The latest banking scandal to rock our political and economic climate, couldn’t have come at a worse time. If you believe in conspiracy theories, a case can be made for the strategic leaking of information to further political agendas, but more on that later.
The news is out there, 17 banks including three prominent South African banks have been handed over to the competition commission to investigate collusion. It is alleged that they used (among other things) fake trades to manipulate currency exchange rates and could have impacted market volatility. It is important to note that nothing has been proven yet and while the competition commission is confident of a prosecution, a full investigation and report still has to be made. Keep this in mind as my jumping-off point.
If we are honest with each other, ethics and the banking industry don’t mix well. What does Wells Fargo, JP Morgan and even our local institution, Absa have in common? They have all been marred by scandals over recent years and it seems that everywhere a shady buck is to make, they are somehow involved. History then makes it very hard to argue that they are inherently important to economic stability, when some banks go out of their way to be disruptive. I don’t think anyone will be surprised if evidence is found to prove the allegations, but what is more important, is the political and economic narrative.
In recent months, financial institutions have come under attack from political parties. From the big local banks to the treasury and the sacking of the then finance minister Nhlanhla Musa Nene, that led to the state capture report. The timing of this incident, seen in this context, becomes so suspicious that even in the lack of clear evidence, one can’t help but feel that it is an orchestrated plot to pave the way for a state-owned bank. With any good theater, timing is key and the call came early after the news broke under the guise of “benefiting the ordinary citizens” that have been “wronged” by financial institutions. Convenient, isn’t it?
Don’t get me wrong, if found guilty banks should be punished accordingly, but calls from parties that licenses be stripped are irresponsible as it would have catastrophic consequences on our financial and economic stability. No matter how rich or how poor you are, almost all citizen’s mortgages and saving are tied up in those institutions and are therefore in jeopardy, who stands to lose the most? Companies won’t be able to trade and operate and will therefore not be able to pay their employees, not that they will be able to access their bank accounts anyway.
The ruling party has adopted the oppositions populist mantra and it comes as no surprise that they are running the current narrative. It’s like a disease spreading through social media as fact: “Since the news broke the Rand has strengthened against the dollar, do you see what they have been doing all along?” No one is checking facts. Facts like President Trump’s economic policy favoring emerging market sentiment, causing the South African currency to appreciate against the dollar.
The narrative is driven by highly educated people, manipulating uneducated opinions using well thought out events for personal gain. It is important for prominent business leaders and academia to stand up and challenge so called ‘facts’ and for the media to give them adequate coverage and not focus solely on the populist agenda.