Gordhan concerned by 'suspicious' Gupta transactions

2016-10-15 20:27
Ajay Gupta (File, supplied)

Ajay Gupta (File, supplied)

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Johannesburg - Gupta-owned Oakbay Investments could have put the South African banking sector at risk in asking Finance Minister Pravin Gordhan to interfere in the banks’ decision to close their accounts.

This was revealed in court papers Gordhan filed on Friday, which contained details of "suspicious" bank transactions by Gupta-owned companies totalling almost R7bn. Gordhan’s affidavit may be the first indication that Treasury has put in motion its so-called "nuclear bomb" option.

While the country waited to see if Public Protector Thuli Madonsela would release her report into the state capture investigation on Friday, Gordhan quietly slipped into the High Court in Pretoria.

He wants the court to declare that, as finance minister, he is in not obligated to help the Guptas in their battle with South Africa's largest banks. All of them terminated their banking relationships with the Guptas and their companies earlier this year.

‘It’s become virtually impossible to do business in SA’

The court papers show that on April 8, Oakbay CEO Nazeem Howa wrote to Gordhan to tell him there may soon be 7 500 job losses at the company. Later, the number of jobs mentioned in the letter is 4 500.

“Following the unexplained decision of a number of banks, and of our auditors, to cease working with us, and of continued press coverage of unsubstantiated and false allegations against the Gupta family, it has become virtually impossible to continue to do business in South Africa,” Howa wrote.

“We believe that this is a part of an anti-competitive and politically-motivated campaign designed to marginalise our businesses.”

As a result of the threat to the livelihoods of the staff who work in their companies, the Guptas decided to resign from all executive and non-executive positions in the business.

Gordhan ‘had no right to intervene in banks’ decision’

In a second letter dated April 17, Howa apologises to Gordhan if his first letter came across as anything but a heartfelt plea for help. He implores him to save jobs.

Gordhan got legal opinion to see if he had any right, as minister, to interfere in the banks’ decisions.

The conclusion was that he did not as the banking environment was well-regulated and the rules were there as an international standard of good practice. He indicated that due to client confidentiality, he did not know why the banks stopped doing business with Oakbay.

“We agreed to continue engaging and you would provide us with any relevant information. In conclusion, we pointed out that the recent attacks on the integrity of the National Treasury are not helpful or in the national interest and should be avoided,” Gordhan responded.

It appears by the correspondence that the “relevant information” was never provided to Gordhan as he later asked for the banks’ letters to Oakbay to be provided to him.

Gordhan got further legal opinion from SC Jeremy Gauntlett and FB Pelsar. They analysed the correspondence between Oakbay and Gordhan and found that while thousands of jobs were at stake if Oakbay could not pay its employees, millions could lose their jobs if South African banks were not allowed to comply with international standards.

“It could also hold adverse consequences for the South African government’s social programmes.”

Request for Gordhan to exercise ‘political power’

Oakbay indicated it could not approach the courts to have their bank accounts reopened as they would not succeed.

According to Oakbay’s letter, in the absence of a legal remedy, the Guptas needed political intervention from the minister, the legal opinion said.

This was despite the legal impediments preventing Gordhan, as political head of South Africa’s economy, from doing so, and due to the regulatory framework.

The correspondence reflected Oakbay’s request for Gordhan to exercise “political power”. There was no legal basis for him to intervene, the legal opinion concluded.

In support of his argument that the banks may have had good reason to close the Gupta’s accounts, Gordhan attached to his application a document from the Financial Intelligence Centre (FIC). It details transactions totalling R6.8bn Gupta-linked companies made between 2012 and June 2016. The FIC classified them as "suspicious".

One transaction was for R1.3bn. This had allegedly been paid from the mining rehabilitation trust fund of Optimum - the coal mine the Guptas' Tegeta Exploration and Resources purchased from international mining company Glencore under controversial circumstances - to the Bank of Baroda.

This is an Indian bank that still does business with the Guptas.

Using the ‘nuclear bomb’ option

In his affidavit, Gordhan expresses concern that the Guptas could have appropriated the rehabilitation fund for other purposes. According to law, the fund should only be used to restore the environment after a mine falls into disuse.

"If those funds from the trust were to (be) spent on anything other than genuine mining rehabilitation, it will expose the fiscus not only to the loss of tax revenue, but also put the burden of mining rehabilitation on the fiscus," argues Gordhan in his affidavit.

In August, as it became apparent that Gordhan might be prosecuted for his role in the running of a supposedly illegal "rogue unit" at the South African Revenue Service, financial journalist Alec Hogg wrote  on BizNews that Treasury would consider the "nuclear bomb" option if the minister’s persecution neared crisis point.

The nuclear bomb option, according to Hogg's sources, involved Treasury's dissemination of damning evidence of corruption against some of South Africa's most powerful business and political figures.

Read more on:    gupta familly  |  pravin gordhan  |  economy  |  politics  |  state capture

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