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Johannesburg - History and context are everything in the brouhaha over the R1.2 billion apartheid-era lifeboat given to banking giant Absa and its predecessors.
The history is the dark, secretive time in which the generous loan by powerful interests in the Afrikaner political establishment to their counterparts in the Afrikaner commercial establishment was granted.
The context is the current era – the most bitterly contested period in democratic South Africa, a period in which an under-siege political clique is doing its utmost to shift the gaze away from its nefarious ways.
IN THE BEGINNING...
Let’s start with the history.
The origins of the “lifeboat”, as the series of soft loans that the SA Reserve Bank gave struggling Bankorp came to be known, were at the height of then state president PW Botha’s reign.
This was a time of sickening incestuousness in the upper echelons, when members and associates of the Broederbond played nicely with each other as they abused public resources.
The Bankorp Group, one of the jewels of Afrikaans business, was involved in an aggressive but perilous expansion drive that involved somewhat reckless lending policies.
In 1985, the Reserve Bank agreed to lend Bankorp R200 million at a superlow interest rate, repayable in 1990.
Over the next few years, more millions would be channelled in Bankorp’s direction, despite the fact that the banking group was defying the Reserve Bank’s appeals to banks to exercise restraint when lending.
In Bankorp’s case, then central bank governor Gerhard de Kock wrote to Bankorp’s chief executive officer CJ van Wyk directly, warning him that his institution was the only one of the big ones not adhering to the agreement to go easy.
Things came to a head in 1990, when the initial loan was due.
With rising interest rates taking their toll on consumers, Bankorp customers defaulted en masse, throwing the group into severe distress.
Instead of having to pay back the money, it was agreed at a high-level meeting to extend the life of the transaction and top up the now R300 million loan by another R1 billion.
The complicated deal required Bankorp to provide collateral by investing R1 billion in the Reserve Bank in the form of cash and government bonds.
Strict operating conditions were imposed on Bankorp.
It was this distressed Bankorp that was acquired in 1992 by Absa, the megabank which had been formed in 1990 through the amalgamation of different financial institutions.
This is where matters become contentious. When Absa took over Bankorp it inherited the bad debt – the loan agreement as the bonds and cash investments deal.
The 1992 agreement retained the 1995 loan repayment deadline with basically the same conditions as the original ones.
Absa insists that with accumulated write-offs of bad business since taking over Bankorp, and its repayment of the amount of R1.25 billion in 1995, it fulfilled all its obligations and closed the chapter.
But the bank’s critics and the Public Protector say it did not pay interest on the loans, and thus owes the Reserve Bank – and, by extension, the South African public – more than R1.2 billion.
Some put the figure at R3.2 billion.
THE SIEGE OF THE 1980S
The Bankorp saga played out against the background of a National Party regime under siege.
South Africa was burning as the Botha government’s militaristic crackdown failed to crush the resistance.
Sanctions and disinvestment were strangling the economy, making it difficult for Botha and company to govern.
With money flowing out of the country and international institutions refusing to grant credit lines to South Africa, the apartheid government was beleaguered, politically and economically.
As Judge Dennis Davis – who headed a heavyweight panel into the saga in the early 2000s – pointed out, this was the background to some deviant decisions, the Bankorp bailout being one of them.
“During this period, a siege mentality prevailed in the South African government and business circles which had a wide influence on the conduct of economic policy.
"Particularly notable ... were the existence of fragility in the financial system and a secretive approach to the business,” he wrote in the voluminous report.
It was under these conditions of paranoia and siege, and in an environment controlled by Broederbonders and their associates, that it was possible for illegal and secretive arrangements such as the Bankorp deal to take place.
A situation whereby the Reserve Bank, whose governor was a phone call away from the finance minister, and a Bankorp director, who was the minister’s brother, could cut a deal is a far cry from today’s transparent and professionally regulated system.
It was inconceivable in the eyes of the then powers that be that a jewel of Afrikaner achievement could be allowed to fail.
ENTER CIEX
Ciex, the British “investigation and recovery” company, set things rolling in 1997 when it approached the South African government offering to recover money stolen by apartheid overlords and their cronies.
The Bankorp lifeboat was just one of these, with the company saying it would be able to recover up to R10 billion from Absa and its shareholders.
After preliminary work commissioned by spy boss Billy Masetlha, for which it was paid R1.7 million, Ciex concluded that Absa owed the people of South Africa R3.2 billion.
The government of the time decided to park the matter until after the 1999 elections, which brought Thabo Mbeki to power.
It was not revisited until then Judge Willem Heath’s special investigating unit had another look, as did a panel commissioned by then Reserve Bank governor Tito Mboweni and headed by Judge Davis.
The two processes concluded that it was best not to pursue the matter – Heath, because targeting a pivotal bank would cause economic havoc; and Davis, because Absa paid fair value for Bankorp and “could not be regarded as beneficiaries”.
POST-POLOKWANE
Since accountability activist Paul Hoffman laid a complaint with the Public Protector in 2011, the matter has been a political football.
Initially, it was used by the post-Polokwane ANC leadership as a stick with which to beat Mbeki and his “neoliberal” regime.
This was proof that the 1996 Class Project, as Mbeki and the likes of Trevor Manuel were known, were in bed with white business.
All manner of conspiracies circulated that their close proximity to captains of industry was the reason that the recommendations emanating from the Ciex investigations were not pursued.
THE GUPTA LINK
As with everything in South Africa – from last year’s drought to Bafana Bafana’s absence from Afcon to Ska Bhora Moreki not being voted song of the year – the name Gupta is never far away.
As legitimate as the inquiry by the Public Protector and the questions by South African citizens are, this is now no longer what this whole thing is about.
The matter has now been seized upon by the Gupta machinery to deflect attention away from allegations of state capture that have been levelled at them.
Now that the provisional report is in the public domain and says not-so-nice things about South Africa’s largest bank, which happens to be run by Maria Ramos, someone they hate with a passion, the defenders of state capture have invaluable ammunition in their hands.
With this they can prove the corrupt ways of “white monopoly capital”.
MKHWEBANE’S LEGACY
How Public Protector Busisiwe Mkhwebane could have accorded the document the status of a provisional report and sent it out to affected parties is a great mystery.
Basic spelling and grammar mistakes indicate that this was a work in progress left behind by her predecessor, Thuli Madonsela.
The conclusions and remedial actions may have remained the same, regardless of further inputs, but it was quite clear that someone was in a hurry to get it out to the affected parties before Christmas and have the comments back by mid-January.
As to why, your guess is as good as Trump’s.
WHERE TO FROM HERE?
This saga was born in the dark corridors of apartheid-era plotters. It is now back there.
Expect this to be one of the dominant stories of 2017 as the defenders of state capture do battle with those who want to hold the practitioners and beneficiaries of state capture accountable.
Expect to hear the chorus of the “white monopoly capital” hymn throughout the year. Expect it to play into the ANC’s succession race in one way or another.
Expect it to be a weapon for character assassination, rather than a tool to correct errant ways and strengthen institutions.
This deal was born in dirt, and unto dirt it has returned.
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