Busting the banks to protect the Guptas

30 October 2016 - 02:00 By Peter Bruce

As President Jacob Zuma's administration slides daily down the ethical ladder, the shocks to our political economy are going to become more intense and more serious. The most obvious is the threat of a downgrade to junk status of our sovereign debt in the next two months. After Finance Minister Pravin Gordhan's medium-term budget on Wednesday, the threat is heightened. There are no measures in it to stimulate growth.Gordhan has run out of the fiscal space (money) to stimulate the economy. All he was able to do was to try to contain the rapid spread of government debt.Between 2009, when Zuma came to power, and today, government debt as a percentage of our GDP has risen from below 30% to nearly 50%. Worse, that borrowing has been used to pay salaries, because Zuma has vastly increased the size of the public service.story_article_left1When the ratings agencies last had us in their crosshairs, they said they wanted two things from South Africa. They wanted growth and they wanted reform of state-owned companies.They didn't get the latter either on Wednesday. Zuma, for example, has flatly refused to stop protecting and subsidising SAA. Gordhan's hands are tied.And while the finance minister is manacled on policy, Zuma's private police force, the Hawks, are trying desperately to find Gordhan guilty of fraud.Watch, if you have not already, the videos of scenes at the headquarters of the South African Revenue Service that surfaced this week. They show Hawks members, and the bodyguard of SARS commissioner Tom Moyane, holding hostage a SARS lawyer who was refusing to surrender a document sent to him in error by Moyane.The document contained an e-mail sent to Moyane by a legal firm that SARS uses, which straight out refuses a Hawks request to gather more information on Gordhan ahead of his court appearance this coming Wednesday because, ethically, the firm disagrees with the effort to prosecute him.We are almost, but not quite, at the bottom. A downgrade would push us further down and bring untold hardship to all South Africans, especially the poor, and would rapidly bring forward the moment when an approach to the IMF or the World Bank for help becomes a real alternative.But actual rock bottom may be even closer. On Zuma's desk is a piece of legislation, passed by both houses of parliament, called the Financial Intelligence Centre Amendment Bill.Once signed into law it would allow our banks to join most of our trading partners in monitoring the accounts of what are called "politically exposed" or "politically influential" persons, and sharing information about them with the international banking community.All around the world similar legislation is already in place. It not only allows banks to track the movement of money into and out of these accounts, but to share it as well.These people are monitored by something called the Financial Action Task Force, a hugely well-funded and resourced team created by the Group of Seven countries.The task force will already know a lot about the Gupta family and the South Africans who swirl around them, including Zuma and his family. And Moyane.story_article_right2They will read reports of corruption from around the world and flag the politically exposed people and they will know the banks they used. It was this task force that South African banks had in mind when they closed the Gupta bank accounts earlier this year. Make no mistake, corruption is taken seriously by these people.Yet Zuma is refusing to sign the bill into law, claiming he has been asked (by former cabinet spokesman Jimmy Manyi no less) to reconsider it.But, soon, unless the president signs it, a South African company will try to pay for goods or services from an Australian counterpart. It will ask its bank - for example, Standard Bank - to make payment to the counterpart's bank, say the Commonwealth Bank.The Commonwealth Bank will already have a red flag next to Standard because the Fica Bill has not been signed and it will simply decline to accept the payment.That would be because it fears losing its banking relations with other banks around the world for doing business with an unreliable source. Then the dam breaks.South African banks will not be able to make international payments and our entire banking system will be exposed and isolated.And all that just to protect the Guptas.Zuma must sign that bill. But he can't, for fear of bringing down the corrupt house he has built...

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