By Feroza Petersen
THE issue of banking misconduct that continues to reverberate through South Africa’s financial sector is one in which the Competition Commission has dragged a select group of international banks, including the surprising inclusion of Nedbank, into the spotlight.
The accusation was a massive price-fixing conspiracy that allegedly manipulated the foreign exchange market, directly impacting the rand, even though the events unfolded years ago.
The Competition Act of 1998 provides the commission with the legal arsenal it needs to target various forms of anti-competitive conduct, from price fixing to market division, bid rigging, and the abuse of dominant market positions.
While this legislation has been in place for years, the revelations about the banking oligopoly’s actions are still painfully relevant today.
Now, amid this ongoing scandal, the Competition Tribunal has issued a landmark judgment that will have significant repercussions for the implicated banks.
The tribunal has dismissed applications and objections brought by various local and foreign banks that sought to escape prosecution in the ongoing case investigating alleged currency manipulation.
The Competition Commission referred a number of banks – including Investec, Standard Bank, and Absa – to the Competition Tribunal for price fixing involving the rand. The commission’s investigation ultimately encompassed 28 banks, including Nedbank and FirstRand, in what is being referred to as the “Forex Cartel” case.
The commission’s findings revealed that from at least 2007, the banks had a general agreement to collude on prices for bids, offers, and bid-offer spreads for spot trades involving the rand/dollar currency pair.
This manipulation directly impacted the exchange rate of the rand, subsequently affecting various aspects of the South African economy, including imports and exports, foreign direct investment, public and private debt, and company balance sheets.
The Competition Commission celebrated the tribunal’s decision, marking it as a second major setback for the banks. The Competition Appeal Court (CAC) had recently ruled in favour of the commission, denying Standard Bank access to the Commission’s evidence.
The CAC specified that Standard Bank could only access the commission’s evidence after responding to the allegations against it.
The tribunal’s decision emphasises the gravity of the alleged misconduct by the banks. It underlines that the respondents are accused of engaging in conduct considered the most egregious in competition law.
Moreover, the alleged conduct pertains to fixing and manipulating the rand/dollar exchange rate, which plays a central and crucial role in the South African economy.
This landmark judgment by the Tribunal reaffirms the commission’s belief that collusion among the banks must be addressed. The prosecution of this matter has been ongoing since 2017, and the banks have yet to answer the allegations against them.
This decision now provides the banks with an opportunity to do just that, as the spectre of price-fixing and market manipulation looms large over South Africa’s financial sector.
And amid this turmoil, ‘reputational risk’ remains a potent force, with the implicated banks citing this as their reason for wanting to shut the Sekunjalo Group and its executive chairman Dr Iqbal Survé’s bank accounts.
* Feroza Petersen is a freelance writer.
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