ABSA’s albatross finally dispatched – Giliomee dispels claims Bankorp lifeboat was “Apartheid Grand Corruption”.

Twenty years ago I had a spell of corporate life. In my early 30s I was recruited from the SABC into newly created ABSA, put onto its Executive Committee and given the hot potato of Group Communications – with the country’s second largest sponsorship portfolio thrown in. It was two and a half highly educational years, providing a rare insider’s perspective those of my craft rarely witness. Reporting directly to and therefore engaging closely with Group CEO (later chairman) Dr Danie Cronje remains a career highlight. Having to defend against repeated falsehoods published as fact about the lifeboat loan ABSA¬†inherited when it acquired Bankorp, gave me a different perspective of what motivates some members of the media. Those wild and damaging accusations seem to matter little today. Except to those of us who believe our future is shaped by what went before. Hermann Giliomee, whose most recent book was The Last Afrikaner Leaders, is among our small number. Or, rather, I am among his. A brilliant academic and resolute researcher, Giliomee has applied his considerable intellect towards the Bankorp “lifeboat” matter and produced the definitive piece on the subject. Funded by¬†the¬†Friedrich-Naumann-Stiftung f√ľr die Freiheit¬†(FNF) and republished with courtesy of James Myburgh’s Politicsweb.co.za, it exposes important pieces of a jigsaw puzzle which rumour and innuendo turned into a grand apartheid corruption scheme that actually wasn’t. – AH ¬†

hgiliomeeBy Hermann Giliomee*

During the late 1980s and early 1990s the Reserve Bank rescued the Sanlam-controlled Bankorp, the fourth largest bank in the country. The gravity of the bank’s troubles, occurring at a point where the political system faced its greatest political crisis, was not the only reason for the intense speculation about the issue. Adding flavour was the fact that Afrikaner nationalists headed up the three institutions involved, namely South African government, the Reserve Bank and Sanlam. It would almost become a show trial of the NP-controlled state and its financial probity.

Because of the secrecy that invariably accompanies central banks’ bail-outs the Bankorp rescue has never been properly examined in the literature. Yet there has been no shortage of rumours and indictments. In 2002 a financial commentator called it “the biggest fraud ever perpetrated on the South African taxpayer.”[1]¬†Ten years later Hennie van Vuuren put the “life boat scandal” at the centre of “apartheid grand corruption., “implicating the South African Reserve Bank in malfeasance.” According to him, the Reserve Bank gave loans to commercial banks “that were essentially converted into gifts or lifeboats”.[2]¬†My analysis strongly disagrees with these interpretations.

The Bankorp crisis occurred within¬†the context of a major political and financial crisis. South African financial institutions and parastatal corporations, particularly Eskom, had run up major financial obligations abroad. In the first half of the 1980s short-term loans surged ahead from 18 per cent of the total loans to 39 per cent. Patti Waldmeir,correspondent of the Financial Times, described the¬† view of foreign banks: ‚ÄúSouth Africa was unstable and small; small, unstable countries (unlike large ones) do not borrow money.‚ÄĚ (Patti Waldmeir, Anatomy of a Miracle (new York: Norton, 1997, p.56)

The crisis was greatly exacerbated by Pres PW Botha’s Rubicon speech in August 1985 that had put a damper on the expectations of major political reforms. As a result, foreign banks refused to roll over loans to South Africa, forcing the government to declare a unilateral moratorium on the repayment of foreign debt. Both Barclays Bank and Standard Bank disinvested.

The Bankorp crisis, seen within the context of the debt standstill, represented a financial crisis of a very grave kind. The loss of billions of deposits would have had a major domino effect on the other banks and business. It would have plunged the country in a severe systemic financial crisis at the very point that the political crisis had reached its culmination. [3]

During the twentieth century bank rescues took place in many other countries, but because of the stability of the South African financial system over a long period people were poorly prepared for the local banking crises that erupted during the 1970s and 1980s. Because almost everything in South Africa is politics many people mistakenly assumed that the Bankorp rescue was somehow driven by Afrikaner nationalist interests and not by financial considerations. On the most bizarre level it was even suggested that the Broederbond membership of some Reserve Bank senior managers made them look more kindly on a bank within the Sanlam group, which also had several Broederbond members among its senior managers.

The Bankorp “lifeboat” was only one of several banking crises that occurred between 1976 and 1990. Others included the rescue of African Bank in the 1970s and that of Nedbank in the early 1980s. Instead of investigating all the cases of banks that had received Reserve Bank assistance, the ANC government singled out the Bankorp case for an investigation. Trevor Manuel, Minister of Finance, repeatedly stated that the Bankorp rescue was funded by taxpayers’ money, which Sanlam had to pay back. They persevered despite the fact that in the budget documents there never was any suggestion of taxpayers’ money being used.

To recap the Bankorp story briefly. The Bankorp group was established between 1975 and 1984 after Sanlam had acquired control of Trust Bank and several other banks. In an aggressive attempt to build up a large bank as quickly as possible many of the loans that were granted were of a poor quality. The Bankorp group soon ran into major problems. By 1985 Bankorp’s troubles were serious enough for the bank’s management to approach the Reserve Bank for assistance. In response, the latter provided a low-interest loan¬†of¬†R 300 million that had to be repaid in 1990.

In March 1989 Fred Du Plessis, CEO of both Sanlam and Bankorp, died in a car crash. In August 1989 Dr Chris Stals succeeded Dr Gerhard de Kock as governor of the Reserve Bank. Shortly afterwards Derek Keys became chairman of Bankorp.

Bankorp troubles were still far from solved, being unable to repay its loan to the Reserve Bank and to meet the prescribed capitalisation requirements for a bank.

Bankorp now announced a rights issue of R350 million, with Sanlam underwriting the issue. The issue, which took place in November 1989, was not very successful. It required Sanlam to invest R 230 million including the rights not taken up.

In June 1990 Bankorp notified the Reserve Bank that it was unable to repay its 1985 loan. The Reserve Bank first requested the external auditors to investigate the financial position of Bankorp and then decided to become “the lender of last resort” by providing Bankorp with a repayable loan to the amount of R1billion at 1% per annum. Bankorp then placed the paper at substantially higher rates that then prevailed. The surplus Bankorp made by lending it out at a much higher rate enabled it to write off the substantial bad debts.

The purpose was to stabilise the Bankorp group and to avoid the severe systemic risk that would occur should the Bankorp group fail to meet its obligations to its depositors. The Reserve Bank secured the capital sum by demanding that the loan be reinvested at the central bank. Sanlam repaid the loan to the Reserve Bank in 1995.

As part of the rescue package the Reserve Bank set stiff conditions. Sanlam had to arrange a second rights issue for Bankorp. The issue, which took place in November 1990, amounted to R526 million. Sanlam as underwriter was compelled to take up 80 per cent of the issue and in the process had to invest a further R420 million in Bankorp.

In June 1991 it became clear that further assistance was required to write off more bad debts. The Reserve Bank agreed to the increase its assistance but demanded that Sanlam provide a ten-year low-interest loan of R500 million to Bankorp. In effect, this meant a further Sanlam “investment” in Bankorp of R510m.

This means that in the period between November 1989 and September 1991 Sanlam put in money and incurred obligations that ultimately would cost it more than R1 billion. This assistance, together with the Reserve Bank’s help, avoided a major financial and banking crisis that would have seriously jeopardized the establishment of an inclusive democracy.

In 1992 ABSA acquired Bankorp and bought out the minority shareholders. No criticism had been expressed about this deal with ABSA

With the detail of the negotiations kept a tight secret, there was intense speculation in banking circles about the contribution the Reserve Bank required of Sanlam as part of the rescue package. Some bankers outside the circle of the Afrikaner volksbeweging simply could not believe that the Reserve Bank officials would not extend preferential treatment to Sanlam. Those inside the circle could not understand how one could doubt the personal and business integrity of those who negotiated the rescue. The following exchange in an interview I conducted with Dr Anton Rupert reflects this:

HG : A top manager of a major bank told me that the Reserve Bank was perhaps extra kind to Sanlam as an Afrikaner institution by asking it to make an interest free loan of R300 million available. The Bank could have told Sanlam to make the amount of R 500 million available. What can one say to that?

Anton Rupert: One can say that Sanlam could declare that R300 million is as far as it is prepared to go, if that is not acceptable Sanlam would let the bank collapse. What would the top manager of your so-called major bank say then?[4]

As indicated above, the actual amount Sanlam actually contributed far exceeded the amounts referred to in my interview with Dr Rupert.

The ANC-led government was not prepared to let their matter die. It first instituted an inquiry into the entire Bankorp history by Justice Willem Heath. It produced no evidence of any malfeasance.

In 2000 the ANC government appointed a panel, chaired by Judge Denis Davies, to investigate the Bankorp bail-out and the transaction with ABSA.The Davies panel found that ABSA paid fair value for Bankorp. It expressed no criticism of this transaction.

The government did not ask the panel to investigate the assistance to other banks. Nedbank, for instance, precipitated the country’s financial crisis in 1985 by recklessly failing to take cover in foreign transactions. Hence it is a question why the new government focused only on the Bankorp rescue effort.

The answer is that the ANC after 1994 did not stop its propaganda campaign against the NP-controlled state. In the financial press there was speculation that the Broederbond members in the Reserve Bank and the Sanlam group sought to resolve the crisis in a way that benefited Afrikaner business. These allegations fed on the stereotype that had been built up in some circles of the Afrikaner Broederbond as a secret cabal at the heart of the previous government prepared to do anything to promote the welfare of its cause.

The above mentioned panel appointed in 2000, headed by Justice Denis Davies, criticised some “individual undesirable features” of the assistance given Bankorp and other banks, but also found that the intervention in the case of Bankorp was “justified”. It states that “there is absolutely no evidence to suggest that the [Reserve] Bank concluded any of the relevant contracts with an element of turpitude. The available evidence indicates that the Bank genuinely and honestly believed that it was so empowered to act.”[5]

On the issue of Afrikaner favouritism the Davies panel formulated the matter as follows: “Some commentators have implied that, instead of merely aiming to protect the financial system, the SA Reserve Bank conferred benefits on the shareholders of Bankorp and ABSA for unspecified reasons… One version of the hypothesis in the public domain is that the close personal ties were linked to other forms of association within the Afrikaner elite such as the Broederbond.”[6]¬†The panel stated that it was not required to investigate this particular issue and had found no evidence to enable it to reach such conclusion about the alleged role of the Broederbond.

In discussing with me the case of Bankorp, Reserve Bank officials are adamant that there was nothing improper about the rescue package. They point out that the bank’s interventions with other banks in trouble followed a similar pattern. The Governor of the Reserve Bank acted within his rights.

Viewing the entire saga dispassionately, one could say Sanlam could have followed a totally different route when it discovered in the mid-1980s that the Bankorp was in grave trouble. It could have put the bank in liquidation and walked away from what was at that point one of the country’s four big banks. None of the Reserve Bank’s critics seems to favour this route.

* Hermann Giliomee is a¬†former Professor of Political Studies at the¬†University of Cape Town(1983‚Äď2002), President of the¬†South African Institute of Race Relations¬†(1995‚Äď1997) and current Extraordinary Professor of History at the¬†Stellenbosch University.


[1] David Gleason, Business Day, 4 March 2002. The view is also expressed in a book by an aggrieved former ABSA banker. See Bob Aldworth The Infernal Tower (Johannesburg: Contra Press, 1996).

[2] Hennie van Vuuren, Letter to Business Day, 22 August 2013.

[3] Apart from the sources below, this assessment is based on my private interviews with people who held senior positions at time in the Reserve Bank and in Sanlam,I also conducted an extended interview with a person who is now a director in an US-based bank. All the interviews were given on the condition of confidentiality.

[4] Interview with Anton Rupert, 3 May 1999.

[5]¬† “Report of the Governor’s Panel of Experts to investigate the SA Reserve Bank’s Role with regard to the Financial Assistance Package to Bankorp Limited”, pp .5, 141.

[6]¬†“Report of the Governor’s Panel of Experts to investigate the SA Reserve Bank’s Role with regard to the Financial Assistance Package to Bankorp Limited”, p.74

This article was published with the assistance of the¬†Friedrich-Naumann-Stiftung f√ľr die Freiheit¬†(FNF). The views presented in the article are those of the author and do not necessarily represent the views of FNF.

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