OVERVIEW: Mosebenzi Zwane pressured Nedbank to take on Gupta-linked accounts - #StateCapture Inquiry hears

2018-09-19 09:18

Former Mineral Resources Minister Mosebenzi Zwane had placed pressure on Nedbank to take on Gupta-linked accounts and made threats about the bank's licence.

Deputy Chief Justice Raymond Zondo
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Last Updated at 13:56
19 Sep 13:35

The inquiry will resume on Thursday at 10:00.

Zondo is yet to receive documentation about tomorrow's proceedings.

Zondo said he will deal with former public enterprises minister Lynne Brown's application on Thursday, before announcing what will happening for the remainder of the week and the following week.

It is not clear from what Zondo said if Brown or her representative will be at the hearing. Brown has previously made an application to cross-examine witnesses. 


19 Sep 13:29

19 Sep 13:28

Appointments at govt departments must be transparent and meritiocratic- expert

Justice Raymond Zondo wants to know about the appointments of officials in departments - and if it could be instrumental in State Capture.

Kaufmann says senior level appointments in government is more nuanced- it is part of a political process. There is a reason why a "particular leader with political backing is elected into power".

Every country differs in the the extent to which these appointments are of political nature, while safeguarding the integrity of civil servants.

This is different to state-owned enterprises, which must play a certain role to maintain and safeguard their independence and function in a commercial way- or be a drag on society.

In terms of director generals (of departments) even decisions which are political- there are systems which allow for a degree of meritiocratic system. 

He adds that there should be more transparency in the decision made with regard to appointments. 


19 Sep 12:33
In related news, the ANC's Enoch Godongwana will approach the commission of inquiry into State Capture to give his side of the story, following testimonies from the banks which indicated that he had arranged meetings with them to discuss the closure of Gupta-linked bank accounts. 

19 Sep 12:28

State Capture undermines democracy - expert 

Some of the major consequences of state capture goes beyond the cost to the economy but broadly governance. It undermines the democratic institutions.

In countries which have transitioned to democracies which are dynamic and vibrant, if a small elite captures a system in the eyes of the rest of the population a loss of the legitimacy of democratic institutions. 



19 Sep 12:07

Countries in transition vulnerable to capture - expert  

Kaufmann explained that state capture is the influence of a system- this could be legislation, or even the spend of public finances through state owned enterprises.

He explained that countries in transition often have institutions which are often undeveloped or start from a weak, initial standpoint. “There is a higher vulnerability in countries which are in transition,” he said.

But transition is not unique to developing countries- he explained that it can take place in industrialised and developed countries like the UK which is going through Brexit. Here major transitions are taking place where institutions, rules, and laws will have to be reformulated.



19 Sep 11:44
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19 Sep 11:42

Dr Daniel Kaufmann, president and CEO of the Natural Resource Governance Institute, is an expert witness who will speak on the phenomenon of state capture.

He says state capture can come in many forms - it is the ability of a very powerful, influencing group shaping the rules, policy, laws, regulations of the state and in extreme forms can become the state itself.

"The captor seeks to shape the law, regulations and the policies of state. Those that are captured are very important enablers. It is not just two parties- it is a complex web. It varies from country to country."


19 Sep 11:35

19 Sep 11:27

19 Sep 11:26

Zwane asked Nedbank to ‘step in’ to save jobs at Gupta-linked entities

Brown said at the IMC meeting Zwane had asked if Nedbank would step in to save jobs and provide and amicable solution given that the relevant family (the Guptas) had resigned from these companies.

"I found it particularly strange," Brown said of the request. Brown said that Nedbank would not reverse their decision as the reputational and business risk would not have changed as a consequence of the resignation of directors. 

Brown said he was thanked for attending and was told by Zwane that he was surprised that other banks refused to meet as banks receive their licence from government. "I found it to be a strange statement - a form of a threat," said Brown. He added that the statement was technically inaccurate as banks get their licence from the Reserve Bank.

He said it appeared the meeting had two objectives - to determine if there was a collusion in the closure of bank accounts and to see if Nedbank had appetite to step in for the Gupta group of companies.

Brown said he left the meeting with the impression a good outcome for the IMC is if Nedbank took over the accounts of Gupta-linked entities, something the bank was not prepared to do

Answering a question from Justice Zondo about whether pressure was placed on Nedbank to reopen accounts, Brown said there were numerous references throughout the meeting about the licencing regime - in effect placing pressure on the bank.

There was a subtext that something could happen to Nedbank's banking licence if it did not behave in a particular way, Brown said. 


19 Sep 11:11

Brown says as at June 2017, Nedbank would have closed close to 100 accounts as a result of reputational risk. While others would have been closed for other reasons such as dormancy. 

He also told the inquiry that Zwane had assured him that the meeting with Nedbank was not to represent a specific family or company.

Brown said that the accounts of any other family were not discussed in the IMC meeting. 


19 Sep 11:08

19 Sep 10:52

Zwane chaired IMC meeting with Nedbank - inquiry hears

Having raised concerns of the government officials attending the IMC meeting with Nedbank about the closure of Gupta-associated accounts, Brown raised concerns that finance minister Gordhan was not in attendance. But former Mineral Resources Minister Mosebenzi Zwane - who chaired the meeting - assured him that Gordhan was aware of the meeting and that they should continue as the meeting was  quorate.

Brown said that he learnt subsequently in a letter by Gordhan which disputed this.

Brown subsequently requested a register of those who attended. The register indicated that Muthambi and her advisors Mzwanele Manyi and Sandile Nene were in attendance, as were Minister Mildred Oliphant and her advisor Herbert Mkhize and the DDG of the department, as were Zwane and his advisor Advocate Zarina Kellerman.

Brown said this is not correct - Muthambi did not attend, nor did Manyi. he is uncertain if Nene attended and the labour minister was not there, he is uncertain if the DDG was there.


19 Sep 10:46

Brown said in May he was requested to meet with the IMC to get clarity on the public statements by Nedbank about the closing bank accounts or termination of relationships.

The ministers include the Minister of Mineral Resources Mosebenzi Zwane, the Minister of Finance Pravin Gordan, the Minister of Labour Mildred Oliphant and Minister of Communication Faith Muthambi.

Brown said he had previously met with government officials, mainly Treasury and normally either at parliament, Treasury’s head offices in Pretoria or even at the Reserve Bank. He was unsure of the IMC and had to find out what it was.

Brown said he had the same apprehensions about attending to discuss client-confidential information, but agreed to attend as a corporate citizen and leader in the banking environment to speak generally on the ability of banks to close accounts.

He said that he found it strange that the meeting was to be held at the department of mineral resources, but assumed that because the finance minister would be in attendance that the department selected was probably logistically the most convenient choice for that day.

He was concerned about who would attend the meeting – and prior to the meeting taking place his secretary enquired about who would be in attendance. The first response indicated that all the ministers in the IMC would be in attendance. But then there was a second email indicating that it was an ad hoc meeting and attendance could not be confirmed.  


19 Sep 10:31

Nedbank was not pressured by ANC to reopen Gupta accounts

Brown said he did not feel pressured to reopen Gupta accounts following the meeting with the ANC.

Instead when the meeting closed he was thanked for providing a better understanding to the questions of the attendees.


19 Sep 10:27

Reputational risk could be terminal - Brown

Brown unpacked the extent of the "reputational risk" to Nedbank. He explained that this is how a business is perceived by stakeholders in general - clients, competitors, media, investors, regulators and depositors. 

"Our business relies on the trust of members of the public in the safety and soundness of banks and the system to enable us to become custodians of nation savings in the form of deposits."

Reputational risk can have a "cascading" effect - as in it could escalate depending on how bad it could get. Some aspects of reputational risk are "business as usual"and can be dealt with in the daily course of business. Sometimes it can be great and have a "material or terminal".

The example of material impact can be seen with the likes of KPMG and McKinsey, or the terminal effect can be seen with what happened to Bell Pottinger.

Justice Zondo wants to know if Brown agrees with the testimony of other witnesses that a relationship with an account holder could be terminated regardless of the account holder has committed any crime or breached any laws, but simply because of the perception in the public domain of an account holder. 

Brown responds in saying "broadly, yes".



19 Sep 10:15

Banks not in the business of closing accounts - Brown

Brown explained to the ANC that banks are not in the business of closing accounts unilaterally. Banks compete with other banks to grow business by opening as many accounts as they can. 

He felt it necessary to explain to the ANC the general process of closing bank accounts, the impact of investor confidence and to assure that banks did not collude to close the accounts of Gupta-associated entities.

Justice Raymond Zondo says it appears the decision to close accounts is taken unilaterally by the bank. "The decision is yours and yours alone." Brown says that is correct as the unilateral decision is taken by a "broad grouping" within the bank. 


19 Sep 10:07

ANC invites Nedbank for meeting

Brown said on April 20- his stand-in PA- received a request from Enoch Godongwana to meet with the ANC. he confirmed that he had been invited to Luthuli House before - once having given inputs on the impact of the nationalisaation of mines on the economy and the financial system.

Brown said the meeting was held on the same day, and that Gwede Mantashe and Jesse Duarte were in attendance. He is not sure if Godongwana was there.

Upon arrival he learnt that the topic was for the ANC to get a better understanding of why a bank would close a client's account.

Brown said he "thought deeply beforehand" as to whether he should or should not attend the meeting.

Two matters were raised- the closure of Gupta accounts, and Brown said he made it clear he could not discuss the specifics given client confidentiality. Secondly there were enquiries about the powers of banks to close accounts generally in terms of legislation, the impact on investor confidence and if banks colluded to close bank accounts.

"It was very important that I address the second narrative of the closure of accounts in general. I thought it was important for the safety and soundness of the financial system in general and Nedbank."

Brown said he did not receive an agenda for the meeting beforehand.


19 Sep 09:59

Brown said that he learnt of the Inter-Ministerial Committee (IMC) into the closure of Gupta accounts from an announcement by then-Minister in the Presidency Jeff Radebe and subsequently the bank was invited to attend the IMC.

Thereafter Oakbay CEO Nazeem Howa approached the bank to reconsider the closure of the accounts. Brown said there is nothing unusual about this. But after the consideration- he said Nedbank decided not to change their decision to close accounts.


19 Sep 09:56

19 Sep 09:54
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19 Sep 09:52

Nedbank flags reputational risk

Nedbank CEO Mike Brown speaks of the reputational risk flagged by the bank being asscociated with Gupta-linked entities.

In February 2016, Brown said he asked the chief risk officer to escalate the review of the accounts of the Gupta family and its associated entities, as there were escalating negative media reports about the family. This could escalate the reputational risk of the bank, he explained.

Further, a media report in March 2016 indicating that deputy finance minister Mcebisi Jonas was offered finance minister Nhlanhla Nene's position was viewed by the bank as a "an extremely serious allegation". 

By April 2016 when KPMG- the auditor and Sasfin- the JSE sponsor, terminated their relationship with Gupta-associated entities, Brown said this implied that they were privy to information that Nedbank was not aware of. 

Nedbank subsequently appointed a subcommittee to review the relationship between the Gupta family and the bank. 

Following FNB and Absa's decision to cut ties with the Guptas, the subcommittee on April 6 concluded to give notice to the Guptas of the termination of their accounts with Nedbank.

Representatives of Nedbank had then informed the Gupta-associated entities of their intention on April 7.


19 Sep 09:19

Nedbank to appear before State Capture Inquiry

Nedbank will present evidence before the State Capture inquiry on Wednesday morning.

Justice Raymond Zondo on Tuesday heard from both FNB and Absa. Both banks revealed that unlike Standard Bank, they refused to meet with Cabinet ministers to discuss the closure of Gupta-related accounts.

All of the banks have told the commission so far that there appeared to be a reputational risk associated with the Guptas, which is why the accounts were closed. 

Nedbank has also indicated in previous media reports that the continued relationship with Gupta-controlled companies would pose significant reputational risks.

Bloomberg previously reported that former Mineral Resources Minister Mosebenzi had urged Nedbank to reconsider, at the time. 

The hearing is scheduled to start at 09:30.

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