South African Banks Back Gordhan in Court Battle on Guptas
(Bloomberg) -- South Africa’s largest banks backed Finance Minster’s Pravin Gordhan’s stance that he has no power to stop them from closing the accounts of a company controlled by friends of President Jacob Zuma.
FirstRand Ltd., Standard Bank Group Ltd., Barclays Africa Group Ltd. and Nedbank Group Ltd., had until 1 p.m. local time on Friday to state whether they would support the minister’s affidavit filed last week in the High Court in Pretoria. In the statement, Gordhan sought an order that he cannot prevent banks from cutting ties with the Gupta family-controlled Oakbay Investments. The family, who are also in business with one of Zuma’s sons, had repeatedly asked him to do so.
“Nedbank will not be opposing the application,” the Johannesburg-based unit of Old Mutual Plc said in an e-mailed response to questions on Friday. It “agrees with the view that there is no legal basis for the minister of finance to intervene in the banker-client relationship.”
The dispute with the finance minister is part of a battle that has pitted the presidency against the National Treasury since Zuma backtracked on his decision to fire his respected Finance Minister Nhlanhla Nene in December and replace him with a little-know lawmaker. Gordhan, who was finance minister from 2009-14, was rehired to the post and has pledged to keep spending under control at a time Zuma’s governing African National Congress is losing support.
In his affidavit, the finance minister highlighted 72 transactions totaling 6.8 billion rand ($485 million) by the Guptas and companies they control that the country’s anti-money laundering agency considered suspicious. The transfers were approved and cleared by the respective banks, Van Der Merwe Associates, who are representing the Guptas, said.
A court case that would give banks the opportunity to explain their behavior would be in the “public interest,” Kuben Naidoo, a deputy South African Reserve Bank governor and the registrar of banks, told Financial Mail, a weekly Johannesburg-based magazine.
Barclays Africa, the continent’s third-largest lender, has agreed to file an explanatory affidavit, the lender said, which will add to arguments put forward by Gordhan. FirstRand, Africa’s largest bank by market value, said on Thursday it agrees with Gordhan’s position.
“The government is not by law empowered or obliged to intervene in the relationship between a bank and its customers,” said Standard Bank, the continent’s largest lender by assets. “Standard Bank has notified the State Attorney that we will not oppose the minister’s application and are taking legal advice about whether we should file an explanatory affidavit.”