The Reserve Bank has sidestepped queries about whether President Cyril Ramaphosa may have contravened foreign exchange regulations by allegedly concealing a large stash of US dollars in furniture at his Limpopo farm.
The money — said to be in the region of $4m (R61.73m) — was stolen in the burglary revealed by former spy boss Arthur Fraser, who last week dropped a political bombshell when he laid charges of money laundering, kidnapping and corruption against Ramaphosa, all linked to the alleged theft.
While Ramaphosa has confirmed the robbery, which was apparently orchestrated by a domestic worker around February 2020, he has denied any malfeasance and said the money was from the sale of game at his farm near Bela Bela. Ramaphosa is known to have a fondness for dealing in game, though the extravagant prices involved have elicited criticism.
He apologised in 2012 for bidding on a buffalo amid a “sea of poverty” at an auction that eventually saw the animal sold to another bidder for R20m.
Fraser, widely considered Ramaphosa’s foe, was appointed head of the State Security Agency under former president Jacob Zuma. His allegations have sparked a political storm around Ramaphosa at the worst possible time, as the president is in a hard-fought bid to win a second term as ANC leader.
The allegations, contained in an affidavit handed to the police in Rosebank, have also called into question Ramaphosa’s commitment to transparency. Questions have been raised in the media about whether the apparent absence of a criminal case in the Phala Phala burglary is due to some sort of cover-up.
There are also questions over whether the stashing of foreign currency may have contravened foreign exchange regulations or tax laws.
Business Day’s attempts to get answers out of the Reserve Bank over whether Ramaphosa may have been in conflict with foreign exchange regulations have so far come to little. The Bank initially tried to dismiss queries by saying residents who “become entitled to sell or procure” foreign currency have 30 days to sell it to an authorised dealer, usually a bank.
However, the Bank’s own foreign exchange regulations suggest that the matter is hardly that simple. The latest iteration of the Currency and Exchanges Manual for Authorised Dealers, which was updated on April 25 2022, indicates that while there are situations in which local residents and businesses can transact in foreign currency, there are strict requirements that come with doing so.
The 2019 version of the manual has the same requirements, though the details are on different pages.
For example, travel agents, hotels, restaurants, shops and other entities whose business is directly related to the tourist industry can apply for permission from authorised dealers to accept foreign bank notes and traveller’s cheques from visitors to SA as payment for goods and services. However, they must make a written undertaking to sell the foreign currency to the authorised dealer by no later than the next business day after acquiring it.
Records of such transactions must also be kept for possible inspection by the Bank’s financial surveillance department, which must be kept informed on a monthly basis of the names, addresses and nature of business of the parties to whom the authority to transact in foreign currency has been granted.
Under a different section of the Currency and Exchanges Manual, which deals with “merchanting trade” involving businesses that wish to either export or import goods from overseas, a grace period of 30 days is granted between the receipt and payment of funds between local and overseas entities. For trade with the rest of Africa, the grace period is 60 days. But such merchant trading still comes with strict conditions and bestows onerous oversight obligations on the authorised dealers that normally facilitate such transactions involving the exchange of currencies.
In cases where an SA entity is exporting goods, the authorised dealers must keep records of the transaction, and ensure there is a trade agreement in place and invoices showing the domestic entity’s profit.
When Business Day queried whether these regulations may have been contravened in the Phala Phala matter, the Bank responded by saying it applies exchange controls “consistently and equally” to all SA residents.
Political fallout
“It is the practice of the [Bank] to investigate matters brought to its attention wherein reasonable grounds exist to believe that contraventions of the exchange control regulations have taken place,” it said in an emailed statement.
“These investigations are conducted and applied to everyone without fear, favour or prejudice, irrespective of the parties involved. It is not the practice of the [Bank] to say on or provide any details pertaining to previous, current or potential investigations it may be involved in as part of its mandate.
“We also do not say on the receipt of documents from the public or third parties that relate to any investigations.”
Rupert Worsdale, a retired attorney and expert in exchange control matters, said the question is whether Ramaphosa’s apparent foreign exchange dealings were done with the consent of regulators or not.
If there was no consent, Ramaphosa can easily apply for administrative relief and face a fine of between 10% and 40% of the amount involved, “and the whole thing goes away”, Worsdale said.
However, the political fallout may be far more damaging for the president.
Update: June 7, 2022. This story has been updated to add the reference to the 2019 version of the Currency and Exchanges Manual for Authorised Dealers.
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