Revisiting transformative justice and the banking sector

FINANCIAL institutions, better known as banks, are regarded as the engine that runs the modern capitalist system. Capitalism in part is an economic system in which private owners control property in accord with their interest. This system is regarded as the lesser evil compared to others.

However, the price of property is so out of reach for many that it is regarded as a norm to obtain a mortgage bond and pay it off for at least 20 or 30 years.

Businesses promote products that people cannot afford. Grooming people to behave in a certain way. Get it now and pay later … But in hindsight, did anybody read the fine print? If you had, would the banking institution change that standard agreement?

Covid-19 quickly burst that bubble. Many are now heavily indebted. Houses have been foreclosed, vehicles repossessed, being inundated with calls from call centre agents looking to recover debt is becoming the norm.

Of course, there are those that have celebrated the capitalist system and guard what they have. While those that don’t have, will suffer the harsh consequences. Trying to get out of it is rigged with insurmountable hurdles.

Financial institutions do therefore play a pivotal role in enforcing the capitalist system in South Africa’s economy.

The legislation governing them is fragmented. This means there are many laws governing different aspects of banking operations. This makes it difficult for the educated or lay person to understand.

There is the South African Reserve Bank (SARB) which receives its mandate from the Constitution. SARB is the central bank of South Africa, and it must protect the value of the currency in the interest of balanced and sustainable economic growth.

The Prudential Authority is responsible for ensuring compliance of banks with the Banks Act of 1994 and is the administrator of SARB.

The Financial Sector Conduct

Authority regulates the market conduct of the banks and aims to ensure market integrity and efficiency. There is also the Banking Ombudsman for clients who feel aggrieved by their bank.

Thomas Jefferson, one of the founding fathers and author of the US Declaration of Independence, called banks, “more dangerous than standing armies”.

Sekunjalo Investment Holdings would give ear to this, having been at the receiving end of having its accounts closed by several banks.

Is it constitutional for a bank to act in this manner? Is there protection for the ordinary citizen should this happen to them?

South Africa has a brilliant Constitution that protects our rights and the dignity of its citizens. However, South African law is based on the RomanDutch law. Particularly, as it relates to security over property.

Banking law is therefore subject to this law and South African courts will interpret contractual, corporate, and commercial issues based on this law.

The banks have cited reputational concerns. A company’s brand is intangible property and depending on the brand, it can be valued at a considerable amount. It is the perception of its customers and potential customers. It will be the deciding factor as to whether a customer stays or whether a potential customer uses the bank’s service.

The court will give considerable weight to the factor of reputation and brand. Particularly at a time when state capture, fraud and corruption are constantly highlighted, and whether banks were complicit in this.

In an urgent application brought by Sekunjalo in the Western Cape High Court recently, the court commented that: “It is fundamentally unfair and contrary to public policy for a bank to unilaterally decide to close an account, place the proceeds of any monies to the credit of the account holder in that bank’s suspense account, and the bank then retains the interest earned on those monies.”

The court further noted that even if such a clause existed, it would be contrary to public policy.

Questions to be asked are: Whether the banks, when closing the Sekunjalo accounts, considered how this could potentially damage its reputation or that of its employees? If they closed the accounts, how would Sekunjalo’s employees of be paid?

If banks believed there was wrongdoing, should they not have reported it to the relevant investigating authorities, rather than acting autonomously?

Should they not have waited for a more definitive outcome such as a prosecution?

It is therefore likely that the Constitutional Court will find that the banks acted arbitrarily, unfairly, and therefore unconstitutionally in unilaterally closing the accounts of Sekunjalo.

The high court made a rather interesting comment that transformative justice had a role to play in the banking sector. Given South Africa’s history and context where it finds itself presently, I agree. Perhaps the time has come to revisit what banks do and how they operate from a transformative justice aspect?

Are the banks’ policies and in line with public policy?

Is a transformative or restorative justice approach not better than, among others, judgments against customers, emoluments attachment orders and writs of executions?

Can our government and politicians take these financial institutions to task?

These are some questions for our politicians as they ponder on how to help the indebted electorate.

Lawyer and CEO of Zelna Jansen Consultancy