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ABSA: No obligation to pay R1.125bn bailout

Jun 19 2017 14:00
Carin Smith


Company Data

BARCLAYS AFRICA GROUP LIMITED [JSE:BGA]

Last traded 141
Change -6
% Change -4
Cumulative volume 2442986
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town - ABSA is under no obligation to pay anything to the SA government, the bank said on Monday.

This was in reaction to Public Protector Busisiwe Mkhwebane's report that she deems a bailout of R1.125bn by the South African Reserve Bank (SARB) of Bankorp to have been unlawfully made and that ABSA must pay it back.

It relates to SARB’s assistance to Bankorp between 1985 and 1995. ABSA acquired Bankorp in April 1992.

"We have not yet received a copy of the report and we are urgently requesting the Public Protector’s office to send it to us. Once we have read it we will consider our legal options including seeking a high court review," ABSA said in a statement.

"ABSA met all its obligations in respect of the loan provided by the SA Reserve Bank by October 1995. It is our firm position that there is no obligation to pay anything to the SA government."

ABSA's parent company Barclays Africa's [JSE:BGA] share price was 2.32% down on Monday at 14:51, trading at R142.20 a share and had lost R15.8m in market value.

Mkhwebane said two investigations into the matter established that the financial aid given to Bankorp Limited/ABSA Bank was irregular. She found that in granting the financial aid to Bankorp the SARB failed to comply with the South African Reserve Bank Act. Furthermore, she said the Ministry of Finance had a duty in terms of the act to ensure compliance by SARB, something she claims it failed to do.

She also found that the government failed to adhere to section 195 of the Constitution by failing to promote efficient and effective public administration.

"In the circumstances the conduct of the SA Government and the SARB constitutes improper conduct as envisaged in section 182(1) of the Constitution and maladministration as envisaged in section 6 of the Public Protector Act," said Mkhwebane.

Mkhwebane referred the matter to the Special Investigating Unit (SIU) in terms of the Public Protector Act to reopen and amend Proclamation R47 of 1998 published in the Government Gazette dated May 7 1998, in order to recover misappropriated public funds unlawfully given to ABSA Bank in the amount of R1.125bn.

She also wants the SIU to reopen and amend Proclamation R47 of 1998 published in the Government Gazette dated May 7 1998 in order to investigate alleged misappropriated public funds given to various institutions as mentioned in the CIEX report.

She said SARB must cooperate fully with the SIU and also assist the SIU in the recovery of what she found to be misappropriated public funds.

“The amount given to Bankorp Limited/ABSA Bank belonged to the people of South Africa,” she said. “Failure to recover the ‘gift’ resulted in prejudice to the people of South Africa as the public funds could have benefited the broader society instead of a handful of shareholders of Bankorp Limited/ABSA Bank.”

Cancelling Bankorp’s licence at the time would have led to “serious implications” for the South African banking system, former SARB governor Dr Chris Stals told Fin24 in January this year.

He explained the reasoning for extending the controversial R1.5bn bailout to Bankorp in 1985.
 
“We protected the South African financial system against a major collapse,” he said. At that stage, the closure of Bankorp risked resulting in “epic” problems for the whole of South Africa, Stals said.

Bankorp was the third largest bank in the country, with assets worth R32bn and over 90 000 clients.

The ABSA takeover of Bankorp helped clear its debt and the money had been repaid to the Reserve Bank, he said.

Fin24 is still waiting for SARB and Treasury to comment on the findings.

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public protector  |  bankorp  |  absa

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