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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

Does a Journalist Have a Legal Obligation to Report Corrupt Activity or Give Evidence?

There appears to be general confusion as regards the legal obligation of journalists when they learn of corrupt activity whether during the course and scope of performing their duties as journalists or not.

This confusion came into sharp focus this past 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 who is a member of the ruling party.

Some observers have suggested that the journalist should report his allegations to the police instead of smearing the politician and then seeking refuge behind the veil of the confidentiality of sources and, generally, his right to freedom of the press and other media as enshrined in s 16 of the South African Constitution. Others have even gone as far as to suggest that the journalist has a legal obligation to report his allegations to the police.

A well-known media personality has 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. Lawyers, doctors also restricted. Journalists expose rot, police must do the rest.”

But is this a valid observation in law? Does it matter that journalists do not “go to the police” anywhere in the world? Is that even factually true? Does this observation raise a question of “ethics of journalism” or a question of law? Is the role of a journalist simply to “expose rot” and then leave the police to “do the rest” without troubling the journalist for evidence?

It is surprising that these questions should still arise in 2019 South Africa because the country’s Constitutional Court seems to have put them to bed as long ago as in April 1996. On current law in South Africa it would seem that a journalist who has information about corrupt activity can be required by a court to answer specific questions regarding that activity in a court of law and even at a Commission of Inquiry, 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 that can become clear only when the specific question is put. It would seem that a journalist does not, in South African law, have the right to refuse to answer questions simply on the basis that the subject matter to which the questions relate forms part of a story that he or she wrote or is researching or covering.

Nel v Le Roux 1996 (3) SA 562 (CC) was concerned with a constitutional challenge to s 205 of the Criminal Procedure Act, 51 of 1977 (“the CPA”). That section says a court may require any person who may provide material or relevant information about the alleged commission of any offence to appear before it to be examined  by the prosecutor. If the person so required provides information to the satisfaction of the prosecutor, he or she would be under no further obligation to appear. The person would also not be obliged to testify or to answer any particular question put, or to produce any book, paper or document, if he or she has “a just excuse” for refusing or failing so to answer or to produce.

In challenging the constitutionality of s 205 of the CPA, the applicant in that case refused to answer questions on the ground that he might expose himself to the civil forfeiture provisions of the Exchange Control Regulations. The court disagreed because s 189(1) of the CPA provided a way out for the applicant. The court said, unanimously:

“If the answer to any question put to an examinee at an examination under s 205 of the Criminal Procedure Act would infringe or threaten to infringe any of the examinee’s chap 3 rights, this would constitute a ‘just excuse’ for purposes of s 189(1) for refusing to answer the question unless the s 189(1) compulsion to answer the particular question would, in the circumstances, constitute a limitation on such right which is justified under s 33(1) of the Constitution. In determining the applicability of s 33(1), regard must be had not only to the right asserted but also to the State’s interest in securing information necessary for the prosecution of crimes. We are not alone in adopting a procedure such as that embodied in s 205. Other open and democratic societies based on freedom and equality do the same. In the United States it is accepted that the investigative authority of the grand jury rests largely on ‘the longstanding principle that “the public has a right to every man’s evidence”. (my emphasis)

The constitutional challenge had been brought under the 1993 interim Constitution, hence reference to s 33(1) which is now substantially s 36(1) in the 1996 Constitution.

For this “public . . . right to every man’s evidence” proposition, the court cited a 1972 judgment of the Supreme Court of the United States.

So, the observation made by the media personality in her tweet about journalists “NOWHERE in the world” being compellable witnesses in respect of alleged criminal activity that they may have discovered would seem not to be in line with the legal position in South Africa.

Also, it would seem that the compellability of a journalist witness is not a matter of “ethics of journalism” but rather a matter of law in South Africa.

And the role of a journalist, whether in relation to a story or not, would seem not to end with “exposing the rot” and leaving the rest to the police as a disinterested observer. It rather seems to extend to the journalist being expected in law to perform his or her duty as a responsible citizen.

The journalist’s right to “freedom of the press and other media” is not absolute. It must be balanced with the State’s interest in securing information that is necessary for the prosecution of crimes. That has been the legal and constitutional position in South Africa, as confirmed unanimously by ten jurists of the Constitutional Court, since April 1996. The public has a right to every man’s evidence, including journalists.

There thus seems to be no question that a journalist may validly be required by a court to provide material and relevant information about alleged corrupt activity. The journalist cannot validly refuse, in South African law, to answer questions put to him or her, or to produce documents required of him or her,  in connection with such alleged corrupt activity, unless he or she can provide a “just excuse” in relation to each question or document or piece of information.

Invoking “freedom of the press and other media” as a general defence would seem not to cut it. The journalist would have to explain why provision of the evidence or document required would unjustifiably infringe upon his or her right to “freedom of the press and other media”.  In South African law there seems to be no general absolution of journalists from answering questions about their story in a court or Commission of Inquiry setting. Freedom of the press and other media does not provide license to a journalist to spread untested (or false) narratives about people, and then hide behind the sanctity of sources and press freedom.

***

Since the Constitutional Court decision in Nel v Le Roux in 1996 on the constitutionality of s 205 of the CPA, Parliament has introduced another piece of legislation that compels persons in positions of authority – and who know or ought reasonably to have known or suspected that any other person has committed, among other offences, theft, fraud, forgery, extortion or other corrupt activity involving at least R100 000 – to report such crimes to the police on pain of a criminal conviction and gaol time of up to 10 years. That legislation is known as the Prevention and Combating of Corrupt Activities Act, 12 of 2004 (“PRECCA”).

Many people – not least journalists and other media personalities – in South Africa seem to believe that PRECCA does not apply to journalists because journalists do not “hold a position of authority”, and are somehow immune, courtesy of the right to freedom of the press and other media, to the civic responsibility in the fight against crime. This seems to be a mistaken view in law.

Section 34(4) of PRECCA sets out in clear and unambiguous terms what Parliament means by persons who “hold a position of authority”. They include

“any other person who is responsible for the overall management and control of the business of an employer”

and

“any partner in a partnership”

Now, these are very wide categories and to my knowledge their constitutionality has not yet been successfully challenged. So, they remain binding law.

So, it would seem that a partner in a law firm is legally required to report corrupt activity involving at least R100 000 to the police. So is a doctor in a partnership medical practice. Therefore, the media personality referred to earlier would seem to have been unaware of this provision when comparing journalists to lawyers and doctors as a category of persons who, in her view, are “restricted” in what they can do about crime in South Africa.

A news editor, it seems to me, is responsible for the overall management and control of the news business of a media company. He or she is thereby the person who “holds a position of authority” in the newsroom of the media company, the employer. The editor’s responsibilities generally include deciding which stories will be covered, which reporter will be assigned to which story,  checking the accuracy and fairness of the news story or report, writing headlines. Somewhere along that value chain, the news editor must get to know about material information that underlies the story or headline that he or she may decide to cover. If the news editor is to do his or her job properly and satisfy himself or herself of the accuracy of the story and its fairness, one would expect that the editor must, of necessity, know enough about the story in order to be able to perform that function. If it involves corrupt activity, he or she must know the who, the what, the where, the when, the how, the how much, the how many and, ultimately, what inferences to be drawn in order to arrive at the why.

That, one would expect, places the news editor, a journalist, in the PRECCA cross-hairs as a person who holds a position of authority in the newsroom of a media house, and therefore has a legal obligation to report corrupt activities involving at least R100 000 to the police. Not so a reporter doing the leg work. The reporter’s legal obligation can be sourced in s 205 of the CPA.

In January 2004, and in his Report into Allegations of Spying Against the National Director of Public Prosecutions (“the Hefer Commission”) Justice Joos Hefer, a retired Judge of the Supreme Court of Appeal, re-affirmed the legal position as articulated by a unanimous Constitutional Court Bench some 8 years previously. He said, with specific reference to a journalist’s duty to give evidence or provide information gathered in the course of performing her duties as a journalist:

“My view was that the constitutionally guaranteed freedom of expression (including the freedom of the press and other media and the freedom to gather and disseminate information) does not entail that every journalist is in all cases entitled to refuse to testify in a court of law or a commission of inquiry or to disclose relevant information gathered in the course of his or her profession. Unless other reasons exist which justify a refusal to testify . . . a journalist, like any other person, is obliged to testify and is only entitled to refuse to answer specific questions against which there is a valid objection. Admittedly, unless it is justifiable under section 33(1) of the Constitution, a witness cannot be compelled to answer a question if the compulsion would infringe any of his or her constitutional rights or freedoms. . . But whether the compulsion would indeed constitute such an infringement depends largely on the nature of the question; and this will only become manifest once the question is asked. This view, I may say, is not popular with the media. . . But it was eventually not questioned when my decision went on review.”

Popular or not with the media, this seems to be the legal and constitutional position in South Africa today. The journalist concerned pursued review of Justice Hefer’s decision to require her to give evidence at that Commission of Inquiry. Her review application failed. She filed an application for leave to appeal and her lawyers threatened to go all the way to the Constitutional Court. Justice Hefer ultimately decided that it was not necessary to call her as a witness and, in any event, found her story to be false.

With journalists and media personalities in South Africa proclaiming their blanket immunity from giving evidence about stories they have covered and written, and involving alleged criminal conduct by third parties, perhaps the time has come that the legal position both under s 205 of the CPA and s 34 of PRECCA be tested constitutionally one way or the other specifically in relation to journalists.

One view is that the law seems clear: journalists are compellable witnesses like any other competent witness to give evidence on alleged corrupt activities in a court of law or in a Commission of Inquiry. And the standard for refusing cannot be that the journalist’s right to freedom of the press and other media would be infringed if compelled to testify. The standard is rather whether that infringement is justifiable on the facts of each case.

That infringement may or may not involve disclosure of the identity of a source. The trial court will make that assessment on a case by case basis. In one case the court may find it unjustifiable for the identity of a source to be revealed. In another, it may find it justifiable. And in yet another case, the identity of a source may not be in issue at all.

Another view is that compelling journalists to testify in relation to the stories they have covered or written, or to report alleged corrupt activities that they may have uncovered in the course of performing their journalistic duties, would pose a threat to freedom of the press and other media as enshrined in s 16 of the 1996 South Africa Constitution.

Much of the media push-back against compellability of journalists to give evidence in relation to their stories seems anchored in the fear of revealing the identity of their sources. But on what justifiable basis can a journalist refuse to honour a s 205 subpoena on that ground, when the information required bears no relation to the source’s identity?  But even if the identity of a source were required in one case, why should that be the basis for wholesale refusal by journalists ever to honour any s 205 subpoena without even knowing what questions will be put to them?

So, would journalist Pieter-Louis Myburgh be a compellable witness in a criminal case against the senior politician he allegedly implicates in corrupt activity in his book? The current legal position seems to suggest so under s 205 of the CPA. Section 189 would provide him with a possible defence but that defence will have to be tested in open court on the facts and in respect of each separate and self-standing question that the prosecution may put to him, or in respect of each self-standing document that the prosecution may require from him. What he cannot do, it seems, is refuse to appear at all on the blanket defence of “freedom of the press and other media”.

Is journalist Pieter-Louis Myburgh under legal obligation – on pain of criminal conviction and a 3 to 10 year term of imprisonment – to report the corrupt activity he allegedly writes about in his book to the police under s 34 of PRECCA? It may be argued that this would depend on the position he holds in the newsroom. If it is a position of authority as contemplated in s 34(4)(i) of PRECCA, then he may be under obligation to report the matter if it involves at least R100 000. If not, then not.

By |2019-04-07T14:24:29+00:00Apr 4th, 2019|Blog, General, News|2 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|4 Comments