Stephan Hofstatter
16 July 2008
Johannesburg — LAND and Agriculture Minister Lulu Xingwana's decision to axe its chairman, Themba Langa, as he was poised to halt the rot at the bank is the likely reason for her removal as political head of the Land Bank, documents in Business Day's possession reveal.
Langa was appointed chairman earlier this year to restore the bank's reputation, which lay in tatters after a series of fraud scandals, poor lending decisions and a malaise of mismanagement, with top agricultural clients poised to take their business worth billions to commercial banks. Xingwana fired him for incompetence last week.
On Monday, President Thabo Mbeki gazetted a proclamation transferring the bank from the agriculture department to the treasury, in effect replacing Xingwana with Finance Minister Trevor Manuel.
Manuel is expected to convene his first Land Bank board meeting today . He is understood to have recalled two former board members who resigned earlier this month. Sources close to the bank say Langa has also been asked to head the board again. He declined to be drawn on whether he would accept the post. "It would depend on the conditions. We'll have to wait and see," he said.
Several sources close to the bank say Xingwana's role in preventing Langa from liquidating the bank's largest nonperforming loan - R640 milion lent to sugar baron Patrick Sokhela's company, Ushukhela - swayed Mbeki in deciding the treasury was better equipped to make sure the bank was run prudently during a worsening food crisis. The bank is meant to play a leading role in boosting agricultural production to bring down food prices.
Tightening up credit controls was a key priority for Langa when he took over the board. He immediately placed a moratorium on loan disbursements until checks were in place, and tried to recover bad debts, including the loan to Ushukhela, which was used to buy a sugar mill and prime coastal farms from Illovo.
In September last year the bank had identified a corporate adviser to determine how best to salvage the loan, which has been in arrears since 2004. A month later the bank was poised to launch a forensic audit to unravel whether the money lent had been misspent, but the decision was apparently reversed two days before auditors were due to be appointed. The reason remains unclear.
The loan, clocking up R20 million in interest a year, was not being serviced at all when Langa took over. He could not fathom why the bank had not foreclosed and instructed the legal department to appoint a liquidator. But sources close to the bank say Xingwana later forced the bank to sign a contract preventing it from liquidating Sokhela's company, Ushukhela, before March next year. This means not a cent can be recovered until then.
It is not clear why Xingwana would block attempts to recover the bank's money, especially as it is likely to result in a qualified audit. Her spokesman, Godfrey Mdhluli, insists Xingwana has never interfered in credit decisions. "On the matter of the Ushukhela application or any other credit matter, the minister played no role in the decision made by the board," he says.
But Langa's axing revolves around his insistence that Xingwana has interfered unlawfully in the bank's affairs. On the afternoon of Sunday, July 6, Langa received a fax from Xingwana's office, informing him of an urgent board meeting to be held at 4pm the next day to discuss staff resignations. The next morning Langa fired off a reply to Xingwana, and accused her of illegal interference in the bank's affairs that was inflicting "untold harm to the bank and traps it in a perpetual paralysis".
There were no legal grounds for a minister to intervene in management issues, the lawyer said. To do so was "an act of violence" that patently violated the Public Finance Management Act and Land Bank Act. An hour before the urgent board meeting, Xingwana sent Langa a fax removing him from the board for incompetence.
During a public spat afterwards, Xingwana emphatically denied she'd ever interfered in the bank's management decisions. But Business Day is in possession of correspondence showing she has made a habit of it before.
Another priority for Langa was appointing the right CEO to run the bank. For more than a year the bank has been run by two acting CEOs appointed by Xingwana, both agriculture department officials with no banking experience.
The first, Phil Mohlahlane, left under a cloud earlier this year after being exposed for trying to buy luxury properties for cash using a cancelled identity document, which is illegal. The second, Xingwana's adviser, Saki Zamxaka, was widely regarded as the minister's inside man until his sudden departure last week. Xingwana put the 28-year-old with only an economics degree and two years' work experience as an analyst for the National Intelligence Agency (NIA) in charge of the R17 billion bank.
The week before the board meeting that sealed his fate, Langa convened the bank's executive committee to tell senior managers of a breakthrough in appointing a permanent CEO. After lengthy negotiations the preferred candidate, chief financial officer of the auditor-general's office Stuart Boyd, had accepted the job, apparently with Xingwana's blessing.
But Zamxaka apparently objected later and threatened to quit, sparking the urgent board meeting to discuss "the resignation of staff members". In his absence Langa was accused of making unilateral decisions and disregarding board decisions in forcing through his choice of CEO , and was summarily axed. But correspondence seen by Business Day shows he'd fully appraised the board a week earlier, and that Boyd had the board's backing.
Government officials are downplaying Xingwana's removal from the bank and deny the move is a precursor to her sacking as cabinet minister.
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