By Corrie Kruger
There are three types of people in this world: those who make things happen, those who watch things happen, and those who wonder what happened.” ― Mary Kay Ash. In the article below Nedbank has vowed to defend itself vigorously, the only problem is it was on the scene of the crime.
Things are starting to happen: The Banking Ombudsman put R25 735 594.17 back into consumers’ pockets after resolving 8 008 complaints against banks last year about current accounts, personal loans, savings accounts, credit cards and home loans.
Adv Shamila Bathohi, National Director of Public Prosecutions, said, “The rule of law in South Africa was on life support at the moment, and it had to be addressed now.”
This was said during a SCOPA report in 2022 dealing with the National Prosecuting Authority on cases referred to it by the Special Investigation Unit (SIU).
Transnet and the Special Investigating Unit (SIU) have jointly instituted proceedings against Nedbank in the Johannesburg High Court to set aside interest rate swop transactions which took place in 2015 and 2016 between Transnet and Nedbank, and under which Nedbank profited more than R2,736,094,704.82.
If the bank made this insane profit who lost the amount? Obviously, Transnet passes the bill to Treasury who in turn look to the citizens of this country, who are taxed.
What a vicious circle and in the process Chief Justice Zondo questions why the budget of the judiciary was cut.
“Transnet and the SIU are of the view that the interest rate swops are void and unenforceable under the Public Finance Management Act, alternatively contravene section 217 of the Constitution and are contrary to public policy.
“Section 217 of the Constitution of the Republic of South Africa requires that when an organ of state contracts for goods and services, it must do so in accordance with principles of fairness, equitability, transparency, competitiveness and cost-effectiveness.
“This applies to organs of state in the national, provincial, or local sphere of government, or any other institution identified in national legislation.
Nedbank has previously said it was not, and could not have been, aware of the Regiments Group’s apparent collusive relationships with senior officials at Transnet or its links with the Guptas.
It said it would defend itself vigorously, as it had not been provided with “any evidence of collusion or corruption on the part of Nedbank or its staff” despite requesting disclosure from Transnet.
In this regard one would rather expect the bank to state that it has instituted all reasonable steps to avail itself of all relevant matters pertaining to the client.
A transaction of this nature is not done in the normal day to day operations of a dealer on the dealing desk.
This is a transaction of such magnitude that the full bank’s scrutiny and due diligence need to be utilised. A pro-active approach must have been followed and relevant questions addressed.
It would be of great comfort to the citizens of the country if Nedbank was prepared to divulge all the material documents and minutes of meetings which it captures on its IT Systems. Anyone familiar Bank Credit Meetings will know that there will always be earnest questions from members of the credit committee.
Instead of the bank asking for proof of wrongdoing it would have helped its shareholders and other stakeholders such as its other clients if the bank itself provided full disclosure and evidence of the steps it took. At the time the transaction took place the client, Transnet, did not have a strong balance sheet, it had changes to board members and regular changes of senior management.
The requirements for a bank to know its client goes way beyond the superficial matters. Any prudent bank ought to have been on high alert surrounding Transnet.
In our case law it is stated, “If banks for fear of offending their customers will not make enquiries into unusual circumstances, they must take with the benefit of not annoying their customers the risk of liability because they do not enquire.”
This case comes at a troubled time for Nedbank. Another case is before the courts with familiar parties involved.
Controversial businessman and former Regiments Capital Director, Eric Wood, appeared together with former Transnet and Eskom boss Brian Molefe, former Transnet group CEO Siyabonga Gama, former Group Chief Financial Officer Anoj Singh, Regiments Capital Directors Niven Pillay and Litha Nyhonhya, former Group Chief Financial Officer Garry Pita, former Group Treasurer Phetolo Ramosebudi, Trillian Asset Management current Director, Daniel Roy for Novum Asset Management and Kuben Moodley for Albatime Pty Ltd.
In recent media reports there are other enablers in trouble such as Sasfin Bank.
SARS is suing Sasfin Bank for more than half of its balance sheet because it allegedly facilitated offshore payments of untaxed billions on the back of fake documents.
Al Jazeera reported that “officials at three major SA banks are helping a gold smuggling gang launder large sums of money in exchange for bribes”, an investigation found.
One can expect the court to ask Nedbank and Transnet to explain why they did not approach the Johannesburg Stock Exchange (JSE) for guidance on the pricing of the interest rate swop. The magnitude of profit generated place a huge question mark over the appropriate pricing. The following is an extraction from JSE announcements at the time.
“Client demand for a swop-style product offering on exchange drove the JSE to begin product development late 2013. The standard interest rate swop future that is being launched is based on the Eris Methodology™ and has been licensed from Eris Exchange, a US-based futures exchange group. The JSE and Eris Exchange announced a Swop Futures partnership on 15 April 2015. The standard IRS Future product will be based on the Johannesburg Interbank Agreed Rate (Jibar) and denominated in South African Rand (ZAR).
The product will follow the standard South African swop market conventions while using the Eris Methodology™, allowing the contracts to replicate the cash flows of OTC swops.
An expert witness in this case would add a lot of value to the Transnet and the NPA. Paul Holden is a South African-born and London-based historian, researcher, writer, and activist working for Corruption Watch (UK). He has published four books to date on issues related to corruption, governance, and democratic practice in South Africa, two of which focus on the arms deal.
Mr Holden made substantial contributions to the Zondo commission providing detailed factual information on the State Capture transactions.
Corrie Kruger is an independent analyst.