“Can Nedbank dodge the consequences of alleged state capture?”
This is the million dollar question most South Africans will be asking themselves as the bank gears up for a legal fight with the Special Investigating Unit (SIU) and Transnet over the alleged R2.7 billion Gupta spoils in an interest rate swops deal dating back to the state capture-era in 2015/16.
Nedbank is front and square of public inspection for its alleged role in state capture as outlined in the Zondo Commission of Inquiry from which it appears it is still reaping billions of rand to date.
“Is Nedbank too big to fail?” This is a question I have been mulling over this weekend after Business Report got line of sight of the Transnet, SIU court papers filed against the bank.
This, as I wasn’t aware that the swop deal is currently still in place until I looked at the court papers – with Nedbank executives having a lot to answer for.
But Nedbank, with total assets of R1.3 trillion and a market cap of R134 billion isn’t going down without a fight it has tasked its lawyers with to gear up for the legal battle against Transnet and the SIU rather than settle.
It is portraying itself as a victim of state capture, and says its has done nothing wrong. It believes its reputation can withstand the onslaught that is likely to come.
But it is facing a whole slew of other allegations that is worrying.
Other time-ticking bomb allegations include:
∎ Nedbank faces allegations from Airports Company South Africa (Acsa) for allegedly carrying out interest rate swops.
Nedbank had a formal business relationship with Regiments dating back to 2009 in which the company acted as an advisory firm that earned fees for transactions it facilitated for the bank.
Chief Justice Raymond Zondo’s report on state capture recommended that law enforcement agencies investigate Nedbank and its employees for their alleged role in a corrupt contract involving Acsa and Regiments.
∎ Questions hang over its role in a deal with the City of Joburg metro.
∎ Nedbank also had a long-running relationship with the Bank of Baroda and this continued long after they had closed their own Gupta-linked accounts, despite numerous media reports on the alleged dodgy activities at the time.
The Zondo Commission found that Baroda Bank facilitated the money laundering operation for the Guptas.
The Organised Crime and Corruption Reporting Project (OCCRP) identified a total of 231 transactions between companies owned or controlled by the Guptas where a so-called inter-company loan was given as the reason for the transfer, and transactions valued at R4.5bn.
According to Open Secrets, an international organisation tracking money in politics and its effect on elections and policy, it said: “As a foreign bank, Baroda could not clear transactions on its own; rather Nedbank cleared those transactions and relied on ‘clearing accounts’ to do so. This is typical of correspondent banking.
“As Baroda’s correspondent bank, Nedbank allowed Baroda to use its infrastructure for all financial transactions. Investigators at OCCRP have alleged that the nature of the relationship between Nedbank and Baroda enabled both banks to avoid responsibility for identifying and reporting suspicious transactions related to all of these accounts.”
Nedbank’s response to the Transnet swop deal is that to date, no evidence has been found or presented to it of any staff dishonesty, corruption or collusion.
“Nedbank stands by its previous statement on the matter of “Termination of Nedbank/Transnet mediation”. To the extent that there was corruption this was on the part of Regiments Group and Transnet staff members and not Nedbank. Nedbank will not be held liable for any governance failures at Transnet,” it said in a statement.
It is now up to the justice system to decide whether Nedbank is guilty or not.
But it will be interesting to see if any other lawsuits of whistle-blowers crawl out of the woodwork now that the legal gloves are off.
I think what deeply disturbs me about this case is that there might not be any political appetite to really dig into these allegations due to how embedded Nedbank is in the financial landscape of South Africa.
This as the country is greylisted for failing to have adequate oversight of terrorists and money laundering in the country.
If the gloves truly came off and the role of South Africans played in state capture was revealed, what would that do to the country’s perception as having robust financial markets with strong regulations?
This as the SA Reserve Bank (Sarb) has never had to deal with its own role in a bank employee being investigated by the Hawks for facilitating the Steinhoff billions leaving South African shores.
The government borrows billions of rand in loans from banks, so the relationship is complex.
This as the financial industry – banks, the Sarb and the Banking Association of South Africa – have a revolving door in the job career space leading to the lack of appetite for hard questions to be asked to upset the apple cart.
This brings me to questions around Mike Brown as the CEO of Nedbank during state capture.
In his career, Brown did a two-year tenure as chairman of the Banking Association of South Africa, and he was also deputy chairman of Business Leadership South Africa
The banking sector warmly congratulated Brown as he recently stepped down from his 14-year tenure as Nedbank CEO – a position for which he earned R477 million in salaries, bonuses, and long-term incentives.
Brown has received accolades for his sterling leadership of Nedbank in its split from Old Mutual, and growing its footprint.
He has also been quite vocal to the point of being an activist against state capture.
So all in all, Brown is the reputable face of banking and business.
But as CEO in theory, you are supposed to represent the company and bear the consequences in corruption or fraud scandals. Leaders are supposed to fall on their sword to demonstrate accountability and integrity.
It makes one wonder why Brown was so prominent and vocal against state capture if things were not lekker back at the ranch. Was this a concerted effort on his part to make things right without the company ever paying the piper?
While Nedbank also faces public scrutiny for its role in cutting its bank clients off for reputational risk with a lack of transparency, with which National Treasury seems to endorse, it is time for Nedbank to face its own crucible of being dragged through the courts.
If it is found not guilty, so be it. If found guilty, what then? Will it still be allowed to handle government deals or will it just face a massive fine? Only time will tell.
Philippa Larkin is Executive Editor of Business Report.
BUSINESS REPORT