Stephan Hofstatter
2 October 2008
Johannesburg — LAND Bank caretaker CEO Phakamani Hadebe took drastic steps to halt huge continuing losses totalling hundreds of millions of rands from debt write-offs, theft and fraud when he was seconded from the treasury to stabilise the bank earlier this year, he told Business Day yesterday .
In his first week on the job he brought in tax officials to improve the bank's bad-debt collection practices and lifted a moratorium on the collection of loans made to black farmers.
He extended a contract with auditors PricewaterhouseCoopers to expand its probe into suspicious payments made by the bank on behalf of the agriculture department's R100m agriBEE fund.
Hadebe also formed a task team assisted by external auditors to follow up on a preliminary investigation that found evidence of a host of irregularities, including in staff recruitment, salary payments, forced suspensions and dismissals, and the appointment of consultants.
The extent of the rot at the bank under Agriculture and Land Affairs Minister Lulu Xingwana was officially acknowledged for the first time this week when the bank tabled its annual report and audited financials in Parliament on Monday. The report provided a frank account of a breakdown of internal controls, poor lending practices, wasteful expenditure, irregular appointments, fraud, negligence and gross misconduct.
Xingwana was removed as political head of the bank in July and replaced by Finance Minister Trevor Manuel.
The existence of the moratorium on loan collections had never been publicly disclosed, either. In its report on the bank's financials, the auditor-general said there was no evidence Xingwana had the authority to approve it.
Hadebe said the bank had to justify the R1,5bn guarantee extended by the treasury when impairments and nonperforming loans were growing.
"The moratorium contravenes the Public Finance Management Act, which stipulates any public entity must take effective and appropriate steps to collect all revenue due to it," he said.
He denied the bank had tried to hide notional losses of R41m made through what its risk officials said were unauthorised, speculative interest rate swaps on the expectation of declining interest rates.
The bank's balance sheet reflected liabilities of R63m and assets of R103m from rate swaps. The risk officials said liabilities would have been limited to R22m had their advice been heeded.
Hadebe conceded notional losses would have been lower without the swaps. But he denied the bank's former treasurer, Makgale Gwangwa, was guilty of any wrongdoing because the swaps were done within limits approved by the board and there was no overall loss. "Some people at risk had concerns. We concluded it wasn't an issue," he said.
Other measures taken to stabilise the bank included seconding management staff from the Industrial Development Corporation and the Development Bank of Southern Africa.
He said these steps were already showing positive results. "We have been able to convince new investors to buy the Land Bank paper and liquidity has improved."
Hadebe conceded he was in for a tough grilling when he presented the bank's annual report to Parliament's finance committee. A date has not been set for the hearing.
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