Quote of the week

The recommendation for criminal charges is particularly applicable to Mr Anoj Singh and Mr Koko, who by false pretences led Eskom, through the officials who processed the R659 million payment, to believe that the R659 million payment was in the nature of pre-payment for coal, as was the R1.68 billion pre-payment, later converted into a guarantee, when in truth and fact they knew that the prepayment and the guarantee were needed to enable the Guptas to complete and save the sale of share transaction.

State Capture Commission Report
Volume 4, Part IV
8 June 2022

Ramaphosa and the foreign currency theft: on the legal issues and the Fargo problem

Whatever the facts may turn out to be in the case of the theft of foreign currency from Cyril Ramaphosa’s Phala Phala farm, it would be a mistake to view the matter only through a criminal law lens. I would guess that Ramaphosa has just as much (or even more) to fear from the court of public opinion, than from any criminal court.

Late last week, former spy boss Arthur Fraser laid a criminal complaint against President Cyril Ramaphosa, stemming from the theft of a large amount of foreign currency from Ramaphosa’s Phala Phala farm in Limpopo. Fraser alleged that the matter was not reported to the police, but was instead investigated by a team led by the head of the Presidential Protection Unit, who proceeded to cover up the matter.

This raises the crisp legal question: did the President break the law? But it also raises broader questions about the failure of the ANC to hold its senior leaders politically accountable.

When I heard about the theft, my first thought was to wonder why Ramaphosa had not bothered to lock this money away in a safe, but rather hid it in furniture. This is not the kind of thing one would expect any law-abiding South African citizen to do. Even if it later turns out that Ramaphosa did not break the law (or will not be prosecuted for breaking the law), Ramaphosa will now forever be remembered as that guy who hid large amounts of foreign currency in the furniture of his home at Phala Phala – something one would expect to see one of those sad and spectacularly incompetent criminals do in an episode of Fargo.

But before I develop the Fargo theme a bit further, it is necessary to have a closer look at the relevant parts of the criminal law, to consider whether Fraser’s complaint may have legs. As always, much will depend on the facts, some of them currently contested or not clear, (and thus on what may or may not be uncovered) in the police investigation which we are told is now under way.

Buying and selling goods using US dollars or other foreign currency

In terms of the Currency and Exchanges Act 9 of 1933, read with the relevant regulations, foreign currency cannot, as a general rule, be used as legal tender in South Africa. Regulation 8 specifically states: “No person shall, except with the permission of the Treasury, and in accordance with such conditions as the Treasury may impose, make or receive payment” except in the currencies specified by the Treasury.

According to the Currency and Exchanges guidelines for business entities issued by the Reserve Bank, “Travel agents, hotels, restaurants, shops and other persons whose business is directly related to the tourist industry may apply for permission to accept foreign banknotes and foreign currency travellers’ cheques from visitors to South Africa as payment for goods and services.”

However, this is on the condition that they provide a written undertaking that the foreign currency will be sold to an authorised forex dealer “not later than the following business day after the transaction”. A record of all transactions “must also be kept and be available for inspection by the Financial Surveillance Department”.

Regulation 6(6) further states that any foreign currency held by people who reside in South Africa “shall not be sold, transferred or otherwise disposed of without the permission of the Treasury and in accordance with such conditions as the Treasury may impose”.

Regulation 22 states that it is a criminal offence to contravene any of the regulations, to make any incorrect statement in any declaration required in terms of the regulations, or to refuse or neglect to “furnish any information which he or she is required to furnish under these regulations”. The maximum penalty for such a breach is a fine not exceeding R250,000, or imprisonment for a period not exceeding five years.

From the above, it must be clear that much will hinge on whether Ramaphosa received permission from the Treasury to sell game for foreign currency, or alternatively, whether his business falls under the tourist industry exception and whether he applied for permission to accept foreign currency as required.

But if the latter is true, a further problem arises as Ramaphosa would have had to keep a record of all transactions, something that may not have been done. Notably, Daily Maverick reported last week, quoting a source “close to the President”, that the President did not know how much money had been stolen and would only be “reconciling all sales over that weekend to assess the trades” and establish the amount. (This claim is odd as it is not clear why such a reconciliation would only be done now, when the theft occurred in 2020.)

Money laundering

In his complaint, Fraser claimed that the mere fact that “Ramaphosa had large undisclosed sums of foreign currency in the form of US dollars concealed in his furniture at his Phala Phala residence is prima facie proof of money laundering in contravention of section 4 of the Prevention of Organised Crime Act (Poca) 121 of 1998”. While it is laudable that Fraser correctly identified section 4 of Poca as the provision creating the crime of money laundering (the Public Protector famously got this wrong), the claim is misleading.

Section 4 of Poca makes it clear that a person will be guilty of money laundering if he or she receives money while he or she knew or reasonably ought to have known that the money is or forms part of the proceeds of unlawful activities, and nevertheless dealt with the money in such a way that it “has or is likely to have the effect of concealing or disguising the nature, source, location, disposition or movement of the said property or the ownership thereof or any interest which anyone may have in respect thereof”.

This means that money laundering will only come into play if the money in Ramaphosa’s house came from unlawful activities and he knew or ought to have known about it. If Ramaphosa’s claim that the money came from the bona fide sale of animals on his farm is true, that would be the end of the matter, as no money laundering could then possibly have been committed.

Of course, if the sale of animals was a ruse to shift hot money around, or if the money came from another source altogether, money laundering may well come into play. In the absence of more information about the source of the money, it is thus impossible to take this inquiry further.

Corrupt payments to buy silence

One of the most disturbing claims made by Fraser is that Ramaphosa, and/or the head of the Presidential Protection Unit had paid R150,000 in cash each to the domestic worker and other people allegedly involved in the matter to buy their silence and thus “not to divulge any information in relation to the huge sums of US$ taken from President Ramaphosa’s Phala Phala residence”. Fraser claims that, among other things, this amounts to corruption in contravention of the Prevention and Combating of Corrupt Activities Act (PCCA) 12 of 2004.

Section 3(b)(iv) of the PCCA seems to be the provision most likely to apply in a situation as alleged here. The section prohibits any person from directly or indirectly offering or giving money to somebody else in a manner that amounts to an unauthorised or improper inducement to do or not to do anything. This means that if Fraser’s claim about the R150,000 payments is correct, there may well be a case of corruption to answer for those involved in organising the payments.

It is impossible to know at this stage if there is any truth to this particular claim made by Fraser. But if it is true, as Fraser claims, that Ramaphosa’s domestic worker was dismissed after the incident, only to be re-employed later despite being implicated in the theft (something that could easily be checked), it would lend credence to the claim that attempts were made to silence the witnesses.

The Fargo problem revisited

Whatever the facts may turn out to be, it would be a mistake to view the matter only through a criminal law lens. This is because the credibility and authority of political leaders (both inside and outside their party) depend, to a large extent, on what happens in the court of public opinion. For this reason, I would guess that Ramaphosa has just as much (or even more) to fear from the court of public opinion, than from any criminal court.

Ramaphosa only has to consider what happened to his predecessor to understand why his current predicament is about more than whether he will be prosecuted and convicted of a criminal offence. In short, Jacob Zuma was politically undone after a sizeable proportion of voters came to view him as dishonest and corrupt. This happened long before he formally became a criminal after being sent to jail for contempt of court. Once we all started joking about the fire pool, the weekend special, and the claims of poisoning, this became Zuma’s story in the eyes of large sections of the voting public.

Which is why it may well be a huge problem for Ramaphosa that he is going to become that guy who hid large amounts of foreign currency in the furniture of his home at Phala Phala, and who then covered up the theft. It’s a plot twist worthy of an episode of Fargo – and it cannot be long before the story becomes the punchline of a joke.

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