The Foreign Exchange market: a multi-billion-rand playground for insiders

One of the 28 banks implicated is Standard Bank. File image.

One of the 28 banks implicated is Standard Bank. File image.

Published Nov 22, 2023


The dust has not yet settled on the forex that was stolen from President Cyril Ramaphosa’s game farm, Phala Phala. The DA and others are taking the rulings by the SA Reserve Bank (Sarb) on review as they are not satisfied with the finding that no foreign exchange regulations were transgressed.

Now the news is flooded with reports of institutions that stand accused of being part of an overarching foreign exchange rigging conspiracy.

One of the 28 banks is Standard Bank.

Standard Bank reported in their 2012 annual report that of the wealth that they had created, there was an item “Corporate and social investment spend” for an amount of R125 million, which was less than 1% of their total wealth created.

The following extract from the Standard Bank 2012 annual report is worth mentioning: Cyril Ramaphosa (60) BProc (Unisa) Appointed 2004 Cyril Ramaphosa is a non-executive director of SBG and SBSA. He is chairman of Shanduka Group, Auram Restaurants Company (t/a McDonalds SA), the Bidvest Group and MTN Group. He is co-chairman of Macsteel Services Centre SA and Mondi Plc. Cyril is a director of Alexander Forbes Equity Holdings, Kangra Coal, SABMiller Plc, TBWA Hunt Lascaris, and Tutuwa Strategic Holdings 1.

“As an independent director he should bring an independent judgment to bear on issues of strategy, performance, and resources including key appointments and standards of conduct”.

One cannot see that he was aware of what was going on.

However, at a numeration of R460000, one must assume that he is not just a passenger to provide gravitas and trust for shareholders and the public to the board. The public interest score of a bank the size of Standard Bank is as big as it gets, and one can, therefore, assume there is huge public interest in the bank.

The following extract from Standard Bank’s 2012 annual report is how the banks typically describe their actions in relation to proprietary deals and deals executed for their clients.

“Trading is predominantly related to client flows, rather than being proprietary, and is managed within the group’s risk tolerance levels. It exposes us to market risk as market prices on these asset classes may increase or decrease due to external factors. This risk can be reduced through offsetting trades with counter-parties and other clients.”

In 2015, the Competition Tribunal launched a complaint against 28 financial institutions that stand accused of being part of an overarching foreign exchange rigging conspiracy.

The Commission alleges that between 2007 and at least 2013, 28 banks from multiple jurisdictions, in Europe, South Africa, Australia and the US conspired to manipulate the South African Rand through information sharing on electronic and other platforms and through various co-ordination strategies when trading in the USD/ZAR currency pair.

The SABC quoted the Competition Commission as saying, “Implicated banks in the alleged rand manipulation have generated about a trillion rand a day between 2007 and 2013”. This was stated by divisional manager for cartels at the Competition Commission Makgale Mohlala to the Competition Tribunal.

The Tribunal required the Commission to limit its pleading to a single overarching conspiracy (SOC). The following two clauses sum up the position of the Competition Tribunal.

– The Commission alleges that the Respondents contravened section 4(1)(b) of the Act in that they reached an agreement and/or coordinated their activities to participate in a SOC to manipulate and distort the normal competitive conditions in the trading of the USD/ZAR currency pair.

– The alleged conduct is considered the most egregious in our Act and the probable effects are presumed to be substantial.

British multinational bank Standard Chartered has agreed to pay a settlement of R42.7 million to the Competition Commission after it was found to have manipulated the exchange rate in South Africa. We have no idea if this is an appropriate sanction.

The UK-based bank reached a settlement with the competition watchdog for its role in fixing and creating fictitious bids, as well as other activities aimed at manipulating the dollar-rand exchange rate between 2007 and 2013.

Instead of filing their answering affidavits as ordered by the Competition Appeal Court, the Respondents (applicants in these proceedings) filed exceptions, objections, applications for dismissal and strike out of the Referral and the Commission’s application to join further Respondents.

This line of non-cooperation does not sit well with the aggrieved citizens of this country. Banks are great, clients of the legal fraternity and it is well known that they will throw good money after bad money to save face, it is time for large shareholders of banks such as the Public Investment Corporation to intervene.

Sarb Governor Kganyago stated this in the 2015-2916 annual report. “Inflation averaged 4.6% in 2015 and was within the target range in each month of the year, reaching a low point of 3.9% in February.”

The main task of the Sarb is to preserve the value of the Rand via its monetary policy. Can someone please explain what went wrong with the strength of the rand if Sarb is using the right policy instruments? The Sarb should change its focus from punishing all economic ills on the consumer and establishing tighter controls in its oversight over banks.

From January 2006 to January 2014, the exchange rate between the US dollar (USD) and the South African rand (ZAR) varied significantly. According to the Exchange Rates UK, the exchange rate in January 2006 was 1 USD = 6.35 ZAR, and on January 2014 was 1 USD = 11.71 ZAR 12.

The victims of the conspirators

The Sarb, whose single most important mission is to ensure price stability in the SA rand. It also makes a mockery of the Prudential Authority, which was created to regulate the banks.

– The importers of goods to South Africa.

– The consumers who are price takers and in addition are on the receiving end when inflated prices lead to higher interest rates, via punitive interest rate hikes such as currently being experienced.

– The exporters who receive less for their goods when the Rans swings back below its intrinsic value.

The entire debt market of South Africa was affected by the findings of the Financial Action Task Force that grey-listed the country. The recommendations included better monitoring of our financial system.

The current case is indicative of a banking sector that does not value its currency exchange license as a valuable asset that must be preserved at all costs.

The World Bank and Treasury said on Friday that the "low interest" $750 million development policy loan (DPL) is meant to support the country’s implementation of the country's Economic Reconstruction and Recovery Plan. To me, it is embarrassing to receive such a loan on such good terms when there is such self-inflicted damage to our country.

Lastly, we have empathy with the forex traders who weren’t in on the conspiracy and could not understand the tsunamis that hit them at regular intervals.

Questions were sent to the Competition Tribunal, which will be dealt with in a further article.

Do not be surprised to see a class action legal suit as the result unless the banks are prepared to pay damages to forex clients at the time, which could include all importers and exporters as the rand can be manipulated both ways not just one-way traffic. The Sarb may itself have been a victim.

Corrie Kruger is an independent analyst.