Run-in at the Land Bank

Helena Dolny's account of her time as managing director adds up to a devastating case for privatisation.

THERE IS UNLIKELY to be another study of post 1994 transformation in a parastatal as full and frank as Helena Dolny's account of her two years as managing director of the Land Bank. In her book, Banking on Change (Penguin, R119.95), she describes the obstacles she faced and the mistakes she made as she tried to instil a new corporate culture and mission into a bastion of white male Afrikanerdom.

However most of the publicity surrounding Dolny's book has centred on the circumstances of her downfall in July 1999 and the egregious role of the Johannesburg daily, The Star. The crisis was precipitated by the memo that Bonile Jack, then chairman of the bank's board of directors, sent to President Thabo Mbeki in May 1999. Jack, a former official in the old Ciskei and candidate for the MD post, accused her of mismanagement, racism, nepotism and irregularly increasing her own salary. In July, while Dolny was on holiday, Jack's memo was leaked to The Star and splashed without first asking her for a comment.

What then ensues is another classic of public sector misgovernance:

  • a sub-committee of the board is set up to deal with the matter; one of its three members is deputy-director general of agriculture Masiphula Mbongwa, with whom Dolny has a long history of ideological differences and who is considered minister Thoko Didiza's right-hand man;
  • Dolny is gagged from speaking to the media, while biased leaks to Prince Hamnca on The Star from an insider (probably either a sub-committee member or one of the board's advocates) continue;
  • the sub-committee appoints the independent Katz committee to conduct a limited investigation into the Jack allegations. It has no powers to compel witnesses to give evidence and no powers of cross examination;
  • Dolny is refused a copy of the Jack letter; she is only allowed to read it and then return it to the board secretary;she sees for the first time a fax dated April 8 that Jack claimed he sent to all members of the board about the salary review. In it he said that he had received legal opinion that decisions on remuneration taken at the March board meeting went beyond its powers;
  • evidence that is crucial to Dolny's case on the salary question turns out to be missing - the board minutes of November 1998 which included policy resolutions on remuneration and which had Jack's signature and the tapes of that March board meeting;
  • her secretary, arriving early, finds the doors to their offices are open and filing cabinets in disarray. There is no sign of forced entry;
  • Katz questions Dolny twice, on the second occasion for eight-and- a-half hours.
  • Katz concludes that all of Jack's allegations are unfounded, except for the salary question. Despite the missing evidence and limitations of the inquiry, he finds against her on this issue, but judges the matter not sufficiently serious to warrant a disciplinary hearing;
  • the board's subcommittee however proposes that there should be a disciplinary inquiry. The minister tells them that "labour law must be followed scrupulously" and asks for their response by September 13. They do not respond;
  • on her way home from the bank, with driver and bodyguard, Dolny's car is shadowed by two identical cars. Their number plates turn out to be false. A bullet is fired through her kitchen window while she is preparing supper for her family. Both events may be coincidental;
  • in October a Business Day journalist informs her that the minister's spokesperson has just said that there will be no disciplinary hearing; the minister is in cabinet and is to see Mbeki afterwards. Later that day the spokesperson withdraws everything;
  • Dolny's attorney finally writes to the board for clarification of her position, after which the board announces that there will be a hearing and that she must pay for her own legal representation;
  • the charge sheet is delivered on October 22 but the charges are so loose and confused that her attorney's request for further particulars takes up 65 pages;
  • the hearing is set for November 10-11 and she is instructed to take "special leave" to prepare for it, but is not formally suspended;
  • George Bizos, the renowned human rights lawyer, agrees to act as Dolny's senior counsel;the hearing is postponed to November 27-28; the bank's board appoints Martin Brassey as senior counsel to strengthen its legal team;
  • Dolny returns to work on the grounds that she has now prepared for the hearing;
  • on November 23, the board informs Dolny that since she has already been found to have behaved improperly by the Katz investigation there is no basis for a disciplinary hearing after all. She is instructed to attend a meeting on November 25 to hear what her punishment will be;
  • Dolny is granted an interdict by the High Court preventing the November 25 meeting from going ahead. An out-of-court settlement is reached soon afterwards;
  • in March 2000 the Land Bank announces that the executive salary increases have gone through backdated to April 1999 and are 25 per cent higher than those approved by the board in March 1999.

During the six months following the Jack letter the bank's management was distracted and urgent tasks did not go forward; there was damage to staff morale and huge legal bills were run up. Most seriously, investors became hesitant and the bank had to pay more to borrow. Not only was there less money to devote to development, but a cash flow crisis ensued that, Dolny believes, could have had fatal consequences for the bank if it had had to rely on the private sector.

She found that many of the non-executive directors were unable to comprehend her growing anxiety about the cash flow crisis. She notes their failure to understand the function of the bank's R1.7 bn reserves and recalls that one member clearly regarded them "as a huge development fund to be tapped into."

Dolny makes suggestions for improving the skills and capacity of members of public sector boards and for improving governance generally. But any reforms will be wasted as long as politicians choose to ignore the separate roles of boards of directors, executive officers and the government as shareholder. These roles are clearly defined, but too often ministers find it expedient to blur them and in the ensuing confusion repossess powers that have been delegated. Whether intentionally or not, Dolny has made a devastating case for privatisation.