FMF vs Louw: Just one more symptom of hardening attitudes

The founder of the Free Market Foundation, Leon Louw, has resigned from the organisation he started almost 50 years ago after a bitter and public split. He claims the FMF initiated a disciplinary process against him following accusations of insolence towards chairperson, Rex van Schalkwyk, and another employee; and says substantial funder resources have been diverted. Most importantly, however, he says, the FMF’s commitment to independence has been replaced by personal political agendas. But a recent forensic audit, requested by a donor following claims of financial mismanagement levelled at the FMF by Louw found absolutely nothing amiss. And the foundation states that as always, the FMF’s engagement is informed by the free market and a classical liberal perspective, with individual sovereignty at its core. Who knows the cause of this unfortunate acrimony – but it speaks to the wider context of hardening political viewpoints and the sad end of a noble enterprise for Louw. – Sandra Laurence

Open Letter: Farewell from FMF Founder and President, Leon Louw

My dear friends, FMF members, funders, supporters and family.

With a heavy heart, after many months of endeavours to avoid this moment, I am choosing to announce my departure from the Free Market Foundation after creating and dedicating my life to a once fine, ethical and influential organisation. It grew from an idea 50 years ago, and with incredible colleagues and supporters I proudly led it to international prominence. I was honoured to represent the FMF not only in South Africa, but in 100 countries, the UN, US Congress, dinner with UK PM Margaret Thatcher, the Mont Pellerin Society, and many more prestigious occasions.  

I am deeply saddened to inform you that the organisation that we created and loved no longer exists. I concluded, after intransigence against many attempts to find solutions, that the real FMF can no longer be salvaged. I am therefore compelled, despite my personal feelings of absolute devastation, to leave it.  

I will shortly send my formal notice of resignation as President. I am also compelled to resign my membership since I can no longer in good conscience recommend membership or support to anyone, especially the many members and funders I brought into the FMF.

Why?

I set out below my reasons for leaving. As always, there are two or more versions. This is mine. You will hear others and judge for yourselves. The simple truth is that what I created, together with all of you, is no more and I cannot continue in good faith to participate in, support, and encourage your support for an organisation that I regard as no longer practicing or promoting the classical liberal libertarian values on which it was founded and prospered for fifty years.  

You may be aware that, after the tiny group (“cabal”) of my self-selected enemies failed over nearly three years of FMF destruction to take-over the FMF by driving me out, they resorted in desperation to a bizarre “disciplinary process” in which I was expected to answer multiple “allegations”. I now regret that, as a gesture of unrequited goodwill, I resisted advice to dismiss those undermining the FMF and me when I had the opportunity. Their “charges” included allegations of me being “insolent” towards Gail Day, a subordinate whom I had employed, and towards the disputed chairperson, Rex van Schalkwyk.  

The supposed “insolence” towards van Schalkwyk, a newcomer, arose from a personal and private letter, which I wrote to him in July 2021, expressing my concerns regarding the direction in which the FMF was moving under his influence. I implored him to step aside lest he continue presiding, as he has done, over further destruction.

My polite request and offer to help him create or join an organisation like that into which he wanted to transform the FMF were ignored, which led to my concerns becoming reality. I expressed my exasperation confidentially, which he, in keeping with the culture under him, chose to publicise. Under his watch, the FMF ceased to be what it was. It has been changed in alien directions, including a culture of secrecy, bias, discrimination, censorship, propaganda and the like. I see the quality and quantity of output of the formerly exemplary and intellectually driven foundation as having plummeted to an all-time low (contrary to “newsletters” and “bragging” by the current management).

Political Neutrality

The FMF’s commitment to independence and political neutrality has been replaced by personal political agendas. The FMF’s positive influence across the political spectrum at the highest level is no more. I was welcomed by politicians of all creeds and factions, and they sought FMF ideas. Now it punts a politically partisan line. The politicised FMF sabotages my efforts to influence all. I will proceed with high-level meetings in which I must distance myself from the politicised FMF. 

One of the founder-members long before any of them were involved, and long-time funder and friend, Bonne Posma, captured what has been inflicted: “The soul of the FMF has been lost.”  

New “Constitution”

Part of their direction from which my values require me to distance myself is that, in August 2021, a new “constitution” was imposed under the pretext that it would address concerns about the abortive July 2020 Annual General Meeting. No constitutional change was necessary to address “concerns”, and the new constitution does not do so. All it achieves is to entrench incumbents at members’ expense.  

At the time I felt compelled to raise my concerns, as President, founder and, above all, member. I did so in a letter to all members of the FMF ahead of the Special General Meeting that had been called with neither time nor coherent explanation to approve the new “constitution”. When I asked the person who does mailings to send the letter, she said that she was no longer empowered, after many years of trust, to send anything not agreeable to Executive Manager, Gail Day. Such gate-keeping and censorship was historically abhorrent and inconceivable in an organisation that preached and practiced freedom of expression.  

“Discipline”

All stratagems having failed, I was confronted with the next abortive assault; a “disciplinary process” in which I am accused of actions “detrimental to the Foundation / President relationship”, and breach of my role as the President. I could not disagree more. All my efforts have been directed at preserving and protecting the FMF and its values precisely as required to do as President.  

To share my concerns, I was forced to instruct an FMF consultant to send the letter, and a similar letter from Lawrence Mavundla, a member of the Board and arguably chairperson. My purpose at the eleventh hour was to minimise the extent to which members would make the FMF’s most profound change in 50 years derived from misinformation, minimal notice and zero consultation. Despite this being obviously consistent with the FMF’s professed libertarian principles, those who had seized control resorted to obnoxious anti-liberty legislation, which the FMF had opposed, to victimise uncensored ideas.  

The Botched “disciplinary hearing” – last ditch attempt to remove me

Many members of the FMF expressed a desire to attend the “disciplinary hearing”, to hear first-hand what misconduct I was alleged to have committed, and my responses thereto. As prescribed by our values, I requested transparency, including an open hearing. However, Day, van Schalkwyk and their cohort insisted on opaque proceedings behind closed doors.  

So, what became of these “disciplinary proceedings”. Resembling former botched efforts, half the allegations were dismissed within minutes by the presiding chair. They called their bungling a “technicality”. Not so, it was a matter of fundamental substance, namely that they had waived their right to take issue with that alleged misconduct.  They did not regard my conduct as egregious or unacceptable at the time, but now, when my constant calling of them to account is a sharp thorn in their side, conduct was dredged from the distant past.  

Having disposed of half the allegations against me at ruinous personal legal cost, I became aware that without consulting me or signing his draft contract, CFO Eustace Davie, purported to change my status from “employee” to “independent contractor”. The effect was that all their charges had to be dismissed. 

When my lawyer pointed this out, they were visibly shocked. After their latest embarrassing bungling, they claimed that they had known all along. If so, why did they proceed at all for a long, costly and wasted eight months and at great expense to members, donors and the cause? They insinuated that “disciplinary proceedings” were somehow to “protect” me. Absurd.

The Final Straw

Their latest disingenuous conduct was for me the last straw. It begs the question: why did they initially contend that I was an employee and seek to “discipline” me? Gail Day stated under oath that the employment relationship was so intolerable that dismissal was the appropriate sanction.  

My view is that they wanted to humiliate me for purely personal reasons, not least to elevate themselves to the status from which they sought to dislodge me after 50 splendid years.  

I reach this conclusion because multiple attempts, efforts and offers to meet and discuss ways to save the FMF, including formal mediation, were dismissed for undisclosed motives. Prominent members, even members of their board, similarly proposed consultation or mediation. Van Schalkwyk and Day have remained resolute in their refusal to discuss solutions to the FMF’s potentially fatal impasse.  

So, in the abandoned process, they have diverted substantial members and funder resources, including an advocate to chair the hearing, and their legal counsel, and many weeks of staff distraction, and my personal ruinous legal expenses to defend my integrity against what I would call their spurious “disciplinary proceedings”. I suggest that, for justice to be done towards the FMF, its funders and members, and me, they should accept personal liability.

Motivation

I have never been told why they are consumed by a passion for ousting me, save that there might be jealousy of my accomplishments and recognition, and some may feel side-lined. That was never my intention. However, what has befallen the FMF over the past three years coincided with me (a) raising much more money than we have ever had and (b) asking questions my fiduciary obligations require of me. When, in 2019, I started investigating finances and governance, those implicated formed a push-back coalition which launched a unidirectional war. Their dubious if not unlawful conduct was instrumental to the chaotic 2020 Annual General Meeting where they tried and failed to take over the FMF. I feared malfeasance when bank statements were withheld from me, and I found that my 50-year bank signing powers (and thus data access) had been mysteriously cancelled. This, together with the desire to move away from the FMF philosophy, might explain all.

The Future

It is in considering “where to now” that I decided I cannot ethically be associated with an organisation where those in power no longer represent the values for which the FMF was created and fought. Under the new regime’s watch the FMF has all but been destroyed and its values violated. We are left with a crippled shadow of a once glorious libertarian force. I have chosen to no longer work or identify with people I regard as inauthentic. It is deeply gut-wrenchingly, depressing and painful to see my life’s work in ruins at their behest.  

I stayed as long as I could hoping for the best. I chose to leave because I am no longer optimistic about anything resembling the real FMF re-emerging. I have been advised by two of our wisest founding fathers and biggest funders, and many who call themselves “Friends of the (real) FMF”, to stop fighting for the FMF internally at devastating personal cost, and instead to find new ways of advancing the cause and values the FMF once epitomised: liberty, free markets, impeccable ethics and financial rectitude.

The terms on which I am engaged by the FMF require me to give notice, which I will do. During that notice period, I will continue serving the FMF and promoting liberty, free markets and impeccable ethics in its name. Thereafter, I will see where the future takes me. I hope and intend that I will continue promoting liberty and free markets. I hope to continue interacting with you in the service of freedom and prosperity for all.  

It remains for me to thank you as members, funders, friends and supporters of the FMF, and the media which has treated us wonderfully – and all who have been part of the FMF family at any time during our 50 wonderful years – for all you have done and will do. Together we created an organisation of which I was immensely proud, and which I had hoped would have continued promoting our philosophy long before I left, but which will not now happen. I hope that we will start something splendid, and that you will be part of phoenix rising.  

I wish you all the best, and should anybody wish to contact me, please feel free to email me at: [email protected].  

Yours in liberty
Leon Louw
Proudly FMF Founder, CE, CEO, President


FMF Executive Committee RESPONSE to Leon Louw’s open letter

The real Free Market Foundation is alive and well!

FMF Executive Committee response to “Open Letter: Farewell from FMF Founder and President, Leon Louw”

The Free Market Foundation (FMF) was founded in 1975 to pursue a simple agenda in South Africa’s public discourse: advocacy of the only verifiable policy route to prosperity. That is an economy based on private property and freedom of enterprise, along with its associated classically liberal institutions, including non-racialism, civil liberty, freedom of the press, constitutional government, and the Rule of Law.

Between 1 July 2021 and 30 June 2022, the FMF was amicus in a winning Constitutional Court case regarding preferential procurement.

We concluded a successful campaign against expropriation without compensation, along with other civil society organisations, culminating to the failure of Eighteenth Amendment Bill to amend section 25, the property rights clause of the Constitution.

The FMF has continued its hard-hitting campaign against National Health Insurance, proposing alternatives that would ensure healthcare for all.

The FMF actively mentors an unemployment forum, helping them find a voice in a policy environment that ignores the plight of the unemployed.

The FMF has been published in the media an average of 12 opinion pieces per week since January 2022; made 16 submissions on proposed legislation; published, re-published, or co-published 14 publications; made presentations to or networked with 21 organisations; and launched its Student Knowledge Bank, for hungry minds of all ages.

In addition, FMF’s Khaya Lam project has, to date, transferred over 8,000 municipally owned properties, turning former tenants into homeowners. Each property transferred from the public sector to the private is worth an estimated R100,000. When we achieve 10,000 transfers, which we are on track to do by end-February 2023, the project will have converted dead into dynamic capital to the tune of R1 billion.

There have always been external, and only recently, internal, challenges to the FMF’s reform agenda, but the FMF is today as committed as ever to championing a free society in South Africa.

In this respect, the FMF has not changed.

What has changed, however, are the political and social circumstances within which the FMF is required to act. It has become evident that critical issues such as the proposed expropriation of property without compensation and the process of the destruction of the independence of the legal profession (and with it the last bulwark against government overreach), require explicit and rigorous engagement. As always, the FMF’s engagement is informed by the free market, classical liberal perspective which has individual sovereignty at its core.

The FMF remains willing to discuss with any group or political party, as it always has, the policy framework necessary to turn South Africa into a thriving economy. That not all political parties wish to reciprocate this willingness does not detract from the FMF’s open-door policy.

Recent tribulations

The FMF is governed by a Board elected by members at an Annual General Meeting. Between Board meetings, the Executive Committee manages the FMF’s affairs.

The current Chairman, Rex van Schalkwyk, is a former judge of the Supreme Court. At the FMF’s 2020 AGM, he was elected to the Board by members, and was elected Chairman of the Board by Board members at their September 2020 meeting. He was re-elected to the Board at the 2021 AGM and again elected Chairman by Board members. Mr van Schalkwyk has been Chairman of the FMF’s Rule of Law Board of Advisers since 2015.

Five Board members serve on the Exco, which is chaired by Gail Day, who has been closely associated with the FMF since 1987. The person with the shortest history with the FMF who serves on Exco, has been associated with the FMF since 2016. None are newcomers.

Recently, certain unfounded and defamatory accusations have been made against the FMF by Leon Louw, an FMF co-founder* and former President, about its internal governance and its public posture. These have not and will not distract the organisation from its important policy and advocacy work.

The FMF’s new Constitution was approved by over 84% of the 69 members present at the August 2021 Special General Meeting (SGM) where revisions to it were discussed and put to a vote. The meeting allowed plenty of time for contentious changes to be explained and debated. At the end, members were convinced that the changes were necessary.

The proposed amendments to the Constitution gave effect to Board resolutions adopted during 2020. The resolutions were intended to ensure that FMF members are bona fide and to prevent proxy fishing at AGMs. The 2020 AGM, in the FMF’s estimation, was an unacceptable spectacle of hundreds of new “members” (whose names were emailed to the FMF on spreadsheets the day before the meeting) assigning their votes to three or four proxies who sought to dramatically change the institutional arrangements within the FMF. No values-based association would allow such a coup d’état to proceed unchecked.

Those who were engaged in the attempted takeover kept up the pretence that they had succeeded in the takeover, until the Board intervened in September 2020.

These events necessitated constitutional changes, which the FMF’s real members, who had been associated with the FMF for years, readily agreed to.

The revisions to the Constitution were mailed to members 21 days prior to the SGM date, as the then-constitution required. The same practice was adhered to when the Constitution was previously amended in November 2017.

Regrettably, Leon Louw was involved in the attempted hostile takeover of the FMF at the 2020 AGM. This followed some time of internal strife between Louw and FMF staff and Board members. After September 2020, as had been long planned by the FMF, and which recent events had confirmed was necessary, Louw was relieved of his executive responsibilities and, with his agreement, moved into the new office of President where he would continue to act as the face of the FMF and its chief policy advocate. This, the FMF hoped, would bring an end to the germinating office politics.

Unfortunately, this did not come to pass. Louw almost immediately began refusing to work within the structures of the Foundation and to work with its executive officers. This has been intolerable for the proper functioning of the organisation.

Attempts by the FMF to resolve this problem, including interventions months prior to his appointment as President, have failed. As in all cases where two parties can no longer work together, a parting of the ways became inevitable, and this is the point at which we now find ourselves.

The hearing launched into Louw’s misconduct was not brought about lightly. One does not easily accuse a long-standing friend and colleague of misbehaviour serious enough to warrant possible dismissal.

This is why the Board first sought a positive intervention by appointing Louw as President. When this did not work, rather than proceeding directly to a hearing, the Board appointed a conduct committee to coherently formulate the charges of misconduct against Louw so that the Board could rationally apply its mind on the way forward. The Board was presented with a 64-page report; 14 of the 15 Board members determined that a prima facie case had been made against Louw, and resolved to proceed to a hearing. 16 charges were prepared, followed by a 458-page bundle confirming evidence of misconduct.

In terms of his appointment as President, Louw was not an FMF employee. He opted instead to become an independent contractor. Being a contractor, Louw was subject to summary contractual termination. Given his long history with the FMF and his extraordinary contribution to the organisation and the cause of liberty, the Board elected instead to convene an enquiry (usually reserved for employees, who enjoy greater labour-law protection than contractors) which offered Louw an opportunity to be heard. An independent chairperson, unassociated with the FMF, was to make an impartial decision on the way forward.

Louw, speaking of the disciplinary hearing, writes that “… half the allegations [against him] were dismissed within minutes by the presiding chair”. This is not true.

On 21 April 2022, the first day of the hearing, Louw’s lawyers argued that several of the charges had been brought too late to be heard. The chair adjourned the meeting so that the lawyers could fully present their arguments. There followed a written application from Louw’s legal representatives, the FMF’s opposing affidavit, and Louw’s replying affidavit. On 30 May 2022, the lawyers made oral submissions to the chair. On 2 June 2022, she delivered her ruling, dismissing only six of the 16 charges, not as being without merit, but because the FMF, in its attempts to reach a positive accommodation, which involved interventions and waiting to see whether those interventions produced desired results, had thereby waived its right to institute disciplinary action at the time (these charges dated from 2020).

The remaining ten charges, each one serious, remained.

The FMF’s finances are managed according to commonly accepted standards and best practice. The FMF is audited annually, and its accounting is outsourced to a reputable and independent firm.

A recent forensic audit, requested by a donor following an accusation of financial mismanagement by Louw, found absolutely nothing amiss and resulted in that donor releasing further funds to the FMF’s Khaya Lam (My Home) Land Reform Project.

Before the aforementioned accusations of impropriety were made by Louw, no such charges were made against the FMF in its long, 47-year history, and other than Louw, no other party has levelled such charges.

Any donor who wishes to interrogate the FMF’s financial records may contact Gail Day on [email protected]. We will provide our full cooperation.

The FMF is deeply disturbed by the tone of Louw’s open letter, and the many inaccuracies it contains, including renewed allusions to financial mismanagement. The FMF is further saddened by his conduct, inimical to the interests of the Foundation which he has, in the past, served with distinction.

The FMF has accordingly terminated Louw’s services, with immediate effect.

In recognition of his past contributions, we wish Louw well in his future endeavours, and hope the baseless and defamatory attacks on the FMF by Louw and his followers will cease, to be replaced by a renewed commitment to setting South Africa on the right policy path.

Our door is open to all good-faith members, funders, and friends; we will answer any questions you may have.

* The FMF’s co-founders were Ed Emary, Mike Lillard, Leon Louw, Fred Macaskill, André Spies and Marc Swanepoel.

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