The Politics of Seizing Stolen Assets in South Africa

14th April 2010 By: ISS, Institute for Security Studies

The Asset Forfeiture Unit (AFU) is known as one of the major components of the state's war on organised crime. Local and international experts seem to agree that the importance of such a unit cannot and should never be underestimated. In South Africa such assertions are supported by the AFU's healthy record of asset seizures, including a number of very high profile cases over the last decade or so. Certainly since its establishment in 1999, the AFU has been fighting to preserve the old saying that "crime doesn't pay". In recent times the AFU has had to face a number of political challenges, raising concern amongst many that the work being done by the unit could be compromised. But is there really a need for such concern?

The AFU was created in May 1999 in terms of the Prevention of Organised Crime Act, 1998. The unit was placed in the office of the National Prosecuting Authority (NPA) to focus on the implementation of chapters 5 and 6 of the Prevention of Organised Crime Act. Broadly speaking the key objectives of asset forfeitures is to take the profit out of crime. It is quite evident that organised crime is driven mainly by the profits derived from illegal activities; therefore seizing the assets gained from criminal activities removes the major incentive for organised crime. Besides confiscating assets that are the proceeds of crime, asset forfeiture also involves the seizure of property used to commit crimes (such as getaway cars in robberies and houses used as laboratories for drug manufacturing).

According to the Department of Justice and Constitutional Developments 2007/08 Annual Report, the AFU had finalised 1 100 cases to the value of R663 million since it was established. In 2006 the AFU had more than R70 million in its Current Asset Recovery Account (CARA) which contains the proceeds of the sale of criminal assets after confiscation. In addition, over R100 million had been paid out to victims by 2006. The Shabir Shaik case was one such development which brought the work of the AFU into the spotlight. In this case the unit was able to confiscate R34 million from Shaik after Judge Hilary Squires found him guilty of fraud and corruption. This despite the fact that Shaik was a close friend and financial adviser to then Deputy president and current Head of State Jacob Zuma. In another case, the assets of an alleged American-Israeli drug dealer and money-laundering kingpin were seized by the AFU in March 2006 after having received a tip from the US Department of Home Security. Assets seized included a R12 million game farm in Limpopo, a R2.5 million mansion in Umhlanga, a Mercedes-Benz and various bank accounts. The AFU has proven to be an integral part of South Africa's fight against organized crime and corruption and has tried to do this without fear or favour.

Of late significant political changes in South Africa have changed the environment in which the AFU operates. The unit is now more than ever appearing in media reports suggesting that the AFU is being undermined for political reasons. There has been no conclusive proof of the former but the reports certainly do warrant concern. It is the infamous arms deal scandal that has immersed the unit into the complex web of loyalty and betrayal that has characterized South Africa's politics in recent years. On March 19 2010, the National Director of Public Prosecutions(NDPP) released a media statement in which it announced its decision to abandon the preservation order against Mr Fana Hlongwane. National Prosecutions boss Menzi Simelane claimed that there was a lack of evidence and thus reason enough not to pursuit the AFU's preservation order. Questions were raised however as it emerged that there is in fact elaborate documentation which could constitute evidence including a 106-page affidavit from deputy director of Public Prosecutions Billy Downer, which details how Hlongwane was effectively paid £4.9-million between October 1999 and July 2001 by Arstow, a company set up by BAE to pay ‘commissions` for the arms deal. Downer said ‘there are reasonable grounds to believe that (Hlongwane) has committed the offences of corruption, fraud, money-laundering and/or racketeering in the context of the arms deal`. Hlongwane was Modise`s special adviser until April 1999, and consequently able to influence and/or pay off people who were able to influence the selection of BAE. Considering this evidence, the Asset Forfeiture Unit was granted a "preservation order" by Judge Willem van der Merwe in the High Court in Pretoria, freezing £437594 in the account of Hlongwane`s Gamari Trust in Lichtenstein`s Bank Pasche . The case was meant to be back in court on the April 6 2010 but was abandoned apparently on Simelane's orders after he met with Hlongwane's lawyers.

The decision to abandon the AFU's preservation order seems to have caused much division within the structures of the NPA with many senior level prosecutors disagreeing with Simelane's decision. Some believe that Simelane was put under political pressure to abandon the AFU's attempt to freeze Hlongwane's assets since the former is a well-connected business figure who is apparently a personal funder of the African National Congress (ANC). At present it cannot be conclusively established whether or not political pressure was applied to Simelane. What is clear though is that this latest scandal has put strain on the relationship between the NPA boss, members of his staff and the AFU. Such a situation surely impacts negatively on the state's fight against crime. Worse than this however is the danger that such a scandal may send an implicit message that political connections may at least delay one's assets from being seized and at best effectively prevent the seizure of one's criminal assets. Such a situation definitely should warrant concern.

Written by: Mongi Henda, Intern, Organised Crime and Money Laundering, ISS Cape Town