Banking group Nedbank has refuted claims by Transnet and the Special Investigation Unit that it earned more than R2.7bn in interest between 2015 and 2016 from a deal harking back to the days of state capture.
Transnet and the SIU said on Friday they are suing the bank and are seeking to recover the amounts unduly paid to it under the transactions. Transnet and Nedbank entered into interest rate swap agreements on existing loans on guarantees of future interest rate payments based on financial derivatives.
Derivatives are contracts whose value is derived from the performance of an underlying asset or interest rate. They allow investors to speculate on price movements or future fluctuations of interest rates to guarantee returns.
It was reported in 2021 that Nedbank collaborated with the controversial firm Regiments Capital, paying it more than R95m in commissions for directing public sector clients, like Acsa and the City of Johannesburg, towards its financial products.
These arrangements, which also included undisclosed additional millions from Transnet deals, often increased costs for Regiments' clients without their knowledge.
Mediation talks between Nedbank and Transnet collapsed in May, largely due to the insistence by the state-owned enterprise that the lender accept it had acted in a corrupt manner in respect of interest rate swap transactions in 2015 and 2016.
In a joint statement, the SIU and Transnet said the interest rate swap transactions featured in the state capture commission and formed part of a greater scheme to misappropriate and divert public funds from Transnet to Gupta-linked entities.
“Transnet and the SIU are of the view that the interest rate swaps are void and unenforceable under the Public Finance Management Act, alternatively contravene section 217 of the constitution, and are contrary to public policy. There is sufficient basis for the sought relief and Nedbank must account for its involvement and conduct in the swap transactions,” they said.
However, Nedbank said the SIU and Transnet were incorrect to allege the bank had profited to the tune of R2.7bn from the swaps as it had earned less than R43m.
“The swaps were commercially sound and the return on equity earned by Nedbank was fair, reasonable and appropriate at 15.5% over the life of the transactions,” the bank said.
Nedbank said no evidence had been found that any of its staff had been linked to dishonesty, corruption or collusion. It stood by its previous statement on the matter that its integrity was beyond reproach.
“To the extent that there was corruption, this was on the part of the Regiments Group and Transnet’s staff members and not Nedbank. Nedbank will not be held liable for any governance failures at Transnet,” it insisted.
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