The case as presented by the Competition Commission is that 28 international and local banks were referred to the Competition Tribunal because of allegations that some of their currency traders were involved in manipulating rand / dollar foreign exchange rate transactions between 2007 and 2013. As it stands now:
In short, 23 banks have not been found guilty of wrongdoing. The case is still in litigation. Like every citizen – natural or juristic – banks are entitled to the due processes that our Constitution and other laws prescribe before any judgement can be made about their guilt or innocence.
It is therefore deeply concerning that some have chosen to make statements, which imply that all the banks charged have already been found guilty of currency manipulation and that this is tantamount to treason or economic sabotage, without the facts of the case having been fully ventilated.
Any wrongdoing by anyone in a financial institution, including making money at the expense of customers, must be denounced and should be punished. However, this does not mean that due process can be ignored and that grossly unfair and damaging exaggerations – which can compromise trust and confidence in the country’s banks – can go unchallenged. South Africa cannot afford a crisis of confidence in its banking system, given its present economic hardships and its need for investment and inclusive economic growth.
The Banking Association South Africa (BASA) is not a party to the ongoing case between some of its members and the Competition Commission. As an industry association, BASA is not a regulator and does not assume any legal regulatory or oversight role of its members. Individual banks account directly to their respective regulatory authorities.
However, BASA members are required to uphold good business practices and ethical governance. In the event of wrongdoing by employees or staff of individual banks, banks must apply necessary sanctions according to their policies; and the relevant enforcement agencies must pursue the individuals and institutions involved to the full extent of the law. BASA and its members will continue to work with its regulators and legislators to ensure that the banking system cannot be abused for financial crime or personal enrichment by those in a position of trust.
Banks are unreservedly committed to the social and economic development of South Africa and the creation of a business environment conducive to inclusive economic growth and job creation. This is best illustrated by the active participation of the banking industry in the joint work groups, set up between business and government at the request of President Cyril Ramaphosa, to tackle the power, logistics and crime and corruption crises in South Africa.
Banks need a growing economy for business and investment opportunities, which is not possible without an enabling environment that is created by the government. At the same time, it is impossible for South Africa to boost inclusive economic growth, create more jobs and be fiscally sustainable without a strong and resilient financial sector. Much of the business of banking inherently supports economic activity. Any perception that banks are not committed to investing in developing South Africa is misplaced and has no basis.
The reasons for the present state of the South African economy, the value of the rand and high interest rates have been the subject of intensive evidence-based research and commentary. They include stagnant economic growth, South Africa’s weak fiscal position and policy uncertainty in key industries, among others.
As National Treasury pointed out: “The wrongdoing described by the Competition Commission would not have influenced the depreciating trend of the currency since 2013, the level of which is driven by broader changes in the global and domestic economy. The value of the currency today, which has depreciated against the dollar, and the resulting impact on prices, should not be attributed to these instances of misconduct between 2007 and 2013.”
A cursory glance at the facts, would show that there can be no way banks are making trillions of rand profit from forex exchange trades, in a day or even a year, as has been alleged.
In the 12 months to April 2023, banks in South Africa generated a total profit of R102 billion, from all their businesses. Of this, banks retained R44 billion as capital to finance growth. By leveraging their capital, banks were able to provide R5,1 trillion to finance investment and spending and to provide home loans for South
Africans. They provided R279 billion in financing for empowerment in 2021.
An estimated R58 billion of bank profits in 2023 was paid to shareholders, which included pension funds, foreign investors and black economic empowerment schemes. The Public Investment Corporation – which manages public servant pensions – is among those pension funds that hold substantial bank shares and benefit from their profits. In the first half of 2023, the big banks alone paid R18,65 billion in tax, according to some estimates. The six largest banks employ over 180 000 people.
South Africa’s stable, well-regulated banking system is a vital national economic asset. It must be protected from baseless allegations and misinformation, spread either deliberately or through ignorance, for the wellbeing of our country, its people and its economy.
Bongiwe Kunene is the Managing Director of BASA.