KATHARINE CHILD: MPs’ wild claims reveal poor grasp of currency trading

A trillion rand is enormous sum of money, which MPs on parliament’s standing committee on finance don’t seem to realise. Last Friday some members casually accused SA’s banks of making “billions and trillions” from foreign traders manipulating the rand exchange rate between 2007 and 2013. 

One would expect MPs who sit on a committee that deals with financial matters to have at least a vague sense of the numbers before claiming, as one EFF member did, that banks have made R1-trillion a day for the past five years. 

On Friday evening the Competition Commission appeared before the committee to update it on the case against mostly foreign banks that employed currency traders who manipulated rand-dollar trades in 2007-13. Many of the accused banks deny the charges. 

Misconceptions abounded in the committee, with the banks in general blamed for SA’s economic problems, including unemployment. 

The commission told MPs that in 2017 it charged 28 banks with exchange rate rigging after insider information revealed that some traders offshore had conspired to withhold bids or bid consecutively to drop or increase the price they could buy and sell rand-dollar pairs for.  

The traders ultimately overcharged firms buying currencies used in international trade. But given the frequency and quantum of trades in forex, which is traded to four decimal points, this is highly unlikely to have either weakened or strengthened the rand. The National Treasury explained this to the committee more than once, but few MPs appeared to understand. 

EFF deputy president Floyd Shivambu accused the mostly foreign banks of “treacherous conduct” and demanded that they pay back the money. “Let’s get that money back so if we paid more for car payments [and] mortgage payments ... the entirety will be repaid.”

There is no evidence that anyone in SA paid more in car or bond repayments because of individual clients being overcharged for rand. But our MPs were not in a mood for facts. ANC MP Dorothy Mabiletsa claimed: “We now have endless poverty in our country, unemployment, inequality and economic exclusion because of this thing.” 

ANC and EFF MPs threw about a smorgasbord of economic terms, referencing “greylisting”, “illicit financial flows”, and the president’s Phala Phala couch scandal. EFF MP Mzwanele Manyi suggested that if parliament held the banks to account for their “shenanigans” SA might be removed from the greylist. 

Anger was also directed at the commission for its proposed fine of 10% of annual turnover if the banks are found guilty of cartel conduct. This is the maximum amount for a first offence provided for in the Competition Act. 

Manyi said it was too low because of the “trillion per day that was made by these banks over the past five years”. The commission had to twice explain to legislators that it had to set penalties within the bounds of what the law allows. 

With the attention span of overtired toddlers the MPs then moved on to picking a fight with the SA Reserve Bank, without explaining why. One MP went so far to accuse the Bank of involvement, asking “whether the Reserve Bank is part of the shenanigans”.

Shivambu suggested the Bank should withdraw the banking licences of all banks that have been charged, including Absa, which co-operated with the commission. Never mind that this would collapse the entire SA banking system — no demand was too small for these MPs. 

For all their bluster, the MPs simply didn’t know enough to hold to account the Competition Commission. SA needs parliamentarians who can ask the right questions, especially since the commission has much to answer for. 

In 2017 foreign banks fought the charges against them, saying they were vague and without evidence or jurisdiction, and in 2019 the Competition Tribunal agreed, asking the commission to redo its charges. In 2020 the Competition Appeal Court upheld this decision. Judge Dennis Davis was scathing of the commission’s initial case, calling it “a movable jurisprudential feast”.

The commission duly reformulated its case and had to defend it at the appeal court in November. Judge Davis will again have to decide if it offered enough facts, evidence and legal coherence to proceed against the banks seven years after charging them. 

Our MPs should surely have grilled the commission about its poorly drafted legal case, and asked why it had to be redone. How much taxpayer money has the commission wasted through years of legal battles? What if the case collapses or is thrown out again, which does not appear impossible?

Instead of holding the commission appearing before it to account MPs were politicking, making wild claims and engaging in rhetoric. We deserve better from our representatives. 

• Child is retail correspondent.