Rand Collusion Investigation Leader Loves ‘the Gory Details’

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Tembinkosi Bonakele
South Africa's Competition Commissioner Tembinkosi Bonakele in Pretoria. Photographer: Waldo Swiegers/Bloomberg

For evidence of collusion, South Africa’s antitrust boss needn’t stray far from his Pretoria office.

Standing on a third-floor landing looking across a grand government campus in South Africa’s capital, Tembinkosi Bonakele, 39, slips a hand in his pocket and laughs as he says that the headquarters of the Competition Commission was built by a construction cartel he investigated and successfully fined.

“It was a bit embarrassing for the DTI,” says Bonakele, referring to the Department of Trade and Industry, which commissioned the building.

The probe into collusion among builders resulted in a combined 1.5 billion rand ($123 million) penalty -- the authority’s largest -- for 15 South African construction companies in 2013, including Murray & Roberts Holdings Ltd. and Aveng Ltd. Since its inception in 1998, the Commission has also extracted financial penalties from steelmaker ArcelorMittal South Africa Ltd. and miller Pioneer Foods Group Ltd.

Those successes have helped establish the reputation of an organization now taking on some of the world’s biggest banks in a currency rigging probe that Bonakele announced May 19.

His pursuit of alleged currency conspirators at banks dealing in the South African rand, including JPMorgan Chase & Co. and Citigroup Inc., may be bigger than any assignment the regulator has taken on to date, Bonakele said in an interview in the commission’s board room.

Chatroom Collusion

Traders used an online chatroom called “ZAR domination,” its name inspired by the rand’s international code, to collude at a cost to bulk buyers of the currency, Bonakele says.

The investigation follows global scrutiny of misconduct in foreign exchange markets. Six banks agreed to pay $5.8 billion in fines in a settlement with the U.S. Justice Department announced May 20. While Bonakele won’t reveal what prompted his inquiry, he says probes in other countries helped motivate him.

The scale of his inquiry and the size and resources of the targeted organizations aren’t daunting, Bonakele says.

“We have won cases where we have one counsel against five,” he says. “I’m never worried about that. That’s the advantage of working for a public institution. You are able to go out there and get the information. Aided by the law, you should be able to bring justice. We’ve had many high-stakes games here.”

Fort Hare

The 11 subjects in the rand-rigging case are JPMorgan, JPMorgan South Africa, Citigroup, Citigroup Global Markets (Pty) Ltd., BNP Paribas SA, BNP Paribas South Africa, Barclays Bank Plc, Barclays Africa Group Ltd., Investec Ltd., Standard New York Securities Inc. and Standard Chartered Bank. The banks have either declined to comment on the probe or said they will cooperate with the investigation.

Bonakele studied law at the University of Fort Hare, the Alice, Eastern Cape province-based institution renowned for producing some of Africa’s most notable post-independence leaders, including Nelson Mandela and Robert Mugabe. It was during a yearlong stint at Clifford Chance LLP in New York City that he developed a taste for antitrust law.

Within a year of returning to South Africa, Bonakele was recruited by the Competition Commission. That was a decade ago.

At the state-funded watchdog, Bonakele is charged with scrutinizing deals to protect Africa’s most developed economy from monopolies, work he relishes.

“You learn so much about how the business world works and how decisions are made,” Bonakele says. “You get inside the companies. You find gory details about them.”

Leniency Policy

Bonakele says he championed the creation of the cartels division -- now 30 people strong -- and developed the commission’s leniency policy, which has encouraged companies to come forward and cooperate.

“The risk of getting caught is very high, so participants in cartels have fessed up early to achieve the degree of leniency,” David Lewis, a former head of the Competition Tribunal, the body that adjudicates on commission findings, said in a phone interview.

Aspects of the Commission’s work have attracted criticism. Some businesses feel the Competition Commission’s interpretation of what qualifies as anti-competitive behavior is too strict, Nedbank Group Ltd.’s Chief Economist Dennis Dykes said in a phone interview.

“The fines can be very significant,” Dykes said. “There has been a bit of a feeling that some of that money should maybe flow back to the victims of the higher prices.”

Sasol Reversal

And not everything has gone the way of Bonakele or the Commission.

A fine of 534 million rand imposed on Sasol Ltd. by the Tribunal for alleged overpricing in the polymer industry was overturned on appeal on June 17.

“Regrettably, the evidence of the commission again reflected a level of analysis which could not possibly be plausibly advanced by an expert in the field,” Judge Dennis Davis wrote in part of his ruling. The Commission is considering its response to the finding, spokesman Mava Scott said.

Bonakele says the Commission’s focus is shifting from breaking open local cartels legitimized during apartheid, when South Africa’s political isolation left the economy hamstrung by sanctions, to keeping international companies in check.

“You had state-sanctioned cartels, and even after those were supposed to be stopped they continued in one form or another,” Bonakele says. “We are still uncovering those. Now we are also seeing more and more international cartels active in South Africa.”

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