SIU to probe Nedbank, Standard Bank over Acsa transactions during State Capture era

SA’s biggest commercial banks might have to defend themselves against a new and potentially damning investigation into their role in executing financial transactions at the Airports Company SA (Acsa) that were allegedly tainted by corruption during the State Capture era. 

The commercial banks in question and in the crosshairs of the Special Investigating Unit (SIU) probe are Standard Bank and Nedbank. The SIU is a body that investigates allegations of corruption at state organs and entities, and has the power to institute legal proceedings to recover losses.

President Cyril Ramaphosa has signed proclamations authorising the SIU to investigate, among other matters, financial transactions that “various banks” structured for Acsa, which is a state-owned company that operates South Africa’s nine major airports. 

The SIU’s media statement that announced the proclamation regarding the affairs of Acsa does not mention the banks by name. However, it has been accepted that the banks are Nedbank and Standard Bank because they were named by the State Capture Commission reports for being involved in financial transactions at Acsa. 

In the reports, Justice Raymond Zondo, who led the State Capture Commission of Inquiry, did not make a definitive finding of wrongdoing against Nedbank or Standard Bank, but merely questioned their work at Acsa and recommended that the financial transactions they structured must be further investigated.

Following the release of the first part of the State Capture Commission report in January 2022 that mentions the Acsa financial transactions, the airport operator referred the report’s findings to the SIU for further investigation and litigation. Acsa believes that the SIU has the necessary tools and structures to initiate speedy litigation. Acsa wants the SIU investigation to have an outcome of wrongdoing so that the airport operator starts a process of recovering funds paid under the financial transactions or any losses it suffered through the transactions. The transactions that Nedbank and Standard Bank structured are known as interest rate swap transactions (more below on how they work), which were worth R3.5-billion and executed between 2009 and 2011. 

At a basic level, an interest rate swap happens when two parties agree to swap the kind of interest rate they pay on loans, which would include swapping a floating/variable interest rate for a fixed one. Swaps are essentially a gamble on what interest rates will be in the future. During an interest rate rising cycle, fixing an interest rate could make a loan and interest payments cheaper. But down the line, fixing interest rates (especially below-market interest rates) costs more.

The SIU has now confirmed that its investigation will look into “improper or unlawful conduct by employees or officials of Acsa”. The SIU goes on: “This includes the unlawful appropriation or expenditure of public funds or property; irregular or unapproved transactions, practices, or measures involving state property; intentional or negligent loss of public funds; damage to public assets; and offences outlined in the Prevention and Combating of Corrupt Activities Act, 2004.” 

The SIU added that the investigation extends to “any unlawful or improper conduct by individuals causing or potentially causing significant harm to public interests”. This is where the role of Nedbank and Standard Bank in the interest rate swap transactions will be examined. 

In a statement, Acsa was somewhat gleeful at news of the SIU’s investigation. “We view this investigation as an important step in ensuring the integrity of our operations and maintaining the public’s trust,” it said.  For banks, this is arguably another headache in a long list of compliance with ethics and governance requirements. 

Standard Bank told Daily Maverick that it was “aware of and notes the proclamation” of the SIU. “We will continue to work with law enforcement agencies as and when approached,” the bank said in a short statement. 

Meanwhile, Nedbank said the SIU proclamation was expected, given the SIU’s previous statements to Parliament about the State Capture Commission findings. 

Nedbank said it was a counterparty to interest rate swap transactions with Acsa between 2009 and 2011. “All transactions were properly authorised by Acsa,” said Nedbank, which also shifted the blame to the airport operator. 

Nedbank said it was not provided an opportunity to present its version of events involving the Acsa interest rate swap transactions before the State Capture Commission. 

“Nedbank maintains its position that it has found no evidence of any Nedbank staff collusion or corruption, nor has it been presented with any such evidence by any external party,” read a statement by the bank to Daily Maverick.

Through the interest rate swaps transactions from 2009, the banks were essentially involved in restructuring the interest on the debt Acsa used to fund its airport operations. At the same time, the banks would receive fees for doing so.

In 2008, Acsa engaged Regiments, a financial services firm linked to the Gupta family, to advise it on funding structures and ways to reform Acsa’s debt situation. According to the State Capture Commission report, Phetolo Ramosebudi, the Acsa treasurer from 2007 to 2011, developed a “corrupt relationship” with Regiments while he was at the airport operator and responsible for managing its money, debt and financial risks. And because of this sullied relationship, the State Capture Commission found that Ramosebudi was instrumental in getting Regiments to be appointed to restructure Acsa’s debt through interest rate swaps transactions, which later involved Standard Bank and Nedbank.

Although Regiments had been appointed on terms that provided for a specific fee, “with the collusion” of Ramosebudi, Regiments arranged to extract more than an additional R50-million at the expense of Acsa.

“There is no evidence to suggest that anyone at Acsa, other than Mr Ramosebudi, was aware of these arrangements. On his own version, Mr. Ramosebudi was not authorised to enter into arrangements like these for the payment of additional ‘fees’ to Regiments Capital,” read the State Capture Commission report.

Mario Visnenza and Moss Brickman, the Nedbank dealers who engaged with Regiments about the Acsa transaction, appear to have had an arrangement with Eric Wood, who headed Regiments. 

This arrangement involved Regiments engineering its “fee”, which was to be repaid by Acsa over the life of the interest rate swap transactions, and would be matched by an equivalent amount to be paid to Nedbank by Acsa.

About Standard Bank’s involvement, the State Capture Commission report said Ramosebudi assured the bank that Acsa was willing to enter into these arrangements in terms of which Standard Bank would pay Regiments “fees” that would be repaid by Acsa over the life of the transactions.

Nedbank is also defending itself against its involvement with Regiments Capital over similar interest rate swaps at Transnet, a state-owned transport group. 

Read more: Special Investigating Unit, Transnet join forces to sue Nedbank for R10.5bn

The matter is yet to play out in court. DM