On the one hand South African taxpayers are watching their contributions frittered away in controversial business transactions; on the other, shareholders of the country’s listed banks are increasingly footing the bill to fight against the corrupt and the captured. South Africa’s banks have increasingly found themselves on a political battleground, defending and protecting themselves in court after refusing to do business with individuals that put them at risk of contravening anti-money laundering legislation. Standard Bank has gone to court in connection with withdrawing support from Oakbay – the business run by President Jacob Zuma’s friends, the Gupta brothers. This week it emerged that Absa is set to continue its legal battle with Fana Hlongwane, a former aide to defence minister Joe Modise who allegedly facilitated the transfer of R24m to secure a deal for an arms company. Hlongwane, like the Gupta family, was named in the explosive state capture report released by former public protector Thuli Madonsela shortly before her term ended last year. The state law-enforcement agencies, meanwhile, stand idle or impotent in the face of blatant allegations of widespread financial irregularities, while a small group of Parliamentarians continues to appeal for the ANC’s most senior leaders to bring an end to the headline-grabbing graft that is undoubtedly putting a lid on economic growth and investor sentiment. – Jackie Cameron
By Matthew le Cordeur
Cape Town – Absa will defend a legal bid by businessman Fana Hlongwane, who is suing the bank for R7m after it closed his business bank accounts in 2013.
The closure followed the bank’s review of Hlongwane’s firms in terms of its policy on politically exposed people. The review was sparked following the Seriti Commission of Inquiry into the arms deal.
The inquiry called Hlongwane – an adviser to former defence minister Joe Modise – to testify after allegations that he facilitated the transfer of R24m to secure a deal for an arms company.
In papers filed in the North Gauteng High Court last month, Hlongwane said Absa acted unreasonably and in bad faith, with an improper motive and/or in abuse of its rights when it closed the bank accounts of his six businesses on December 9 2013.
He said Absa had no valid commercial reason for closing the accounts, it falsely contended it was unable to serve his needs as a client optimally and failed to take into account that the accounts had been conducted satisfactorily without any breaches for up to nine years.
Hlongwane is aiming to get his accounts reopened and his six companies and himself awarded R1m. He also wants Absa’s closure of the accounts declared unlawful and unconstitutional.
He said that Absa “purported to close the accounts on the basis of an alleged political exposure review”, but said the decision was based on Absa’s “perception” of him.
“Absa failed to afford the plaintiffs an opportunity of making meaningful representations regarding the closure… when a contracting party in its position, acting in good faith and reasonably, would have done so.”
Absa said in a responding affidavit in December that it “intends to defend the action”.
Bid follows failed court case in 2016
This is the second legal challenge Hlongwane has made against Absa, after he failed in 2016 to get the bank to supply him with all the documents it used to make its decision when closing his accounts.
In the 2016 ruling, Judge Nomonde Mngqibisa-Thusi said Absa made the decision to close the accounts “after it became apparent that the first applicant (Hlongwane) had become a PEP (politically exposed person)”.
“There was not only a commercial, but also a reputational risk to the first respondent (Absa) in keeping the first applicant (Hlongwane) and his related entities as clients.
“The first respondent (Absa) had no obligation to retain a client whose monitoring in terms of money laundering measures put in place would be more onerous when compared with the benefit, in terms of fees, it would receive from the applicants.
— TransAfricaRadio (@TransAfrica872) January 9, 2017
“I am of the view that the first respondent’s (Absa) bona fides in deciding to close the applicants’ accounts cannot be questioned.”
Hlongwane’s role in State of Capture Report
Hlongwane was also implicated in former public protector Thuli Madonsela’s State of Capture report as allegedly being in a meeting between Finance Deputy Minister Mcebisi Jonas and the Guptas, where the family tried to bribe Jonas R600m to take over as minister from Nhlanhla Nene. Jonas, who made the allegations, said he rejected the offer.
As part of her investigation, Hlongwane told Madonsela he is an “uncle” to Duduzane Zuma, the son of President Jacob Zuma.
Guptas accounts closed by all four banks
The Guptas – close friends to Zuma – also had their bank accounts closed by South Africa’s top four banks FNB, Absa, Standard Bank and Nedbank in 2016. They have not approached a court to seek that the banks reopen their accounts, but instead have allegedly pressurised government to act on their behalf.
Zuma formed an inter-ministerial banking inquiry into the matter in 2016, which saw Mines Minister Mosebenzi Zwane announce a formal inquiry into the banks without approval. The move was subsequently rejected by Zuma.
Under pressure, Finance Minister Pravin Gordhan filed papers in 2016 seeking court protection against being forced by the Guptas to intervene in the matter.
All these banks were included as respondents and subsequently filed affidavits, defending their actions to close the accounts.
In its application in December, Absa said it started its review into the bank accounts linked to the Gupta-owned companies in November 2014 as part of its annual review into politically exposed people. It closed their accounts on February 16 2016.
Zuma rejects key bill to monitor politicians
The legal bids come as Zuma refuses to pass key legislation that would put politicians under further financial scrutiny.
The draft Financial Intelligence Centre Bill will require a senior bank official to approve the accounts of prominent influential persons and oblige banks to to establish the source of funds, as well as monitor these accounts on a regular basis.
Prominent influential persons would include top government officials from the president down to municipal managers, as well as company chairpersons, CEOs and chief financial officers and individuals who do business with the state, including their immediate family, partners and business associates.
In November, Zuma referred the draft bill back to the National Assembly for reconsideration.
“I have given consideration to the bill in its entirety and certain submissions regarding the constitutionality of the bill. After consideration of the bill and having applied my mind to it, I am of the view that certain provisions of the bill do not pass constitutional muster,” said Zuma.
The Sunday Times reported in July that the Guptas were among prominent persons trying to get Zuma to reject the law.
An anonymous senior government official told the paper: “The bill has been with the president for some time and the Guptas have run to him to say that he must not sign. But the reality is that the president can only not sign if there is a constitutional objection. – Fin24