Nedbank Urged by Mines Minister to Retain Guptas as Clientsby
Lender severed ties with family on business, reputational risk
CEO Mike Brown met with Zwane as head of government task team
Nedbank Group Ltd. said South African Mines Minister Mosebenzi Zwane urged the lender to reconsider its decision to sever ties with companies tied to the Gupta family, who are friends of President Jacob Zuma and in business with his son.
Nedbank, in a letter to Oakbay Investments (Pty) Ltd. dated April 7, said a continued relationship with the Gupta-controlled company would “create material business risks that could pose significant reputational risks,” according to an affidavit Chief Executive Officer Mike Brown filed Monday in the Pretoria High Court. It gave the company 30 days to find alternative bankers.
After the country’s four biggest banks closed their accounts earlier this year, the Guptas asked Finance Minister Pravin Gordhan to intervene. Gordhan sought a court order in October stating that he can’t prevent banks from cutting clients. The lenders, including Standard Bank Group Ltd., Barclays Africa Group Ltd. and FirstRand Ltd., have said they agree with Gordhan’s stance. Nedbank has to consider international banking rules on anti-money laundering, bribery and corruption when dealing with customers, Brown said in the court papers.
Brown agreed to meet Zwane in May because the minister was part of of an inter-ministerial committee that also included Gordhan and Labour Minister Mildred Oliphant to probe why the banks stopped doing business with the Guptas. Zwane told Brown that the finance and labor ministers were aware of the meeting and told him to proceed in their absence.
Brown said that despite assurances from the minister that the goal of the meeting was to resolve “apparent issues of investor confidence,” and not to represent any particular family or company, Zwane posed several questions relating to the specifics around Nedbank’s termination of the Gupta accounts.
Nedbank was unaware of the names of the attendees who had joined the meeting so it requested a list from the committee’s secretary. That list included Communications Minister Faith Muthambi and Mzwanele Manyi, an adviser to Muthambi and a former government spokesman. The list incorrectly said Oliphant attended the meeting, Brown said.
Manyi leads the Progressive Professionals Forum, which asked Zuma to delay signing a law that will compel banks to more closely scrutinize their customers and their transactions because it has constitutional defects. Zuma has sent the bill back to parliament, which may result in the country missing a deadline to pass the law.
“The overall impression I came away with was that the purpose of the meeting was to determine whether there was a co-ordinated decision among the major South African banks to terminate the accounts of persons affiliated with the Gupta family, and whether Nedbank would consider engaging with the relevant entities as their primary banker,” Brown said.
Zwane’s spokesman Ayanda Shezi referred a request for comment to cabinet spokesman Donald Liphoko, who said by phone on Tuesday it doesn’t remark on matters before the court.
Zuma “reprimanded” Zwane after the minister issued a statement in September that the cabinet had decided to set up a judicial investigation into the country’s banking industry following the decision to close the Guptas’ accounts. The presidency said on Sept. 2 the statement was issued in Zwane’s personal capacity and didn’t reflect the views of the cabinet.
FirstRand Ltd., Africa’s biggest bank by market value, was the first lender to file court papers last month. Like Brown, Chief Executive Officer Johan Burger said FirstRand severed ties with the Gupta family because of risks to its business and reputation.
In his affidavit filed in October, the finance minister highlighted 72 transactions totaling 6.8 billion rand ($500 million) by the Guptas and companies they control that the country’s anti-money laundering agency considered suspicious. The transactions were approved and cleared by the respective banks, Van Der Merwe Associates, who are representing the Guptas, said at the time. The Guptas and Zuma have repeatedly denied any wrongdoing.