Banks have an important role to play in our financial system, but the financial system does not exist only for their own narrow interest.
After the judgment handed down by the Competition Appeal Court on July 17, Standard Bank issued a letter to all companies whose bank accounts it holds related to Dr Iqbal Survé, including Independent Media. The bank stated it intends to close their bank facilities by the 21st of this month.
This announcement immediately wiped out at least half the market capitalisation of the listed entities, indicative of the severity and full impact of the value destruction that was caused by this decision. It has also vested a precedent in the South African financial system, and it is not just about one bank and one client.
Access to the financial system is of national importance, with many initiatives aimed at banking the millions of unbanked in our country. The question we should be asking ourselves then, is: “does the banking system belong exclusively to the banks themselves or to all of us?”
The banking system is a national asset, just as water, freedom of speech, and all the rights bestowed on the citizens of this country enshrined in our Constitution are.
It is little wonder that the EFF calls for the nationalisation of the banks, when they can unilaterally decide the rise and fall of the capital markets, have been found guilty of price fixing and other transgressions, for all of which they either receive a rap on the knuckles for or buy their way out.
The banks must, however, reconsider their role while they have the opportunity.
In the Sekunjalo case, the banks claim reputational risk as their reason for closure. This argument rings hollow and the extreme level of self-righteousness against the backdrop of their own transgressions is very difficult to accept.
The media have extensively covered many banks’ participation in corruption, money laundering and various other unsavoury actions. The unfair treatment of customers is also well-known, with the banks having a track record of setting their lawyers on customers in distress. The various bank failures in South Africa are also still fresh in customers’ minds, such as VBS, African Bank, Saambou Bank, the battles of the Post Bank and the list goes on.
In a sample of 173 transactions extracted from the FinCEN files, the International Investigation ICJ’s data shows how suspicious transfers flowed to and from South Africa with around $482 758 (R7 861 183) received and $60 270 011 (R981 430 832) sent. Standard Bank features prominently in these reports.
This brings one to the point of the bank regulator, the Prudential Authority. Citizens need to know what their take is on the closures. We do not want to hear what their view is three years down the line when a commission is appointed to find out what happened, which appears to be standard practice in South Africa for delaying investigations and comment. The Prudential Authority must take a stand now. They are here to protect the integrity of the banking and financial sector in South Africa.
Banks also have a social and ethical responsibility to not only their shareholders, but their customers too, which seems to be missing in the case of Sekunjalo, where the moral implication of their decisions on employees and their families has been negated.
Public interest points – social and ethical points cut both ways
All state-owned, listed and unlisted public companies, and companies with a high public interest score are required by law to have a social and ethics committee. Principle 1.2 of King III addresses the social aspect of corporate governance when it states: “The board should ensure that the company is and is seen to be a responsible corporate citizen”. Further, King III Report, 2009: Section 72 (4) of the Companies Act 71 of 2008 as amended (Companies Act) read with Companies Regulation 43, requires all listed public companies, state-owned companies, and companies, which (in any two of the previous five years) to score above 500 public interest points to appoint an SEC.
The question, however, is this, since the Companies Act refers to how a public interest point of 500 will necessitate the appointment of a social and ethics committee, that number can also apply to the bank’s relationship with a client who has a score of 500 points or more.
In the case of the Survé-associated group of companies, turnover and other related matters aside, the points allocated to the number of employees are 1600 alone. To put that in perspective, assuming these employees earn the average South African salary of R26 000 per month, that equates to R500m per annum.
The closure of all these companies’ bank accounts cuts off the income of families to the extent of R500m.
From an ethical point of view, I urge the banks to balance their right to income against a suspicion of wrongful business conduct by either the shareholder or chairperson of the group of companies or the companies themselves. Any action must weigh the consequences of such deed. There may even be serious reputational and commercial damage to the banks themselves, as it is quite conceivable that many of the 1 600 employees currently have bank accounts with them, home loans, car finance, credit cards and so on.
Once they are without income, they will blame the banks that have closed the accounts, be it Standard bank, Absa, FNB, Nedbank or whoever.
The imminent closure of some of the Sekunjalo Group company accounts, and the prospective demise of these companies, also poses another dilemma.
In January 2020, CIPC introduced its Compliance Checklist, which requires companies to declare their compliance with specific mandatory sections of the Companies Act. Should CIPC deregister a company, which would be the case if it could no longer trade, they insist that such a company must have a valid open bank account at the time of deregistration. Something these companies will not have …
Perhaps it is time for the banks to learn something from the medical sector. Imagine a doctor refusing to treat a patient because they disagree with the terms of commercial transactions the patient is involved in.
A doctor sticks to what they are trained for – treating patients. A doctor is not there to pronounce judgment. Likewise, the banks are there to safeguard and help grow money that customers trustingly put into accounts administered by bankers and their appointed personnel. The banks are not there to decide on the good behaviour or otherwise, of who should get to have an account, as they are neither judge, jury nor executioner.
Corrie Kruger is an independent analyst
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