Sarb's Kganyago raised red flag on Gupta bank probe | Fin24

Sarb's Kganyago raised red flag on Gupta bank probe

Oct 16 2016 13:33
Liesl Peyper

Cape Town – South African Reserve Bank (Sarb) governor Lesetja Kganyago raised his concerns about possible political interference in the operations of banks as early as April this year. 

In a letter that formed part of an affidavit submitted to the North Gauteng High Court in Pretoria on Friday by Finance Minister Pravin Gordhan, Kganyago reacted to a Cabinet resolution in April that certain ministers engage with banks who had terminated their relationship with the Gupta family. 

“We caution against the unintended consequence of this being viewed as undue political interference in banks’ operations, and restricting the ability of banks to make independent operational decisions within the parameters of the existing legal and regulatory frameworks,” Kganyago wrote. 

“This could introduce heightened levels of uncertainty and pose a risk to South Africa’s financial stability,” he continued. 

Kganyago’s letter to Gordhan was dated April 26 – five days after Minister for Planning, Monitoring and Evaluation Jeff Radebe told journalists in a media briefing that three cabinet ministers were to hold meetings with South Africa’s four big banks to find out why they closed the bank accounts of the Gupta-owned Oakbay Investments. 

READ: Radebe opens Oakbay can of worms

At the time, Radebe said the three ministers tasked with the deliberations would be Minister of Mineral Resources Mosebenzi Zwane, who has ties with the Gupta family, as well as Labour Minister Mildred Oliphant and Gordhan. 

Although Gordhan was never part of these meetings, he sought legal advice from senior counsel Jeremy Gauntlett who said Gordhan wasn’t empowered to intervene in the matter. 

On Friday, Gordhan went a step further and asked the Pretoria High Court to declare that he is not legally empowered to intervene in the relationship between the Guptas and the four big banks, Absa, First National Bank, Standard Bank of SA and Nedbank. 

In his court papers it is revealed that 72 suspicious transactions, totalling R6.83bn, took place, all of which were related to the Guptas, or companies controlled by the family.

DA spokesperson on finance David Maynier said it is interesting to note that of the 72 suspicious transactions, 26 of them in the amount of R5.99bn took place after Nazeem Howa, the chief executive officer of Oakbay Investments, lodged his first complaint to Gordhan, claiming “corporate bullying” and “anti-competitive practices”. 

"Whatever the case, we have to be sure that the suspicious transactions are being investigated by the South African Police Service," Maynier said. 

Included in Gordhan's affidavit was correspondence between him and Oakbay Resources, as well as letters from Kganyago, the executive director of the Financial Intelligence Centre and Kuben Naidoo, deputy governor of the Sarb. 

In his letter to Gordhan, Kganyago said it is the Reserve Bank’s view that there are sufficient remedies and recourse for bank customers in the form of the courts and ombudsmen. “As such, any aggrieved bank customer should seek recourse through the said establishments and processes.” 

READ: VR Laser, Denel go back 15 years - Brown

In separate letter, dated August 12  2016, which was also part of Gordhan’s affidavit, Naidoo alerted the finance minister that Standard Bank had informed the Financial Surveillance Department of a “particular foreign exchange transaction” involving VR Laser Asia. Naidoo said this “could form the basis of an exchange control-related investigation”.

State-owned entity Denel formed a joint venture with VR Laser Asia – a company 100% owned by the Guptas' business partner Salim Essa. The deal was mired in controversy – on the one hand because of its perceived links to the Gupta family, and on the other because Denel had not obtained Treasury’s permission for the deal as required by the Public Finance Management Act. 

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