Cape Town – The inter-ministerial committee set up by Cabinet to probe why South Africa’s banks blacklisted Gupta-owned businesses recommended that a judicial inquiry be set up, according to Mineral Resources Minister Mosebenzi Zwane.
Zwane, who headed up the committee, said in a statement released late on Thursday on the department's website that the judicial inquiry should consider the current mandates of the Banking Tribunal and the Banking Ombudsman, consider the current Financial Intelligence Centre Act (Fica) and the Prevention of Combating of Corrupt Activities Act in relation to the banks' conduct, and re-consider South Africa’s clearing bank provisions to allow for new banking licences to be issued.
Importantly, he said the inquiry should look into the establishment of a state bank of South Africa with the possible corporatisation of the Post Bank being considered as an option.
President Jacob Zuma will now have to approve these recommendations.
“Evidence presented to the IMC suggested that all of South Africa’s economic power vests in the hands of very specific institutions, institutions who have shown that their ability to act unilaterally is within their mandate and is protected,” said Zwane. “These institutions are owned by private shareholders and report to National Treasury who in turn do not need to act on information provided to it.”
“The IMC conducted a number of meetings with various banks, financial institutions and insurance companies as well as with representatives of Oakbay Investments,” he said. “Although the Minister of Finance was a member of the constituted IMC, he did not participate in its meetings.”
Cas Coovadia, managing director of the Banking Association South Africa, told Fin24 on Friday that they "will await a response from the president to the recommendations before considering this release".
Actions a result of reckless media statements - Zwane
“Evidence presented to the IMC (inter-ministerial committee) indicated that all of the actions taken by the banks and financial institutions were as a result of innuendo and potentially reckless media statements, and as a South African company, Oakbay had very little recourse to the law," said Zwane.
“Looking into these mandates and strengthening them would go a long way in ensuring that should any other South African company find itself in a similar situation, it could enjoy equal protection of the law, through urgent and immediate processes being available to it as it required by the constitution."
Regarding Fica, Zwane said “evidence presented to the IMC (inter-ministerial committee) was unclear on whether the various banks and financial institutions as well as the Reserve Bank and Treasury complied with these and other pieces of legislation”.
“The IMC (inter-ministerial committee) was also briefly ceased with the implications of legal action against any of these entities and the potential impact that would have on the volatility of the rand as well as the measures that could be put in place to protect the economy. This was not something that fell within the mandate of the IMC and should therefore be considered by the Judicial Enquiry.
“The IMC (inter-ministerial committee) was presented with evidence suggesting that the South African banking system is controlled by a handful of clearing banks, which ensured that every other local or international bank participating in the South African banking sector would need to go through these clearing banks in order to have their transactions cleared, thereby creating an oligopoly.
“Evidence was also presented that these institutions may have placed undue pressure on banks that sought to assist the company by subjecting them to unwarranted auditing processes. It is unclear why the Reserve Bank will not issue new banking licences to other banks and this would need to be given careful attention by the Judicial Enquiry as it did not fall within the purview of the IMC (inter-ministerial committee).”
It was agreed that the inter-ministerial committee would monitor the process of finalising these matters and would report back to Cabinet on its progress.Read Fin24's top stories trending on Twitter: Fin24’s top stories