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- The DBSA says it has an external investigator has concluded the probe to allegations raised by Bantu Holomisa.
- It says there was no evidence of impropriety or lending to politically connected people.
- The bank is yet to share the investigator's report with Parliament.
The Development Bank of Southern Africa (DBSA) says it has completed investigations that found no evidence of corruption, maladministration or any wrongdoing in the appointment of its board, nor in transactions flagged by UDM leader Bantu Holomisa.
The development finance bank appeared before the Parliament's Standing Committee on Public Accounts (Scopa) on Tuesday and told the MPs that they premised the allegations made by Holomisa on "incomplete and inaccurate information".
"There's been no evidence of a conflict of interest in all these deals. There's no collusion that we have become aware of, even with further investigations or fraud on all these transactions. We say the failure is primarily attributable to the economic recession in the aftermath of the 2008 financial crisis," said DBSA CEO Patrick Dlamini on Tuesday.
The allegations
Holomisa raised eyebrows in 2020 when he alleged that there was wide-scale looting of state resources at the DBSA by politically connected individuals.
In November, he took the Scopa through what he believed was questionable investment decisions.
These include loans made to companies Cranbrook Property Projects, Blue Horizon Investments and Proline Trading. There were also suspicions around the proposed R50 million loan to a water infrastructure company, Poisedon.
Holomisa was also scathing about the appointment of the ANC's head economic transformation committee Enoch Godongwana as the DBSA board chairperson in October 2020.
At the time of Godongwana, certain existing DBSA board members left, and Holomisa said the chairperson allegedly got rid of the directors who did not "toe the Godongwana line". But the DBSA only came to Parliament now to respond to those allegations.
Dlamini said the bank's investment processes and the due diligence it takes before granting loans were watertight. It knows that it is being watched closely by the capital market players who would punish it if found complicit in corruption.
He said, for this reason, DBSA wanted to be transparent about all the transactions in question. So he started with the Cranbrook Property Projects' loan.
Cranbrook approached DBSA in 2006 for a loan to fund bulk infrastructure for housing in Limpopo and provide capital for its BEE shareholder to buy a stake in the company. At the time, Lephalale had been identified as a growth node, and there was increased demand for housing.
DBSA gave Cranbrook's BEE shareholder a R10-million loan to acquire a 17% stake. Over and above that, it approved another R124 million to a related company, Blue Horizon, for bulk infrastructure in Lephalale and another R125 million to another affiliated company, Proline Trading, for bulk infrastructure in Burgersfort.
But after the 2009 global financial crisis, the demand for housing declined. As a result, these entities defaulted and had to restructure their loans. However, the BEE shareholder did repay R10.4 million between 2009 and 2011. Blue Horizon repaid R113.5 million between 2010 and 2017. Proline Trading, on the other hand, has only repaid R24.1 million between 2011 and 2020.
Dlamini said the DBSA restructures loans when projects go into difficulty all the time. The Cranbrook investment was no exception. He said the company is also in the process of trying to recover those loans. But Blue Horizon opted for voluntary was placed in liquidation in 2017, and that process is yet to be finalised.
Dlamini said its loans – and Proline's – were secured by mortgage bond, and DBSA was confident it would recover some monies as there is a legal process ongoing.
Investigations show no evidence of corruption
Dlamini said DBSA commissioned external investigators to probe all the allegations made by Holomisa but found no fault on the BDSA's part. The bank is yet to share the investigators' reports with Parliament and Mboweni.
"This investigation has recently concluded, and outcomes are currently being considered by the bank and also the Auditor-General. No fraud, corruption, noncompliance with laws and regulations were identified," said Dlamini.
On the proposed loan to the Poiseidon Water Project, Dlamini said no loan had been disbursed to the company yet as Holomisa flagged that transaction before the DBSA approved it. He said the DBSA board has done another due diligence on the company and enlisted the help of Werman's Attorneys to review the transaction.
"We were very satisfied from the Werksman's Attorneys' report that there were no [politically exposed persons] involved here and that there was no previous board member of DBSA who was ever involved. The former chairman of DBSA Mr [Jabu] Moleketi, is only a non-executive director, said Dlamini.
Mboweni says the Godongwana-chaired board is properly constituted
Finance Minister Tito Mboweni responded to the allegations that there was an irregular reformation of the board, which propelled Godongwana to the highest seat. Mboweni said the board of the DBSA had been functional way before he became the minister of finance.
But when some directors' tenure expires, the board does need to be "replenished". So, the remaining board members make recommendations on who the replacements should be. However, the problem is that the process that culminates in the shortlist given to Mboweni is not an open one. DBSA uses a database provided to it by a recruitment agency, and only people who are part of that database get a chance to join the board.
Still, Mboweni said there was nothing untoward about the DBSA's process.
"That's basically the process. It's basically in line with the corporate government, the King Reports, guidance from The Institute of Directors. And given my experience in the private sector where I was the chairman in some of the largest companies, that's how the processes normally go," he said.
He said some directors might be disgruntled that they were not re-elected to the DBSA board and thus making up "all kinds of furious accusations."
"That happens. Sometimes you fall off the board, and life goes on. When you are on the board, it's not a lifetime appointment," he added.
