Finance minister Pravin Gordhan’s court papers, filed on Friday and detailing R6.8bn in “suspicious and irregular” transactions involving the well-connected Gupta family, is intriguing both for the boldness of the move, and the political environment in which it takes place.
The revelations in the papers, which were first published by Daily Maverick, are by every measure astounding. At its heart, they provide a devastating answer to why six SA banks summarily closed the Guptas bank accounts, while blowing apart the conspiracy theory that the family has been unfairly “targeted”.
On the face of it, Gordhan filed the papers to get a declaration from the court confirming that the government, in the form of the finance minister, is not empowered to intervene in a case where banks boot out their clients.
But in a week in which he was charged for fraud over what experts believe are trumped-up administrative charges aimed at seeing him axed from his post, this move has far deeper implications.
For one thing, the Financial Intelligence Centre (FIC), the body tasked with rooting out moneylaundering, isn’t allowed to reveal the contents of “suspicious transaction reports” lodged by the banks except “for the purpose of legal proceedings”.
Gordhan has now managed to force the real and substantial concerns around the Gupta’s funding into the public arena through entirely legal means. This ensures that even if he is removed based on the tenuous “fraud” charges, any successor cannot simply cover this up.
Sensationally, Gordhan’s application includes a list of no less than 72 “suspicious transactions” flagged by SA’s banks involving the Guptas and reported to the Financial Intelligence Centre between December 2012 and June 2016.
Gordhan says the FIC documents highlight an “increasingly serious state of affairs” regarding a vast number of suspicious transactions linked to Oakbay.
These range from small amounts (R100,000 involving Sahara Computers), to much larger sums (R1.2bn involving Koornfontein Mines), and a R10m transaction involving Mabengala Investments, which is part owned by Jacob Zuma’s son Duduzane.
Perhaps most notable is a “suspicious transaction” in which R1.3bn was to be transferred from the “rehabilitation trust” of the Optimum Mine, which the Guptas bought from Glencore, for R2bn.
This underscores suspicions over the deal dating back to December, when mining minister Mosebenzi Zwane raised eyebrows by going with the Guptas to meet Glencore CEO Ivan Glasenberg in Switzerland to negotiate the purchase.
This created the impression that Zwane was willing to act on the Guptas’ behalf.
Gordhan now says in his court papers that “with the written approval of (Zwane’s) department of mineral resources, R1.3bn was intended to be transferred from the account closed by the Standard Bank to the Bank of Baroda”.
Other alarm bells
“(A) mining rehabilitation trust is exempt from tax. If those funds from the trust were to (be) spent on anything other than genuine mining rehabilitation, it will expose the fiscus not only to the loss of tax revenue and also put the burden of mining rehabilitation on the fiscus,” he said.
Other alarm bells were raised too, as the Bank of Baroda was allegedly being investigated by the Reserve Bank at the time. It is unclear, however, whether the money was ultimately transferred
Nor was this the only eyebrow-raising deal. In August, banking registrar Kuben Naidoo wrote to Gordhan telling him that the Reserve Bank’s financial surveillance department was considering investigating a “foreign exchange transaction” involving another company linked to the Guptas, VR Laser Asia.
But the court action goes so much further than simply highlighting some shady deals.
Including in the application are numerous legal letters that provide a damning critique of the “inter-ministerial committee”, ultimately led by Zwane, that was tasked by cabinet to examine why the Gupta’s accounts were closed.
Gordhan’s legal opinion, dated April 25th, from the well-respected advocates, Jeremy Gauntlett SC and Frank Pelser, said it was clear that “no cabinet member has any power to intervene in the banker-client relationship”.
“Any such intervention is unlawful,” it said.
The lawyers go further, saying this could even be regarded as an “abuse of public power”, which would create an adverse precedent for companies to tolerate.
“(The) banks’ perception that Oakbay presents business and reputational risks to themselves and to their other customers cannot be second guessed — especially not by government”.
Lesetja Kganyago, the Reserve Bank governor, was equally worried by this “inter-ministerial committee”, telling Gordhan in April that an unintended consequence is that this could be seen as “undue political interference in banks’ operations”.
“This could introduce heightened levels of uncertainty and pose a risk to SA’s financial stability,” Kganyago wrote.
(Gordhan ultimately declined to participate in the “inter-ministerial committee”, leaving Zwane to take the lead.)
In letters that Gordhan wrote to Oakbay CEO Nazeem Howa in recent months, he points out that his legal advise suggests he cannot intervene in this case, and also warns Howa against “attacks” on the treasury which he says “are not helpful or in the national interest”.
In August, Gordhan says “it is concerning that Oakbay still does not accept that the minister of finance, in law, is unable to interfere with the relations between registered banks and their clients”.
Gordhan’s court action now opens the way for the banks to detail their exact concerns with the Guptas’ accounts, as they are cited as respondents.
If the banks take up this invitation, it should blow apart the conspiracy theory that the Guptas were simply being targeted for no good reason — a view echoed repeatedly by Howa in recent months.
Says Gordhan: “the public assertions that registered banks within the regulatory environment in SA acted for no adequate reason, irregularly and indeed for improper reasons in closing accounts are harmful to the reputation for integrity of SA’s financial and banking sectors.”