Shortly after Land and Agriculture minister Lulama Xingwana fired Land Bank chairperson Themba Langa, President Thabo Mbeki has issued a proclamation removing Xingwana as the bank’s political head, placing the bank under finance minister Trevor Manuel’s control. When prominent Johannesburg lawyer Langa was appointed chairperson earlier this year, he made no bones about what he’d been hired to do.
Fraud scandals, poor lending decisions and a malaise of mismanagement meant the bank’s reputation had “sunk to the bottom”, he’d told Farmer’s Weekly. Its top clients and the bond markets where it raises finance had all lost faith in the Land Bank as an institution. His job was to restore that faith or lose the bank.
He opted for a four-prong rescue plan and embarked on a hearts-and-minds campaign by communicating it in person and via the media to key customers poised to take their business, worth billions, elsewhere. Langa’s actions came as a pleasant surprise. But they did little to endear him to those he was trying to expose. Langa’s first priority was to close the chapter on the 2007 forensic investigation by Deloitte & Touche that led to the resignation of the bank’s former CEO Alan Mukoki, and to several board members walking the plank.
That investigation still casts a shadow over the bank as nothing conclusive ever came of it. Cabinet initially recommended that criminal action be taken against those implicated, but the decision was rescinded in December 2007, sparking speculation of a political cover-up. Langa immediately sought legal opinion on the resulting report, which would inform the board’s decision on whether to take action against current and former managers and board members.
He vowed he would not hesitate to lay criminal charges if advised to. In correspondence dated Friday 4 July, seen by Farmer’s Weekly, Langa informed the board the issue would be addressed at its next meeting. But land and agriculture minister Lulama Xingwana fired him first. The sequence of events is revealing. On the afternoon of Sunday 6 July, 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.
On Monday morning Langa fired off a reply to Xingwana, accusing 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 pointed out. To do so was “an act of violence” that patently violated the Public Finance Management Act and the Land Bank Act, he said. An hour before the board meeting Xingwana sent Langa a fax removing him from the board for incompetence.
The discussion on the Deloitte forensic report was never held. During a public spat afterwards Xingwana emphatically denied she’d ever interfered in the bank’s management decisions. But unknown to Langa, the Deloitte forensic investigation itself is mired in gross governance irregularities. Farmer’s Weekly is in possession of a commissioning letter dated May 2007 signed by Xingwana on behalf of the Land Bank, engaging the services of Deloitte.
The bank’s legal department later twice obtained independent legal opinion seen by Farmer’s Weekly that warns Xingwana has no power to sign a letter of engagement on behalf of the bank, which invalidates the Deloitte contract. “The appointment of the auditor was illegal,” it concludes. Asked how signing a contract binding the bank to a financial transaction could be construed as anything but direct interference, Xingwana’s spokesperson Godfrey Mdhluli declined to comment. Xingwana’s decision has cost the bank dearly.
Correspondence seen by Farmer’s Weekly shows Deloitte initially estimated the job would cost R2,5 million, but by early August invoices exceeded R5,1 million, with the final payment apparently topped R6 million. To date no demonstrable benefits can be shown.
A BEE fraud cover-up?
Langa’s second task was to tackle an explosive dossier he’d been given by the bank’s suspended chief financial officer Xolile Ncame, detailing suspicious payments totalling R80 million made by the Land Bank on behalf of the agriculture department’s R100 million AgriBEE fund, created to support black farmers engaged in various agricultural projects, dairies, feedlots and biofuel. Ncame showed the funds were disbursed from a special account housed in the Land Bank to companies that don’t exist, and he supplied external auditors Ernst & Young with supporting documents seen by Farmer’s Weekly.
The board was not even aware of the fund’s existence until Ncame pointed out the suspicious payments, Langa told Farmer’s Weekly. Sources close to the bank say the revelations prompted the board’s audit head, Joe Mthimunye, and head of risk, Modise Motloba, to resign. Meanwhile Ncame, the whistleblower, was fired for failing to exhaust internal procedures before reporting the matter. Langa said the dossier contained “prima facie” evidence of fraud and Price Waterhouse Coopers was appointed to investigate.
The dossier, seen by Farmer’s Weekly, is highly embarrassing to Xingwana. The fund is administered by her deputy director general in charge of black farmer support, Phil Mohlahlane, a close associate of Xingwana’s who doubled as acting CEO of the Land Bank when several suspect payments were made, including a flurry of disbursements totalling R17,5 million on 23 December last year and on 31 January this year – unusual dates for company transfers.
Meddling in credit decisions
Next Langa tightened credit controls. He immediately placed a moratorium on loan disbursements until checks were in place, and he tried to recover bad debts, including R640 million loaned to Kwazulu-Natal sugar baron Patrick Sokhela to buy a sugar mill and coastal farms from Illovo. In September 2007 the bank identified a corporate advisor 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 if the loaned money had been misspent, but the decision was apparently reversed two days before the auditors were due to be appointed.
The reason remains unclear. The loan, clocking up R20 million in interest a year, wasn’t being serviced at all when Langa took over. He couldn’t fathom why the bank hadn’t foreclosed and instructed the legal department to appoint a liquidator. But sources say Xingwana later forced the bank to sign a contract preventing it from liquidating Sokhela’s company, Ushukela, before March 2009. This means not a cent can be recovered until then.
It’s not clear why Xingwana would block attempts to recover the bank’s money, especially as it’s likely to result in a qualified audit. Her spokesperson Mdhluli insists Xingwana has never interfered in credit decisions. “On the matter of the Ushukela application or any other credit matter, the minister played no role in the decision made by the board,” said Mdhluli. But, several sources say Xingwana’s decision on Ushukela is the most likely reason for the proclamation removing Xingwana from the bank’s helm.
Dodgy consultants paid millions
Another early intervention by Langa was to put a stop to the bank’s practice of hiring consultants paid millions for dubious services duplicating existing functions. He froze new appointments and made payment of outstanding fees subject to submitting proof of terms of reference and deliverables.
“The bank has hired 144 consultants,” Langa previously told Farmer’s Weekly. “There’s a great deal of corruption going on there.” He declined to name the companies involved. But documents seen by Farmer’s Weekly show they include Expose Advertising and Marketing Media, a PR firm owned by former agriculture department official Zola Pinda. According to the documents, Expose was hired to draft the annual report and align the new corporate plan with the bank’s turnaround strategy, despite having no business process or auditing expertise and even though the bank employed a full-time communications staff.
Despite being paid over R3 million in four instalments, Expose’s plan was never used. The bank’s procurement department took the risk that this expenditure was fruitless and reckless seriously enough to send a letter to its legal head, Ntsietso Mofokeng, raising concerns that Expose was appointed without following proper tender procedures. “The above should be viewed in the light of possible audit concerns that may arise in the future,” the letter seen by Farmer’s Weekly concludes.
The same concerns are raised over the appointment of four other companies, including an IT firm paid over R1,5 million. Again, Langa vowed to get to the bottom of the payments but was fired before being given the chance.
Who’s the boss?
From the outset Langa understood appointing the right CEO to run the bank was the first and most important step in any rescue plan. Since Mukoki’s departure last year the bank has had two acting CEOs, both agriculture department officials with no banking experience appointed by Xingwana.
The first, Mohlahlane, left under a cloud earlier this year after Farmer’s Weekly exposed him for trying to buy luxury properties for cash using a cancelled identity document, which is illegal. The second, Xingwana’s advisor Saki Zamxaka, was widely regarded as the minister’s inside man until his sudden departure last week. Xingwana put the 28-year-old in charge of the R17 billion bank with only an economics degree and two years’ work experience as an analyst for the National Intelligence Agency (NIA) under his belt.
He is also central to Langa’s dismissal. The week before the urgent board meeting that sealed his fate, Langa convened the bank’s executive committee to inform 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 later apparently objected 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 collective board decisions, with reference to his choice of CEO, and summarily axed.
Xingwana’s ploy backfires
Attempts to gag Langa by Xingwana and the remaining board, headed by Free State academic Herman van Schalkwyk, appear to have backfired. Xingwana’s firing fax includes an instruction to Langa not to talk to the media, which did not prevent her from savaging him in public. Sources close to the ANC told Farmer’s Weekly this had angered party bigwigs, who would call her to account at a special meeting at Luthuli House.
Meanwhile Van Schalkwyk, as acting board chair, issued a statement on 11 July ordering Langa to stop his “campaign of disinformation”, supporting Xingwana’s decision to sack him for disregarding collective board decisions, and pointing out the board had not been presented with a final candidate for CEO yet. But correspondence seen by Farmer’s Weekly shows Langa had clearly consulted the board in selecting a CEO.
In a letter sent to board members dated 4 July, Langa states: “I will endeavour to sign and announce the appointment of the new CEO as the board has consistently resolved and it is the same candidate, Stuart Boyd, that the minister [and] myself have satisfied ourselves about. The board has also been advised on all the developments on the discussions.” Langa declined to comment on speculation he’s been asked to head up a new board reporting to Treasury.
