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The Pen as Sword: The Unbridled Power of Journalists and its Effects on Society

It is often said that “the Pen is mightier than the Sword”. Quite so, in the South African media space, but not in the sense sought to be conveyed by the epigram.

It is with concern that I watch ordinary South Africans, in the absence of rational and informed voices in the public space, drinking copiously from the font that is the supposed wisdom of “opinion makers” on esoteric matters of law they know little (if anything) about, and are therefore caught up in a maelstrom of ignorance.

The Bar discourages its members from engaging in public debate on matters that are pending in the courts. This may inadvertently be a contributing factor to the dominance in public media of ill-informed, and dangerously misleading, commentary on legal matters. Perhaps, given the changing times and proliferation of fake news and ignorance, it is a prohibition that the Bar should seriously consider revisiting.

In an environment where uninformed legal commentary monopolises the public space, the rule of law is sure to take a back seat while the truth gets lost in the process.

We have seen many examples where court rulings were interpreted based on bias, prejudice, perception and preconceived narratives, instead of the actual basis of the ruling. For example, the persecution of President Zuma in the media on a charge of which he had been acquitted by a court of law; the praising of Minister Gordhan for “winning” a case he had in fact lost, it being suggested that he “achieved what he wanted”; the excoriation of the Chief Justice for dissenting and characterising the majority’s judgment as judicial overreach in a case in which the media seemed intent on the opposite outcome.

Too often we find that the media and, by extension, the general public, expect the court to rule in a particular manner because it fits what to them seems as common sense. One example of this phenomenon comes following a 9 March 2018 High Court order that the assets of the Gupta family be released from state capture (pun intended) because, said the court, there is no reasonable possibility that a confiscation order may be made.

The Gupta Asset Forfeiture Case

Many opinion makers reacted quite emotionally at the outcome of that case! They blamed everything from the (supposed) incompetence of the prosecuting authority to the (supposed) incompetence of the Judge. There was even a theory that the National Director of Public Prosecutions may have deliberately assigned people to the “prosecution” of the case and withheld resources from them so that they failed. That the state was led by Senior Counsel of considerable experience and ability was conveniently disregarded.

When one reacts from an emotional space because one’s preconceived narrative has been disturbed, it becomes difficult to take a step back and objectively assess whether the Judge may have been right in his assessment of the evidence before him, and may in the process have come to the only reasonable conclusion on that evidence.

When you only reason from the script that the Guptas are guilty of state capture (a “criminal offence” of media invention from the Public Protector’s report titled “State of Capture”), it could easily be believed that everything they own is “proceeds of crime”. However, nothing in life is that simple. So, when the Judge deviated from that script, either he or the “prosecuting” team was deemed incompetent.

This is a dangerous phenomenon which poses a serious threat to the Rule of Law.

Let me hasten to state that I express no view on whether the Judge was right or wrong in his finding. I am simply cautioning against being driven by assumptions, especially when fuelled by prejudice, and urge us all to get back to the Rule of Law. Law is not actuarial science. It brooks no assumptions but rebuttable presumptions.

The Gupta case was not a criminal prosecution. It was a civil case brought in terms of chapter 5 of the Prevention of Organised Crime Act (POCA). This is how it works:

  • First, the Asset Forfeiture Unit (AFU) – a unit within the National Prosecuting Authority – seeks a restraint order from the High Court to search the premises of the respondents (the Guptas) and seize all their “realisable property” if they are suspected of having committed a criminal offence. It matters not whether or not the assets themselves are “proceeds of crime”.
  • Second, the restraint order is obtained without giving notice to the respondents for fear they may hide or dispose of them.
  • Third, the order gives the respondents an opportunity to show cause, typically on 24 hours’ notice, why the restraint order should not be made final.
  • Fourth, if they fail to show cause, the order is made final. That means the respondents cannot do anything with those assets and, where feasible, they are removed and placed in the care of a curator appointed by the court at the instance of the AFU.
  • Fifth, at this stage, all the AFU has to show is that there are reasonable grounds for believing that a confiscation order may be made against the respondents in respect of those assets. If it does, the restraint order will be made final. If it fails, the order will be discharged. That means the assets will be released from state capture. A confiscation order is made only once a conviction has been secured on the criminal offence of which the respondents were suspected.
  • Sixth, whether or not the order is made final, the prosecuting authority will, if it still believes that there are reasonable prospects of a successful prosecution, take the matter to trial on the alleged criminal offence. Just to be clear: There is no such thing as a “state capture” criminal offence. It is a media invention.
  • Seventh, once the respondents (accused) are convicted, the AFU will then apply for, and obtain, a confiscation order. That means the assets will be lawfully owned by the state. If the respondents are acquitted, the respondents will be entitled to the release of their assets.

All that has happened in the case against the Guptas in the Bloemfontein High Court is that, after granting the restraint order and affording the Guptas an opportunity to show cause why the restraint order should not be made final, the Guptas took that opportunity and showed that there are no reasonable grounds for believing that a confiscation order may be made. In other words, they showed that there are no reasonable prospects of a successful prosecution and conviction.

That an expectation may have been created in the media that the Guptas’ guilt of “state capture” was a forgone conclusion when their properties were raided to much delirious applause is completely irrelevant.

This does not mean the end of the road for the prosecution of the alleged offences against the Guptas. It does not mean the Judge is incompetent or that the prosecution is incompetent. At best for those of us who believe in the system, it means that the Rule of Law still trumps the Rule of ill-informed opinion leaders in South Africa.

But more than a year has now passed since that 9 March 2018 judgment. The question that arises is whether the state has since pressed on with its criminal case and obtained a conviction. I certainly have not heard anything in that regard. Yet the narrative persists that the Guptas are “guilty” of “State Capture”.

At the risk of being accused of siding with the Guptas, or of being labelled a “Zuptoid”, I must stress that the reality is that until they have been found guilty in a court of law, it remains an allegation and cannot be posed as a foregone conclusion.

Wisdom lies, I believe, not in abrogating our judgment and reasoning capability to the baying mass that is a cohort of self-appointed legal analysts who have never seen the door of a law lecture room.  As journalists play a significant role, which comes with huge responsibility in shaping public opinion, they should be cautious not to run the risk of overreaching in matters of law they know little, if anything, about. There is much virtue in seeking at least a couple of opinions from those trained in the discipline before launching headlong into a definitive lay opinion piece about complex matters of law.

The Rogue Unit Judgment That Never Was

Here is a most recent example of such overreach. In the rogue unit (or investigative unit) skirmish between the Public Protector and the Minister of Public Enterprises a view that the SARS rogue unit is lawful (despite prima facie evidence to the contrary) has now been put forward by a journalist based on a recent judgment in Wingate-Pearse v SARS. This is being put forward as definitive authority for that proposition.

On a close reading of the Judgment, however, it is not.

(I pause here to point out that I refer to the unit as the rogue unit because that is the generally used term.)

There is a clear distinction between the concepts obiter dictum and ratio decidendi in a court judgment. In short, at its most basic definition an obiter dictum is an observation that a judge makes in a judgment but which is not necessary for purposes of the order ultimately made in that judgment. A ratio decidendi is the basis for the order made in the judgment.

An obiter dictum is not binding on lower courts or tribunals but may have persuasive value. A ratio decidendi is binding on lower courts and tribunals. It is also binding on courts of similar status unless the later court is satisfied, in a reasoned judgment, that the earlier judgment is clearly wrong.

Thus, when I read an article such as the one titled “Rogue Unit” ‘lawful’: High Court judgment bolsters Pravin Gordhan’s case against Public Protector, where it is pronounced that the Wingate-Pearse judgment confirms that the rogue unit is lawful, that it must be relied upon by the court now seized with the Minister’s application to interdict and set aside the Public Protector’s report in which she found that the rogue unit is unlawful, and so the Public Protector will lose that case, I cringe.

It is clear to me that the author has not sought legal opinion on a proper reading and interpretation of the judgment on which she relies for her pronouncement. Any lawyer worthy of their robes who has read the judgment will likely find that the judgment does not say what the article purports it says.

But, lawyers being lawyers, there may still be differences of opinion (whether genuine or by design is often difficult to tell) about which aspects of the Judgment constitute obiter dicta. Where there is a will to reach a particular preconceived conclusion in this fractious debate about the lawfulness of this rogue unit, people have shown creative ways of getting there, whatever the facts. Ultimately, it seems to me that only the highest court may finally settle the debate – the sooner the better for us all.

Nowhere, whether in the order or in the text of the judgment itself, does the Johannesburg high court in Wingate-Pearse in fact say the rogue unit was lawful. The journalist appears to have lifted one paragraph, from a 41-page judgment of 87 paragraphs, as authority for the proposition that Judge Meyer found that there was no factual basis for saying there existed a rogue unit within SARS. The paragraph appears under the rubric “Material Disputes of Fact”.

But in that paragraph all Judge Meyer does is relate the Nugent Commission’s “findings” on the issue and Judge Kroon’s evidence before that Commission. Judge Meyer characterises those observations as “findings”. It is not immediately clear how these can be “findings” when Justice Nugent did not investigate the matter. But nowhere does Judge Meyer say he agrees with those “findings”. And nowhere does he make an order to that effect. That renders Judge Meyer’s observations themselves obiter dicta.

In fact, it can arguably be said that the ratio decidendi on this aspect of the case is that the rogue unit was established long after SARS had investigated Mr Wingate-Pearse’s tax affairs, and that it was not at all involved in that investigation. This comes in the very next paragraph lifted by the journalist.

The case concerns an additional assessment for income tax on Mr Wingate-Pearse who was accused of having under-declared his income. Part of his multi-pronged defence was that he had been subjected to unlawful search and seizure operations and unlawful interceptions by an unlawful rogue unit. This is what prompted the Judge to quote from the Nugent Commission report which had been introduced by SARS. He did not say he shares those observations.

The ratio decidendi of the judgment is this:

  • Because Mr Wingate-Pearse did not dispute material factual allegations made by SARS in its affidavits, the Judge had no choice but to accept the SARS version of facts and dismiss Wingate-Pearse’s version and, with that, his application too (this is known as the Plascon-Evans rule);
  • Mr Wingate-Pearse argued that if his prayer 1 for a declaratory order that the rogue unit was unlawful was granted, that would mean that any information obtained by that unit could not be used against him (a so-called “poisoned tree defence”). The Judge said, rightly and with reference to a 1996 Constitutional Court decision, that this is a legally flawed point of departure because it is for the trial court (the Tax Court) to make a determination on whether or not to admit into evidence fruits of a poisoned tree, even if it were to find in his favour. That was the end of that prayer. It was disposed of in 3 paragraphs. The Judge did not rule on the lawfulness or otherwise of the rogue unit because he did not have to do so in light of this finding.
  • As regards the factual disputes about the SARS calculations of Mr Wingate-Pearse’s tax liability, the Judge said, again rightly, this is an issue for the Tax Court to determine as a specialist court.

Everything else is obiter dicta.

The Takeaway

So, it would seem that the article is (wittingly or unwittingly) misleading. This worries me, because too often South Africans rely very heavily on the media as the source of their information. Journalists carry the heavy burden of ensuring that they protect the interest of the public by highlighting the truth and in the process ensuring that they themselves do not deceive, whether by design or out of incompetence.

It is therefore incumbent on journalists to ensure that, when their subject matter relates to a point of law, they must do proper research, otherwise they could tread on dangerous ground and lead the public down the wrong path.

In this case people may now expect – on the assumption that the journalist was right – that the high court seized with the application of the Minister of Public Enterprises against the Public Protector on the latter’s findings and remedial action in relation to the rogue unit must, of necessity, make orders in favour of the Minister because (as the journalist has said) the high court has already found that the rogue unit was lawful.  If that does not happen, the public is then likely to feel that the judiciary is “captured”.

This has already happened in the recent past when another journalist publicly deprecated two Judges of the Supreme Court of Appeal who formed part of the majority (in a 5-panel Bench) for rendering a judgment (in relation to two senior public prosecutors) that departed from the script the journalist had already scripted. This prompted followers of the journalist on social media to join the fray lambasting the judges not so much for their reasoning as for their unpopular conclusion. They wanted to see blood. The judges did not give them blood. So, they concluded the judges are “captured”.

This is dangerous ground and a slippery slope to lawlessness where judges are trusted only if they deliver judgments as expected by opinion makers.

We dare not go there and, dare I say, Journalists stand between us and that otherwise certain reality.

By |2019-07-19T12:25:30+00:00Jul 19th, 2019|Blog, General, News|2 Comments

Kill Zuma: By Any Means Necessary – A Review

A Judge once directed the jury as follows:

“Gentlemen of the jury, you’ve heard the evidence of the witnesses for the Crown and that of the accused. If you believe the evidence of the Crown witnesses you will convict the accused. If you believe the accused you will believe anything.”

The jury promptly acquitted the accused.

If current popular narrative sweeping urban South Africa is any indication, South Africans generally do not seem to be made of the stuff of which that jury was made. We seem generally to have abdicated our thinking and reasoning capacity to newspaper editors, reporters and self-styled analysts who all seem to agree on almost everything.

Witness how our analysts – at least those to whom media houses elect constantly to expose us on television and mainstream broadsheets – seem all to agree that President Jacob Zuma is “guilty” of “State Capture”, apparently a most serious criminal offence the elements of which, at least as far as I can gather in my 26 years of practising law, are yet to be defined in any judgment or Criminal Law textbook.

Witness, too, how that same cohort of analysts seem all agreed that President Zuma is needlessly “playing victim” or mounting a “conspiracy theory” steed when reporting to the Zondo Commission of Inquiry into “State Capture” the death threats allegedly received by his personal assistant not only to himself but also to his lawyers, or of being mendacious when constantly clearing his throat during his testimony at the Zondo Commission – an irritating habit of his that we have had to bear, by the way, since we had the misfortune of being subjected to his 8 State of the Nation Addresses over a period of 9 years.

One journalist even made much of a photo image of President Zuma’s Senior Counsel’s hand resting on the shoulder of the ruling party’s Secretary-General during a short adjournment at the Zondo Commission, suggesting, by innuendo, a closer relationship than there may have been.

It is because of this thoroughly compromised landscape of our journalism that Gayton McKenzie’s book, “Kill Zuma: By Any Means Necessary” should be celebrated. But, alas, it is a cathartic book that is unlikely to earn him the Alan Paton Award nomination because eNCA newscasters and viewers, Radio702 talkshow hosts and listeners, and BusinessDay writers an readers have directed urban South Africa in terms not dissimilar to those of our rather presumptuous Judge to the jury – and found fertile ground.

This is rather ironic, given that the Alan Paton Award is conferred for books that present

“the illumination of truthfulness, especially those forms of it that are new, delicate, unfashionable and fly in the face of power”.

But it is precisely these qualities that have seemingly earned the book urban South Africa’s obloquy from people some of whom have not even read it.

Power – in Neo-Capitalist South Africa as in others – lies not in governments but in multinational corporations that brook no national boundaries. Governments in such societies tend, by and large, to do the bidding of multinational corporations, and the History books are littered with nationalistic leaders (mostly in developing economies) who have fallen, one way or another, for daring to stand in the way.

The book has been dismissed by the self-appointed police of our national narrative as “pure fiction”, and so urban South Africa, without even having read it, appears to have taken a cue from that. This is demonstrative of the creeping intolerance of those wedded to one world outlook toward another.

As our courts are now increasingly being turned into blunt instruments for quashing any world view that departs from the common narrative, I took the view when the book came out in December 2017 that litigation attempts might spring from its publication if sales should reach “unacceptable” levels thus posing a danger of its contents gaining some traction. That this has not happened is testimony, more likely than not, to the book not exactly flying off the shelves.

It does not take much in mainstream urban South Africa these days to be “outed” as “a bot” or “captured” or “Guptarised”. All you need do is train your searchlight on the suspicious dealings of those revered by mainstream media in urban South Africa. And if you can toss in a bit of common sense amid the mob-like opprobrium for one Indian family, pointing out the obvious that the “capture” of South African institutions did not begin with that family, well, then, you’ll be well and truly scarlet-lettered.

To this, McKenzie seems to have said to himself, “Sod it. Let’s do it!” And do it he did – and in fine fashion, too, on balance.

Fairly early on in the book he makes plain not only what the book is about and aims to achieve, but also what it is not about. The book, says McKenzie, is

“about why and how various agencies and the interests they represent have identified Jacob Gedleyihlekisa Zuma as their enemy”.

He then boldly asserts that the book

“will open your eyes to some of the deepest truths about South Africa that you have probably never thought about”.

He characterises these “deepest truths” as

“jarring and capable of overturning all the casual, everyday assumptions that we as South Africans have come to take for granted”.

He does not muck around either. In the very first page of the first chapter, McKenzie tells us of a cabinet minister being

“summoned to talk to a member of a family that has often found itself in the headlines for various reasons, including allegedly wielding an inordinate amount of influence over the state and the business sector as a whole”.

Three pages later you get a sense of exactly what he means by the “inordinate amount of influence” that he says this family wields, and the “jarring” truths he is talking about:

“I want you to go and tell your president that I looked after Mandela. But if he fires Pravin Gordhan and Mcebisi Jonas, I will destroy this economy. My friends and I will make it look worse than Zimbabwe”.

No. McKenzie is not quoting a member of the much-maligned Indian family. He is quoting a white man addressing a cabinet minister he had allegedly summoned to his lair during the first quarter of 2017.

This allegation has now been officially placed in the public domain, under oath, before the Zondo Commission of Inquiry by President Zuma. It remains to be seen whether anything will come of it, and whether those implicated will be invited by the Commission to give their side of the story thus far ignored in mainstream media.

This narrative is delivered in suspenseful motif which would, at least by South Africa’s cinematic standards, come pretty close to making Alfred Hitchcock nod a hesitant approval. From there, I was hooked, and read on.

*******

The book is not a scorecard on the Zuma presidency or his numerous brushes with the law – real and imagined. Numerous other books, comparatively more warmly received (by all accounts), have cornered that market. It does not even pretend to rescue President Zuma’s image, or whatever is left of it. On the contrary, the book is rather critical of President Zuma for, among other things, doing very little to disturb the prevailing economic landscape in South Africa. McKenzie – in an understatement of which Oscar Wilde would have been proud – even expresses “doubt” that “all his actions as the president are above reproach”.

But concerning that about which you are unlikely to read or hear in privately owned mainstream media, the book is a fast-paced roller-coaster ride.

By the end of 73 pages, we have learnt of “Comrade Fear” and the existential panic he allegedly wrought upon the ruling party in exile.

By page 100 we have learnt how the negotiating team that was to represent the ANC at the CODESA talks had been gerrymandered while Zuma, Mbeki and the then ANC President Mandela were out of the country.

By page 128 we have been reminded of 12 compromises the ANC needlessly made at CODESA, each of which appears to be a capitulation rather than a compromise, and the deleterious effects of which are still plaguing the South African economy today.

The eponymous chapter of the book comes 129 pages into the book. In it we learn of the numerous attempts on President Zuma’s life. One such attempt, McKenzie tells us in remarkable detail, involved tampering with the official presidential jet. That jogged my memory.

I remembered jumping on the opposition DA and privately owned mainstream media bandwagon in criticising the wastage of the President chartering a plane while his presidential jet was perfectly fine. As it now turns out, it was not perfectly fine. Two South American Presidents had in 1981 died within two months of each other in plane crashes that were supposedly “perfectly fine” for apparently bucking the trend of the hegemonic overreach of Western powers and the multinational corporations that feed them.

The BRICS economic union, McKenzie tells us by page 180, is another inconvenience to the insatiable hegemonic pursuits of the West. It appears that the potential that BRICS holds in promise for the economic independence of emerging economies from the World Bank, IMF, EU and US stranglehold (detailed elsewhere in the book) is considered a threat to that hegemony. So, media reports have from inception of the union in 2006 pushed the line that BRICS is a fool’s folly.

The nuclear build programme that President Zuma’s government is rumoured to have negotiated with Russia’s state-owned nuclear agency, McKenzie tells us, plays directly into that space. The affordability of the build programme for South Africa appears to be an Aunt Sally argument. The real purpose seems to be to scupper any Russian involvement in the deal. If it were done with the US or UK that would have been more “acceptable”.

I pause here to mention that I have read many books and international journals about East-West relations covering the period 1947 to 1991. I am fortunate to have attended a well-resourced high school and university. Although the school did not exactly encourage independent thought in History class (I once had a mildly cantankerous exchange with my History teacher about the Yom Kippur War) there was enough information in the library to help one form an independent view instead of one aimed at passing an exam.

And Professor Robert Shrire was nothing if not engaging in his small International Politics classes at UCT during my academic struggles there.

So, thus privileged, I can pronounce that we have been lied to. The fall of the Berlin Wall did not mark the end of the Cold War; the Cold War simply morphed from being a race predominantly about arms and ideological propaganda into a race predominantly about the economy. Understood from that perspective, McKenzie’s ruminations regarding the West’s unease about BRICS and the nuclear build make a whole lot of sense.

*******

Privately owned mainstream media in South Africa is not spared in the book. An entire chapter is devoted to its predilection for scandal, provided it engulfs the usual suspects (namely, President Zuma and the Indian family) and does not touch its own revered champions.

This is not surprising. To make his point, McKenzie anchors this chapter of the book in a poignant quote from a celebrated journalist at a press banquet held in his honour in 1880 America:

“We are the tools and vassals of rich men behind the scenes. We are the jumping jacks, they pull the strings and we dance. Our talents, our possibilities and our lives are all the property of other men. We are intellectual prostitutes”.

McKenzie gives relatively recent examples of this journalistic “intellectual prostitution”. By now, the reader has learnt of the “jarring” and “deepest truths about South Africa” to which the author had promised to open our eyes in his foreword to the book. The intimate detail with which they are told makes nonsense of the naysayers’ dismissal of the book as “pure fiction”.

His criticism of South African media is fair. He does single out a few instances of journalistic intrepidity in the late Barry Sergeant whom he describes as

“a pre-eminent example of a journalist who went against the flow and wrote about the state capture attempts of the kind of big firms that few in our media have had the courage to write about”.

He then proceeds to share some of the stories Barry Sergeant pursued and reported on. It’s jaw-dropping stuff for those accustomed to tales of corporate probity in South Africa.

*******

Now, what are the negatives?

In the final chapter, written in the style of a letter, McKenzie addresses black people in language that rather clumsily conjures up the spectre of Biko’s I Write What I Like, Mandela’s Long Walk to Freedom, and Chika Onyeani’s Capitalist Nigger all rolled up into one. The man seemed unsure whose character among these three he should adopt. So he went with all three.

The chapter reads more like a whistle-stop political speech on a campaign trail in Alexandra than a heartfelt call to economic arms by the oppressed masses across the country.

But the trouble with the book does not end there. I have noted at least 28 instances of rudimentary literary faux pas, ranging from simple spelling mistakes to incomplete and incoherent sentences. One wonders whether his proof-readers were on Regmakers or on a placebo.

These embarrassing mistakes are in addition to at least two factual inaccuracies that I picked up. Maria Ramos was never Governor of the Reserve Bank, and Paul Hoffman SC was never evidence leader in the Arms Deal Commission. Nevertheless, neither of these detract from the force of the book’s content. Perhaps McKenzie will do a Bonang Matheba and publish a more refined second or revised edition of the book.

Judging by the reluctance of some of the major book outlets to stock the book (one white man at a major outlet with national footprint told me they don’t stock it because they “don’t like its cover”) and the general dismissal of it by many who have not even read it, the very idea of the book seems to have touched a raw nerve as people appear to have conceived of it as providing a counter to that other book by a retired journalist-turned-cook-and-now-back again seemingly to push a narrative on the “Rogue Unit”. So, any attempt – real or imagined – at salvaging President Zuma’s image appears to be considered an act of sacrilege by mainstream urban South Africa.

That, if nothing else, is enough for the curious and independent-minded to read the book and judge it on its own merits, not by the identity of its author – an unfortunate favourite South African pastime.

*******

McKenzie, as he himself admits in the book, is a convicted bank robber. But then so, too, were three white South African men, Andre Stander, Patrick McCall and Allan Heyl, now immortalised in a big screen movie production. Does that fact alone render McKenzie incapable of research and writing a book? Of course not. Read the book, not the man’s past.

The book is not a work of art. Very few non-fiction books are. It simply gives you information you would not otherwise obtain from mainstream publications. If you like, it is almost like a book version of Noseweek, giving you “the news you’re not supposed to know” in less than 250 pages. Like Noseweek, it is an easy read. I am a slow and deliberate reader when I read to comprehend rather than to impress. Reading to comprehend, I consumed the book in about five hours, including time spent rechecking some of the facts and highlighting excerpts to which I knew I would want to return – and did.

So, you have a choice: either find out for yourself what lies beneath the cover that a national book outlet finds so offensive, or allow privately owned mainstream media, and others who haven’t read the book, decide for you that the book is “pure fiction”. For me, the book is a breath of fresh air from the staleness of our Guptified existence. I wish more such books become available.

By |2019-07-17T20:58:30+00:00Jul 17th, 2019|Analyses and Reviews|1 Comment

The 2019 South African Cabinet Affair: Is the Constitution at Risk?

On Wednesday 29 May 2019, the South African President Ramaphosa announced his cabinet. Among the people he announced as part of his cabinet were Mr Pravin Gordhan (Mr Gordhan) and Mr Fikile Mbalula (Mr Mbalula).

PENSIONGATE

A week previously, on Friday 24 May 2019, the Office of the Public Protector had released a report in which it found that Mr Gordhan had “failed to uphold” and to “act in accordance with the [South African] Constitution”. This conclusion resulted from a finding by the Office of the Public Protector that Mr Gordhan had – while Minister of Finance in 2010 – approved early retirement, with full benefits, for a 55 year old senior civil servant and, at the same time, approved that civil servant’s continued remunerated appointment in the same position without a break in service.

The Office of the Public Protector took the view that on the facts presented to it, “there was no retirement in fact and in law”, and so the civil servant “was not entitled to early retirement with full benefits”. It concluded in the report that Mr Gordhan was not authorised by applicable legislation to approve the early retirement and the re-appointment of the civil servant. It found that the arrangement was “contrived and not lawful”.

By way of remedial action in terms of the powers conferred on it by section 182(1)(c) of the South African Constitution, the Office of the Public Protector directed that the President

“take appropriate disciplinary action against [Mr Gordhan] for failing to uphold the values and principles of public administration entrenched in section 195 of the Constitution, and the duty conferred on Members of the Cabinet in terms of section 92(3)(a) of the Constitution to act in accordance with the Constitution”

For convenience and ease of reference I shall refer to this matter as “Pensiongate”.

On Tuesday 28 May 2019 – the day before the President announced his cabinet – Mr Gordhan launched an application in the High Court challenging the jurisdiction (or power) of the Office of the Public Protector to investigate Pensiongate.

He also wants the High Court to declare that the Office of the Public Protector has acted not only in contravention of the Public Protector Act but also in contravention of the Constitution itself. In addition to seeking a costs order against anyone who may dare oppose his application, he also wants the High Court to order the Public Protector herself to pay costs of his application from her own pocket and on a punitive scale.

In short, Mr Gordhan wants the High Court to set aside the report of the Office of the Public Protector as being “unconstitutional, unlawful, irrational and invalid”.

DUBAIGATE

On 19 December 2018, the Office of the Public Protector released a report in which it found that Mr Mbalula had acted in contravention of the Executive Members Ethics Code and the South African Constitution.

This conclusion resulted from a finding that Mr Mbalula had – while Minister of Sports – taken a holiday to Dubai with his family which was funded by a company that at that time did business with a sporting federation (SASCOC) that fell under the auspices of Mr Mbalula’s department and so constituted a conflict of interest on his part.

No remedial action was taken against Mr Mbalula by the Office of the Public Protector. Nevertheless, he threatened to challenge the report in the High Court. It is not clear whether or not he did.

THE LAW

In numerous interviews, attorneys for Mr Gordhan have consistently expressed the view that the report of the Office of the Public Protector has no legal effect (in other words, it is suspended) because Mr Gordhan has launched review proceedings to have it set aside. This view has been repeated by various analysts and reported, with apparent approval, by almost all journalists on the story.

But this view does not seem to accord with what the courts have said. It is the only issue that is dealt with in this discussion.

The merits of the review application will not be discussed here.

But before we get to what the courts have said about the status of the report of the Office of the Public Protector, it is important to distinguish between two court processes, namely, an appeal and a review.

Difference Between Appeals and Reviews

This is a complex subject but I shall try to simplify it.

In an appeal, the appellant challenges the correctness in law of the decision of the lower court or tribunal. In other words, the appellant wants the higher court or tribunal to reverse the decision on the ground that the decision is wrong in law.

In terms of the Rules of the High Court, and now also in terms of the Superior Courts Act of 2013, once the appellant has given notice to the respondent that he intends challenging the decision on appeal, the decision appealed against is automatically suspended, unless the respondent brings an application for an order that the decision is not suspended, and that order is granted.

This makes perfect sense in law and logic because giving effect to a decision which is subsequently set aside as being wrong in law would bring the rule of law into disrepute.

Different considerations, however, apply where a decision is challenged by way of review. The question on review is not whether or not the decision is wrong in law or on a legal point. That is not the function of a review court. South African courts have said this.

This consideration may easily be confused – perhaps by non-lawyers – with some grounds of review under the Promotion of Administrative Justice Act, 2000 (PAJA), on the one hand, and grounds of review under the legality principle, on the other, which seem, on the face of it, to look into the correctness of a decision in law.

Under PAJA and legality review, it is the “action” or “conduct” or decision to do something (or not to do something) that is in issue. In an appeal, it is the decision (as in judgment or ruling) itself or the legal basis for the decision (as in judgment or ruling) itself that is in issue. In other words, a decision by a court or tribunal that an application for review of the report, even before it has been decided one way or another, suspends the report and its legal effect, is as a ruling either correct in law or it is not, and so is susceptible to appeal to a higher court or tribunal. But a decision of the decision-maker that is attacked on the basis that she has misdirected herself in law, or applied the wrong principle in arriving at her decision, or conducted herself unconstitutionally, goes to the conduct as informed by the misdirection or wrong principle and so is susceptible to review, not appeal.

In short, an appeal is concerned with whether the decision (as in ruling or judgment) is right or wrong in law. A review application is concerned with whether the decision is justified or not, or vitiated by some irregularity causing actual prejudice. In addition, South African courts have said that a review application cannot succeed unless the applicant can show that he has suffered actual prejudice. In an appeal, the decision being challenged will be reversed if it is found to be wrong in law, whether or not there is prejudice to the appellant.

Does a Review Application Suspend the Decision?

When a person is aggrieved by a decision on any of the recognised grounds of review – whether under PAJA or legality principle – and he wants to suspend the decision from taking effect until the review application has been finally decided one way or another, he usually brings an application in two parts but in the same papers.

“Part A” is usually an application for an interim interdict in which the applicant asks the court to suspend operation of the decision against him or, if implementation of the decision is already underway, to suspend further implementation until “Part B” (the review application) of the application has been decided.

“Part A”, seeking to interdict implementation of the decision, is usually sought on an urgent or semi-urgent basis. In that case the applicant will have to satisfy the court that because implementation of the decision is imminent, or has already commenced, he will not obtain substantial remedy in due course if the court does not stop the process of implementation now. He does that by way of interim interdict, not review. If the interim interdict is granted, then implementation of the decision will be suspended until the Part B review has been decided one way or another.

In order to secure the interim interdict, and so the suspension of the decision, the applicant will have to satisfy all four requirements for an interim interdict. But, even if he does, the court still has a discretion nevertheless to refuse the interdict if it considers it in the interests of justice to do so.

So, the “Part B” review application seeks to set aside the decision on the recognised grounds of review. That is all it does. It does not suspend implementation of the decision. It is the “Part A” interim interdict that does that. Thus, to those people who say it is ludicrous to implement a decision that may be set aside on review, this is your answer.

Two of the important requirements for an interim interdict are (1) that the balance of convenience favours the granting of the interdict than not granting it because of the (2) apprehension of irreparable harm that may be occasioned if the court should refuse to grant it now. These requirements are intended to address precisely the sort of concern that has been raised about the President implementing the remedial action taken by the Office of the Public Protector only for it to be set aside by the High Court by which time the person to whom the remedial action relates has been subjected to what by then is found to be unlawful or irrational or invalid or unconstitutional.

But Mr Gordhan has not asked the court for an interim interdict. That was his choice. He has simply asked the court to review the report and set it aside. So the protection of an interdict described immediately above is not available to him. There are a number of court judgments, including the Constitutional Court, that say a court cannot validly grant orders that the applicant has not asked for.

But what do the courts say about the legal effect of the report or remedial action of the Office of the Public Protector before it has been set aside by a court? This question can be answered with reference to three judgments. There are more but let us confine ourselves to these three.

In Oudekraal Estates (Pty) Ltd v City of Cape Town 2004 (6) SA 222 (SCA) the Supreme Court of Appeal said:

“But the question that arises is what consequences follow from the conclusion that the Administrator acted unlawfully.  Is the permission that was granted by the Administrator simply to be disregarded as if it had never existed?  In other words, was the Cape Metropolitan Council entitled to disregard the Administrator’s approval and all its consequences merely because it believed that they were invalid provided that its belief was correct?  In our view it was not.  Until the Administrator’s approval (and thus also the consequences of the approval) is set aside by a court in proceedings for judicial review it exists in fact and it has legal consequences that cannot simply be overlooked. The proper functioning of a modern state would be considerably compromised if all administrative acts could be given effect to or ignored depending upon the view the subject takes of the validity of the act in question.  No doubt it is for this reason that our law has always recognized that even an unlawful administrative act is capable of producing legally valid consequences for so long as the unlawful act is not set aside.”

So, even if the decision of the Office of the Public Protector is unlawful, it is binding and has legal effect until it has been set aside by a court in review proceedings. It cannot be ignored just because the person affected by it takes the view that it is unlawful or unconstitutional or irrational or invalid.

Just over a decade after the Oudekraal judgment, the Supreme Court of Appeal again reinforced the principle, this time in relation to a decision of the Office of the Public Protector.

So, in SABC v DA 2016 (2) SA 522 (SCA), the SCA said:

 “[I]t is well settled in our law that until a decision is set aside by a court in proceedings for judicial review it exists in fact and it has legal consequences that cannot simply be overlooked (Oudekraal Estates (Pty) Ltd v City of Cape Town & others [2004] ZASCA 48; 2004 (6) SA 222 (SCA) para 26). It was submitted, however, that that principle applies only to the decision of an administrative functionary or body, which the Public Protector is not. It suffices for present purposes to state that if such a principle finds application to the decisions of an administrative functionary then, given the unique position that the Public Protector occupies in our constitutional order, it must apply with at least equal or perhaps even greater force to the decisions finally arrived at by that institution. After all, the rationale for the principle in the administrative law context (namely, that the proper functioning of a modern State would be considerably compromised if an administrative act could be given effect to or ignored depending upon the view the subject takes of the validity of the act in question (Oudekraal para 26)), would at least apply as much to the institution of the Public Protector and to the conclusions contained in her published reports.”

That same year, in EFF v Speaker of the National Assembly and Others 2016 (3) SA 580 (CC), the Constitutional Court, no less, said the following in relation to the status of the remedial action of the Office of the Public Protector and about the only means by which its sting can be avoided:

 “[O]ur constitutional order hinges also on the rule of law.  No decision grounded on the Constitution or law may be disregarded without recourse to a court of law.  To do otherwise would “amount to a licence to self-help”.  Whether the Public Protector’s decisions amount to administrative action or not, the disregard for remedial action by those adversely affected by it, amounts to taking the law into their own hands and is illegal.  No binding and constitutionally or statutorily sourced decision may be disregarded willy-nilly.  It has legal consequences and must be complied with or acted upon.  To achieve the opposite outcome lawfully, an order of court would have to be obtained.”

So, in order to avoid the legal consequences of the remedial action of the Office of the Public Protector “an order of court would have to be obtained”. The Constitutional Court did not say the launching of a review application avoids the legal consequences of the remedial action of the Office of the Public Protector. It said in order to achieve that result, an order of court would have to be obtained.

Mr Gordhan has not obtained an order of court. He has simply filed an application for review. He has not obtained an interdict. He has not yet obtained an order reviewing and setting aside the report of the Office of the Public Protector.

Neither has Mr Mbalula although no remedial action was taken in relation to him.

So, what now? The President has been directed by the Office of the Public Protector to

“take appropriate disciplinary action against [Mr Gordhan] for failing to uphold the values and principles of public administration entrenched in section 195 of the Constitution, and the duty conferred on Members of the Cabinet in terms of section 92(3)(a) of the Constitution to act in accordance with the Constitution”

The President has not indicated what disciplinary action he has taken against Mr Gordhan (at least not at the time of writing this blog). The Office of the Public Protector is an important institution established in order to “strengthen constitutional democracy in the Republic”. Its decision may not be ignored willy-nilly, especially by the first citizen whom the Constitutional Court has described in these terms:

 “The President is the Head of State and Head of the national Executive.  His is indeed the highest calling to the highest office in the land.  He is the first citizen of this country and occupies a position indispensable for the effective governance of our democratic country.  Only upon him has the constitutional obligation to uphold, defend and respect the Constitution as the supreme law of the Republic been expressly imposed.  The promotion of national unity and reconciliation falls squarely on his shoulders.  As does the maintenance of orderliness, peace, stability and devotion to the well-being of the Republic and all of its people.  Whoever and whatever poses a threat to our sovereignty, peace and prosperity he must fight.  To him is the executive authority of the entire Republic primarily entrusted.  He initiates and gives the final stamp of approval to all national legislation.  And almost all the key role players in the realisation of our constitutional vision and the aspirations of all our people are appointed and may ultimately be removed by him.  Unsurprisingly, the nation pins its hopes on him to steer the country in the right direction and accelerate our journey towards a peaceful, just and prosperous destination, that all other progress-driven nations strive towards on a daily basis.  He is a constitutional being by design, a national pathfinder, the quintessential commander-in-chief of State affairs and the personification of this nation’s constitutional project.”

By not implementing the remedial action of the Office of the Public Protector, in the absence of an order of court by which the legal effect of the remedial action can lawfully be avoided, has the President not thereby contravened the very Constitution he has taken an oath to uphold?

Assuming the President simply “reprimands” Mr Gordhan as a form of giving effect to the remedial action, is that substantive compliance with the remedial action? Is that an effective remedy for what the Office of the Public Protector (a Constitutional institution charged with “strengthen[ing] constitutional  democracy in the Republic”) has found to be contravention of the Constitution itself? What message would that send about the President’s commitment to the Constitution and its values?

Often the argument advanced for ignoring the remedial action of the Office of the Public Protector is that the head of that Office has been found in two High Court judgments to be “incompetent”. While that is a ground for removal of the Public Protector from Office by a majority of two-thirds of the members of the National Assembly, does a finding of a court (which does not have the power to remove the Public Protector from Office) justify the President ignoring the decisions of the Office?

Also, what seems lost in the personalisation of the Office of the Public Protector is that this is an institution established in terms of the Apex Law of the country (the Constitution) by national legislation. It is not its incumbent head anymore than “the Presidency” is the President.

We have a popular President (if mainstream media reports and opinion pieces are an accurate indication) and an even more popular Minister in Mr Gordhan. Some may raise a concern, not without justification, whether the Rule of Law in South Africa today is driven by media popularity.

But there may be hope still that the courts are immune to being swept up in the strong pop culture currents. The Chief Justice has cautioned against judges sacrificing justice at the altar of public opinion. Whether or not any one of the many civic organisations in the country will, for the sake of constitutional certainty, dare ask the courts to decide whether the President’s conduct is an attack on the Constitution will be the measure of society’s own commitment to it.

By |2019-05-31T13:48:53+00:00May 30th, 2019|Blog, General, News|7 Comments

African Customary Law and its Place in South Africa’s Constitutional Framework: A Case Study

Following news that President Ramaphosa is considering the release from prison (or pardon) of King Buyelekhaya Dalindyebo – Aah Zwelibanzi!!! – a thought that I had at the time of the decision of the Supreme Court of Appeal in Dalindyebo v S (090/2015) [2015] ZASCA 144; [2015] 4 All SA 689 (SCA); 2016 (1) SACR 329 (SCA) (1 October 2015) and, subsequently, the Constitutional Court, re-emerged in my mind: Why is a King being charged under the Common Law for conduct that some, including the King, consider as falling under Customary Law?

The King was convicted of arson, kidnapping, assault with intent to do grievous bodily harm and defeating the course of justice. The conduct that formed the basis for these convictions is deplorable. About that there can, in my view, be no quibbling. But what role, if any, did Customary Law play in the courts’ assessment of the applicable law?

In a 43-page judgment, the Supreme Court of Appeal (the SCA) uses the phrase “customary law” on only 4 occasions. On all four occasions the SCA uses the phrase with a view to dismissing the King’s argument that the King’s conduct was done in accordance with customary law.

But not once is there a teleological treatment of the body of law that is Customary Law in the judgment. A passing reference is made to

“Professor Digby Sqhelo Koyana [testifying for the State] that customary law demanded that a King ensures the maintenance of law and order, protects the life and security of his people, act compassionately with due regard to the dignity of his subjects.”

The Constitutional Court dismissed the King’s application for leave to appeal against the judgment of the SCA. It does not appear to have heard oral argument on the substance of the body of law that constitutes Customary Law that had received no substantive treatment in the SCA.

Section 39(2) of the South African Constitution enjoins every court, tribunal or forum to promote the spirit, purport and objects of the Bill of Rights

“when interpreting any legislation, and when developing the common law or customary law”.

But what does that mean in practical terms? The common law is contained in actual texts dating back more than a thousand years. It has also received considerable teleological treatment in court judgments over hundreds of years. So, developing something one can touch and feel – and which has been the subject of debate among lawyers, judges, law students, law professors, legislators, and ordinary people – is not too difficult.

But what is the touch and feel of Customary Law? There have been frightfully few cases, since the South African Constitution came into effect on 4 February 1997, in which the subject of Customary Law has come up and received substantive judicial consideration in comparison to the common law. Why? The South African Constitution does not, on the face of it, create a hierarchy of laws between the common law and Customary Law. So, why is so there so little teleological treatment of Customary Law in our courts? Was section 39(2) of the South African Constitution, by its reference to the development of customary law alongside the common law, merely part of the CODESA settlement arrangement, intended merely to make Customary Lawyers and those who subscribe to it feel good about themselves and nothing more?

In the hope of finding some answers, given the back-handed treatment that Customary Law appears to have received from our courts over the years, I have decided to invite a teleological treatment of Customary Law from all South Africans, especially from those who care deeply about the development and mainstreaming of Customary Law. Young lawyers and students are especially encouraged to take up this invitation.

The assignment

  • The topic is: African Customary Law and its Place in South Africa’s Constitutional Framework: A Case Study.
  • The case of King Buyelekhaya Dalindyebo (aah Zwelibanzi!!!) and the VaVhenda Kingship case should serve as a central point of reference as regards how Customary Law is treated by our courts. You will have to read. (1) the High Court judgment and the SCA judgment in the King Dalindyebo (aah Zwelibanzi!!!) case, and the High Court judgment in the VaVhenda Kingship case.
  • Explore also what constitutional grounds, if any, arise in each case, and whether the Constitutional Court was correct in dismissing the King’s application for leave to appeal on your appreciation of the role that Customary Law should rightfully play in South Africa’s constitutional jurisprudence.
  • Obtain the papers filed in all 3 courts in the King’s case, and consider whether the grounds advanced on behalf of the King for the challenge were good or bad and why in each case. What would you have done differently? What case would you have put up in relation to the interface between Customary Law and Common Law in modern-day South Africa? Did the courts do justice to Customary Law, or did they ignore it?
  • Take note: what is required is not a mere critical analysis of the court judgments. That is only part of the task, and from a Customary Law perspective. The bigger task is to breathe life into Customary Law as you think it should have been applied by the courts in these two cases, and show whether in your view Customary Law has been accorded its rightful place in the South African constitutional landscape by reference to these two cases. If your thesis is that Customary Law has no role in South Africa’s constitutional landscape, develop your argument with reference to specific examples of Customary Law provisions that you consider to be inconsistent with specific provisions of the Constitution, bearing in mind the principle that where a law is capable of both a constitutional and an unconstitutional interpretation, the courts are enjoined to adopt the interpretation that saves the law from unconstitutionality.
  • I shall pick the paper that satisfies me most on (1) content, (2) style, (3) language, (4) quality of research output, (5) length (5000 is the absolute maximum. If you can make a compelling case in less, then by all means do so but not less than 3000 words. This is a research paper, not a blog). For your guidance on writing style see examples on this website. Click on the “Ngalwana Judgments” tab and the “Analysis and Reviews” tab.
  • Ensure that you use proper referencing and acknowledge your sources. Plagiarism will not be tolerated.
  • The ultimate object of the exercise is to elevate the status of Customary Law within our constitutional framework, and ultimately influence a constitutional process in giving practical effect to that object.

Terms and conditions

  • My decision on the winning paper is final.
  • Only the author of the wining paper will receive an award of R10,000 (Ten Thousand Rand).
  • If your paper has not been chosen, that does not mean your writing is poor. I can only pick one paper.
  • I reserve the right to pick more than one paper and merge them in “settling”. In that event, the award of R10,000 (Ten Thousand Rand) will be shared equally among authors of the selected papers.
  • No feedback will be given on papers not selected.
  • The winning paper will be “settled” by me and the terms of that will be discussed with the author. That means I reserve the right to edit your paper, either stylistically or substantively, or both.
  • The winning paper will be published on this website. It will bear the name of the author.
  • The deadline for submission of the final paper is 31 October 2019 at Midnight.
  • This invitation for expression of interest closes on Sunday 30 June 2019 at Midnight.
  • Expressions of Interest must include a proposed outline of the paper.
  • Only the first 20 expressions of interest will be considered
  • I reserve the right to adjust the deadlines
  • Expressions of interest must be submitted at this email address: anchored@anchoredinlaw.net and addressed to “The Editor”
  • The winning paper will be announced on this platform on 30 November 2019.
  • No correspondence will be entered into with individual authors of papers not selected.
By |2019-05-01T12:10:37+00:00May 1st, 2019|Blog, General, News|0 Comments

Land. Equality. Dignity: A Look at Land Expropriation Without Compensation

If we are to realise at least two of the Constitution’s Foundational Values – the achievement of equality and human dignity – then land expropriation without compensation is an absolute necessity in South Africa.

But is that possible under the 1996 Constitution in its current form? What does the Constitutional Court’s jurisprudence and academic treatment of the subject tell us about the possibilities?

Must section 25 of the Constitution be amended in order to enable an orderly and lawful land expropriation without compensation, or is all we need the enactment of legislation in order to give effect to its provisions?

These, and more, are the questions that are explored in this paper.

Read Full Analysis and Review here

By |2019-04-06T11:30:01+00:00Apr 6th, 2019|Analyses and Reviews|0 Comments

The Truth About Retirement Annuity Funds In South Africa: A Prologue

There appears to be a general misunderstanding as regards the legal obligation of a journalist when he or she learns of corrupt activity whether during the course and scope of performing his or her duties as a journalist or not.

This misunderstanding came into sharp focus this week following news of the release of a book by a journalist, Pieter-Louis Myburgh, in which he allegedly (I have not yet read the book) chronicles alleged corrupt activity by a senior politician of the ruling party.

Some people on social media suggested that the author should report his allegations to the police; others even went as far as to suggest that he has a legal obligation to report his allegations to the police. A well-known media personality then tweeted:

<:”I am just gobsmacked at number of people who truly believe journalists should ‘go to the police’. NOWHERE in the world do journalists do that. It is completely outside the ethics of journalism. Layers, doctors also restricted. Journalists expose rot, police must do the rest.”>/

Journalists in South Africa seem to believe that they can never be compelled to answer questions at a Commission of Inquiry (or a court) on the subject of their story, whatever the circumstances. This is incorrect. A journalist can be compelled to testify unless to do so would infringe upon his or her constitutional right or freedom unjustifiably. But whether compulsion would infringe upon any such right or freedom depends on the nature of each question, and can become clear only when the question is put (see Nel v Le Roux 1996 (3) SA 562 (CC) at para [7]).

There is in our law no general absolution of journalists from answering questions about their story in a Commission setting. Freedom of the press and other media does not provide license to a journalist to spread a false narrative about people, and then hide behind the sanctity of sources and press freedom.

The media in South Africa has some serious introspection to do in its coverage of Commissions of Inquiry. There are too many instances where it appears that some journalists have become emboldened to mount vitriolic attacks on judges personally for making judgments that the journalist does not like or with which the journalist disagrees.

Take the case of Jiba and Another v General Council of the Bar of SA and Another; Mrwebi v General Council of the Bar [2018] 3 All SA 622 (SCA) which found that the conduct of the two appellants did not deserve ultimate censure of being struck off the roll of advocates. A journalist, writing for Daily Maverick, so personally and trenchantly attacked two judges of the Supreme Court of Appeal in July 2018, effectively associating them with corruption at the highest level of government, that the General Council of the Bar of SA, the party on the losing end of that judgment, was moved to issue a media statement condemning the attack.

If judges can be so wantonly attacked by a journalist just because the journalist does not like the judgment, what hope does a Commissioner have in a Commission of Inquiry when issuing a report containing recommendations that are inconsistent with the narrative already carved out by journalists for an outcome favoured by them? Should the Commissioner wait until then, in the hope that the General Council of the Bar will condemn the attack, or should the Commissioner be given statutory powers to nip this undesirable and inappropriate practice in the bud?

What deterrent effect does an ex post facto condemnation of such personal attacks on judges have? I have not seen any.

Analysts

There is another burgeoning phenomenon in South Africa: that of “a political analyst”. The South African variety is difficult to place as the same person could one day be a radio talk-show host, a television show host the next, an analyst the next day, and a journalist when called for. Most striking is that the “political analyst” is often readily identifiable with one political narrative and leader, pushing that leader’s line at every opportunity, and exhibiting unmasked hostility towards another political narrative and leaders, excoriating them at every opportunity.

Such “a political analyst” poses a greater threat to a Commission of Inquiry because, as she is no “media” or “press” when wearing the “political analyst” hat, the media regulator can arguably have no power over her for misrepresenting facts given at a Commission. When posing as a hired gun, she can snipe with impunity at witnesses who present evidence that is unfavourable to her favoured politician or narrative.

What is the Commission to do in such circumstances: Issue a warning that such exploits “obstruct the Commission in the performance of its functions”, which the Commissions Act proscribes, or “prejudice the Inquiry”, which the “State Capture” Commission regulations prohibits, and so constitutes a criminal offence?

By |2019-07-17T13:04:22+00:00Apr 4th, 2019|Blog, General, News|7 Comments

The Truth About Retirement Annuity Funds In South Africa: A Prologue

On a warm Autumn day in April 2007 I sat down, a little black book and a fountain pen in hand, to jot down what I would do over the next 5 years, then 10 years, then 15 years.  I had recently stepped down as Pension Funds Adjudicator in March of that year despite demur from National Treasury and the Financial Services Board.  My time was up.  I had served my 3 years.  It was time to move on.

I had been approached by life insurance companies to join them as an executive.  That was hardly an option I was prepared to entertain.  I had been approached by asset management companies to sit on their board of directors.  I was not interested in that either (although some 2 years later I did succumb to Alexander Forbes at the urging of a very tall man for whom I have enormous respect).

Ultimately, I jotted down the following notes:

  • A Memoir by 60
  • Back to the Bar – definitely not Cape Town
  • PhD in Tax
  • Routine for Comrades (6 Silvers to go) by 50
  • Blue number at 2 Oceans by 2010

Then I got distracted.  I had, a few days previously, missed my Sainsbury Medal target at the Two Oceans Ultra Marathon by just over 5 minutes.  What was supposed to be 4:59,59 turned out to be 5:05,19.  I was brooding.  I went for a full body massage.  Then, as I lay there – a genuinely Thai woman at Angsana Spa walking on my back – it hit me: write a book on your experience as Pension Funds Adjudicator.

The following morning, I took out my laptop and started typing.  Before I realised, it was evening again.  And so, over the next 12 years, I would write a chapter per year – until now.

This is the edited Prologue to the book:

In his 1946 essay on Politics and the English Language, George Orwell succeeded in surgically peeling off the veneer of prosaic respectability from what passes for “modern” English to expose the ugly lies ignominiously hidden beneath.

Mourning the perversion of the English language – ostensibly in the name of modernism but, in truth, with a view to obfuscating and deceiving – Orwell observed that the decline of a language must ultimately have political and economic causes.  That observation finds an austere ring of truth about it in the South African retirement industry’s language of choice.  Indeed, the great enemy of clear language is insincerity.

The phrase “maturity value” or “actuarial value” is in many instances (fashionably blamed on market volatility or downturn by large and dominant institutions trusted to manage retirement fund investments) an insult when members of retirement funds emerge from the “investment” experience with less than they put in.  There is often neither “maturity” nor “value”.

So, too, is a “smoothed bonus” or “reversionary bonus” policy when life company actuaries are at liberty to reduce (not augment as the word “bonus” suggests) members’ investment values using unexplained actuarial tools like the “Market Level Adjuster”, in itself yet another abuse of the English language intended to deceive.

So, to talk of “underwritten” retirement annuity funds in the South African context is quite misleading.  To “underwrite” is to assume financial liability, to finance, to guarantee, to bankroll.  Life companies or insurance companies that “underwrite” retirement annuity funds do not guarantee, bankroll or finance these funds.  Instead, a good argument could be made that retirement annuity funds finance the business of insurance companies.

In fact, all insurance companies that “underwrite” retirement annuity funds do is lock members of those retirement funds into long-term edicts from which they cannot escape.  This guarantees to those “underwriting” insurance companies sustained business for as long as people save for retirement.

I say these are edicts because, to say the insurance policies in which “underwritten” retirement annuity funds are invested are “contracts” would be an abuse of the English language since there is little, if any, “agreement” between the member on the one hand, and the insurance company on the other.  The only agreement, according to “underwriting” insurance companies themselves, is that between the trustees of the retirement annuity fund on the one hand – themselves employees or former employees of the insurance company – and the insurer on the other.

Much of the perversion described above informed, in part, the writing of my book, The Truth About Retirement Annuity Funds in South Africa, which should be published soon.  I am amazed at the ease with which “underwriting” insurance companies get away with their manifestly bad business model founded, as it is, on investment by duress.  National Treasury, under the stewardship of successive Ministers of Finance from what is supposed to be a libertarian ruling party, seems to see nothing wrong with this model, while the Financial Services Board or FSB (now called the Financial Sector Conduct Authority or FSCA) can only regulate on the basis of legislation produced largely at the instance of National Treasury.

These two realities conspire to produce an intractable problem.  While the executive at the then FSB, who was responsible for the regulation of retirement funds, expressed concern to me in an interview about underwritten retirement annuity fund business model, and the virtually incestuous nature of its governance, his hands were tied by existing legislation.  By the new Financial Sector Regulation Act, which came into effect on April Fools’ Day in 2018, both National Treasury and the ruling party appear to have no intention of addressing this problem.

The writing of the book was informed also by an event which, at the time, seemed innocuous enough. One could simply have dismissed it (as is on’s tendency when confronted with imbecilic comment) as the idiotic musings of a simpleton not worthy of any attention.

It happened at the Sandton Gautrain station. A man travelling with his family, his 3 to 4 year old daughter perched on his shoulders, crept up to me and said, sotto voce,

You’re the guy that fucked up the insurance industry, aren’t you?”

“I beg your pardon!” said I incredulously.

“You’re him, aren’t you”, said he, characteristically ignoring the incredulous look both on my face and in my voice.

He then slithered into the lift, wearing the smug face of one who had put power in its place, and disappeared into the Sandton concrete jungle, confident in the thought that he had made his point – whatever that was.

That short encounter convinced me that if there are people out there who believe that I “fucked up the insurance industry”, then perhaps I owe South Africa an explanation of precisely what it is that I was about.  Media reports on the rulings of the Pension Funds Adjudicator tended, while well-meaning, to err on the sensational.  I was touted, variously and in screaming headlines, as “Life Saver”“Consumer Champion”, and “Change Agent”.  My repeated protestations (the last in an interview in Rosebank, Johannesburg, with the late Michael Coulson) only served to encourage some financial journalists (not Michael) to talk me up as some kind of hero.  I was not.  I am not.

While I may plead guilty to “change agent” (in small letters) in other endeavours, that was neither the role I set out to play, nor in fact played, as Pension Funds Adjudicator.  As Pension Funds Adjudicator I simply applied the law as I understood it (which in most instances was endorsed by the courts).  I was no consumer crusader.

The book is the product of my experience as Pension Funds Adjudicator during the period March 2004 to March 2007, as well as from the practice of law at the Bar for almost 20 years, during which period I have acted as a Judge of the Labour Court and the High Court.

During that period I learnt of numerous problems in the retirement industry, many of which are the result of “underwriting” insurance company practices enabled in no small measure by legislative and, with that, regulatory inadequacies.  Because “underwriting” insurance companies account for about 80% of market share of underwritten retirement annuity fund investment, problems wrought by such dominant players pervade and indeed define the industry.

As Pension Funds Adjudicator I was charged with investigating and resolving retirement fund related disputes.  In the course of that exercise, and within just two years in office, I discovered business practices by “underwriting” insurance companies that evoked in me a sense of being raped by these behemoths.  It was no rocket science, really.  All one needed to do was look in the obvious places.

Yes, the rape metaphor is in my view quite appropriate considering that current legislation and governance rules by which underwritten retirement annuity funds are regulated are such that the investor is in my experience helpless against the life company juggernaut with regard to the management of his or her investment.  Watching one’s investment fritter away year after year, and being helpless to do anything about it (such as taking one’s money elsewhere without incurring penalties that are unlawfully imposed) leaves one with a sense of being financially raped, even though I can only imagine the horror through which a physical rape victim goes.

In the book I hope to share some of the horrors of “underwritten” retirement annuity funds that I have witnessed during my tenure as Pension Funds Adjudicator.  I shall also make suggestions on how these horrors should be eradicated – for good and forever.  The starting point could well have to be change in government.  The current ruling party has shown little appetite for tackling the abuse by life companies of their dominance in the retirement fund industry.  And, while the new Financial Sector Regulation Act talks of “transformation” in the financial services sector, on closer scrutiny – and by its own terms – it does nothing of the kind.

A topic for another day.

By |2019-03-16T13:46:48+00:00Mar 16th, 2019|Blog, General, News|0 Comments

Nationalisation: The Boogeyman of Economic Transformation?

On Thursday, March 7 2019, South African President Cyril Ramaphosa announced in Parliament that his government will “do away with” some 770 “external shareholding” in the South African Reserve Bank.

Many commentators see this announcement as the first step in the implementation of the resolution taken by the ruling African National Congress at its 54th national conference in December 2017 to nationalise the South African Reserve Bank, South Africa’s Central Bank.

Media headlines screamed “Rand Takes A Pounding”, as copywriters joined their imaginary dots between the President’s announcement in Parliament and the currency’s slide.

Here is the unembedded truth.

The Bank of England was nationalised in 1946. The Pound Sterling did not go into free-fall. The UK economy did not collapse.

In France three major banks, Banque Nationale de Paris (BNP), Société Générale and Crédit Lyonnais, were nationalised after the Second World War, and remained nationalised for half a century. The sky did not fall. France was not “Venezuela-ed”. It was not “Zimbabwed”.

In 1948 the Australian government tried to nationalise commercial banks but that was successfully resisted in the High Court on constitutional grounds. But try they did. The sky did not fall at the news of the attempt.

In 2008, Iceland nationalised four large commercial banks: Kaupping, Landsbanki, Glitnir and Icebank. In 2009, a fifth bank, Straumur Investment Bank and the savings bank was also nationalised. The sky did not fall. The country was not “Venezuela-ed” or “Zimbabwed”.

The 2008 United States Troubled Assets Relief Programme by which Henk Paulsen pumped staggering amounts of taxpayers’ dollars into the banking system is widely regarded by economists as nationalisation. Denialists insist that this was a “relief” programme or “recapitalisation” or “bailout” – naturally. The idea of the paragon of capitalism nationalising assets is unthinkable. But it did. And life goes on.

Norway’s Posten Norge (Norwegian Post Office) is state-owned; Switzerland’s Schweizerische Bundesbahnen (Swiss Federal Railways) is state owned; Électricité de France is state-owned; so, too, are hundreds of local savings banks in Germany. The sky has not fallen.

Zimbabwe and Venezuela are often cited as examples of the decrepit effects of nationalisation. Yet, many listed South African companies remain invested in Zimbabwe.

Venezuela thrived under Simón Bolívar’s nationalism bent. What failed under President Chávez is not nationalisation; it is rather the manner of its implementation exacerbated by the United States and its allies which conspired to ensure failure of implementation as they saw it as a threat to “The New World Order”, a euphemism for rampant plunder of Venezuelan oil resources.

Implementation that has disastrous effects in these circumstances can never be indicative of the inefficaciousness of the policy itself. The experience in Continental Europe proves this beyond doubt.

But pop culture and facts make for strange bedfellows.

Gustave Le Bon and Edward Bernays are two of the names that spring to mind in regard to the power of influencing group psychology by manipulating the content of the information that the public consumes; a phenomenon colloquially known as Propaganda.

Stripped of all frills, the phenomenon comes down to three psychological tactics that have endured since the turn of the 20th Century:

  1. Creating carefully calculated associations with the subconscious fears and desires of individuals.
  2. Influencing opinion leaders and perceived authority figures in order to reach those who follow them.
  3. Initiating the contagion of behaviours and ideas through social conformity.

The object is social conformity by sheer deception. Perhaps the best illustration of this phenomenon in recent times is the fabled “War on Terror” which is considered by some as a lie perpetrated by successive governments in the United States as a ruse to plunder natural resources in the Middle East and elsewhere.

In South Africa, talk of nationalisation (especially of the South African Reserve Bank) has by sheer manipulation of facts become something of a boogeyman of economic transformation. South Africans, black, white, educated and uneducated, are now conditioned to believe that nationalisation is the most stupid idea. This is done through relentless bombardment in the media, carefully selected television interviews, social media and carefully edited “news” material about Zimbabwe and Venezuela.

Of course, no one likes to be perceived as “stupid”, least of all people with tertiary qualifications. So, they tend to conform, and probably grumble in private for fear of being accosted with a Venezuela or Zimbabwe trope, and labelled “stupid” for good measure.

Professors of Economics are not spared either. Witness the vitriol that followed Professor Chris Malikane for daring to speak out in favour of nationalisation. The depravity of the assault even borders on racism when the professor’s academic standing was called into question, prompting his peers to spring to his defence.

The attack on nationalisation in South Africa hinges on factual deception of which Le Bon and Bernays would have been proud. But what are the true facts.

Mineral and petroleum resources in South Africa were nationalised more than 15 years ago and the South African economy did not collapse as a result of that. Mining companies require prospecting and mining licenses from the government in order to prospect and mine resources. The government has the power to suspend and cancel those licenses.

One of the objects of the legislation by which government nationalised mineral and petroleum resources is “to promote equitable access to the nation’s mineral and petroleum resources to all the people of South Africa”. The reason ordinary South Africans are largely not benefiting from these resources is not the failure of nationalisation; it is the failure of this government to give effect to the objects of the legislation.

So, when people demand “nationalisation of the mines”, I wonder if they have any idea that South Africans already have a right of equitable access to the mineral and petroleum resources of the country. And it is not in the rapacious interest of mining companies to talk too loudly about that, or for this government to remind ordinary South Africans, lest we make our rightful demands.

Banks are an obvious strategic target for nationalisation because the single most egregious impediment to most black South Africans’ entry into the supply-side of the economy is the banks’ prejudicial tight-fistedness.

[Yes, the Industrial Development Corporation (and other government funding entities) is not faring much better either. That is a story for another piece.]

But nationalisation of the Reserve Bank will achieve nothing. The Bank’s mandate must change. The Reserve Bank should, like the Bank of England, facilitate employment and competition in the market, not just target inflation largely in the interests of its private shareholders.

When the Bank of England was nationalised in 1946, the reason advanced was its “importance to the economy”. It has two primary objectives: to maintain price stability and to protect and enhance the stability of the financial system. But it also has another objective: to facilitate growth, employment and competition.

Contrastingly, the legislative objectives of the South African Reserve Bank are limited to “monetary stability” and “balanced economic growth”. It does so by influencing total monetary demand through the exercise of control over money supply and the availability of credit.

Inflation targeting is the resultant obsession. Economic growth, employment and competition be damned. The inevitable result is that the emergence of many smaller businesses on the supply side of the economy – especially in banking and financial services – is suffocated under the mound of the inflation targeting policy.

But if you dare point this out, you are quickly snuffed out as “stupid” because this is not the sort of thing that resonates with entrenched interests – white and black.

The South African Reserve Bank, like the Bank of England, should be nationalised because of its “importance to the economy”. Its legislative objects should be amended to include facilitating employment and competition in the market, like the Bank of England. Until that is done, and visionary and competent people appointed to achieve that goal, the meaningful and sustainable transformation of this economy will remain something that governments like to say but have absolutely no intention of ever achieving.

Commercial banks are also strategically important to the economy if used to facilitate growth, employment and competition. What we have currently is an oligopoly of banks driven by individual greed of shareholders and executives. This is precisely the sort of incentive that resulted in the 2008 financial crisis.

The “social conformity” angle we have been fed is that South Africa was relatively spared the pain of the 2008 crisis because of our banks’ monetary stability policies. The truth, however, is that banks and other big businesses were sitting on bundles of cash they were not investing in the economy citing “political uncertainty”.

The bottom-line is this: Nationalisation is not the problem. Like every policy proposition, it is its implementation that will be the measure of its success. The fact that this government’s deployees at state-owned enterprises are disastrous in their running of some of those entities is not the appropriate measure of nationalisation’s success. Think of South Africa beyond the African National Congress. There are many bright young people outside political circles in South Africa who can make this country great.

Nationalisation in South Africa is bastardised by people who view it through an ideological prism as a sort of “Swart Gevaar” rather than focus on its efficaciousness in promoting and facilitating economic growth that is inclusive of all hard working South Africans, adequate employment and competition.

The benefits of nationalisation are grounded in cold, hard economic sense. The facilitation of sustainable economic growth, employment and competition depends on it. Zimbabwe and Venezuela are an Aunt Sally argument.

By |2019-03-08T16:22:18+00:00Mar 8th, 2019|Blog, General, News|0 Comments

A Tale of Two Public Protectors: Separating Fact from Fiction

It is interesting to observe how human bias – especially when people have gone into “groupthink” or “mob mode” – causes blindness toward the errors of some and a magnification of the errors of others. When we believe that someone is “like us”, “thinks like us”, their mistakes very easily become invisible to us. That is not something we would easily recognise in ourselves, much less openly admitting that our bias steered our thinking. I believe Psychologists call it “cognitive bias”.

There is a present day example of cognitive bias playing out in front of us, which I have been observing with much interest. It reminds me of Charles Dickens’ A Tale of Two Cities. Many South Africans are probably aware of the lengthy opening sentence in that book. But most of those who cite excerpts of the sentence have probably never actually read it – or the book.

Its “best of times” and “worst of times” oft-quoted opening salvo apart, the less talked about aspect of the book is the contrasting motifs by which Dickens depicts London as a calm and peaceful city, but Paris as mired in violent tumult. People rarely ever ask why; and when they do, the speculative answer that is often offered is that the book depicts the historical events of the revolution in France.

But the book is set in 1775. The French Revolution was still some 14 years in the future. When it started, Dickens had not even been born. When it ended, he was all of 13 years old. But why ruin a good narrative with facts? The contrast between Paris and London is a theme of the book. Any fact that spoils that theme just would not do.

Now, fast forward some 244 years, to the southern part of the African continent, and you find much of the same: facts getting in the way of a good yarn intended to depict one Public Protector as representing the Dickensian “age of wisdom” and the other “the age of foolishness”.

The inconvenient truth is that both Madonsela and Mkhwebane have been prone to both moments of wisdom and moments of foolishness. The difference is that – for reasons about which it would be foolish to speculate – Madonsela’s moments of foolishness have drawn little or no censure, while Mkhwebane has virtually been burnt at the stake for hers, even by people who have not bothered to read her reports, relying instead on media reports or commentary as their only source of information for the contents of the Public Protector’s reports.

Parallels are often drawn between Mkhwebane and Madonsela and, more often than not, it is concluded that Madonsela was the Gold standard and that Mkhwebane is failing miserably at her job. But are all the facts taken into consideration when this conclusion is drawn, or is cognitive bias toward Mandonsela making her mistakes invisible? Let us look at some of the facts that have been overlooked for fear that they will spoil the intended contrast between two perfectly capable women.

Instruction to the Special Investigating Unit

In one of her provisional reports, Madonsela took remedial action in which she instructed the head of the SIU to

“conduct a forensic investigation into serious maladministration in connection with the Vrede Dairy Integrated Project of the Free State Department of Agriculture, the proper conduct by officials of the Department and the unlawful appropriation or expenditure of public money or property with the view of the recovery of losses by the State” [sic]

This remedial action was legally incompetent because Madonsela purported to issue an instruction to the SIU.  She had no power to do that.  No one attacked her competence for this. It did not even make page 5 of the Sunday tabloids.

Section 5(6)(b) of the Special Investigating Units and Special Tribunals Act, 74 of 1996 (“the SIU Act”) confers on the Public Protector only the power to refer a matter to the SIU that falls within its terms of reference.  It does not confer upon the Public Protector the power to instruct the SIU to conduct a forensic investigation. It is the President who has the power to establish a SIU for purposes of mounting an investigation.

Madonsela did not end there. She also instructed that the SIU reports to her periodically on the progress of the SIU investigation. That she did not have the power to do. Again, she overreached. The SIU does not report to the Public Protector, and Madonsela did not have the power to monitor its investigation.  The SIU Act does not impose an obligation on the SIU to report to the Public Protector. No one attacked Madonsela’s competence for this overreach. Not the Minister of Finance; not the media; not the many NPOs that have now found their voice to attack Mkhwebane.

Contrastingly, in her 19 June 2017 report on the South African Reserve Bank, Mkhwebane referred to the SIU the matter of the recovery of the Billion Rand debt arising from a loan that the Reserve Bank had granted to Bankorp (since acquired by ABSA Bank) many years ago. She did so expressly “in terms of section 6(4)(c)(ii) of the Public Protector Act”, and because she appears to have been alive to the fact that she did not have the power to instruct the SIU.

On 16 February 2018, some 8 months after Mkhwebane had already decided that she does not have the power to instruct the SIU, the Full Bench of the High Court (three judges) confirmed that this provision (1) does not empower the Public Protector to instruct the SIU and (2) that it empowers her only to refer a matter to the SIU. No one highlighted Mkhwebane’s wisdom in this respect. Instead, the Reserve Bank – in concert with National Treasury and Absa Bank – attacked her, effectively for her temerity to hold them accountable on the recovery of public funds from a commercial bank. The media cheered on. No organ of state came to her defence despite the Constitution in section 181(3) directing that organs of state must (not “may”) “assist and protect [the Public Protector] to ensure [her] independence, impartiality, dignity and effectiveness”, and section 181(4) directing that “No person or organ of state may interfere with the functioning of [the Public Protector”.

In her final report of 8 February 2018 on the Vrede Dairy Farm project, Mkhwebane removed Madonsela’s remedial action by which Madonsela had unlawfully instructed the SIU to conduct a forensic investigation into serious maladministration. Mkhwebane did so because she knew she had no power to instruct the SIU, as the Full Bench of the Pretoria High Court was to confirm a week later. Instead of commending her, the official opposition attacked her for this in court papers. The media cheered on. No apology was extended to Mkhwebane after the Full Bench had confirmed the correctness of her legal position. Not even an acknowledgment.

Instruction to the Auditor-General

Quite apart from Madonsela’s overreach in instructing the SIU to conduct a forensic investigation, she also overreached in instructing the Auditor-General to perform a function the Auditor-General did not have the power to perform. No one attacked her competence for that.

Madonsela instructed the Auditor-General in her provisional Vrede Dairy Farm report to perform “a forensic and due diligence audit” which, she directed, would be “monitored on a bi-monthly basis” by the Public Protector.

But a proper reading of section 5(1)(d) together with section 29 of the Public Audits Act does not countenance the Auditor-General performing “a forensic and due diligence audit” at the behest of the Public Protector and being “monitored on a bi-monthly basis” by the Public Protector.  There are numerous indicators in this regard in both provisions.  Here are some of them.

  • First, when the Public Audits Act talks of “investigations or special audits” the word “investigation” must be read within the context of “special audit”. The sections do not create a new non-audit function for the Auditor-General, thereby turning the Auditor-General into some sort of super investigative unit.
  • Second, the Auditor-General cannot in any event perform a forensic and due diligence investigation into an organ of state which he is ultimately constitutionally mandated to audit [see s 5(1)(a)(i) of the Public Audits Act]. If he were permitted to do that, an untenable conflict of interest would result, with the Auditor-General (or his office) ultimately auditing his (or its) own forensic investigation that he (or it) would have done under section 5(1)(d) of the Public Audits Act. It is precisely this sort of blurred lines that have given rise to “accounting and audit irregularities” in the audit profession and which are the subject of investigation by the South African Institute of Chartered Accountants (SAICA) and the Independent Regulatory Board for Auditors (IRBA).
  • Third, it is clear from a plain reading of section 29(3) of the Public Audits Act that the section does not envisage investigations of the kind ordered by Madonsela.
  • Fourth, the Auditor-General can only perform “other functions” if his role as Auditor-General and independence will not be compromised [see s 5(1)(a) of the Public Audits Act]. Madonsela’s remedial action instructing the Auditor-General to commission a forensic and due diligence audit was coupled with a reporting obligation and ongoing monitoring by the Public Protector. This runs counter to the Public Audits Act as it would compromise the Auditor-General’s independence if the Auditor-General now has to account to the Public Protector.

There are numerous other misdirections – some more glaring than others – of which Madonsela has made herself guilty over the years. To chronicle them here might risk turning this contribution into a Madonsela-bashing affair. It is not. Her competence should not be attacked for her numerous misdirections. All lawyers err from time to time in their interpretation and application of the law. The courts are there to determine disputes where there is a difference of opinion as regards the proper interpretation and application of the law. Even the High Court and the Supreme Court of Appeal err. That is what the Constitutional Court is there to put right – as the apex court.

Some of the Constitutional Court’s decisions have themselves been the subject of criticism, most recently the judgment in Jacobs and Others v S. This was not the first. It is not the last either. The Constitutional Court will err again. The Public Protector will err. High Court judges will err. So will Judges of Appeal.

Other Facts

Hardly ever mentioned in the wholesale attacks on Mkhwebane is that some of the investigations and reports that she has had to defend were done on Madonsela’s watch. She has been attacked even on issues in relation to which Madonsela had made the same finding but was not attacked.

Examples of this arise in respect of the Vrede Dairy Farm report. In her provisional report Madonsela declined to investigate cattle deaths and value for money allegations. So did Mkhwebane, who gave the same reasons advanced by Madonsela for declining investigation of these issues. She was attacked for this. Madonsela was not.

Mkhwebane was attacked by the official opposition for investigating 3 issues in relation to the Vrede Dairy Farm project. Madonsela investigated 4 issues and was not attacked. All those 3 issues that she investigated had also been pursued by Madonsela whose term ended before finalising the investigation.

When Madonsela told the Pretoria High Court that she does not have sufficient resources to investigate “State of Capture” and, for that reason, the High Court should direct the establishment of a Commission of Inquiry, there was groundswell support for her. The official opposition even filed papers in court supporting not only the establishment of a Commission of Inquiry into “State of Capture” but also Madonsela’s complaint that she lacks sufficient resources.

But when Mkhwebane raised the same resource constraints as a reason for not being able to pursue some investigations timeously, she was attacked, including by the official opposition in court papers.

In March 2018, Mkhwebane prevailed in the Supreme Court of Appeal on an important principle of law. The principle was whether the remedial action or conduct or report of the Public Protector can be reviewed and set aside under PAJA. Mkhwebane said it could not because her remedial action does not constitute administrative action. The Supreme Court of Appeal agreed in Minister of Home Affairs and Another v Public Protector of the Republic of South Africa 2018 (3) SA 380 (SCA) at [36]-[37]. No drum rolls for her.

In a subsequent case, when another of her reports was attacked only under PAJA, Mkhwebane raised the issue again pointing to the decision of the SCA as being the complete answer to the entire application. The court agreed, but promptly afforded the applicant an opportunity to amend her papers so as to attack Mkhwebane’s report under the principle of legality that the applicant had failed to plead in her papers.

The applicant was represented by two Counsel, including Senior Counsel. Neither she nor her Counsel was minded to amend her papers so as to smoothe the PAJA wrinkle. The court simply decided that she should. Mkhwebane stoically did not complain.

To Close

When lawyers err in their interpretation and application of the law, they are not thereby demonstrating their incompetence or unfitness. It is unhelpful in the protection and development of a democratic state for one Public Protector to be lauded as a saint despite her shortcomings, and another to be vilified for what she is perceived to represent, merely for being human like all other arbiters of fact and law.

It is us, the public, who are in need of some serious introspection. The questions we should ask ourselves are these: Are we not running the risk of creating a  tale of two Public Protectors which may very well impact negatively on the ability of this crucial constitutional institution to function effectively? Is there not a danger of this malaise spreading to other constitutional institutions if we continue defining them by the cognitive bias we hold of the persons who lead them?

By |2019-03-06T18:40:44+00:00Mar 6th, 2019|Blog, General, News|6 Comments

#BudgetSpeech2019: Is Early Retirement of Public Servants the Answer to the Large Government Wage Bill?

Often the easiest thing to do is criticise a proposed solution without offering an alternative. I empathise with Finance Minister Tito Mboweni who has the tough task of crafting a budget in difficult economic times, and steer the mutiny-prone ship that is South Africa from stormy seas to more placid waters so that South Africans can ultimately enjoy the services they deserve from a government they elected democratically.

In his maiden budget speech 2019, Finance Minister Tito Mboweni says the public service wage bill is unsustainable. He may be correct. He says the solution is to reduce it by R27 billion over the next three years, and that this will be done by encouraging public servants to take early retirement. This may not be a prudent budgetary approach  as it will have inevitable negative consequences. He deftly left it to Minister of Public Service and Administration Ayanda Dlodlo to “outline the details of the early retirement framework”.

Armed with this rather blunt budgetary scalpel, Minister Dlodlo is certain not only to be on a collision path with public servants but is also likely to ratchet up the cost of her surgical intervention on the fiscus. And who do you think will take the fall for the fallout that may follow?

Public servants are members of defined benefit pension funds, like the Government Employees Pension Fund (GEPF). The benefits of each employee are defined based on the employee’s pensionable salary, pensionable service and actuarial factor. Each of these cannot be determined with any accuracy in advance as this is an exercise that involves complex actuarial principles.

For that reason, some observers may argue that the Finance Minister’s announcement that Minister Dlodlo will reduce the public service salary bill by R27 billion over the next three years is either a pipe dream or a deliberate election stroke. At least three sets of considerations would explain such scepticism.

Firstly, for the Minister to know in advance by exactly how much the public service wage bill will be reduced over the next three years, he must be in possession of facts on which the employment of general actuarial principles is based in order to arrive at a desired outcome. These include

  • how many employees will take early retirement over the next three years;
  • what the salary of each of these employees will be over that period;
  • whether each of these employees will receive salary increases over that period and how frequently;
  • how many of these employees will die before taking early retirement;
  • how many of the employees who take up early retirement will be married in the next three years;
  • how many of these employees will resign before taking up early retirement;
  • how many of them will be dismissed for misconduct over the next three years;
  • how many of them will be re-employed and therefore return on the government payroll.

These are facts that even the pension fund’s actuary cannot know in advance, and in respect of which he can only make an educated guess using the tools of his trade, actuarial principles. So, presumably untrained in the actuarial science discipline, how can the Minister possibly know all this? Did he seek advice from people skilled in this discipline? What did they tell him? Is he following their advice or did he ignore such advice?

Secondly, for the Minister’s project to be realised there will most probably have to be some government (employer) interference with the fund actuary’s work and that of the trustees who owe a fiduciary duty not to government but to the pension fund. The reason for this is that the means by which politicians want to achieve budget cuts in public service may not necessarily be aligned with what is in the best interest of the fund. That being so, government interference would not only be unlawful; it would also pose the risk of an unmitigated disaster for the financial soundness of the fund.

Thirdly, early retirement from a defined benefit fund is not cheap for the employer – in this case, the government – because there is an early retirement penalty to be paid. The amount of that penalty will depend on the salary of each employee taking early retirement at a given time, the number of employees taking early retirement, and the number of years that each affected employee has until reaching actual retirement age. Depending on these factors, that could be a huge bill. Ultimately, it is the taxpayer who pays that penalty.

So, until the Minister has shown the nation these numbers, it is difficult to understand how he could possibly have arrived at the R27 billion number as one by which the public service wage bill will be shaved over the next three years.

Now, let us consider each of the three grounds for scepticism on this announcement.

(1) On General Actuarial Principles, the Minister’s R27 Billion Project is Difficult to Grasp

Quite apart from the final salary that each employee who takes early retirement receives at the time, and the number of years recognised by the fund as pensionable years of service, an important factor that the fund actuary takes into account when calculating each retiring member’s actuarial interest (benefit) is what is called actuarial interest factors. This is an actuarial pursuit without which it is impossible to work out each employee’s early retirement benefit in defined benefit funds.

The computation of actuarial interest factors is a complex actuarial discipline which entails reliance on actuarial assumptions that fall into two broad categories, namely, demographic assumptions and financial assumptions.

The broad principles in the calculation of actuarial interest factors can be simplified as follows:

  • Understanding the purpose and calculation of actuarial reserve values is critical in understanding the purpose and application of actuarial interest factors and why they change over time.
  • An actuarial valuation of a pension fund – done every two years in the case of the GEPF – is done in order to check (among other things) whether the fund has sufficient assets to pay out the benefits promised to members as they become due. If the GEPF has sufficient assets, it is considered to be financially sound. If not, it is financially unsound, and so additional contributions may be required from the employer or other remedial action (such as decrease in actuarial interest factors, less benefit payments to pensioners, more tax revenue collection) may have to be taken by the trustees of the GEPF.
  • The liability value that is determined at the valuation date (the member’s “actuarial reserve value” or “actuarial interest”) is only in respect of the portion of benefits that relates to service up to the valuation date. The portion of benefits in respect of service after the valuation date is funded by future member and employer contributions to the GEPF.
  • The GEPF is a defined benefit pension fund in which the benefit payable to a member on retirement is set out in the rules and calculated using formulae based on the member’s pensionable service and pensionable salary at the date of retirement. When each member will retire (e.g. at the normal retirement age or before normal retirement age) is not known before the event actually occurs, nor is the salary he or she will eventually be earning at retirement. The exact amount of money needed to meet the benefit that will be paid on retirement (or on death, disability or resignation) is not known in advance and the actuary estimates this amount as part of the actuarial valuation.
  • The member’s actuarial interest at the valuation date is therefore the actuary’s best estimate of how much is required in order to be able to pay out the benefits due to the member in terms of the rules of the GEPF whenever the member actually leaves or retires from employment at any time in the future. This is obviously impossible to predict for a specific member, but the actuary can estimate the average amount required for homogenous groups of members, e.g. by age, gender, etc.

In brief, the actuary estimates the value of the benefits that may be paid to the member at any point in the future and discounts this value to the current time, i.e. the assets required now, which together with the investment return that will be earned on these assets, will be sufficient to pay the benefits as they fall due.

As indicated earlier, the actuary makes a number of assumptions in these calculations which fall into two broad categories, namely, demographic assumptions and financial assumptions.

Demographic assumption is the basis upon which it is assumed that:

  • the member will leave the GEPF, e.g. the likelihood that the member will leave by retirement (or early retirement) or death or disability or resignation. This assumption is critical as it determines the form of benefit that is payable to the member. A resignation benefit, for example, is much less than a retirement benefit and so will cost the fund less;  
  • the date on which the member will leave the GEPF, e.g. the likelihood that the member will retire, die, resign or become disabled at each future age;
  • the member’s marital status at the date of exit, e.g. whether the member will be married and how old the member’s spouse will be. Marital status affects the value of the benefits payable on death in-service and on retirement (a pension continues to be paid to the spouse on the death of the pensioner).

Financial assumptions entail questions such as:

  • what annual salary increases and promotional salary increases the member will receive between now and his or her exit from the GEPF. This is important as it affects the value of the benefit that will be payable on exit.
  • what pension increases will be granted to pensioners in the future. This will affect the value of any pension paid to the member (and subsequently to his or her spouse if the person is married) if the member becomes a pensioner in the GEPF through either disability or normal or early retirement.
  • what the investment returns are that will be earned in future. The assets required at the valuation date to pay the future benefits will be higher or lower depending on the level of investment returns that will be earned on the assets of the GEPF.

The actuarial valuation incorporates all of these assumptions and calculates an actuarial reserve value for each member. The total of these values is then the GEPF’s liabilities and these are compared to the assets in the fund to determine if the GEPF has sufficient assets to pay benefits as they fall due.

The actuarial interest factors are tables of factors at each age (described as F(Z) and A(X) depending on whether the member is younger or older than age 55, respectively) which are applied to the member’s pensionable service and pensionable salary at the date of exit. The higher the interest factor, the higher the benefit. And these factors may increase or decrease at each fund valuation. That is not something the Minister would have known during his budget speech.

The demographic and financial assumptions used in calculating actuarial interest values, and therefore to determine the actuarial interest factors, are not arbitrary assumptions determined at the whim of the actuary.

The demographic assumptions are determined from regular experience investigations of the GEPF, i.e. the profile of how members have retired, died, resigned or become disabled in the past and at what ages members have tended to leave are determined by examining the records of the GEPF. The longevity of pensioners, and their spouses if they are married, is also examined by investigating the mortality experience of the GEPF’s pensioners. This experience is used to construct “decrement tables” which are used in the next actuarial valuation.

The demographic assumptions derived from the experience investigations will change over time for various reasons, such as:

  • The profile of the GEPF’s membership changes over time, e.g. a greater proportion of female members.
  • Behavioural changes with regard to resignation and retirement, e.g. greater employment mobility could result in more resignations at younger ages or financial conditions could result in less members retiring before normal retirement age.
  • Mortality improvements, due to such issues as better healthcare and living conditions, result in less members dying during employment and pensioners living longer in retirement.
  • Promotional salary increases (above general annual salary increases) are treated like a demographic assumption as past increases can be derived from the GEPF’s member data and used as an assumption for future increases.

So, the demographic assumptions derived from each experience investigation, historically done every four years or so, after interrogation by the GEPF’s Benefits and Administration Committee and the trustees for reasonability, are normally used in the next actuarial valuation to determine actuarial reserve values. The changed assumptions can result in higher or lower actuarial interest values. Neither the Minister nor his advisors can possibly know this in advance.

The financial assumptions, namely, future general salary increases, pension increases and investment returns, are all linked to future expected inflation. For example, future general salary increases can be assumed to be a constant amount above inflation each year, pension increases a constant percentage of inflation each year, and investment returns reflect a “real return” above inflation each year. The salary increase and pension increase “gaps” to inflation can be regularly tested and reviewed based on the GEPF’s experience.

Future expected inflation and real investment returns can be derived from the financial markets at any point in time, e.g. expected inflation can be derived by examining the yields on each of appropriate conventional government bonds and inflation linked bonds.

These changes in the financial assumptions derived from the market and the experience of the GEPF can result in higher or lower actuarial interest values.

Given that financial markets are constantly moving, different financial assumptions could theoretically be derived every day. If an actuarial valuation were done for the GEPF every day this would result in different actuarial interest values (ignoring any change in membership, service and salary details) and therefore different actuarial interest factors. This would be theoretically appropriate as the member would then receive the actuarial interest value applicable on his or her date of exit.

For administrative and practical reasons, and because formal actuarial valuations are only undertaken every two years, revised actuarial interest factors are only derived as part of each formal actuarial valuation of the GEPF and used for a period of two years until the next actuarial interest factors are derived.

Revised actuarial interest factors are therefore not determined in order to provide higher or lower benefit values to exiting members. They are revised to ensure that the member receives his or her actuarial interest in the GEPF based on demographic and financial assumptions that are applicable at the relevant time. This actuarial interest is the present value of expected future benefit payments and changes whenever the demographic and financial assumptions change.

Payment of an amount other than the appropriate actuarial interest value could be considered unfair to the member (if the amount is lower) or unfair to the GEPF (if the amount is higher).

Put differently, the benefit paid to the member is always the same, namely, it is the member’s actuarial interest in the GEPF. It is the amount of the actuarial interest that changes over time as the actuarial interest factors change, based on the demographic and financial assumptions that are applicable at the relevant time.

So, actuarial interest factors can increase or decrease depending on the demographic and financial assumptions that the fund actuary has made during the bi-annual actuarial valuation. It is thus difficult to grasp how the Minister and his advisors could possibly know, three years in advance, what those actuarial interest factors will be in three years’ time when there is every possibility (if not probability) that these may be revised upwards or downwards within the next two years depending on demographic and financial assumptions used by the fund actuary based on the fund’s financial soundness at valuation date.

(2) Short of Government Interference with Trustees and Actuary, it is Difficult to See How the Minister’s R27 Billion Project Can be Achieved

As pointed out above, with reference to general actuarial principles, it is difficult to understand how the Minister’s project of reducing the public salary wage bill by a specific amount (R27 billion) over the next three years by encouraging public servants to take early retirement can be pre-determined.

But even assuming the Minister could achieve this Herculean task of shaving off R27 billion from the public service wage bill in the next three years, is early retirement of public servants a wise move? Those who understand how defined benefit funds, like the GEPF, work may say no. Here is why.

(3) Early Retirement may be a Costly Exercise Ultimately for the Taxpayer

The suggestion by the Finance Minister that the public service wage bill be reduced by R27 billion over the next three years by encouraging public servants to take early retirement may be considered by some to be irresponsible.

There are two provisions of the Public Service Act that regulate early retirement: s 16(2A) and s 16(6). These must be read together with the applicable provisions of the GEPF Law, specifically, s 17(4) and Rule 14.3.3 of the GEPF Rules. From a plain reading of these provisions, it becomes rather clear that the early retirement option may not be the most efficacious or financially prudent.

Section 16(2A) says

“(2A) (a)          Notwithstanding the provisions of subsections (1) and (2)(a), an officer, other than a member of the services or an educator or a member of the Agency or the Service, shall have the right to retire from the public service on the date on which he or she attains the age of 55 years, or on any date after that date.”

Section 16(6) of the Public Service Act says:

“(6) (a)             An executive authority may, at the request of an employee, allow him or her to retire from the public service before reaching the age of 60 years, notwithstanding the absence of any reason for dismissal in terms of section 17(2), if sufficient reason exists for the retirement.

(b)            If an employee is allowed to so retire, he or she shall, notwithstanding anything to the contrary contained in subsection (4), be deemed to have retired in terms of that subsection, and he or she shall be entitled to such pension as he or she would have been entitled to if he or she had retired from the public service in terms of that subsection.”

Section 16(4) says an employee who reaches age 60 may be retired from public service subject to the approval of the relevant executive authority. Excluded are members of the armed forces, teachers and state security personnel.

The material differences between s 16(2A), on the one hand, and s 16(6), on the other, are these: s 16(2A) sets early retirement age, as a right, at 55 (normal retirement age is 60) but does not entitle the employee to full retirement benefits as if s/he had reached age 60. Section 16(6), on the other hand, does not confer early retirement as a right. The employee requires the approval of the executive authority (usually the relevant Minister); “sufficient reason” is required for ministerial approval; an employee can take early retirement at any age before 60; and the employee is entitled to full retirement benefits as if s/he had attained the age of 60.

In practice it is s 16(6), for obvious reasons, that is susceptible to much abuse. A 30 year old engineer at Eskom could under this section conceivably take early retirement, receive the pension of a 60 year old, and be re-employed on contract for his scarce skills set to the same position from which he retired, earning the same salary while receiving a pension.

But it is the effect of s 17(4) of the GEPF Law, read together with Rule 14.3.3(b) of the GEPF Rules, that may raise some eyebrows and which render this early retirement option less efficacious from a prudent budgeting point of view.

Section 17(4) of the GEPF Law says:

“If any action taken by the employer or if any legislation adopted by Parliament places any additional financial obligation on the Fund, the employer or the Government or the employer and the Government, as the case may be shall pay to the Fund an amount which is required to meet such obligation.”

The “action” by the employer would be the approval by the executive authority of early retirement in terms of section 16(6)(a) of the Public Service Act. Once that “action” takes place, Rule 14.3.3(b) is triggered. That rule says where a public servant who has been in public service for at least 10 years reaches the age of 55, or where a teacher reaches the age of 50, that employee’s early retirement benefit will be reduced by one-third of one percent for each complete month between his actual date of retirement and the retirement date as prescribed by the rules. In other words, where an employee takes early retirement at 55, the employer is liable for one-third of one percent for every month between the date of that employee’s early exit and the month on which he turns 60.

That one-third of one percent is the early retirement penalty, or pensionable service “buy back” that is for the employer’s account, i.e government which in essence means the taxpayer. It is the additional financial obligation on the fund which could never have been foreseen by the fund actuary when determining that employee’s actuarial interest at fund valuation stage with reference to demographic and financial assumptions.

Depending on the seniority of the civil servants who are prevailed upon to take early retirement, the indispensable skill they possess, the number of months they still have to go until reaching actual retirement age, and their commensurately high final salaries, the one-third of one percent that government will have to pay in each case may run into millions of rand and the overall figure may not justify the R27 billion sought to be shaved off the salary bill – especially if many of these will in any event be rehired in the same positions (typically on fixed-term contracts) in order to keep the state machinery ticking over.

Is this a prudent budgetary solution to a public service wage bill? Perhaps not. But what alternative does the opposition have?

By |2019-02-22T12:40:13+00:00Feb 22nd, 2019|News|2 Comments