Cape Town - The Gupta family went into crisis mode on Friday, taking the drastic step of resigning their executive positions at the firm Oakbay Investments.
They were trying to salvage their embattled business after the closing of its accounts by two major banks and severing of ties by audit firm KPMG.
President Jacob Zuma’s son, Duduzane, also resigned from all Oakbay companies and undertook to “exit” investments, though he did not specify which.
This comes as Oakbay chief executive Nazeem Howa told staff in a letter it had become “virtually impossible to continue to do business in South Africa” following the closing of Oakbay’s accounts by Absa and FNB.
“Without bank accounts we may find ourselves in a position where we are unable to pay you,” he told staff.
The company’s broker, Sasfin Holdings, also announced it would terminate its relationship with Oakbay from the beginning of June.
Howa said in the letter that the company had written to the ministers of finance, mineral resources and labour, as well as the Presidency, to raise its concerns over the “unexplained decisions” by the banks and “to make it very clear that livelihoods are at risk”.
The family has previously denied reports they intend leaving the country.
Economist Dr Iraj Abedian said the company would have been under “enormous pressure” after being deserted by banking and financial partners of this stature, because any association with Oakbay would come with significant reputational implications for other companies they might approach to take over these services.
There were South African and international reporting requirements that obliged banks and auditors, in particular, not only to sever relations with a company if they suspected illicit behaviour, but to report it.
If anything, it was surprising it had taken so long for KPMG and the banks to act, Abedian said.
KPMG specifically cited “association risk” as the reason for its decision, said Reuters.
“If nobody is prepared to bank you, how do you do business in the modern day, how do you transfer money?” Abedian said.
The Guptas had been “defeated” by prudential and oversight measures of good governance.
“Market oversight is beginning to override political connections and/or regulatory weaknesses in some countries.”
Abedian said while the resignations of the Guptas and Duduzane Zuma was a beginning in rehabilitating Oakbay, it was not sufficient.
Proxy people could continue taking care of their transactions.
“That whole stable has to be cleaned up.”
Oakbay Investments subsidiary Tegeta recently struck a deal for the purchase for $136 million (R2 billion) of a coal mine which supplies Eskom’s Arnot power station, and there has been speculation it would be unable to finance the deal in light of its banking difficulties, potentially attracting a heavy penalty if it fails to honour its commitment.
Duduzane Zuma acquired a stake in Tegeta shortly before the deal was announced.
The Gupta family have been overtaken by a series of scandals, starting with the firing of Nhlanhla Nene as finance minister and his replacement with David van Rooyen, who arrived at the Treasury with two Gupta associates in tow.
There was a strong belief in ANC senior circles at the time that Nene had been removed over his rejection of a nuclear programme from which the Guptas would have been able to benefit through their interests in the Shiva uranium mine.
Anger in the ANC exploded when Deputy Finance Minister Mcebisi Jonas revealed he had been offered Nene’s job by the Guptas before the minister was removed by Zuma.
This and subsequent revelations of the family’s attempts to influence cabinet ministers and government officials resulted in the ANC resolving to inquire into the allegations through its secretary-general Gwede Mantashe.
The Guptas said on Friday they had been victims of “a period of sustained political attack on our family and our businesses”.
But ANC alliance partner the SACP said its campaign against what it terms “corporate capture” would only intensify.
The SACP campaign would continue “until such time that no one can claim to exercise powers, functions and prerogatives that, in terms of the constitution, do not belong to them”, Mashilo said, referring to Zuma’s prerogative, as president of the country, to appoint and remove ministers.