South Africa Minister Urges Review of Gupta Account ClosuresBy , , and
Cabinet didn’t mention proposals in statement issued Friday
Nedbank CEO Brown says lender would cooperate with any probe
A South African cabinet committee called for a judicial review to consider creating a state bank and probe the mandates of banking oversight bodies after the nation’s four biggest lenders said they would stop doing business with a family that has ties to President Jacob Zuma.
The decision followed an investigation by an inter-ministerial committee led by Mineral Resources Minister Mosebenzi Zwane, who previously called on the banks to resume doing business with the Gupta family-owned Oakbay Investments Ltd. Zuma’s son Duduzane is in business with the Guptas and one of his wives has worked for them. While Zwane said it was a cabinet resolution, the cabinet made no mention of the recommendations in a statement issued on Friday following its meeting this week.
Evidence shows the banks’ actions “were as a result of innuendo and potentially reckless media statements and, as a South African company, Oakbay had very little recourse to the law,” Zwane said in a statement on his ministry’s website. “Looking into these mandates and strengthening them would go a long way in ensuring that, should any other South African company find itself in a similar situation, it could enjoy equal protection of the law.”
The call for a review of the decision by the banks came amid increasing tensions between Zuma’s government and the Treasury and the central bank, with Finance Minister Pravin Gordhan under police investigation for setting up an allegedly illicit surveillance unit when he led the tax agency. Zwane has suggested to the cabinet that it withdraw the central bank’s authority to license banks and make it the responsibility of the finance minister, Business Day newspaper reported on Wednesday.
“Cabinet made a resolution about the inter-ministerial committee to look into the banks issue in April,” Donald Liphoko, Government Communications and Information System director general, said by phone from Pretoria. “If cabinet had made another resolution on that issue it would have been in today’s cabinet statement. A further statement will be issued later today.”
With Zuma scheduled to step down as leader of the African National Congress next year, his allies in the party and the government are concerned he will soon lose his influence, said Zwelethu Jolobe, a politics lecturer at at the University of Cape Town.
“All the groupings within the ANC and various business interests that have allied themselves to him are now on shaky ground,” he said by phone. “What you are seeing is their attempt to reconfigure power in such a way that they get their golden handshake en route out.”
Because it has the mandate to oversee the banks, the Reserve Bank should undertake any investigation into their decision to close the Gupta’s accounts, said Robert Jeffrey, the managing director of economic advisory service Econometrix (Pty) Ltd.
“It is far better to have control of the banks under the Reserve Bank than under anybody else,” he said by phone from Johannesburg. “Centralized control is something that would be of major concern to investors.”
FirstRand Ltd.’s First National Bank, Standard Bank Group Ltd. and Nedbank Group Ltd. said earlier this year they would shut accounts related to the companies of the Gupta family, who is accused by critics of using their friendship with Zuma to exert influence over political appointments. Both the Guptas and Zuma deny the allegations. FirstRand will cooperate with any outcome, the lender said in an e-mailed response to questions.
Oakbay Investments Chief Executive Officer Nazeem Howa has said the steps are unfair and unprecedented, and threaten jobs at its mining and media units. The lenders all acted independently when deciding to close the accounts, have to comply with laws, such as money laundering rules, and need to ensure their clients abide by these regulations, the Banking Association South Africa said in April.
“The South African financial sector is globally acknowledged to be both sound and well-regulated so we are certain responsible action will be taken by all parties in this matter to ensure that the integrity of the financial system, underpinned by its alignment to global banking regulation, is maintained,” Nedbank Chief Executive Officer Mike Brown said in an e-mailed response to questions.
The committee wants the nation’s clearing-bank provisions reconsidered to allow for the issuance of new banking licenses, it said. “It is unclear why the Reserve Bank will not issue new banking licenses to other banks and this would need to be given careful attention by the judicial inquiry,” Zwane said in the statement.
The Gupta family made the surprise announcement on Aug. 27 that they will exit all their interests in South Africa by the end of the year.
Gordhan was a member of the ministerial committee, but didn’t participate in its meetings, Zwane said in the statement.
Zwane has been criticized by opposition politicians who have said he told Glencore Plc Chief Executive Officer Ivan Glasenberg to sell the loss-making Optimum coal mine to Tegeta Exploration & Resources Ltd., a company in which the Guptas have an interest. Tegeta says the minister had no influence over the deal and wasn’t involved in negotiations.
The Economic Freedom Fighters, an opposition party, said banks and auditors that cut ties with the Guptas should disclose their reasons. If there is any corruption, the lenders should file criminal charges so that these can be heard before a court rather than a judicial commission, which may not be independent, the EFF said in an e-mailed statement.