Big Banks Called to Account
by Iswamo Kapalu
In 1997 South Africa’s parliament enacted the Competition Act. Parliament realised at the time that Apartheid laws and practices had created an environment where there was a concentration of industrial ownership. The concentration of ownership of trade and industry left the South African economy vulnerable to anti-competitive practices and unjustly limited the access of all South Africans to their economy.
Enacted to address these wrongs, the Competition Act created three bodies to fulfil its mission – the Competition Commission, the Commission Tribunal and the Competition Appeal Court.
The Competition Commission was established specifically to “investigate, control and evaluate restrictive practices, abuse of dominant position, and mergers.”
One of these “restrictive practices” is in terms of Section 4 of the Act is collusion between competitors to fix prices. The reason why this is a prohibited is clear. When competitors get together to fix prices, they usually fix prices higher than the laws of supply and demand ordinarily allow, ultimately hurting consumers.
Between collusive tendering, price-fixing and market-allocation, collusive practices make millions of Rands a year in illicit profits, at the expense of the public. So many would be surprised to hear that these practices were only criminalised last April, a full 19 years after the enactment of the Act.
And the latest culprit in an ongoing war against a corporate culture that robs millions of South Africans of millions of rands, is the banking sector. Last week the Competition Commission announced that it had referred 17 multinational banks to the Competition Tribunal, the body responsible for adjudicating these matters. The banks are accused of collusively rigging Rand-Dollar trade.
The timing of the latest revelations is awful. Primarily because the marrow-deep corruption prevalent in these financial institutions is seeing light in time where the conduct of banks has already been politicized by the Gupta matter. If the Tribunal finds that the banks illicitly colluded to fix our Rand, they could be liable for an amount of 10% of their annual turnover.
However, the question of whether it happened has now largely been answered by the fact that one of the accused banks, Citibank N.A., has already ready reached a settlement with the Competition Commission. What remains now is to find out how deep the rot runs.
In terms of their settlement Citibank will pay almost R70 million in penalties and give evidence and produce witnesses to help build a case against the other banks. The R70 million is however much less than the maximum penalty of 10%.
The more than 10 years of currency rigging has had real consequences. The dollar being the currency of a good bulk of international trade means that for years, imports of much needed food, medicine, oil and other goods cost more money.
Additionally, our confidence in the value of our rand as a performance indicator for fiscal policy must now also be called into question.
It is hoped that the prosecution of these banks reveals the depth of the rot so we can begin to put measures in place to save our rand; for the common good.
Beyond changes to policy and law, what is needed is a deep cultural change in the corporate world. The love of money and profit above all else is destroying the world and the humanity of the people in it.
The frequent flouting of laws and the accumulation of tremendous power in the hands of big business has brought us to a crossroads. The time may well have come for serious societal conversations about divorcing the interests of big business and matters of state. Just as it was realised in the past that it is in the interests of democratic society to separate church and state.
Although big business, like the Church, plays an important role in society – that role cannot be control. The absence of a principled separation between corporate and political power, impairs the ability of the state to make and enforce sound laws and policies.
This separation may well be even more urgently required than the separation of church and state because the church was at least accountable to God. Big business, it appears, is accountable only to money and its accumulation.