There is something disgraceful, even dangerous, about the way certain politicians are using the Competition Commission’s case against the banks for cheap electioneering. Worse, it seems to reflect such ignorance on their part about the way an economy works that one can only fear for the government’s ability to get growth going.
Minister in the presidency Khumbudzo Ntshavheni led the charge last Monday when she used the post-cabinet briefing to claim that the settlement the commission reached with Standard Chartered was evidence that the banks had manipulated the rand to collapse the economy and that the private sector had no interest in SA’s development. EFF and ANC MPs took up the cudgels in parliament on Friday.
They blamed the banks for the rand’s decline and the rising cost of living. They attacked the Treasury and the Reserve Bank when they tried to explain the events in question had happened 10-15 years ago and had nothing to do with the rand’s depreciation — which was the fault of the economy, not the banks.
But it is the commission that has fuelled all of this with the eight-year-old case in which it has accused 28 local and international banks of a “single overarching conspiracy” in the rand/dollar market in New York all those years ago. It has stuck with its case in the face of multiple legal challenges to its jurisdiction and to the quality of the case itself.
There clearly were traders for a handful of international banks who made mischief in the markets in online New York chat rooms, fixing prices of bids, offers and bid-offer spreads and, in effect, front-running their clients.
We know this because the US justice department charged some international banks for market abuses a decade ago, and some traders pleaded guilty in 2015. The commission used the justice department evidence to charge more banks, but had little or no proof for some of them. Conveniently, it suddenly settled with Standard Chartered in the midst of the hearing, after years of rejecting the UK-based bank’s offer to settle for R42m.
Whether the rest of the “conspiracy” case has any merit is an issue the competition appeal court will have to deal with. Crucially, however, even if the courts ultimately find fault with some or all of the banks, those traders would not have moved the rand exchange rate in the giant forex market. They simply colluded on the spreads to make profits for themselves, and banks, at the expense of their clients. And governments around the world, including our own, have implemented far-reaching reforms since that time to prevent such abuses.
Since then SA has gone through state capture, more than a decade of load-shedding and stagnant economic growth, a ballooning of its public debt and the loss of its investment-grade credit rating. The rand has had ups and downs but the trend has been steeply downwards.
Meanwhile, SA’s sound financial system and its strong and well-regulated banks have been one of the few bright spots. Heaping reputational damage on the banks does SA’s economy no good. The commission needs to beef up its case with proper evidence or drop it. And Ntshavheni and her political friends need to grow up and stop the cheap shots.
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