In November last year, Minister in the Presidency Khumbudzo Ntshavheni was in a state of high excitement. One of the 28 South African and international banks that have been fighting the Competition Commission for a decade in what is known as the Forex Cartel case had admitted culpability.
The bank, Standard Chartered (no relation to SA’s Standard Bank), admitted liability for price fixing and dividing markets in the long-ongoing case, which involved currency traders using chat rooms to try to manipulate trades. Standard Chartered agreed to pay a fine of R43-million.
In response, Ntshavheni said in a report-back on a Cabinet meeting that this proved the government’s long-term belief that the rand was being “manipulated by the private sector who has no interest in the development of this country [and] who continue to engineer and do machination [sic] to make sure that the government collapses”.
There would and should be consequences, she said. At this point, it seemed the Competition Commission’s case was at last getting somewhere. Well, how different things look now. The Competition Appeal Court confirmed this week what some of the SA banks have been saying for a decade: they were completely innocent, and they had no involvement in this particular case of currency-trading shenanigans.
The Competition Appeal Court has dismissed the inclusion of 23 out of the 28 commercial banks that were implicated in the commission’s case, including all the SA banks except Investec. What the Competition Commission is left with is the international banks which have already admitted complicity to US authorities. But even that does not mean they are culpable; the commission still has to demonstrate that actual damage was caused to SA’s economy.
Doing that is much harder than it seems. The US banks concerned have already settled with the US authorities and they will argue, I guess, that they have made the necessary reparations to their regulator. Now the SA authorities have to demonstrate some local effect, otherwise, if no harm was caused, then they can’t be liable here as well.
What the Competition Appeal Court’s finding demonstrates is that Ntshavheni’s notion that there is a grand conspiracy of banks colluding to depress the value of the rand and generally destroy the economy is the ridiculous, ideological bumf that we are beginning to expect from senior government ministers.
This finding is completely unsurprising because, in a decade, the commission has not been able to produce even the tiniest thread of evidence against the banks. Nothing. Niks. Nada. No involvement whatsoever. They just joined local and foreign banks seemingly at random.
Suspicious origins
The origins of the case are themselves suspicious: it was brought at the time banks were closing the accounts of the Guptas, so it was a convenient moment to try to hit back. But if that is so, it means that the Competition Commission, theoretically a technical body, is just a pawn of its political masters. Perish the thought.
The question is, why did the commission continue with the case after the Guptas had long since left the country with the billions they stole from South African taxpayers? Why would you continue trying to pursue a lost case against the SA banks that transparently had political underpinnings? Wouldn’t that make you the laughing stock of competition authorities around the world?
I suspect there are three reasons why the commission continued its case against the SA banks.
First, with corruption in government contracts being exposed almost daily, it was useful for the government to have some claim that they weren’t or aren’t the only ones. Obviously, that claim largely falls away now and obviously, Ntshavheni will come out and apologise for making such a rash, stupid statement about banking conspiracies. Sorry, just daydreaming there for a minute.
Second, I think the commission knows that, particularly for the international banks, the settlement amounts are so tiny that they could win a moral victory just by keeping the case going. Standard Chartered paid R43-million, or to put it another way, just over $2-million. This is a bank with a market cap of R400-billion.
The cost of keeping two legal teams, one local and one foreign, involved in the case is probably somewhere between R6-million to R12-million a year. Standard Chartered, which probably would have been exonerated if it had not paid the admission of guilt fine, would therefore be saving money if the case goes on for another five years or so, which now seems likely.
Third, I think the Competition Commission itself gains out of keeping the case alive. How so? Because, by conniving with government anti-bank predilections, it can claim a larger budget than it might otherwise. There are costs on the commission’s side too, obvs. By keeping the banking conspiracy theorists — of which there are plenty — in the political sphere happy, my guess is that they can make additional claims on the public purse. Too cynical? I don’t think so.
So what is going to happen now? My bet is that the commission will appeal in the Constitutional Court against the finding of the Competition Appeal Court. The only person who can stop this wasteful insanity is Trade and Industry Minister Ebrahim Patel, and since he has presided over this whole fiasco from beginning to end, that seems unlikely. The commission has every reason to keep going (see above).
But as Ntshavheni says, there are consequences. You can see those consequences in the decline in mergers, in the decline in listings, in the business confidence indices, in foreign investment leaving SA, and ultimately in the parlous economic growth rate.
Ntshavheni might think she is standing up for ordinary people struggling to get modest loans from big banks. In fact, she is not: she is crushing them. DM