Cyril Ramaphosa. Picture: GCIS
Cyril Ramaphosa. Picture: GCIS

President Cyril Ramaphosa could be drawn into a forensic probe initiated by the Nigerian government into alleged foreign exchange violations by banks acting on behalf of SA telecommunications giant MTN.

Ramaphosa’s former investment holding company, Shanduka, is among previous and current shareholders in MTN Nigeria whose names have cropped up during a forensic audit of billions of dollars flowing in and out of Nigeria.

The audit centres on foreign exchange declarations the banks issued to MTN, for whom Nigeria is the biggest and most lucrative market.

A confidential audit report, which Finance Uncovered has seen, makes no allegations of wrongdoing against MTN, but its claims raise questions about whether MTN knew about its bankers’ alleged violation of Nigerian laws and even if it might have benefited from this.

Ramaphosa was also nonexecutive chairman of MTN during the time of the banks’ alleged violations.

MTN said it had not been approached by the authorities, adding that the company “has not at any material time participated in any improper repatriation of funds from any jurisdiction”.

SA’s Standard Bank is one of several global banking groups which are alleged to have “breached” Nigeria’s foreign exchange regulations repeatedly, by billions of dollars over a 15-year period.

A spokesman for Standard Bank’s Nigerian subsidiary said it had received no “formal communication” from the Nigerian government about the investigation and therefore could not comment.

The forensic probe also flags SA’s Public Investment Corp (PIC) as having received an irregular forex clearance around the time it acquired its MTN Nigeria stake.

amaBhungane has established that the PIC stake was bought from Shanduka in 2015. Ramaphosa’s family trust held a 29.6% stake in Shanduka but he eventually unbundled his shareholdings after he became deputy president in 2014.

The fact that the PIC bought most of Ramaphosa’s stake also appears to have been concealed until recent inquiries by Finance Uncovered and amaBhungane.

The investment was a bad one for the PIC: the shares were declared to be worth R2.8bn at the time of purchase; in the 2017 annual report for the PIC they were valued at only R996m — 35% of what they were bought for.

Much of the loss in value was due to the huge fine imposed on MTN in October 2015 for violations of Nigerian subscriber registration rules.

Questions are likely to be asked about whether Ramaphosa had any knowledge of the Nigerian regulatory risk at the time Shanduka sold its shares in April 2015.

His acting spokesman Tyrone Seale did not respond to numerous requests for comment.

In August 2012 Ramaphosa’s Shanduka investment vehicle received clearance from its Nigerian bank, Standard Chartered Nigeria, to bring US$10.9m in preference shares and equity to Nigeria to invest in the MTN company there.

The Nigerian government probe has identified this capital movement as one of hundreds of irregular clearances issued to MTN and its shareholders by commercial banks in contravention of Nigerian capital control laws.

This inflow appears to have been linked to Shanduka’s public announcement, in November 2012, that it had acquired a minority stake in MTN Nigeria worth $335m.

The stake was acquired from three private investors by Shanduka Telecommunication (Mauritius), reported to be a wholly owned subsidiary of Shanduka Group.

At the time, Ramaphosa held the largest stake in Shanduka, and also chaired the MTN Group.

Ramaphosa re-entered the political arena in December 2012 — a month after Shanduka announced its MTN Nigeria investment — when he was elected deputy president of the ANC.

He stepped down from the MTN board a few months later.

Ramaphosa announced his intended divestment from Shanduka following his appointment as SA deputy president in May 2014, and by May 2015 he had reportedly finalised his divestment by selling his 29.6% stake to Phembani Group as part of a Shanduka-Phembani merger.

Over the period October 2012 to January 2015, the Nigerian forensic report indicates, Shanduka Telecommunication (Mauritius) received dividends of $88,7m from MTN Nigeria.

Until late last month, MTN’s official website showed Shanduka Telecommunication (Mauritius) owning 2.71% of MTN Nigeria.

When Finance Uncovered approached Phembani (the merged conglomerate) for comment, a spokesman said the MTN Nigeria stake was not part of the assets it acquired from Shanduka.

“Shanduka Group no longer held shares in MTN Nigeria at the time of Phembani acquiring the Shanduka assets,” they said. “We are advised that Shanduka no longer holds a stake in MTN Nigeria.”

Two days later, the same webpage was updated to reflect a new MTN Nigeria shareholding — without any Shanduka stake.

The updated webpage instead reflects a new shareholder: SA state-owned public sector investment arm, the PIC, with a 1.76% stake.

A spokesman for the PIC said: “The PIC can confirm that it acquired MTN Nigeria shares through the over-the-counter (OTC) market in Nigeria. The shares were purchased in 2015 for $230.993m.”

The PIC said it purchased MTN Nigeria shares on March 27 2015 and took transfer on April 2 2015: “The parties involved in the transaction were Standard Chartered Bank, which acted as an escrow agent and Sao Capital as the transaction adviser. There was no negotiation with Mr Ramaphosa, Shanduka or MTN. The PIC put in a successful bid for the shares, based on what we deemed to represent the fair value of the shares. At the time of making the investment, the Nigerian telecommunications market was attractive ... However, following this investment, MTN was fined for not complying with regulations in that country ... We are now comforted that MTN has taken steps to strengthen regulatory compliance and risk management to prevent a repeat of what happened. As a long-term investor, our view is that the medium to long-term prospects of the Nigerian telecommunications market remain attractive.”

A further 0.95% stake is unaccounted for in this newly disclosed shareholding, but MTN told us it had been purchased by Hermitage Overseas Corp Limited, which has been linked by allegations in the Nigerian parliament to local billionaire Victor Odili.

Before it merged with Shanduka, Phembani was majority-owned by Phuthuma Nhleko, who now chairs the merged Phembani group.

Nhleko and Ramaphosa were a long-running double act as CEO and nonexecutive chairman respectively of MTN between 2002 and 2011.

Nhleko then resigned but returned to MTN to succeed Ramaphosa as nonexecutive chairman in 2013.

Nhleko temporarily took the reins as MTN executive chairman between 2015 and 2017 to help steer the company through its regulatory challenges in Nigeria.

Nhleko is now nonexecutive chairman again.

Standard Bank named in Nigerian probe

SA’s Standard Bank is one of several global banking groups which “breached” Nigeria’s foreign exchange regulations repeatedly by billions of dollars over a period of 15 years, a leaked confidential audit report has alleged.

The damning report accuses Standard Bank’s Nigerian subsidiary, as well as the UK’s Standard Chartered and US rival Citigroup, of widespread misreporting of their currency flows in Nigeria.

The audit report centres on foreign exchange declarations the banks issued to their client, MTN, for whom Nigeria is its biggest and most lucrative market.

Nigeria’s attorney-general commissioned the audit from a Lagos law firm last year.

The audit report recommends the banks immediately “refund and return” up to $13.2bn (R152.5bn) to the Central Bank of Nigeria — a regulatory sanction in line with the central bank’s Foreign Exchange Manual.

Unlike Standard Chartered and Citibank, Standard Bank has not been asked to return any money. It is understood that the reason for this is at the time of the audit its subsidiary Stanbic IBTC had not transferred funds out of Nigeria on behalf of MTN.

But the report alleges that Stanbic may have failed to declare almost $950m in capital inflows to Nigeria and recommends that its future right to use these declarations to repatriate dividends for MTN shareholders is withdrawn.

The report makes no allegations of wrongdoing against MTN, but its claims raise questions about whether MTN knew about its bankers’ alleged violation of Nigerian laws and even if it might have benefited from this.

The report’s authors added their recommendations were “without prejudice to criminal charges” that may also be considered by the attorney-general under the country’s foreign exchange laws.

It is unclear whether the Nigerian government has provided the banks with a copy of the report and has given them an opportunity to respond to the allegations.

While the report states it “forensically analyse[d] ... documents and information obtained from the concerned banks”, a spokesman for Stanbic said it had received no “formal communication” from the Nigerian government about the investigation and therefore could not comment.

MTN said it had not been approached either, adding that the company “has not at any material time participated in any improper repatriation of funds from any jurisdiction.”

The report’s demands for “required enforcement actions” were delivered to the attorney-general and the central bank last October but almost five months later there are concerns nothing has been done. A whistleblower, angry at the perceived inaction of Nigeria’s authorities, showed a copy of the report to Finance Uncovered.

They said the report was a “landmark case” made possible by the present government’s “anti-corruption stance”.

The central bank has in the past ordered offending banks to refund irregular forex trades, and temporarily suspended others from trading — but this report’s recommended actions are believed to be unprecedented in its scope and scale.

Sceptical analysts have previously suggested that the Nigerian government has been targeting SA multinationals with regulatory fines in the wake of the oil price slump of 2014, which had left Nigeria with budget deficits and constrained foreign currency reserves.

MTN’s share price has not recovered since the Nigerian government issued an initial fine of $5,2bn in 2015 for failing to disconnect unregistered mobile phone subscribers. The fine has since been reduced to under $1bn after high-level diplomatic negotiations.

Stanbic also faced a $5m fine in 2015 for allegedly issuing misleading annual financial statements, a claim Stanbic disputed. A year later the bank announced it had reached an “acceptable settlement” with the regulator.

Nigeria is particularly vulnerable to sudden shocks in its foreign currency reserves because of its dependence on a single commodity — oil.

Its foreign exchange regime was established to control the level of currency flows in and out of the country, partly so it has enough reserves to buy vital imports such as manufactured goods, food and medicines.

To manage this risk, Nigeria’s central bank operates a capital control system, under which foreign investors can bring capital into the country via any authorised commercial bank.

The commercial banks are required under Nigerian law to check the inflow is a legitimate investment (in practice this means checking four or five supporting documents) before issuing the investor with a certificate of capital importation (CCI) showing the date and value of the conversion into naira.

By law, the banks must not only issue the CCI within 24 hours of receipt of the foreign inflow, but also declare it to the Central Bank within 48 hours.

This provides the central bank with prompt data which it can use to manage its currency reserves.

Importantly, a validly issued CCI later acts as a pass for the investor to repatriate any profits and dividends, subject to paying tax. By law, banks also have to declare all outgoing repatriations to the central bank.

According to the report, the auditors examined more than 350 CCIs issued to MTN between 2001 and 2015 by the banks.

Their findings suggest the scale of the paperwork irregularities over the years was widespread.

Some of the alleged breaches cited by the audit report are:

• Declarations that do not match inflows. When MTN first invested in Nigeria in 2001, they imported $269m via Standard Chartered to pay for their licence fee. A year later, they imported a further tranche of $25.4m for working capital and shareholder loans.

In both cases, the report says that Standard Chartered issued MTN with CCIs for lesser sums, leaving a total $7.2m in inflows undeclared. “Standard Chartered did not and has yet to explain” the difference, reads the report.

• No evidence of capital inflows. For instance, the auditors were unable to obtain “verifiable evidence” from Standard Chartered that MTN had in fact imported a further total of $73,1m of foreign capital inflows for which it had been issued with CCIs.

• Late declarations. In the case of Stanbic IBTC, it allegedly issued 185 out of a total 225 CCIs (82%) outside the stipulated 24 hours.

According to the whistleblower, some of Standard Chartered’s declarations were allegedly filed more than five years late.

• Stanbic issued a total of 225 CCIs to MTN but allegedly reported only 13 of these to the central bank. The aggregate amount of capital imported with these allegedly undeclared CCIs totals $947m.

• Citibank allegedly transferred a number of CCIs to Standard Chartered to use without obtaining prior approval from the central bank, and then allegedly “repeatedly used” some of them itself to remit a further $1.77bn to MTN offshore.

Standard Chartered allegedly “falsely made ... remittances” to MTN shareholders of dividend payments totalling nearly $1,5bn without central bank approval.

Questioned about the report by Finance Uncovered, a spokesman for Stanbic IBTC said it had received no “formal communication” from the Nigerian government about the investigation and therefore could not comment.

Standard Chartered and Citibank Nigeria declined to comment, citing the ongoing nature of the investigation.

The audit has also raised questions about the regulatory role of the central bank itself. The whistleblower suggested its officials had worsened the situation with “lax or accommodating monitoring”.

This echoes the findings of a separate investigation by Nigeria’s upper house of representatives, the senate, completed late last year.

The senate report, which focused on MTN and has not been made public, reportedly “condemned” the central bank for “granting extensions and exemptions, which became prone to abuses”. It also reportedly cleared MTN of any wrongdoing.

MTN has previously said the allegations were “completely unfounded and without any merit”. It told Finance Uncovered: “MTN has the greatest respect for the countries within which it operates and remains unflinchingly committed to conducting its business within the parameters of all pertinent local and international laws.”

It is understood that the central bank has set up a committee which is still considering the report, and the question of criminal charges remains before the attorney-general.

There is some frustration that the government has apparently not yet acted on or responded to the report’s recommendations.

Highly placed officials in the attorney-general’s office confirmed that an investigation was ongoing but declined to comment further.

The central bank did not respond to written questions.

The Lagos law firm which conducted the audit also declined to comment because it had “confidentiality obligations” to its client, the attorney-general.

* Written in collaboration with AmaBhungane. 

The amaBhungane Centre for Investigative Journalism produced this story. Like it? Be an amaB supporter and help us do more. Know more? Send a tip-off.