By Corrie Kruger
The 2020 Phala Phala robbery aka Cyril Ramaphosa’s farm burglary or Farmgate Scandal was front page news in South Africa, and made it into the international press too.
The now infamous incident which occurred on February 9, 2020, saw an indeterminate amount of cash – US dollars - being stolen from the President’s private farm near Bela Bela in the Limpopo province.
At this time, the rand was trading at R14.91 to the US dollar (USD). In July 2019, the rand traded at R13.91 to the USD. At the current rate (2023) of R19.09 to the USD, there has been an appreciation of 28% in favour of the USD.
The amount the President should have received for selling his Buffalo at the time of the transaction had he converted it immediately into rand, would have been R8 647800. If he has/had held onto the dollars, that amount if converted today, would be R110 722 00.
In terms of South African commercial law, a transaction can only be legally binding if there are certain prerequisites in place; i) the parties entering the transaction must be certain of the identity of the other contracting party and, ii) the parties must both be certain of the object that they are contracting on. There is a third requirement, that being the agreed-on price to be paid for the transaction.
How to bring cash into the country
Excess currency in terms of South African Reserve Bank (SARB), Exchange Control Regulation, refers to any amount of more than R25 000 or any foreign currency, which is convertible to rand more than R25 000.
Travellers must obtain written permission from the SARB before entering or leaving South Africa with excess currency.
The buyer in the Phala Phala transaction is purported to be Hazim Mustafa, a Sudanese millionaire, living in Dubai, and apparently, married to a South African born lady from Italy. What is clear is that Mustafa is not your conventional investor, switching from buying property to buying Buffalos or cattle whilst he resides in a country more known for its goats and camels...
American paper currency comes in seven denominations: $1, $2, $5, $10, $20, $50, and $100. This would suggest that Mustafa, who purportedly paid for the bull in cash, would have needed to stash 5 800 notes of the largest denominations. Given that the average paperback book contains about 300 pages, Mustafa and his companions would have had to bring in some 19 paperback books for example were they to travel on a commercial aircraft and arrive via the normal channels.
Was this currency declared to the SA authorities?
But this is South Africa, and we already know that some travellers are given preferential treatment – we only must think of the Gupta wedding plane that landed in Waterkloof…
The vagaries of banks and banking
Irrespective of how Mustafa arrived in the country, the fact of the matter is that the money never so much as sniffed going anywhere near a bank account.
Is it any wonder then that the country has been grey listed by the Financial Action Task Force (FATF), much to our citizens’ shock?
The above transaction illustrates what is wrong in our banking and financial regulatory environment. The SARB Financial Stability Review of 2022 commented that “grey listing” would carry the following consequences:
Consequences include: Higher transactional, administrative, and funding costs for domestic banks; Restrictions on cross-border transactions, which will affect imports and exports, leading to a decline in gross domestic product. Reputational damage to South Africa’s financial system could have negative capital and currency implications; and it may lead to the inability of South African banks to maintain corresponding banking relationships with offshore institutions.
Grey listing by the FATF has raised SA's risk profile, placed a question mark over its financial regulatory bodies and attached a higher risk premium to corresponding relationships between SA banks and international financial institutions.
The reputation of South African banks is not of the required standard for their international peers to be comfortable with, as our banks have also been found wanting in their own handling of several high-profile accounts – some even going so far as aiding and abetting money laundering schemes. For these transgressions they have been fined, but the harm they have inflicted on the country is beyond monetary value.
Yet, this has not stopped many of them from attacking citizens and companies in South Africa and spuriously closing bank accounts, fearing a stain on their already tarnished images.
The saying that comes to mind is “people who live in glass houses should not throw stones.”
A recent article published a list of the five richest South African bankers. Their combined wealth is an astonishing R 58 694 400 000, which is the equivalent of the annual salary of 188,000 ordinary South African workers. Now that is a system for the privileged few that takes no prisoners in their quest to control the financial landscape of our country.
SA’s interconnected banking and finance system – a catch 22
Our financial sector is interwoven with several different entities forming part and parcel of the system. One of the entities is the Companies and Intellectual Properties Commission (CIPC), a division of the Department of Trade and Industries. They require companies to submit their financials to them on an annual basis. Failure could lead to deregistration and that will result in the loss of its legal status. The SA Revenue Service has a link to the banks and they in turn to CIPC.
Should a company wish to open a bank account the bank will first check with their online system to CIPC to verify the details of such a company. CIPC will not re-register a company if it does not have an active bank account. It follows then that a bank account is essential for a company to have legal status.
I posed the following questions to the Financial Services Conduct Authority hoping to receive a response from the Prudential Authority which regulates the Banks:
Background: Cash at Ramaphosa's home at the Phala Phala game farm in Waterberg, Limpopo was stolen on or about February 9, 2020. The President did not report the crime and the existence of such a large amount of foreign currency was not declared to the Reserve Bank - despite regulations.
The SARB released the “results” of its investigation into the saga yesterday, the outcome being that no foreign exchange rules had been contravened and that because the buyer, Hazim Mustafa, had not received what he purchased – 20 Buffalo – the deal was not perfect.
That does not negate the fact that money changed hands. The question is, did Ramaphosa pay Mustafa back for the transaction that did not happen?
This story is far from over…
Corrie Kruger is an Independent Analyst