Guptas will find it hard in banking wilderness
THE gates are slamming shut on the Gupta empire. Imagine the scene: a member of the family is headed home late one night.
The family are used to people coming to them, but people have become a little skittish about popping in at the family estate in Saxonwold of late. So the Guptas are having to make house calls of their own. He is a little short of cash. It’s midnight, so he goes to an FNB ATM at a service station, he punches in his pin and his card is swallowed. It’s happened to all of us at some time.
He takes out a second card and the same thing happens. He stops at the fourth. The personal banker on speed-dial doesn’t return the call. The same happens at the Absa ATM.
This of course is a dramatisation. Banking secrecy means I have no idea how banks tell their clients when their custom is no longer desirable. What started with auditors KPMG, reeling from the reputational hazards of the South African Revenue Service “rogue unit”, resigning as Gupta auditors, to Sasfin quitting as advisers is spreading to banking.
This has serious ramifications for the ability of the Gupta family to do business. It won’t be long before they cry conspiracy and start calling in favours or even seek recourse in court — but they’d probably be wasting their time. They have been dumped by two of the big four banks — and it’s likely others will follow.
But no one in the broader South African Gupta clan, as far as I can see, has been convicted in this country of a criminal offence. Sure, South Africans have become used to reports on how the Guptas are used to getting their own way. A few phone calls get you landing rights at Waterkloof, TV coverage for your state-owned-enterprise-sponsored breakfasts, a government minister to join you in negotiating for coal mines that supply Eskom. Then there are allegations that you provide recruitment services for the president. There is lots of noise. Nothing, however, has been proved in a court of law. So why can the banks do it? They are relying on the 2009 precedent-setting court judgment Bredenkamp vs Standard Bank. Bredenkamp took Standard Bank, which had ended its relationship with him, to court on the grounds that it was against public policy and he was being denied a constitutional right. Bredenkamp and entities linked to him were accused in 2008 by the US Treasury of funding unethical policies in Zimbabwe. The bank, believing the relationship might bring its name into disrepute, ended it. The appeal court upheld the high court judgment.
Banks fire clients all the time. They’re just not in the habit of telling the world. It’s that thing about client confidentiality. We only know the Guptas are out in the cold because they issued a statement themselves.
Banks are in the business of taking risk. Telling a customer you no longer want their business — especially a high-profile, profitable one, is never easy.
But there is a logic to what banks are doing. They do business globally and are subject to a raft of regulations. The banking relationship is built on trust. If your bank breaches that trust, you are free to move your account. It works the other way too. And trust can be an ephemeral thing. Importantly for banks, if they believe a relationship could hurt their reputation and if they are seen to be funding transactions that could later be exposed as questionable or even fraudulent, they might hold that up as a reason to cut ties.
The listing of Oakbay on the JSE does not appear under threat. But the firm is going to have to move fast to avoid sanction. In terms of JSE listings requirements, a company must have a registered sponsor and accredited auditor. There are listings requirements that include notification to the JSE and even a possible Sens announcement when an auditor resigns. Crucially, the company has to ensure its financials are signed off by a JSE-accredited firm. It’s unlikely the balance of the big four are signing in at the Saxonwold gate to tender for the business.
Whitfield is an award-winning financial journalist and broadcaster