Banks owe the Guptas, and us, an explanation
This week, FNB announced its decision to close the bank accounts of Oakbay Investments, the JSE-listed company that holds the business interests of the Gupta family.
FNB declined to provide any reasons for the move, on the basis of "client confidentiality". Oakbay said it did not know why its accounts were being closed, and has demanded an explanation.
The move follows a similar decision by Absa, which late last year notified Oakbay that its accounts would be closed. The matter had remained under wraps until last week .
Another financial services company, Sasfin, which provides JSE sponsor and corporate advisory services to Oakbay, issued its notice to terminate services three weeks ago. It also declined to provide reasons for its decision.
Then there was KPMG, whose CEO sent an e-mail to staff about the firm's decision to resign Oakbay's audit.
Credit to Trevor Hoole for taking the time to explain the move.
"The recent media and political interest in the Gupta family, together with comments and questions from various stakeholders ... have required us to evaluate the continued provision of our services to this group ... " Hoole's e-mail reads. "We have decided that we should terminate our relationship with the group immediately."
Before making the decision, KPMG had apparently consulted regulators, clients, analysts and the firm's own risk department.
It has emerged that both Absa and Sasfin made their exit decisions soon after "9/12" - the events of December 9, when Zuma replaced finance minister Nhlanhla Nene with David van Rooyen.
When the markets plummeted and South Africa lost billions in those "four days in December", it was in part business, led by the banking industry, which successfully lobbied for Zuma to reconsider his decision, leading to the reappointment of Pravin Gordhan as finance minister.
Is it coincidence, then, that two of the country's biggest banks have decided to dissociate themselves from the Gupta family at this time? Oakbay sees the banks'moves as "part of a carefully orchestrated political campaign" the banks have allowed themselves to be dragged into.
My first issue with these events is consistency. I recall the two big investigations carried out by the Competition Commission a few years ago. One related to collusion in the construction industry to build the 2010 Soccer World Cup stadiums, and the other to a bread cartel.
The construction case exposed a well-orchestrated crime by South Africa's biggest construction companies. In summary, they sat in boardrooms and agreed how they would price their tenders to influence who won which contract.
This led to the fiscus paying much more than it should have for the stadiums.
The big construction companies took advantage of the situation and there was nothing we could do about it. Well, until Tembinkosi Bonakele and his team bust them.
block_quotes_start We must be careful about taking permanent decisions based on temporary circumstances block_quotes_end
To put it into perspective, Aveng, Murray & Roberts, WBHO, Stefanutti and Basil Read have paid a total of R1.5-billion in penalties for their role in the collusion.
This excludes any potential civil claims that may be instituted by the municipalities and the South African National Roads Agency.
So, basically, the construction industry stole from the South African government, was found guilty and paid fines for its crime.
If the "state capture" allegations and negative reputation of the Gupta family are the core reason for the banks and audit firms to ditch them, shouldn't the same or even worse have happened to the construction companies and bread cartels?
Did they not pose a "reputational risk" to their audit firms and banks?
My second issue is that no reasons were given. If Oakbay is correct that the notices from FNB and Absa provided none for the closure of their accounts, I am concerned. And if that is allowed or considered normal practice, I am alarmed.
If there is any suspicious activity on one's bank accounts, the law requires banks to report these for investigation, but to close an account and not provide any reasons to the client can't be right.
I do not want to believe that public opinion, "state capture" allegations and negative media reports about the major shareholder of a listed company are reasons to shut the bank accounts of that company and not even inform it of the reasons.
Irrespective of how we may feel at a particular time, we must be careful about taking permanent decisions based on temporary circumstances.
It is the prerogative of every business to decide who it chooses to have as its clients, just as Zuma has the prerogative to appoint who ever he wishes as minister of finance. But as we recently learnt , prerogative is a right or privilege exclusive to a particular individual. In the national interest, this right must always be carried out responsibly.
Just as the business community, especially banking, expected Zuma to change his mind after 9/12, which he did despite his prerogative, banks should provide clear reasons to their clients when they choose not to service them any longer.
What's good for the president is surely good for the CEO.
Khumalo is chief investment officer of MSG Afrika Group and presents "Power Business" on Power98.7 at 5pm, Mondays to Thursdays