SARB Phala Phala probe was limited to exchange control violations, Kganyago tells parliament

It was not the mandate of the South African Reserve Bank to investigate whether or not President Cyril Ramaphosa and others told the truth about what happened when foreign currency was stolen at the Phala Phala farm in 2020.  

This is what Reserve Bank governor Lesetja Kganyago told MPs on Wednesday when he appeared before the standing committee on finance.  

Last week, the bank said it could “not conclude” that Ntaba Nyoni Estates flouted foreign exchange control regulations by accepting foreign currency because it was “not a perfected transaction” when Sudanese businessman Hazim Mustafa bought buffalo from Ramaphosa.

Kganyago said FinSurv’s investigation and approach was “not premised on the unquestioning acceptance of the versions placed before the investigators, and that all the truth has been told.  

“It is premised on the need to reach conclusions on the relevant facts before FinSurv and to restrict the investigation to the scope and purpose set out in relation to the mandate of the financial surveillance department,” he said.

Kganyago said the scope, purpose and final report of FinSurv's investigation were limited to whether there were exchange control violations and matters relating to whether there was a breach of the law that should be investigated by other relevant authorities.

“The exchange control regulations generally do not apply to nonresidents of the republic. Currency, including foreign currency, physically introduced into the republic is dealt with in terms of the customs and excise legislation and by the SA Revenue Services. So any cash that crosses our border at the point of entry has to be declared to SARS. It is a customs matter not an exchange control regulations matter.”  

A declaration form must be filled at the point of entry and a declaration is made to SARS, not to the Bank.

“The mere possession of the foreign currency is not what is regulated in terms of the exchange control regulations,” explained Kganyago.

He said the applicability of regulation 6(1) in this particular matter would depend on whether there existed an unconditional contract for the purchase and sale of buffalos (a perfected transaction).

This means that because the foreign currency was stolen before all the necessary agreements (including and among others, informing the state vet to conduct tests on the animals and getting travel permits from the department of agriculture) were finalised, the sale was incomplete. 

Kganyago said if it followed that there was such (unconditional contract), an entitlement to the foreign currency on the part of Ntaba Nyoni Estate would have existed, triggering the obligation under regulation 6(1) for Ntaba Nyoni Estate to make or cause to be made, within 30 days, a declaration in writing of such foreign currency to FinSurv or to an authorised dealer.  

“Conversely, if there was no perfected transaction, there would not be legal entitlement by Ntaba Nyoni Estate to the foreign currency and therefore regulation 6(1) would not apply.” 

Kganyago said based on the information available to FinSurv as well as that the sale was subject to conditions precedent (some of the sale agreements were not met or finalised), FinSurv is of the considered view that the transaction was not a perfected transaction, which gave rise to the legal entitlement by Ntaba Nyoni Estate to the foreign currency. 

“It appears on the facts available to FinSurv, as related to exchange control regulation and which have not been contradicted by any other evidence which is available to the FinSurve, that the obligation under the exchange control regulation 6(1) was not triggered on the part of Ntaba Nyoni Estate upon receipt of the foreign currency by a nonresident of South Africa.” 

In the circumstances, there is no breach in regulation 6(1) by Ntaba Nyoni Estate, he said.

Accordingly, FinSurv and the Bank, “on the facts available to it, cannot conclude that there was a contravention of regulation 6(1) by either Ntaba Nyoni Estate or the president”. 

Releasing the report was a criminal offence, he added. “If you are asking me to avail the report, you are asking me to commit a criminal offence, which I am not prepared to do.”

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