Three years after former Chief Justice Raymond Zondo handed over the final tranche of the State Capture Commission’s report, South Africa’s two major banks – Nedbank and Standard Bank – remain under the glare of state capture scrutiny for their alleged involvement in dubious dealings connected to the Gupta network.

The State Capture Commission was formally established in January 2018 to investigate the extent of state capture and corruption.

In June 2022, Chief Justice Zondo delivered the final reports to President Cyril Ramaphosa, among the most salient findings, were the implications of the banking sector in facilitating or benefiting from corrupt activities.

A central thread in the commission’s work was the involvement of banks with Regiments Capital, a consultancy linked to the Gupta family that the commission found to have played a role in state capture through arrangements with state-owned entities. 

The report asserted that two of South Africa’s largest banks should be investigated for participating in questionable business dealings tied to the Gupta network.

The Zondo Commission’s findings include that Nedbank and Standard Bank were implicated in arrangements in which Regiments Capital invoiced large sums for interest rate swap transactions with Airports Company South Africa (Acsa), and the banks subsequently recovered these costs from Acsa over the life of the swaps. 

The report stated that “Regiments Capital had invoiced a total of more than R35 million to Nedbank for various interest swap deals between Nedbank Capital and Acsa, and then Nedbank recovered the money from Acsa over the life of the interest swap transaction.”

On Standard Bank, the commission highlighted a transaction of more than R22 million invoiced by Regiments Capital to Standard Bank in connection with a R1.75 billion interest swap between Standard Bank and Acsa, with the sums recovered by Standard Bank from Acsa over the life of the swap. 

The report summarised the matter bluntly: “The Acsa interest swap contracts with Nedbank and Standard Bank were procured through the corrupt involvement of Regiments Capital.”

The Commission recommended that the banks be subjected to a deeper investigation, noting that it ran out of time before completing its inquiries, including hearing the banks’ side of the story.

In the government’s follow-up actions, last year, the Special Investigating Unit (SIU) received authorising proclamations to probe, among other matters, financial transactions designed by “various banks” for Acsa. 

The SIU work comes alongside court actions by Transnet against Nedbank over the life of swap agreements in 2015 and 2016, in which Nedbank allegedly profited.

In a statement reflecting the bank’s stance, Nedbank’s spokesperson, Annaleigh Vallie, responded to inquiries referring to the bank’s 2024 statement.

She said Nedbank would “strongly defend the litigation against it and will pursue its counterclaims against Transnet and others.” She added:

“To date, no evidence has been found or presented to Nedbank of any Nedbank staff dishonesty, corruption, or collusion. The swaps were commercially sound and the return on equity earned by Nedbank was fair, reasonable, and appropriate at 15.5% over the life of the transactions.”

Standard Bank spokesperson, Ross Linstrom, asserted a similar position, noting that the bank was “aware of the recommendations in the Zondo Commission report but maintained it was duly mandated and acted appropriately in this transaction.” 

Linstrom added that the bank had cooperated with authorities, stating,  “We confirm that ACSA and various authorities have approached us for assistance with information and documents, which we have shared.”

“We will continue to work with law enforcement agencies and regulators when approached to share information and documents on lawful grounds.”

Alude Xuba, a legal analyst at Xuba & Associates Attorneys, states that banks have long been seen as powerful, often untouchable institutions. 

He emphasised that a decisive ruling against the banks could set a significant precedent, urging that the accountability should extend beyond individuals to include auditors, attorneys, and asset managers involved in the deals.

“If the matter goes to court, it would be interesting to see how it plays out, given that not one person, politician, or accountant was involved; there were auditors, law firms, banks, and asset managers involved; they must all account,” Xuba said, highlighting the need for comprehensive accountability.

Former Standing Committee on Public Accounts chair Themba Godi said that the law enforcement agencies appeared slow when dealing with the banks.

“It raises concerns when only parts of the report are followed through, but the same is not done regarding these banks. Corruption must be tackled not in pieces but holistically… this is why the former Chief Justice recommended law enforcement agencies conduct further investigation,” Godi said.

Kaizer Kganyago, the SIU spokesperson, did not respond to requests for an update on the status of the probes, leaving unanswered questions about the pace of the inquiry into Nedbank, Standard Bank, and other financial institutions implicated by the Zondo Commission.

thabo.makwakwa@inl.co.za

IOL Politics

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