The commercial banks, the Reserve Bank and the Competition Commission should be more proactive in responding to the angry public fallout over accusations of manipulation of the rand, and must be seen holding those found liable accountable, or it will feed the conspiracy blaming business for government failures.
As South Africa precipitously declines because of the government's actions, decisions and policies, there are many who are ready to blame the economic meltdown on greedy companies, Western imperialist machinations, NGOs, and capitalism as a system. Banks are likely to be a key scapegoat for government failures.
As South Africa’s most critical election since 1994 approaches, populist parties are likely to increasingly blame business for all the country’s problems. The manipulation of the currency by banks is likely to be a key plank of their election campaigns as they try to whip up disaffection against financial services for political gain.
There will likely be renewed wrong-headed calls for the nationalisation of the Reserve Bank as a panacea for the economic crisis. There are also likely to be increasing demands for nationalisation of key industries and the establishment of more state-owned entities, such as state-led national health insurance and a state bank. Many have called for the creation of a state bank to provide consumer and retail services, even though South Africa has many state banks, such as the Post Bank, which are largely inefficient, mismanaged and not financially viable.
There is deep-seated dissatisfaction with banks in general, which is being mined by populist politicians and groups. The economic meltdown has meant that many people are finding their homes, cars and assets repossessed by banks. There have been accusations in the past that banks charge higher interest rates to black customers. South African banks generally lend for consumption rather than for entrepreneurship, houses and education, which is a sore point for many policymakers and the public.
High levels of corruption in the government and the ANC, without the perpetrators being held to account for their crimes, create a culture across society tempting local and international players to game the system
There is a real prospect that the ANC may at a national level be in a coalition next year with the EFF or smaller, predominantly black, populist parties, which are likely to latch on to anti-bank sentiment in their governing model.
Twenty-eight local and foreign banks have been accused of rigging the USD/ZAR exchange rate between 2007 and 2013. The Competition Commission has been investigating the allegations since 2015. In 2020, the commission filed charges against the 28 banks, alleging currency manipulation. While the investigation is ongoing, Standard Chartered Bank has paid a R42.7m administrative fine for its role in the scandal. In 2017, Citibank paid a fine of R70m.
Also in 2017, then Barclays Africa CEO Maria Ramos apologised on behalf of the bank for its role in the rand-fixing affair, saying the bank had tipped off regulators about the practice after suspending two of its traders. “We deeply regret that this conduct took place within our organisation,” Ramos said. “Those who contravened our rules will be held accountable.”
Reserve Bank governor Lesetja Kganyago has said there have been several official inquiries into currency manipulation in the past. Many countries are investigating misconduct in their foreign-exchange markets.
High levels of corruption in the government and the ANC, without the perpetrators being held to account for their crimes, create a culture across society tempting local and international players to game the system. The corruption, monumental incompetence, state failure and toxic policies that led to deindustrialisation and the flight of investment and skills contributed significantly to rand weakness.
Nevertheless, paltry fines for banks found to have been involved in rigging the currency are not enough punishment given the negative impact on the economy, the public anger and the potential that political opportunists will use the scandal to drum up anti-market, anti-business and statist solutions to complex problems.
The Reserve Bank and local banks must explain to the public whether the currency rigging was an organised conspiracy or whether it was just the devious work of individuals. The banks must also show they have acted against the guilty.
Competition Commission fines must be more than just administrative — they need to be more substantial to fit the misdemeanours. As South Africa’s government leaders become the definition of corruption, lack of care and incompetence, the private sector, including the banks, must showcase better leadership, accountability and competence.
• Gumede is associate professor, School of Governance, University of the Witwatersrand, and author of 'South Africa in Brics' (Tafelberg)
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