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Rand manipulation by banks leaves South Africans poorer

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Picture: Bloomberg – The Standard Chartered headquarters in London. A bank spokesperson confirmed that it had lodged a lawsuit against the owner of a metals trading company in Qingdao, China.

By Kim Heller

In 2019, the EFF asked whether the National Treasury had investigated “the impact of the manipulation of the rand by various banks” and if so, what were the findings. “No” answered Minister of Finance, Tito Mboweni. Mboweni stated that neither the National Treasury nor the South African Reserve Bank “have any evidence that any bank has taken part in currency manipulation”. The Finance Minister urged Members of Parliament to wait for the outcome of the Competition Commission’s investigation.

It was in 2015, four years earlier, that the Commission opened its probe into allegations of rand manipulation and collusion by a large concert of local and multinational financial institutions. These included Standard Bank, Absa, Investec, Citibank, First Rand Bank, Barclays, Merrill Lynch, HSBC and Standard Chartered. Evidence points to a network of well-coordinated corrupt activity as banks colluded on prices in the trading of the rand in a six-year period, from 2007 to 2013. The Competition Commission estimates that close to R1 trillion was transacted daily between 2007 and 2013 in this illicit currency trading. Today eight years after the investigation began there has been paltry accountability and justice.

In 2016, Jacob Zuma, who was the President of South Africa, had openly shared his suspicion that banks were manipulating the rand and purposefully damaging both his Presidency and the economy. His protestations were scornfully dismissed. He had borne the brunt of blame for the volatile and negative performance of the rand. These revelations call for a revision of the assessment of the economy under his watch.

In 2017, the South African arm of Citibank pleaded guilty and paid an “administrative penalty” of R69.5m for its role in price fixing and currency manipulation. In the same year, Barclays Africa asked for forgiveness for their involvement in this illicit activity.

Not one of the institutions voluntarily came forward to admit to their transgressions. Or repent for their sins. They were simply found out. This is what prompted the ‘sorry is the hardest word to say’ apology from Barclay’s Africa Group’s Maria Ramos who said “We deeply regret that this conduct took place within our organisation … those who are found to have contravened our rules and conduct will in due course be held accountable.” Barclays Africa’s co-operation with the Competition Commission meant that its financial assets, Barclays Capital, and Absa were afforded leniency in the matter.

Last week, the British based multi-national bank, Standard Chartered, agreed to pay an administrative penalty of R42.7 million. Standard Chartered Bank admitted to currency manipulation back in 2019. Most of the banks implicated are still trying hard to weasel their way out of the situation claiming that the accusations are unfounded or that the Commission lacks the necessary jurisdiction to prosecute. They are also trying to diminish the scale and effect of the illicit activity.

Feeble apologies, and pocket money fines are not enough. For the damage done by currency manipulation is no small change. Currency manipulation has the potency to damage economies, downgrade prospects of citizens and can plunge economies into junk status. The grand scale manipulation of the rand has left South Africans poorer.

In an analysis published in the Mail & Guardian, on January 18, 2016, entitled ‘Why the rand is falling’, economist Fatima Bhoola wrote “The weak rand has a number of implications for the country’s growth prospect”. “Firstly, the weakening currency carries the risk of pushing up inflation because imported goods are more expensive. This means that the South African Reserve Bank faces a difficult decision. It can keep interest rates low but then faces even higher inflation. This will only devalue the rand further. If the central bank takes more aggressive action by raising interest rates, it risks stifling growth in an economy that is only growing at 1.5 percent.”

Bhoola continued: “The rand’s weakening could not have come at a worse time for South Africa. The country is suffering from the worst drought since 1992 which has increased food costs and pushed the farming industry into recession. The price of white corn, a staple food in southern Africa, has more than doubled on the South African Futures Exchange in the past year.

With large parts of the economy already in recession, coupled with worsening debt levels and the threat of credit-rating downgrades, it looks like the economy will contract. The weak rand will also see the cost of imported goods for consumers rise. In addition, while the rest of the world benefits from record low oil prices, the country’s weaker currency means it will not be able to take full advantage of this and may face higher fuel prices in the near future.”

President of the ATM, Vuyo Zungela has said “We can’t let this currency manipulation slide. The banking industry must be fully investigated for any and every unethical practice they are involved in. People lost homes, cars got repossessed, millions of people are in an endless cycle of debt because of these greedy banks”. Zungela has written to the speaker of Parliament requesting an urgent parliamentary debate regarding the manipulation and banking misconduct.

The EFF has taken a strong stance. National spokesperson Sinawo Thambo said, “The EFF maintains that all those who admit guilt to the charges of currency manipulation must lose their banking licenses. Furthermore, the directors and staff members who were involved must also be prosecuted, and their assets must be seized”.

The EFF has called on the Competition Authorities to “fast-track the cases of the remaining banks that participated in this corrupt scheme that was designed to profit from the suffering of our people.”

Non-profit organisation Public Interest SA says it’s “underwhelmed” by the settlement agreement. It contends that the negative impact on the South African economy could “arguably, extend into trillions of ZAR in the next decade”. The organisation describes manipulation of currencies as an “insidious practice” used by “greedy economic actors” and “reminiscent of economic hitmen, who operate under the guise of corporate entities”.

While the Competition Commission is said to be exploring whether criminal charges can be brought against the accused banks, this is unlikely. Banks, both within the jurisdiction of the South African authorities and beyond, will no doubt be protected against harsh penalty. Such is the unnatural and unequal order of the world we live in.

The ANC has called for the implicated banks to face charges of economic sabotage. Certainly, bank manipulation is a form of economic sabotage. Some have even described it as treason. But while the ANC can cry economic sabotage from its VIP protected ivory towers, it has to take responsibility for not taking charge of the mechanisms of economic control and power relations in the economic and financial sector. The ANC has failed dismally in seeking and demanding accountability either from apartheid banks which gave illicit loans (as is expressed in the notorious Bankcorp CIEX matter) or from current financial institutions who continue to stray and play in democratic South Africa. This episode of economic corruption by big white owned and controlled financial players, is likely to be just one of the many acts of grand corruption committed by the sector. The South African Reserve Bank’s principle role is to protect the value of the currency in the interest of balanced and sustainable economic growth but in this matter it has failed dismally.

Poet and social activist Ntsiki Mazwai posed a salient question this week. She said “People get arrested for match fixing but not fixing an entire currency??? Kanti, who owns South Africa?”

Perhaps the greatest learning that comes out of the rand manipulation fiasco is that South Africa still remains in the financial and economic capture of others. The ANC may have won political freedom, but the levers of the economy are not in its hands. It has little financial control or power. This is economic self-sabotage. And, as always, it is ordinary citizens are suffering.

Kim Heller is a political analyst and author of ‘No White Lies: Black Politics and White Power in South Africa’.

This article was written exclusively for The African. To republish, see terms and conditions.