Ivo Vegter: ANC manipulates currency scandal for political gains, falsely accuses private sector

In a questionable political move, South Africa’s ANC government leverages a currency manipulation scandal involving banks like Standard Chartered and Citibank for electoral gain. The alleged grand conspiracy implicates 28 banks, raising skepticism about its plausibility. Minister Khumbudzo Ntshavheni exploits the situation, falsely blaming the entire private sector for undermining the government. Economic experts, like Dawie Roodt, assert that the ANC’s incompetence, corruption, and socialist policies, not the private sector, are responsible for South Africa’s economic woes. The article sheds light on the political maneuvering and emphasizes the private sector’s vital role in stabilizing the economy.

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Ntshavheni is just embarrassing on rand manipulation

By Ivo Vegter

The ANC is exploiting a dogged witch-hunt against so-called currency manipulators for electoral gain.

In mid-November, the Competition Commission announced that Standard Chartered Bank (SCB) had admitted liability and offered to settle allegations of manipulating the rand-dollar exchange rate between October 2007 and September 2013, paying an ‘administrative penalty’ of R42.7 million for doing so.

Citibank had settled along the same lines back in 2017, paying R69.5 million.

They are but two of a grand total of 28 banks that the Commission insists were part of a grand conspiracy to make favourable deals on rand currency exchange pairs.

Other banks have vehemently denied the accusations. FirstRand has called the Commission’s allegations ‘for the most part unintelligible and incapable of sensible response’, which is staggeringly blunt for a court filing.

Other banks, including HSBC, Credit Suisse, BNP, and JP Morgan, have called the accusations ‘vague and embarrassing’.

The Competition Tribunal has rejected the banks’ claim to have the charges set aside. The banks, in turn, approached the Competition Appeal Court (CAC), which will rule on the matter early in the new year.

Standard Bank CEO Sim Tshabalala reported that one of the CAC judges asked: ‘What is the point of pursuing this? And, surely there’s massive injustice to a bank to be hauled in front of the Tribunal on a cartel case, where in fact there’s plausible evidence – more than plausible, incontrovertible evidence, that they’re not part of the deal.’

Grand conspiracy

That currency manipulation happens is not news. It ought to be punished when discovered, but it’s certainly not unheard of. What would be surprising is that a group of traders managed to construct a conspiracy involving as many as 28 competing banks. That is extraordinarily hard to believe.

News24 has published a good overview of what exactly the allegations entail, and how the case – which was first opened in 2015 – has been progressing.

Enter minister Khumbudzo Ntshavheni. She exploited Standard Chartered’s admission to paint not only SCB and Citibank, and not only the 26 other banks that have not been found to be complicit, but the entire private sector, as having ‘no interest in the development of this country’, and ‘engineer and do machinations to ensure that the government collapses’.

So, not only does she believe an implausibly grand conspiracy among 28 banks, but she expects us to believe that a conspiracy exists that encompasses the entire private sector.

That is, of course, patently absurd.

The private sector is not a monolith. It consists of a vast number of companies, 295 of which are listed on the JSE. They do not all act in concert. They’re not like state-owned enterprises, all controlled by the same single shareholder. They’re not even friends. They are sometimes partners, but they are most often rivals.

Profit motive

All these companies do, however, have a deep interest in the development of this country. A country that is growing, and in which people are becoming more prosperous, is a country in which businesses can more readily make profits. Every company in South Africa wants its customers to have more money, not less, to spend on their products and services.

Many of them would no doubt love to see the back of the ANC, because it has been a total disaster for South Africa’s economy and business climate, but even so, big businesses still routinely suck up to it.

Witness collaborators like Adrian Gore, CEO of Discovery. (Has he decided that the National Health Insurance Bill is a terrible idea yet, or is he still falsely singing its praises, hoping that his company will get a big chunk of business administering it?)

Witness the party-funding disclosures which show donations to the ANC at almost twice the level of its nearest rival, the DA. That is not a sign of a private sector trying to ‘do machinations’ to collapse the government.

Marginal impact

Rand/dollar exchange rate manipulation has only a very marginal impact on the country, in any case. It cannot halt the country’s development. It cannot collapse the government.

The Competition Commission allegations make mention of holding exchange rates steady for a few minutes, or sometimes just seconds, in order to benefit one party or another.

Free market prices are self-correcting. When disturbed, whether by legitimate trades or market manipulation, they quickly reconverge on their ‘true’ or ‘fair’ value.

The rand, being a relatively small currency in a large open market, has always been vulnerable to movement by speculative traders. A few attempts to manipulate it, more than ten years ago, would have had hardly any effect even at the time, and let alone now, more than ten years later.

Negligible

Don’t take my word for it. I’m not an economist. But Dawie Roodt, chairman of the Efficient Group, is.

He told Daily Investor that the alleged currency manipulation was negligible in the long-term value of the rand, and the country was unaffected.

He also commented upon Ntshavheni’s broadside against the private sector:

‘The poor state of the economy is because of the incompetence and corruption of the ANC government,’ he told the news outlet, adding that the banks and the private sector are the only groups keeping the economy from collapsing.

‘We have a government which is actively undermining the South African economy. If it was not for the private sector, there would not have been anything left,’ Roodt told Daily Investor.

Tshabalala also responded to Ntshavheni in a lengthy editorial, denying Standard Bank’s involvement and describing its many contributions to the development of South Africa.

Shifting blame

Ntshavheni’s rant was obviously designed as a crude attempt to try to shift the blame for the country’s collapse from the ANC to the private sector. She might have been totally ignorant of what currency manipulation really entailed, or she might have deliberately trying to deceive. Either way, she was not truthful.

Perhaps, before she points out the mote in the eye of the private sector, she should behold the beam in the ANC’s own eye.

If you want to see true harm done to the currency, cast your mind back to 2001, when an extravagant bout of money-printing by the South African Reserve Bank saw the rand-dollar exchange rate crash from R9.7950 per dollar on 29 November 2001, to R13.86 on 20 December 2001 (the source article misprinted the date as 20 November 2001).

The rand took a year to recover. Over the next year, the sharp increase in the money supply caused consumer price inflation to spike from 4% to a staggering 13% by 2003.

Imagine how much that little stunt cost South Africans.

The present weakness of the rand, and every other indicator of South Africa’s economic malaise, are not the fault of the private sector. The private sector is trying as hard as possible to keep the economy afloat, and perhaps turn it around, mainly because it is in their own financial interest to do so.