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|6 Comments

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).


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”.


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.


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|8 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|2 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.


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|16 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|3 Comments

The Tom Moyane Affair: A Travesty or Just Deserts?

For a constitutional democracy to thrive, the independence of the courts is imperative. Section 165(2) of the Constitution decrees it. Section 165(4) enjoins all organs of state to assist and protect courts to ensure the independence, impartiality, dignity, accessibility and effectiveness of the courts. We all have a duty, for the sake of the rule of law and a sustainable constitutional democracy, to uphold, and defend jealously, the independence of the courts.

But courts are not buildings. They are the robed judicial men and women (Judges and Magistrates) who sit on those high benches ready, as their oath of office commands, to apply the law and dispense justice to all who appear before them impartially and without fear, favour or prejudice in accordance with the Constitution and the law.

Judges are human and, therefore, not perfect. When members of the public considers a decision of the courts to be unjust, could they be accused of  interfering with the independence of the courts and bringing their dignity into disrepute if they were to criticise the decision of the courts? For example, politicians may fear being accused of trying to hide something, journalists that they are siding with those they have been associated with, advocates may fear backlash from their own profession.

The answer should be obvious. Law journals are teeming with critical analyses of court judgments written by academics and practising lawyers alike. I myself can lay claim to a few critical analyses of judgments of the Supreme Court of Appeal published in the 1990s when I had more time in my hands as a student and junior advocate. But one can no longer be sure these days where critical analysis may be treated as an intemperate assault on the dignity of the courts by those for whom the judgment being criticised is considered something of a vindication of a political position or journalistic pursuit.

Let us use a recent judgment to illustrate this point. There is a real danger that the 4 February 2019 decision of the Constitutional Court in Moyane v President of the Republic of South Africa and others (CCT 334/2018), in which it dismissed Mr Tom Moyane’s application for leave to appeal against the decision of the High Court, may be perceived by some as being nothing short of a travesty. The Constitutional Court dismissed the application – saying it “bears no reasonable prospects of success” – not only without a reasoned judgment but also without hearing argument on the many constitutional issues raised by Mr Moyane.

The question that arises is whether this was an appropriate case for a summary dismissal of Mr Moyane’s application for leave to appeal, given the very serious issues of constitutional import that he raises, against a person who occupies the highest and most powerful office in the country, and mindful of the fact that no further appeal lies against a decision of the Constitutional Court.

Right of access to court and fairness

Courts of appeal can decide applications for leave to appeal on the basis of submissions made to them in writing, and without hearing oral argument in open court. For example, section 17(2)(d) of the Superior Courts Act, 10 of 2013 says the two judges of the Supreme Court of Appeal, designated by the President of that court to decide whether or not to grant leave to appeal, may dismiss the application without hearing oral evidence. But it also says they must call for oral argument where they are of the opinion that circumstances so require.

Rule 19 of the Constitutional Court rules says applications for leave to appeal may be dismissed without the hearing of oral argument or even receiving written argument other than that contained in the affidavit filed in support of the application. But it also says the court may order that the application for leave to appeal be set down for argument, and direct that the parties deal not only with the question of whether or not leave to appeal should be granted but also with the merits of the dispute between them.

Many may ask whether this application was an appropriate one to be dismissed summarily by the Constitutional Court without hearing oral argument on so many constitutional issues that it raises between a much-maligned senior government official (if the media is to be the measure), on the one hand, and the President of the country, a senior member of his cabinet, and a retired Judge of the second highest court in the land, on the other.

The right of access to court is not just a right to enter a courtroom, complain, vent your spleen and be on your merry way. It includes the right to have judges listen to your case without prejudging it. It includes judges looking at your case without being jaundiced by who you are, or by what they think you represent within the raging “State Capture” narrative that is dominating national discourse. It includes judges, ultimately, making a ruling on what was argued before them, not on what they believe should have been argued and lost.

That is fairness. The Constitutional Court in Walele also said that the right includes the legitimate expectation to be heard before a decision is made, even if the aggrieved person has no antecedent rights affected thereby. So, even if the rights that Mr Moyane asserts are spurious, it could be argued that, on its own authority, the Constitutional Court should have heard him. Why did it choose not to?

Since the enactment of the Superior Courts Act in 2013, prospects of success is not the only standard for deciding whether or not to grant applications for leave to appeal. Now, courts must also consider whether there are compelling reasons for the case to be heard. Many would argue that there are, given the fraught nature of the dispute and the profile of the personalities involved and positions they hold in the constitutional state.

If the sworn affidavit by an officer of the court that has been filed in the Constitutional Court is to be believed, at face value Mr Moyane appears not to have been afforded the right of access to court that is guaranteed in section 34 of the Constitution. According to the affidavit, the High Court viewed Mr Moyane’s application with a sense of irritation and disdain, characterising it as “abominable”. This is cause for concern.

But what was “abominable” about the application? Mr Moyane sought to have the process of the appointment of his successor stopped until his dispute with the President concerning the lawfulness and constitutionality of his dismissal had been decided by the court on a later occasion. This is not unusual because if a successor is appointed, and the higher court subsequently finds that the dismissal was unfair or unlawful, and orders reinstatement, it could prove tricky to give effect to that order if someone else has already been appointed in your position. Lawyers call such an order a brutum fulmen. The English call it a pyrrhic victory. South Africans would probably call it “Eish”!

So, to buttress his case, Mr Moyane asserted that (1) the President had abdicated his powers; (2) the President had violated his oath of office; (3) the President had waged a co-ordinated assault on Mr Moyane’s constitutional rights; (4) the President’s actions were part of a pre-rehearsed script aimed at Mr Moyane’s removal as Commissioner of SARS; (5) the President was motivated by ulterior and improper motives.

These are normal grounds of review under the principle of legality. The Constitutional Court has upheld similar grounds in previous cases. Academic writers recognise them. Asking why the High Court views them as “abominable” in Mr Moyane’s case, and why the Constitutional Court did not even want to hear argument on these matters, would be valid questions.

Conspiracy theorists may say that it was to avert a possible constitutional crisis that might conceivably result from a possible finding that two presidents, within three years of each other, violated the Constitution, and a possible embarrassment that could result from a finding that a senior retired Judge of the second highest court acted beyond the powers conferred on him by the terms of reference of his inquiry into the administration of SARS. It may be difficult to fault such a theory on the facts of this case.

The right of access to court is not about the case being strong or good. It is just about being heard by an impartial judge who has not prejudged the case and who will rule without fear, favour or prejudice for or against either party.

Mr Moyane’s case may well have been weak on the merits. But there seems to be no compelling reason for the Constitutional Court not to listen to his argument when so much is at stake. I would venture to say that it was probably in the public interest to have the debate on these serious constitutional issues, involving the head of state and one of his employees in whom he had declared loss of confidence, and hired his own personal lawyer to sit in judgment of Mr Moyane’s ability as Commissioner of SARS, conducted in full view of the country. This would have placed citizens in a better position to make up their own minds after hearing oral argument, as they did in the Nkandla case.

Punitive costs for asserting constitutional rights

The High Court characterised Mr Moyane’s application as “frivolous”, “vexatious and abusive”, insulting and defamatory of the President and Judge Nugent who chaired the SARS Commission appointed by the President to look into the administration of SARS under Mr Moyane. On that basis, the court concluded that Mr Moyane’s conduct was “abominable”. It then ordered that Mr Moyane pay the costs of two Counsel on a punitive scale, saying

“It is time that litigants realize that they cannot lightly make abusive allegations in Court affidavits under the mantle of safeguarding their constitutional rights, on the assumption that Court cost orders would not be granted against them.”

Orders of that sort are reserved for litigants who act disreputably in the conduct of their case. The Constitutional Court in Biowatch confirmed the general rule in Affordable Medicines that:

“[O]rdinarily, if the government loses, it should pay the costs of the other side, and if the government wins, each party should bear its own costs”.

The Constitutional Court justifies the rule on three grounds, namely, (1) that it diminishes the chilling effect that adverse costs orders would have on parties seeking to assert constitutional rights; (2) that constitutional litigation, whatever the outcome, might ordinarily bear not only on the interests of the particular litigants involved, but also on the rights of all those in similar situations; and (3) that it is the State that bears primary responsibility for ensuring that both the law and the State conduct are consistent with the Constitution.

The High Court punitive costs order against Mr Moyane, and the Constitutional Court’s endorsement of it, may be considered by many as putting senior government officials on notice that if they dare challenge the President on what they feel is unfair treatment that violates their guaranteed constitutional rights, they may be in danger of having the wrath of the courts visited upon them.

“Abominable”, “vexatious”, “frivolous” and “abusive” are strong emotive words. Their use by a court to describe the conduct of a citizen who seeks to assert his constitutional right – against the most powerful office in the country – to human dignity which is guaranteed in s 10 of the Constitution, his right to fair labour practice guaranteed in s 23 of the Constitution, his right to just administrative action guaranteed in s 33 of the Constitution, his right of access to courts guaranteed in s 34 of the Constitution, is cause for concern. Here we are on thin ice. The highest court in the land has now endorsed such a finding, without affording the citizen the right or legitimate expectation to have his argument heard when there appears to be compelling reasons to do so. This opens the door to many questions.

But even if Mr Moyane had “abused” the President by his application – and many may struggle to identify any abuse here – why would the High Court, and the Constitutional Court, run the risk of coming across as protecting a politician so trenchantly as to punish Mr Moyane with a punitive costs order? I am reminded of the courts, since 1956, saying that being abused is par for the course for politicians.

In 1956 the Johannesburg High Court said in Pienaar and Another v Argus Printing and Publishing Co Ltd 1956 (4) SA 310 (W):

“I think that the Courts must not avoid the reality that in South Africa political matters are usually discussed in forthright terms. Strong epithets are used and accusations come readily to the tongue. I think, too, that the public and readers of newspapers that debate political matters, are aware of this. How soon the audiences of political speakers would dwindle if the speakers were to use the tones, terms and expressions that one could expect from a lecturer at a meeting of the ladies’ agricultural union on the subject of pruning roses!”

That sentiment was shared by the Supreme Court of Appeal in a 2004 judgment and, more recently, by the Constitutional Court itself in The Citizen 1978 (Pty) Ltd and Others v McBride (Johnstone and Others, Amici Curiae) 2011 (4) SA 191 (CC) in upholding a “fair comment” defence to a defamation claim where Mr Robert McBride was labelled “a murderer and a criminal” in a newspaper article. The Constitutional Court’s remarks are instructive:

“Public debate in South Africa has always been robust.  More than 50 years ago [a reference to the Pienaar v Argus Printing case], within the then-constrained perimeter of racially-defined public life, a court noted that in this country’s political discussion, ‘(s)trong epithets are used and accusations come readily to the tongue’. The court also found that allowance must be made ‘because the subject is a political one, which had aroused strong emotions and bitterness’, of which readers were aware, and that they ‘would not be carried away by the violence of the language alone’.

These words are still apt today. Public discussion of political issues has if anything become more heated and intense since the advent of democracy. A constitutional boundary is the express provision in the Bill of Rights that freedom of expression does not extend to hate speech. Another is the legitimate protection afforded to every person’s dignity, including their reputation. But, so bounded, it is good for democracy, good for social life and good for individuals to permit maximally open and vigorous discussion of public affairs.”

The President did not claim Mr Moyane was guilty of hate speech. He was not suing Mr Moyane for defamation of character. It is therefore a little difficult to follow the logic around how the High Court, on the pleadings before it, reached the conclusion that Mr Moyane’s application to stop the President appointing a successor to Mr Moyane’s job while Mr Moyane’s application for the review of the President’s decision to dismiss him was yet to be heard, was “abusive” and “defamatory”. The Constitutional Court considering this conclusion to be so justifiable as to merit the punitive costs order that the High Court had made against Mr Moyane, while not requiring oral argument, does leave us in the dark.

By |2019-02-18T08:24:46+00:00Feb 16th, 2019|News|1 Comment

#StateCaptureInquiry vs Criminal Proceedings: What’s At Play Here?

W hy exactly have the Directorate for Priority Crime Investigation (also known as the Hawks) pounced so suddenly on whistleblowers who are giving evidence at the State Capture Commission of Inquiry, and on those who have yet to give evidence at that Commission on, among other things, corruption involving senior government officials, business executives in the private sector, Cabinet Ministers, and other members of Parliament?

Lest we forget, the Terms of Reference of the State Capture Commission of Inquiry include to

“inquire into, make findings, report on and make recommendations concerning whether the President or any members of the present or previous members of his National Executive (including Deputy Ministers) or public official or employee of any state owned entities (SOEs) breached or violated the Constitution or any relevant ethical code or legislation by facilitating the unlawful awarding of tenders by SOEs or any organ of state to benefit the Gupta family or any other family, individual or corporate entity doing business with government or any organ of state.”

This goes much wider than many had hoped, and covers much of what we have thus far heard from numerous witnesses at the State Capture Commission of Inquiry about the Bosasa exploits and the family that owns that corporate entity. The ruling party and Cabinet are well and truly on trial at the State Capture Commission of Inquiry. It must be more than unsettling to them.

Many have been quick to say that these arrests have nothing to do with the State Capture Commission of Inquiry and that they arise from a report of the Special Investigating Unit (SIU). But that SIU Report came out almost ten years ago! So why act on it now? What exactly have the Hawks been waiting for all these years? It’s not as if they had more to investigate as the SIU had done that work for them. Even if they had more leads to follow, what could possibly have taken them ten years to bed down? But more importantly, why now when allegations of corruption implicating Cabinet Ministers are emerging in full glare of live television coverage?

Is it because the heat that has come out of the evidence thus far presented at the State Capture Commission of Inquiry is getting increasingly unbearably too close for the comfort of the political and corporate big wigs? Or is it a matter of the government finally acting on graft?

Many will argue (and some have already argued) that evidence given at the State Capture Commission of Inquiry is not admissible at a subsequent criminal trial. So, the argument goes, Angelo Agrizzi’s evidence at the Commission will not be admissible as evidence against him or those he has implicated if he and they were charged and prosecuted for the crimes to which he has admitted in his evidence at the State Capture Commission of Inquiry. Therefore, says the argument, these arrests will have no effect on the State Capture Commission of Inquiry.

Well, it is true that evidence given at a Commission of Inquiry is generally not admissible in any subsequent criminal trial on the issues covered by that evidence. This is a standard provision in commissions of inquiry regulations around the world. The State Capture Commission of Inquiry is no exception. Regulation 8(2) prohibits the admissibility of such evidence in any subsequent criminal trial, except where the charge is perjury or other numerous infractions of a disreputable sort. The idea is to encourage even those who may incriminate themselves to give evidence at a Commission of Inquiry which, unlike a criminal trial, is less about finding guilt but more about unearthing the truth in all its unpleasant detail.

But there is a catch. It is the evidence already given at the Commission of Inquiry that is not admissible in any subsequent criminal trial. It does not follow that such evidence may not be led or extracted from the same witness afresh in criminal proceedings either against himself or against others that he may have implicated. If his evidence at the criminal trial should be materially different from the evidence he gave at the Commission of Inquiry on the same issue, then he opens himself up to a charge of perjury because either the version he gave at the Commission was false or the version he gives at the criminal trial is false. They cannot both be true.

But the admissibility at a subsequent criminal trial of evidence given at the State Capture Commission of Inquiry is not even the issue here. The issue is this: the moment Agrizzi and his gang of State corruptors become accused persons in a criminal case involving corruption, the Constitution protects each of them against incriminating themselves.

Section 35(3)(j) of the Constitution says:

“Every accused person has a right to a fair trial, which includes the right . . . not to be compelled to give self-incriminating evidence”

In order to spill the beans at the State Capture Commission of Inquiry against those Cabinet Ministers that they have allegedly corrupted, the Bosasa gang have to tell Deputy Chief Justice Zondo, under oath or affirmation, that they did the corrupting and how they did it. Those who have been named as having been on Bosasa’s bribery payroll may wish to cut a deal with the prosecuting authorities by offering bigger fish, incriminating themselves in the process. Section 35(3)(j) of the Constitution protects them from doing that and the evidence leaders at the State Capture Commission of Inquiry may have a tough time trying to compel them under regulation 8(1) to give evidence against those Cabinet Ministers.

A related defence that the arrestees may raise is the much-abused sub-judice principle. They may say that because the matters about which the evidence leaders want them to give evidence at the State Capture Commission of Inquiry are now the subject of a criminal case, they cannot give evidence and so either the Commission must await the conclusion of the criminal trial or the criminal case must be quashed so that they can be free to give evidence at the Commission.

Therein lies the rub. The Cabinet Ministers – perhaps even arguably the one at whose pleasure they all serve – are likely to get away with alleged corrupt activities on a technicality brought about by a series of arrests and threatened prosecutions curiously timed. But if the evidence leaders are imaginative, there is a neat way around this which I suspect those who contrived the idea of these curiously timed arrests may have missed.

Anyway, there is a risk that no serious prosecution will come from these arrests anytime soon. With the elections barely three months away, the arrests by themselves have done the trick and may effectively close the whistleblowing tap until both those implicated and those who have yet to be implicated devise another plan to make these allegations go away – for good.

Let us see how the evidence leaders respond to these developments.

By |2019-02-08T16:26:38+00:00Feb 8th, 2019|News|2 Comments