‘Tax concerns’ sink Gupta bank move
THE far-reaching hand of banking regulation may be a hurdle too far for Vardospan in its bid to buy the South African branch of Habib Overseas Bank.
On Friday, Bloomberg reported that the Reserve Bank had written to the finance minister recommending that he block the merger.
The report said the central bank cited concerns over Salim Essa’s and Hamza Farooqui’s income and tax declarations. They had set up Vardospan, a joint venture between Cinq Holdings and Pearl Capital.
Through Vardospan, Essa and Faroooqui had bid for the South African stake of Habib Bank. In November last year, they paid R450-million to acquire the business. Last month, the Competition Commission approved the merger “without conditions”.
Essa, a well-known Gupta associate, and the Reserve Bank did not respond to requests for comment.
Political analyst Daniel Silke says the battles over the licensing of banks and the regulatory resistance are all “in parallel to political battles that are playing themselves out as we speak”.
The move comes after the big four banks closed the accounts of the Gupta family’s businesses. The banks have since been involved in a mudslinging match with the family, with both sides being backed by top government officials.
The move to buy Habib Bank could be interpreted as the family’s way of getting around the account closures. Having a South Africa bank that will accommodate the family’s business would be a coup for Oakbay, the main Gupta firm.
“There are all sorts of creative ways which people with deep pockets can [use to] potentially work the system to their advantage,” says Silke.
He adds that the resistance shown by Finance Minister Pravin Gordhan and the Treasury makes it clear that the na-
The battles are all in parallel to political battles playing out as we speak
ture of the transactions brought forward “is suspect, therefore there are obstacles that are being placed in its way”.
News of the Habib merger bid comes as President Jacob Zuma is under pressure from the banks to sign the Fica bill into law. The bill has been updated to include new anti-money-laundering measures and guidelines on dealing with politically exposed persons, but has been sent back to parliament.
The president and his supporters have stated that the bill is unconstitutional. Silke says the “delays in signing the Fica bill and imposing additional regulation within the banking sector also plays into the hands of those who are attempting to circumnavigate the system”.