Archive for the ‘Fraud’ Category


In the early hours of Friday morning, 31 March 2017, following a meeting with senior ANC officials, President Jacob Zuma announced that he had decided to reshuffle his cabinet. The reasons he gave were that the reshuffle was for effectiveness and efficiency and to draw younger people and women into the cabinet. Amongst those removed was Pravin Gordhan from his post of Minister of Finance.

There was an immediate response of accusations against Zuma that he was lying and that his true reasons were those of patronage and ultimately of self enrichment.

The question arises, if it is true that Zuma was lying, whether the criminal law has any possible response.  The answer seems to require an analysis of when lying is punished as a criminal offence in our law – which it sometimes is under the offence of fraud.

In what follows I consider whether – on the assumption that Zuma did indeed lie – he may have committed the crime of fraud. The conclusion is that it seems – on the relevant assumptions made – that Zuma may well have committed fraud as it is understood in our law. As will be seen, this does not require any sort of novel application or development of the law of fraud . It is not straightforward, but that is a function of the law of fraud itself which is inherently complex. However, once the complexity is grasped, it seems clear that Zuma may well have committed fraud.


The facts against which this will be considered are as follows:

Jacob Zuma met with several senior members of his party late on 30 March 2017 to seek their approval for his proposed cabinet reshuffle.

At the end of that meeting, at 00:31 (midnight) he announced that he was reshuffling his cabinet for – his reasons: efficiency and effectiveness and to give woman and younger people a chance to serve in cabinet.

The markets reacted almost immediately and the rand began to fall, capital started leaving SA’s market, and South African bonds lost value. Within days the loss was in the billions. As at the time of writing, S&P had downgraded SA to “junk” status – in direct response to Zuma’s move.


The question that arises here for consideration all turns in whether the reasons given by Zuma are false. Many senior respected individuals have suggested – with some detail – that Zuma’s ultimate motives were not as he claimed, but rather driven by concerns with patronage and self enrichment. The discussion that follows will presume that this is true for the sake of analysis. The question of interest is whether he could be convicted of fraud if he lied about his reasons.

I will also presume that a court would have overruled a decision to reshuffle the cabinet based on a President’s concerns with self-enrichment and patronage. I am well aware that the DA attempt to have the swearing in ceremony of the new ministers interdicted and that the Court declined to do so. However, there would be fundamental differences between that application – aimed at the swearing in in which the applicant was unable to provide essential evidence of improper motive,  and one in which the decision itself was attacked and the evidence is based on what Zuma admitted  on national television and published through government communications.


Fraud is the unlawful intentional making of a misrepresentation which is prejudicial or potentially prejudicial to another.

Therefore, fraud requires that someone:

  1. intentionally
  2. unlawfully (with no right to do so – such as in self defence or with consent);
  3. misrepresents something;
  4. which causes actual or potential prejudice.

Setting aside for the moment the requirements of intention, unlawfulness and prejudice – which I will return to shortly, the crucial issue will be whether he made any form of misrepresentation.


As will be seen, this will resolve down to the question of whether he lied. Ordinarily, in the context of fraud, the misrepresentation is a statement (oral or in writing) that something is true, which is, in fact, false. Classically, examples include telling someone that a piece of glass is a diamond, or that, say, a vehicle has only done 20 000km, whereas it has, in fact, done 200 000km.

Crucially however, one may misrepresent something by implication alone and by misrepresenting one’s state of mind (R v Persotam 1938 AD 92; R v Deetlefs 1953 (1) SA418 (AD)). The Court in S v Isaacs 1968 2 SA 187 D stated that “the state of a man’s mind is as much a fact as the state of his digestion” (p 191).

For example, if I walk into a restaurant and sit down, I imply that I intent to pay for any food or drink served to me. I represent that my state of mind is that I intend to pay. If, in fact, I don’t intend to pay, assuming some other minor requirements are also satisfied, I commit fraud and I do so at that moment – at the moment of my implied state of mind.

Applied to Jacob Zuma’s cabinet reshuffle, the question is whether his mental state was other than what he said and implied it was. Notice that not only did he explain that his reasons were for efficiency and effectiveness, but, as the President, he implies that his reasons are informed by the best interests of the country. His representation therefore was that he took the decision(s) for efficiency and effectiveness in the best interests of the country. In the result, on the assumptions above, it seems that Zuma made a misrepresentation.


Prejudice is widely defined in law to include proprietary and non-proprietary loss – that is, it is not limited to losses that have a monetary value. Prejudice may be non-proprietary in the sense that it causes someone to become exposed to civil or criminal litigation (R v Seabe 1927 AD 28) to contract with someone they otherwise would not (R v Deale 1960 (3) SA 846 (T)) or otherwise to suffer a significant degree of what amounts to inconvenience.

In the case of R v Heyne 1956 (3) SA 604 (A) the accused was a person licensed to sell alcohol under strict conditions – including the keeping of an accurate sales register. He had falsified the entries to permit for more sales. He was convicted of fraud on the basis of the potential prejudice to the State’s ability to control the supply of liquor. The accused had posed a risk of interference with proper governance.

There can be no question that the decision to reshuffle and the reshuffle itself caused billions of rands of loss – actual proprietary prejudice. But one must recall that it is the misrepresentation that must cause the actual prejudice or pose potential prejudice. We know that the decision and reshuffle made caused loss, but the decision and reshuffle was not the misrepresentation.

Arguably, also, the financial (patrimonial) losses resulted not from a belief in the lies, but from disbelief. In this sense there can be no claim that Zuma’s lies caused the losses that resulted from the markets falling precisely because investors did not believe him.

However, if a bank paid out a million rand of Z’s money to X on the misrepresentation of X to Y, who is a bank teller, that X is Z, X cannot rely on the fact that he made the misrepresentation to Y – and not the bank. This links the misrepresentation to the prejudice in the form of the proprietary losses – of billions of rands of losses on the markets – by taking account of the effect of the misrepresentation on the intermediaries: the senior party members with whom he met and then civil society.

Also, it is worth observing that this form of fraud – that we are concerned with here – would be unconventional in the sense that, instead of requiring of the victim to do something, to his or her prejudice, in this case the president would require that the victim(s) did nothing and let him do what he wants. What Zuma needed was to be allowed to do what he wanted without anyone frustrating his plans by political means or, ultimately, by legal action.

Also, as indicated, it is not necessary that the prejudice suffered must be proprietary in that it has a value in money. As discussed above, fraud can also be committed by causing non-proprietary prejudice, or, following on what was said immediately above, potential non-proprietary prejudice. Non-proprietary prejudice includes – discussed above – even causing a weakening of proper governance. Once this is understood, the proposition that Zuma may have committed fraud is not such a stretch after all.

Is there conceivably something that could have been done if Zuma had told the truth – that he was annexing, for his ultimate own ends, the resources of treasury? If one regards this – as it must incontrovertibly be – a consumate act in breach of his constitutional obligations, then there was, at the very least, or perhaps at the very last, the option of urgent court intervention.

To follow through then, one must consider what the position would have been if Zuma had not made the misrepresentation. This requires that one consider what would have happened if Zuma had told the truth – on the assumption that the allegations of self-enrichment and patronage are true. Imagine if Zuma had throughout told everyone, before he made the decision and in testing the lie on his fellow party members, and afterwards in making the announcement that has decided to reshuffle his cabinet, that he was motivated by considerations of self-enrichment and patronage. One may expect that he would have realised that it would be unwise to proceed or would been blocked by some members of his own party. Assuming his own party members moved against him, all losses may have been averted – proprietary and non-proprietary.

If this had not halted the reshuffle, one may imagine the legal response which an announcement at midnight from Zuma of his true intentions would have triggered and, at the same time, it would have provided the best evidence possible that his decision violated the Constitution and the rule of law. Assuming that he was permitted to make the announcement that he intended this unlawful course of action, there would have been some losses (proprietary and non-proprietary), but one may expect that immediate and decisive action in the Courts  – perhaps at sunrise that morning – to prevent the move would have contained the damage.

If he had told his fellow South Africans at 00h31 in the morning of his intentions and his true reasons, one may expect that political opposition parties and civil Society organizations would have been waiting at the doors of the courts as they opened that morning. Some judges may have been dragged from their beds and begged to hold court in their kitchens within hours of the announcement – as the rules of Court permit.

Would they have had a better chance than the DA did at 18h00 on that Friday night? As indicated above, there would have been crucial differences: 1) the damage would not already have been done in the sense that the announcement had yet to be implemented; and 2) there would have been the clearest evidence required for a court to conclude – at least provisionally – that the President had gone mad. I suspect that a Court would have issued an interim interdict against the president.

However, if this seems too speculative, fraud does not require that the lie is actually believed and that loss is actually incurred. It is enough if the misrepresentation posed potential prejudice – that is, it could have, at the moment it was made, caused prejudice or loss – irrespective of whether loss actually occurred (R v Kruse 1946 AD 524; R v Heyne 1956 (3) SA 604 (A); R v Seabe 1927 AD 28). It would be enough if, in making the misrepresentation, a reasonable person might have acted on the misrepresentation. Crucially – again – this is tested by reference to an objective standard – a reasonable person – and not the actual people to whom it was communicated. In this context, acting on the misrepresentation meant taking no action and allowing Zuma to proceed to make the announcement of the reshuffle and to effect the reshuffle.

The question becomes – on hearing of Zuma’s intention to reshuffle the cabinet for nefarious purposes – would a reasonable person have stood by and done nothing – or is it possible that s/he would have moved against Zuma and initiated a process to stop Zuma in his tracks?

In other words, the prosecution will not have to prove that the lie did actually immobilise those who would otherwise have frustrated his move, but only that, it might have. It seems entirely possible that had Zuma told the truth, someone would have moved against him and that either all or some of the proprietary and non-propriety loss may have been averted.

It would seem then that a court may be persuaded that his misrepresentation caused the necessary prejudice or posed the necessary potential prejudice.

Unlawfulness and Intention

Regarding unlawfulness, there appears no conceivable ground on which a misrepresentation of this nature could ever be justified. It is, almost axiomatically, unconstitutional and therefore unlawful.

Was there the required intention? This would require that Zuma foresaw and accepted the following:

  • That his representation was false. We should recall that the misrepresentation was one relating to his mental state. It is virtually inconceivable that he did not know that he was misrepresenting his true motives.
  • That the misrepresentation, at least, posed potential prejudice. That is, did he foresee that if he told the truth he would be halted and that, if he wasn’t, that South Africa would sustain severe losses in the markets or that he would constitute a cabinet incapable – or less than optimally capable – of proper governance in the best interests of South Africa.
  • That he had no right or other legitimate justification for making the misrepresentation. One may expect that any court will be satisfied easily that Zuma knew he was not entitled to make this misrepresentation.

It seems conceivable that a court may be persuaded of all of this.


Will this be impossible to prove? There can be no question that proving that a person believed or thought something other than what they claim to have believed or thought is a difficult task.

However, it is a task that is undertaken and achieved on a daily basis in our courts when the state is put to the proof by an accused who denies that he intended to kill, to steal, to assault – and, of course, to defraud. The courts operate on the “must have” inference – that is, that, given the evidence, the accused must have been thinking, say, P, and not as the accused claims, Q. Sometimes the inference is based on the circumstances alone, sometimes based on what the accused him/herself says – even in an attempt to deny responsibility. Often it will be based on what the accused told others in confidence – especially when those others need to offer up something or someone to save themselves. The point, of course, is that while this task may be difficult, it is by no means impossible.


It is worth considering whether the liability for fraud extends to anyone else. The answer is an unequivocal yes – to anyone who knew – or suspected – that Zuma was lying and who assisted by doing something or by doing nothing when our Constitution requires that they did something. These people would all qualify as accomplices to the fraud, and be liable to the same punishment as Zuma himself.


On this analysis then, it would seem that there is a very real prospect that – again, assuming the representations were false and this could be proved – Zuma could be convicted of fraud. This could be charge number 784.

James Grant