seal ta, ayn Fa julien, %peoimionerepariesge Spe <—proliniasy rare pace 42 489 83 + prelaniry repo page 4 pares GAT 30d 83.140 18interes! cemed ow the onde that Gankerp punchased with tha lean senount, It did rat have ary obligation to repay INis la Ihe Reserve Bank o« the government. ‘Fhe pretirinaty report fs (nerfs awd whan sonckres that there is a deb that is ttt owee fe he Fsserve Bank® No such uel exists SURISRIOTION 40 a she investigation in this mater has tS crigles m1 & complaint euteited fo fhe Pubs Presto en 11 Novernber £014 by Mr Paul Hotiman, the Dirzeter of Insitute for “pooesatiity in Soufnem flea? The complaint Irctaded dagaltons that he Clex report had no, boon implamented by the goverment, that mens were oulsinndteg arsaunio ned tb the Reserve Bark Mawing For the aevstanee provided i Bankorp and tat “ABSA ined exade contingent orevsion te repay thts erneunt secon 5(9) of the Pubte Protector Act 29 of 4084 sats ar: portent Ait ar the Jnedinson of the Punto Prctedor, Ik says that “except wnere the Puske Proticcr special errumstensey, vittin we or her diserst n, 80 peril, a complaint oF rellsr safemedio the Pubic Protector anak not be sntonisiyed unfese Ils repiied tothe Puble sprotsctor thin two yaere from the coounmence of elneuent arsTatier Homceeres: Crotiinany regan pgs ara axl speolminay sepent eye Spare Ne42 The prellininary reper deals with the jk ffiun question by eghfustye she Subjest mattor of the report, On me ane hand, he roped reserda thal ine Pubte Protector hed Iudedistion 40 invecligate the cormiaint becsuse ihe failure (0 cecover the tear “nepoened @ fon years after the Pubte Protector Office wae eslabiohac’.* THs fs incorrect The Pulic Protecior’s office was estabished In October 1998, The fran (pus ‘terest wos fully epold by Cotober 1998 43° nthe other have, the pret ary regor: aevonds mist the investigation by Giox vas summissioned on 1S Ostober (B07 ster tho Public Protectors nifiee was steady tablish The is comact, However, #8 not enough to give the Public Prosecter ruriedation over che complaint because ‘ha commpighnt related to meters eeeuyred wore than two years tstore Nevorsber 2041. In eer for the Public Protector '2 Investigate @ rater that eacured mare then tu yeurs bolure a earopioint wat lodged itt che office, thers must be spesial sreumitances present, The prolitinary report records thal ihe Putsle Proxcotar determined that these speclat Mreumsiances Werte : prevent bocouss wf Ms inlneste of fee pulls, government, Bankr estar enc (he sfagalion Wit ABBA unk hed mad provison for the repayment of fhe far. Lael, tha report records Fra he Pubic Prolector dacdad that the mettor ought le br vestigated “nit fniiy 29 tho uncertainty iteast en the hiegriy af goveramesnt, BARE ane fnansialsenices sector regulation yas mal good fortis coun” t Preliminary renov: pags 10 para 4} tpretlatrany cetor page 11 e579 44) relies report pane {* pare *(B) gatintvany Tepe FAGE SS pers A HAE 4"44 45 None of Ltase states roneahe Jistttes en investigation into raters Ut occurrent fowtecr, years before Wi Herimen’s complaint, There wee no aged for the Puble Prolecioy to brhig mahors Le finally in reli voto the AGHA lifeboat, This fay had treaty Deen actrees m 2601 when ths Devis pose! dilly investigated the isswes and round thot thore was no legal basla on which the Reseive Bank oauid reoover soy amourig relaley 19 the finoncil seclstonce provited. The Eterasts ef the pubes gevernmont and the bering sector are ol prouered by the Invedtignion, She lnnestigetion prosecads on 9 flawed inctual premise, nerrely, the trove Is mores thal is stil ened by ABSA to the Ressive Dank, No moneys ated fo the Reserve Bank, This thas boon made clear by tie Barks own former ofidels tn ther evdnree befe the Pulte Preteator end 1¢ Bank's backs of aceouri. Ji hays made provision for sehwil wes cued fe the Finally, the notion that ABSA + reserve Sark fs uncustainable iho IgM ofthe tact that at ABSA’S otilgalons He rrosenve Brkt were diechatot flora tne Puail Protestors office was astaitoned, The alingee proven does rot. there's, qual ab 9 ebacil reumtnc ty Pubs Poteet nerefore cl nt ave jean > Investiget tls coment The specie’ ercumstances, wish he prattinary report isis a fasting the Investigation, rave ne fourdation. rrROLES OF GOVERNMENT AND RESERVE BANK 47 Interns at section 223 of tha Consttutlen, tne Rascove Denk 1s the wentrl bat of South Atiea. Section 22442) of the Constitution provide that the Reserve Gare must perform re fanctions thuenenterty and withwut oer feveut er preuces, The Gank & iherefere ethos pat of government nor the Navona? Tressuty. This Csi bstvens the Kecarve Bank and govercmont was explotred to the Pulse: Protector a6 far back as'2043 when che mat vith reprosautelives of the: ark cing the thes Governor Marcus and ume: Govomoribeweri ag. Devote ts constitotally entrenched separatian, the prciminay rapert regetoely confuses guvemnment and the Resewe Bank, Por ex he, te rape Tras Cat the reserve Sank and the government ned an obigation Tiniement tha Glee sapcrt. There fe ne basis Tor ths Fring, The Raterse Bank had noting f@ de with the Clex report ard hea 19 odinations afising fom it The ropa eleo excses thm das ct He reserve Bark for net having delbersted of the Ciox rapont ul Ihe 6 unosiFee peseune, us us eminined to the Patil Prokooor, the Rasere Bats phase no role Ir procurng the reper end ofly reseed copy of #8 rape receatly, The report stiles that tha Roseree Baviés faire & implemen Glex report wae in reach cf rumerous alatttry obtgationsinlucng zactens 195, 257, S6(4}0) of Me Gonsitalon, seoton €3(2; 0% tre Publ Fitace Manageroonl Act 1 of 19 and (oe Expouties Ftles Cade, ny 0! hese hikeraris de rot ever apply tothe Reserve Bak stn enpest 1©_ prslarlraty tego page 88 Fats 24 Spalinihary repens peye fil pore TA.8S Tony Pepe: pegs 8p telveached because the Reserve Genk bed ne of thove thal 29, they hove nat bes knowledge of, or duties arsing from, tha Gien repo. REMEDIAL ACTION 4 “he tametkel ation proposed 11 tne prelinknery report egainet the Hasorve Bek Is im tteo pans. a4 The Reserve Banks requitad to ‘onsure system, ragelations and pedicles are put tn place vithin 90 days to prevent *He enomaly in providing lasnsFfeboat to banter ty future’ 4to.2._ Tne Reserva Sank sheuld consider revising fe lending pects le eve a skihar sitet me faure."* fal extign against 48.3. The National Troasury atl the Rename Dank mest ihsttine ABSA tu teccver {6% intareot necarmulaind over period of ve years amuating (o i126 pllfon lus interest.” 6) This proposed remectal attion Is flowed Infact and in aw. © pretinynary repo naga 3 pve 8 46> pretuminry raped nage 63 era 8.22 Prelimhary pet sage 80 Fare 223 a 20a 4 FS ‘At the lovel of fact, shave fs no besis far the recovery of any amounls alegedly owing 12 the Reserve Bank bexause all che amounte duo and payable under the Ifeboat have slraedy been pald. [Atte level of low, te remectal aolinn is unconstiational end conffetwith the Raseve Bens dulles underthe South Aifieas Reserve Bank “ict 90 of 1989. Tha Reserve Bevis constionelly mandated to protect tho value ef the currency In He intoroa: ef balanced and sustairable growth in the cesiniry, Its empowered! undo advences a well ts sections “O(IMt) and 10(7)]{s} Bf tee SARG Act fo grant fran ar perform stich cthar functions of bankers and Thenslel acoms as ceriml banks customarily may perform raapeetily, eing in tarme of oone poner, the Hosavve Bank has stzoped ia fy proce financlal epeisturoe tg divessed senha whera thei ‘qudiy concems threaten fo andermine clabity in the fixencal sect. tis bon constluboneily warelated to perform ths funelion In order to pratect the currency anc etatutory empowered to 19 s when It aats tp provide dsertionery lildiy te banks in distess, the Res pecforming & common finer of eerkral Danks arouie! the wor, “the Pubig Preieio’s proposed tered acon that weuid reyulea the Haserve Bank to ut plows ogulatons tha would prevent ths enor” ser reanig afeundaes enral bani coustance fo feling Irethions 8 not ah ance, [8 @ ote fumatin of thot etebilising vole & socialy, The seiedal action ja therofero unlewtd. Is m coat etn te Reserve Danks cansbutioes| obigation fe pxxont tha eer ard In osc uth the Rosarve Bank's rele in maintaining finsnetel etait inthe county, Pr‘Tho Recerve Batt catmnot be required (0 fake alps fo remove the pemers and Julies thal have been vanerredl on 3 under the Genetitutlon and ihe: GARB Act Ib ts aleo legatt urtenatle to ceeqire the Reearve Bark to take stays fo avoid (ns type ol shitation in the faire, The Reserve Bark muet raepand eaiffy to concems aout benk fiaukdly as end when thoy erie, id 90 28 revervly a6 2014/2016 in velian fo lean Bank when imaiartal Reulshy conetraiate tn the bank threntened Ie impact om the banks Itself ts radars, staff members ane wie wider banking arc fingecs! eordigge sack fa South Afriza zemecial ation, which is designed to remove these powers tan the Reserve Bank to respond swiky and cocievaly in the evert of a onsés, would be urlanna It remesel sotion of ihn soa 8 to bo rated fh Ihe fre reper, the Roparye Banicrequests thal (he Public Protector give @ fot warning, before (he Pullicetion of the fret repor:, so that i lagent Intordictery reff fiom the ours 10 prevent the my laps (2 ot mplercontatln of te resnedtal action pereding a review ‘The Reserve Dank -erpes this foreterening baceden Ht cannot Bek being placed in & sitaction were it Is dity bound to act fo eeve s fairy Hnslution, welle a the sare Kine Protuctra revved! action which stripe IL of dls using bound to comply with the: PUbKi powreGONCLUSION fn ine ght oF wat fs set oul above, the Reserve Dank respectully svbnts that the proftnary report needs to he cubstatiely nafsed tis socpe oxght to Ee lite 4 tne scope af the Public Protcotars Inestigaton by te Glex repent It ought i And mat fhe Renorve Bank hed ro knowledge of, or dullas arising from, th Cex fapori, Tae Final repent alse ought nots verse ioaes roatlag 1 tha ABSA hfehoat beoene these were no spect creumetarces justifying an trvesiyation into his issue, In eny event here is nothing to tnves'gate in relation to Ihe ABSA Iifehoat beoause Bet rp atid ABSA'S tatitles fo the Reserve Bank under the various agreements were fully dlacherpad Finally, the comedio' aufion agains: the Rosoive Bark musi be reve ‘There is w9 tectus’ of ona batts fer he proposed sation, tig rtaied inte tne tenor, $ wi Bon confit wih te Resewe Bean's constiuion€ and statucary dates, The Raservo Bonk all G2 lef wita n9 ap:lan but to seek the Immadiatn assist fo courts 10 prevent ts FURTHER aD SERIATIN, at thts sntion, the Receive Bank responds 10 spose fneiags inthe prema report thathave no. uese eucrozcod shove but which requis 2 avtnatneszonse, Any eing the prelivinery cept tnt I consistant wil: wha i tated abone orln the: seen Uhak fellows Is dieputed 362 Adparae) en poe 15 B21 1p a gefterally cecapten prinelpie thal disclosure by a central bank ta the general pusle of infeemien mgarling lender af last resutt assistance has the porentol of werserystiecing pio cerfidonce i that insttuson. Ht could resuit on a tun on ihat bare which vould exone-baie any exteling Raulty Frobleme thot the bank hay 26 exporionsing, Contral oaks hevefoe cova, 8 rule, report nthe PUNE domain on epee andor of fast resew supsedt provided fe banks, Moteaver, ceotian 33 af tho Saulb Ativan Reserve Berk Ach, 1969 (ACL No, $C ef *888), praservalion of secmsy provision, prohibte fe os losure of frfcimaton of Ihe nature lo tie general aublc, Section 20 vf tne Gouih Aiean Recerve Bank At tpad (Get No, 29 of 1944), tho Adt chal Srifially applied when the Ioan ems exierded 9 frp, also conslttos & eitlar provision of sarrecy cause gsines this boakpraund the sterner br pote {0} thet The egioerment bebseer SARB ard Bankorp and later ABSA wor kept a A for no reason fs without rer jcreral ebsorvutione” page +7 gat it ls Inearesk that Dr Sia delayed the Arneson sf ine Pubte Pro‘extore riatiglion, The inestgaion bean Tn 2017 end wes declared, a the Rande f the Pubbie Preece, perbstcaly, for 3 patiod of four atl = Hef years, The Inst sina that ar inecdens wih Li Stas was carted wets in Eeprambar 2918, Or cpl Ire nedetey afiged und provided Ins normation tsa he COUR. Or Saks srt, se the prefrinary report tts, fone the Masene Sank wity “original information’, Oe Bale assed he Publis Pratector by pricing her wth inter af tha lcan ogreemente wit Benkorp and ABGA, bi evidenoo Ye the Tofgate Erary al either pubis dacenments or 2 end ths gubite statement of Judge {feath. Thesewere documents used by Dt Slals for purpnses of hls extdense to che Tollgate [Eneuiry, There 6 ho beeie on which fo allege that Lhose wre “orignal” ocumatts; co th vere wa evi untoward In this regare. 64 Ad pega 49 pare 5.5.2 Bet in this paragrapa, the Public Proleater fezcres that “the: dev’ston set to 1exover sefiausiy arejuuced the peaple of Seuth Affioa, Howes, the Botlh African pcblic: \ere not areudieed in any way henause no euchiunal aniawal vas chav Ly ABSA sari. Government nalucing the Sout Alficam stile) act the te the Roseve fpeneitt of the tinanoe grevided thrcugh tha: seie af fs tonds and pad the market rotated Inlorest due and peveble 91 tho bends. Moreover, the general pubic enjoyed the benoit of 4 sebte bankng ayoiom ae a result of tha iteboet 28 Febnuary 2017 2ws, Soesecyreuses es race of Printer ts 702 Sen Shenae eR 284 Stephen Hoffman Stephen Hoffman stephen TRANSCRIPT OF INTERVIEW | RADIO 702 20 JUNE 2027 PRESCHTER | STEPHEN GROGTES ("STEPHEN") INTERVIEW WITH ] ADVOCATE PAUL HOFFMAN ("Hoffman") SURTECT j PUBLIC PROTECTOR'S FINDINGS ON ABSA LIFEROAY So the Public Protector, Advucste Busislwe Mkhwebene finding thet Absa Bank must repay 81,125 billion to Government, She says that this is because public funds vere misappropriated during the ballout oF Baniorp in the 1990s, In the soga it sterted before the ANC took over in 1994 so we are going back a long Way and 1 must Just read the Absa statement, They say ‘Its our firm position that there iS rv cLilgallon to pay anything to the SA Government”. So that ic What they are saying, they zre also saying thel they havent recetved 2 copy of the report and they are "urgently requesting the Publl¢ Protector's office to send Itte the bank and once we have read it we wlll consider cur fegal options", In order words wo all know what that means right? They arc off to court, Well the person who lodged the criginét complaint Is the Director at the NGO Accountatility NOW and its Advocate Paul Haffman ~ h2/s on the line from Cape Town. Advocate Hoftrraa goed aftcrnaon Good aflernoon Stephen and good afterneon to your listeners 2s well. All of this happened a very long time ego, Why why should Absa Bank pey back money that was part of a batiout that goes back 20 years? Because it was an tilegal baliout ard because os our complaint put it at the vary beginning ~ there was eviderce of maladmin'stralion of the part cf the new South Afvicart Government in Its fallure to follow uz an work that wea done to recover misappropriated monies when the uh now South Africa emerged from the asres of the cid South Afca. And its nol orly the Absa Bank umm - thete were several other transactions that are coveted in the CIEX report and I am pleased to sce that the Pubile Protector hasn't fargatten about them ang she has asked that the STU gets Iesalf all geared up te look into that as well as into part of the money that CIEX thought was recoverable fom Absa Bank. Whether its still recoverable remains te be zeen, There are questions of prescription and jurisdiction and ali sorts of reviews coming fram Absa Bank as you ‘menticned es 1 came.on alr, Advoeate, lets Just talk wbout that CIEX report, Su basically this ic a forelgn company, is rin by a lorelga netional an ex-snonk okay for the Brits - s0 a British spy, He complies thls report ~ he says that there is money that is recoverable, Sa that report gets corsidered by President ‘Thabo Mbekl ~ he decides rot to Implement it. 1: gets considered by the Finance Minister st the time, Trevor Mantal - he says It should not be Implemented, The Former Finance Minister Pravin Gordhan has cald it shoul¢ not be implemented and that the persen who said It shauld be ~ the person who wrote tha report is @ petsch who would benefit. In other words he wes going to get a cotrmission from the monay that wasTrrgaliet oF iat vith M2 Stephan rete eASEEARIGL nun Hoffman Stephen Hoffman Stephen Hoffman Stephen reccvared. So meny peoole at the time said i should nox be Impiemested Why do you lhink the Public Pratector disagree? Well H1 eaink that the politcal wheel has certainty turned quite a long wey from the time that the uri the report of CIEX was sought by the ... well T think i was commissioned by the Mandsia Administration and it wes canned at the time of the transition ta the Mbeki Administration but If you are going to spend 600,000 pounds sterling of South Africas taxpayers Thoney for the purpose of fincing aut what can he dove to recover miseparapriated monies from the old doys, then you cannot simply putt the plug because you dent feel like carrying an. You heve got to give a ratienal basis for doing It if the mile of law means anything end the thinking behind the complaint was why spend 6D0,CO0 pounds to ind out who you can go after, get told tnat there are several different tretitutlons ard people that you caa go after and then say Well actually nu we've lost ‘terest in the this project and sity about the taxpayers money but we are getting on with samething else now. ts your target «. Advocate T have to put it Ike this .. Is your target Govarnment? in that they did the wrong thing ~ {s your target Absa? Our our complaint ... yes E .. you see the Public Protector does not have Jurisdiction over private entities ke Absu Bank and Rke disappearing Geninet eiisisters wilh dollers Sneaking cut of their [sic] as they run. The Publle Pretector has jurisdiction cver the conduct of the alfetrs of state and the way that the sublic admintatratior in South Africa ts run ane if there Is maledministration of prejudice in what i3 being done In those two spreres then she has tie power to take remedial acilon once ste has investigated and reported on complaints that are made to her or cn matters that she Stores cn her own motion withau: any complaint and in thls particular case the complaint is very clearly directed against Billy Matsatia anc the spocke in the new South Africa co engage Michae! Oakiey to cone ard use his Expertise to find out who had stolen what as the transition acctrved and to Go that and then nit follow through an & is case a? malacrinisiretion and Tem sure that ne matter who litigates thls thet partule” Rrding will stand. Advocate, the Reserve Bank mandate, ihe Public Pratector says it should ‘change, bascally #xe wants some kind of change to the current mandate & inflation teryeting ~ ond { must cay { don’t sae how she gets Frem your complain whlch 's essentially about where the mney should! be recavered or net te the mandate of Infiztion targeting. Did you ask her to change the merndate? No. Certainly not ard 1 do not believe that i Is anywhere near the scope of her coreditutional mendate. Ik it .. She's on a frollc of her own, It hes rothing to do with the complaint and I am sure that the Reserve Bank will Seccesstully Knock that particular Gnicing of the Public Protector on tes head. Advocate Paul Hotfmer, Director at Accountabliity Row. [End interview]owe ‘oneiovysouraasr sa Traner i a Pssow wy 708 Ea Eusebius: FP. Eusebiust Pe: su meen fPADEEC CEA TRANSCRIPT GF INTERVIEW | RADIO 702 20 JUNE 2017 | 10:00 PRESENTER | KUSEBTUS MCKAISER ("EUSEQSUS ") INTERVIEW WITH | PUBLIC PROTECTOR BUSISIWE MKHWEEANE (PP) SUBJECT [ RESERVE BANK ct 4 (you are ceding Ubat legal ground te the Prasidant, winet Is the basi which you are oppasing? Ubi Not really thet I am ceding shat to the President. T acknowledge that indaed there Is that Fegal arovision Ia the Constitution this being solely the mandate of the President but then knere are various Issyes which have bosh raised in the Prosicent’s affidavit regarding this partleslar matter ~ gelng [urther as well chat the Public Protector, yew atvnot delegate her powers to the commission of enquiry buz the Publlc Protector should be investigaling those issues and coming Up with the finciigs. So tne the hence { am Saying that the reasoning why we ~ knowing that that is tre provislan and also wanting the Coulis to pronounce or to Interpret that particular provision cn the other hand thete are ather cdditional Issues felating regarding whether the Public Pretector can go to that Jarticular extent tc have that Judicial review matter because it goes back to what people are saying now aQout the CIEX Report of on whether Ue Pubic Protector can come Up te the remedial actions which ste has pronounced on. power. 3a which of those two stratogles ts It? Tis both. its its Using bath, Yes we would want to tave a legal cenfirmation on whether the Public Protector cen oo to that particular extent fut then again there is @ lege! basis to say at the ond of the fay T meaa the President remember raised the Issue of @ coafict of Interest or the fosue of I canna: be the the the Judge and the uhhm you know referee and @ player in in this perticslar matter especially in the Nkandlz matter so some times again now the President Is coming ot and saying 7 don't have a problem with tre judiclal review and so i wifi help Us lo lave clarity on this metter. But when you cay you are opposing |f, does that then mean that the {rounds for oppasing it are not the grounds thet pacple think fe yeu concede that the President is right, he nas got the exclusiva Constituvioral pierogatory power to decide who should head a commission of enquiry. It an mmm but Tem a pit confused Peblic Protector, J will tell you why this Tascinstes me becatise as a felled wold he lawyer T pay attention to languade and wken you sey you ate opposing I worder whether that means opposing 35 a matter of law or whether you are simply saying 9 the Court we are going to fellow these proceadings as an fnterested parcy ‘and we cannot watt to get constitutional clarity fram you, That ts 3 very different lodat position that Says ¢ disagree with the President on the nexus iscue of whather he has the exclusive oterogatory constitutional“Tangri of crea 702 sable Mein 425646501 ioe Eusebius: Is the President inconsistent across thase two view points. pp: Ja because pow he sald he is not heving any problem te have a judicial enquiry althavgh its not possibly about the one i court but a comprehensive investigation of all the issues relating to State capture so ‘mean if you feel that thet needs to be done, why now having challenges with this, Gut ic wilt help to have the court interpret this for us Eusablus: They will get there, T ain teylag to understand your logic Pe: mmm Eusebius Becauiee | think a 1ot of paopla don’t understand your leget reasoning. But T think 1 zm beginning to Inderstand what you are seving. Is this a Userul surrisary of what you have just sald PP: mmm Euse ot If In scenaric A the President seys J cannot be both the judce PP: ond the jury Eusebius; and the jury but in scenaric 2 he says T would like ta be the judge and the Jury then we have a legal problem PP: Yes So we neae 10 clarily those issues and se need to know going forward where can we unm you know which err at what level cen we stop as the Publle Pratecter end how can we go about to make sure that certain remedlet actons ... where do we draw the ling in fect when that matter comes te light [.. 23:15 to 20:58] Eusebius! 24 minutes befare 11 - we are in conversation with the Pubic Protector and 5 want to rrove on tea different theme Public Protector ~ T want to Touch or. this question esound the role of the Reserve Bank, Now you have come under lots of scrutiny for recommending thet che Constitution thould be amended to read as follows: "The priniary abject of tiie Reserve Bank fs to promote balonced and sustwinable ecararmie stowth in the ! Republic white ensuring thet sccfo economic wellacing of the altizens : protected". have seen economists weighing in on tis over the last 12 i hours, Twont to eet aside the aeonarale merits of the progosal. I want te | talk t@ you tirstly about law. What Is the legal besie of your making this recommendation, 2s Public Protect2r, where In the Public Protector Act | and/or Chaster @ that defines your tole do you get fre legal basis for making this recommendation. PP: The jegal basle Eusebius % that in the investigation of the Ine.administration, the corruption, the urdue delay and abuse af state Tasol Tres, abuse of puote power, we nced to report on those and wa need to have remed'al action, Our rrain bass iS the redress :o whoever we ore dealing or we ae assisting and again its slweys checking what preludice fic ine comleinant or people whe arc Impacted by that investigation ailfered, So in ttis perticelar instance we heve several reports as gn“rece oP ens 76 Suen Moker ASAE Eusebius: Pa: Euseblusi #P: Eyseblus: Pre Eusebius: institution where aur findings, che intention Is to make sure that we have fon numerous oceasione in ovr reports where we have called far pol-cy chang, legislative changes. And E must hasten to say that If'you reed the report end you reac the remediel action, it says that vie Cnalmperson of the Porifolig Committee en Justies anc Cartectiansl Services must initlate a process that wtil result In the amendment of section 224, Initiate the process. Tals is stil @ p-ocess and 1 am “ot saying these are the proposals they con deliforate on that and then they can decide no we are not amending We zre fine with the nay the Constitutional provielens are. So this is Savino Initlate a process. Because again taking il ta the committee, the committee Is representing all South Africans, all political parties are ‘epresented there, poopie nave their mendates and thelr constituencies veil 92 saying this iS oUF view on this parcicular snetter therefore that is the main intention, But Advocate Whether you sey Inltiate @ process or whether you say here ig the exect wording that should be used to recta a part of the Constitution .. mmm In both scenaries you ere gelng bayond what you are lawfully alowed to do, What patt of the Public Protector Act or what past of chapter 9 is permitting you, as @ matter of law, hot as a citizen - we can debate this you not wearing your het af Public Protector and there is @ reasonedle disagreement one cari have ebout whether the preposat is good. That i= why 1 am saying set aside the merits of 1. Ag Public Protector whet part of the various sources of law that are thal is the basis of your authority & this recommendation to even Initiate 8 discussion stamming from? Ubbh stemming from? The mandate of the Public Protector Is to as T am saying, the remedial action ~ tece remedial action which wil bap in the iesue of making sure that whoever affected by thi Invactigetion are not ‘ealudiced are placed ir 9 position they wouts have been better off In the Breumstances, So the issite fs che Constitution, the Public Pretector Act, Because the Constitution eur mandate is to investigate, to repost on and take remedial actions so the remacial actions are saying those remedial actions how can they redress the the prejudice which has teen suffered by whoever is effected by thls partietiar Investigation. But when the drafters of the Constitution gave you the enttlement to come up with remedial action, which we now know though very progressive case law, means binding Unless set aside upon review, it did fot ervisage that the remediel action will include you evanting to tell the leglstatures what kind of eanversatiors about c7anging the Constitution to Initiate, So you do have remediel action powers mmmm and wa are gratefui that you de but why do yau tink that remedial action power eludes you teliing the executive on che legislature what kind of Thonges to make to an Instinition Is central 10 governance zs 4 reserve bank, "Tha # fot whet wes envisaged by saying shat you are allowed to come up with renedial action