A recent Special Investigating Unit (SIU) investigation has revealed that a group of officials and insolvency practitioners, allegedly working together, rigged the liquidation system in South Africa. The investigation, which was submitted to President Cyril Ramaphosa in September 2023, found evidence of fraud, corruption, and other forms of malfeasance. The report details how a network of master’s office officials, liquidators, and insolvency practitioners captured the lucrative liquidation system, rigging appointments and engineering creditor support.
The SIU investigated 273 matters and identified irregularities in 28 of them, making 47 criminal referrals to the National Prosecuting Authority (NPA). However, the NPA has yet to act on the report, with its spokesperson, Kaizer Kganyago, failing to respond to requests for comment. Justice and constitutional development minister Mmamoloko Kubayi stated that her department was aware of the interference in the appointment of liquidators and insolvency practitioners and had taken disciplinary action against some employees.
The SIU report highlights the activities of Kaap-Vaal Trust, a firm of liquidators whose practitioners became embroiled in multiple SIU investigations. In one matter, the SIU found that the company’s officials appeared to have fabricated claims worth about R345m to engineer their appointment as preferred liquidator. The report also implicates former acting chief master (ACM) Theresia Bezuidenhout, who allegedly improperly interfered in at least two critical liquidator appointments.
Bezuidenhout allegedly pressured officials to appoint Cloete Murray in the Bosasa liquidation, despite lacking the authority to direct the process. Murray, who was assassinated in March 2023, was a prominent insolvency practitioner who handled several high-profile corporate failures. The SIU found that Bezuidenhout assembled a team of officials from different master’s offices to appoint Murray as Bosasa’s provisional liquidator, departing from established practice.
The SIU report also details the alleged corrupt relationships between insolvency practitioners and officials. In one case, an employee opted to resign after being threatened and pressured to illegally facilitate the employment of a specific liquidator. The department has referred other cases to the Directorate for Priority Crimes Investigation, commonly known as the Hawks, for further investigation.
The appointment of a liquidator is a critical decision in the insolvency industry, as it determines who controls the disposal of assets, litigation, creditor claims, and professional fees attached to collapsed companies. The SIU’s findings have significant implications for the insolvency industry, highlighting the need for greater transparency and accountability in the appointment of liquidators.
The minister of justice, Mmamoloko Kubayi, stated that her department had taken steps to address the issues raised by the SIU report, including disciplinary action against employees and referrals to the Hawks. However, the lack of action by the NPA has raised concerns about the effectiveness of the country’s law enforcement agencies in tackling corruption and malfeasance in the insolvency industry.
Key points
- A "cabal" of officials and insolvency practitioners allegedly rigged the liquidation system in South Africa, committing fraud and corruption to channel lucrative insolvencies to a favoured few.
- The SIU investigation made 47 criminal referrals to the NPA, but the authority has yet to act on the report.
- The report implicates former acting chief master Theresia Bezuidenhout and highlights the activities of Kaap-Vaal Trust, a firm of liquidators involved in multiple SIU investigations.
