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Why close Sekunjalo Bank account when Steinhoff is still having one?

25 Feb 2024 at 08:12hrs | Views
The decision to shut down the Sekunjalo Group's bank accounts and associated companies is a clear case of discrimination masquerading as concern over "reputational risk."

Ongoing legal battles in various courts will reveal the true motives behind the account closures, which points to a mix of discrimination, competitive manoeuvring, and political machinations rather than financial prudence.

The aftermath of the Public Investment Corporation (PIC) Commission's report saw major banks sequentially unbanking Sekunjalo, with Absa leading the charge, followed by FNB, Nedbank and others, and Standard Bank, the last.

This series of terminations, particularly impacting one of South Africa's large media houses, Independent Media, signals a worrying trend of selective accountability and bias under the guise of mitigating reputational risk.

The banks' rationale, centred on "reputational risk," is a smokescreen and fails to hold water upon close inspection.

A thorough review of Sekunjalo's conduct, its directors, and related companies reveals no involvement in corruption or unethical conduct and practices.

Their businesses have been conducted with unwavering integrity, leaving the banks with no substantial foundation beyond the discredited PIC Commission report sent for review.

Challenging the PIC Commission findings, Sekunjalo initiated the Heath Commission, led by retired judge Willem Heath.

The Heath report cleared the group and criticised the PIC Commission's conduct and conclusions. Yet the banks remained stubborn to keep Sekunjalo and its associated companies unbanked.

None of the other companies mentioned in the PIC Commission report had their bank accounts closed by the banks.

The disparity in the treatment of Sekunjalo is further illuminated when juxtaposed with the handling of predominantly white-owned companies implicated in the State Capture Commission's investigations. The leniency afforded to entities with adverse mentions, such as Bosasa' (now rebranded to African Global Operation) or Steinhoff's continued banking despite a massive corruption scandal, exposes a disturbing pattern of discrimination.

Steinhoff, implicated in one of the largest corruption scandals of over R150 billion, did not trigger the banks to sever ties or act zealously to safeguard their reputation by disassociating from the company and its associated companies. Conversely, while the Special Investigating Unit (SIU) and the National Prosecuting Authority (NPA) persistently highlighted their ongoing criminal investigations into Steinhoff, the banks refrained from an abrupt closure of bank accounts, unlike the hurried measures adopted against Sekunjalo.

This selective application of punitive banking actions highlights an undeniable bias against Sekunjalo, a group implicated in no wrongdoing, illustrating a clear case of discrimination.

Nedbank's legal defence before the Equality Court, claiming that white companies implicated in corruption had "rehabilitated," rings hollow when considering the transformative efforts within Sekunjalo itself.

Despite similar or even more substantive management changes, the ongoing pursuit of the closure of Sekunjalo's bank accounts reveals a clear bias.

The treatment of Sekunjalo and its associate companies completely contrasts with the handling of white-owned firms embroiled in corruption, such as EOH, McKinsey's, ABB, and Glencore, among others.

The global consultancy firm McKinsey returned R902 million to Eskom after acknowledging financial improprieties.

Similarly, a Swiss multinational, ABB, conceded to "overpayments" by refunding R1.6 billion to Eskom, a clear admission of corrupt practices. Further to this, ABB resolved charges with the US Securities and Exchange Commission over its involvement in a bribery scheme in South Africa, agreeing to a settlement of R2.5 billion in favour of South Africa.

Despite these substantial admissions and settlements indicating serious ethical breaches, EOH, ABB, and McKinsey continue to enjoy banking services without the stigma of being a reputational risk that could lead to account closures. The fact that their banking relationships remain unaffected by admitted corruption scandals highlights a significant inconsistency in how financial institutions assess and act upon the alleged ‘reputational risks'.

Ongoing court cases will continue to expose the discrimination against Sekunjalo and its group of companies.

The legal victories scored by Sekunjalo highlight the judiciary's role as a critical bastion of defence for fair treatment in the face of such bias by the banks. The forthcoming revelations from the Cape High Court's order for banks to disclose documentation related to the closures are anticipated with keen interest, promising to shed light on the motivations and influences behind banks' decisions.

The discrimination Sekunjalo and its affiliates face is evident in their treatment, with the judiciary now their only hope.

The insistence by banks to terminate Sekunjalo's accounts, despite ongoing legal challenges and the pending Competition Commission investigation, reveals a troubling eagerness to sidestep due process. It contrasts sharply with their more measured approach to white companies implicated in state capture and corruption, never hastening to terminate their banking facilities.

Why the urgency from banks to close the accounts of a black-owned business while showing leniency towards white-owned firms? It appears that banks were willing to negotiate and do deals with white companies but determined to abruptly close accounts of black-owned businesses despite understanding the economic and catastrophic impact.

The Sekunjalo bank account closures seem less about "reputational risk" and more about discrimination and targeted actions by the banks, influenced by undisclosed motives.

The question will continue to linger: "Who's pressurising the banks' rush to close Sekunjalo's bank accounts?"

* Edmond Phiri is an independent contributor and analyst.

Source - IOL
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