Competition Tribunal: Banks colluded to shut down Sekunjalo accounts

Sekunjalo Investment Holdings, which has stakes in Independent Media, Ayo Technology and Premier Fishing & Brands, this week told the Competition Tribunal that the major banks colluded in closing its bank accounts between 2020 and 2022.

The responding banks hit back, saying there was no collusion and their decision was based on the reputational and commercial risk of continuing to do business with Sekunjalo, which is chaired by Iqbal Survé.

In late 2020, Absa sent out letters informing Sekunjalo-related entities that their services would be terminated in 60 days. Other major banks, including Nedbank, Investec and Standard Bank, followed suit by closing accounts or placing the accounts under review.

Some 36 applicants in the case, known collectively as the Sekunjalo group, lodged a complaint with the Competition Commission in December 2021 against nine banks.

The group is asking the tribunal for interim relief against Standard Bank and Nedbank, prohibiting them from terminating their relationship with Sekunjalo until the main complaint of collusive behaviour is decided by the commission.

Sekunjalo is also asking the tribunal for an interim order that would force seven other banks to restore its banking accounts. The seven banks are FirstRand Bank Limited, Absa Bank Limited, Mercantile Bank Limited, Sasfin Bank Limited, Investec Bank Limited, Bidvest Bank Limited and Access Bank Limited.

Advocate Vuyani Ngalwana, representing Sekunjalo, told the tribunal the banks had adopted an “insouciant and disreputable” stance by relying on media reports to claim they suffered potential reputational risk by maintaining a banking relationship with Sekunjalo.

The PIC

The banks appear to have turned sour on Sekunjalo after a commission of inquiry led by Judge Lex Mpati issued a report in 2020 on governance lapses at the Public Investment Corporation (PIC), with the finding that the PIC had invested in Sekunjalo companies, often against the advice of investment advisors, due to the close relationship between the then-CEO of the PIC, Dan Matjila, and Survé.

The PIC is suing to recover funds it says were irregularly handed over to Sekunjalo.

Ngalwana noted that the PIC has substantial shareholdings in each of the major banks as part of its remit to invest public sector employees’ pension funds, and that there was a coordinated effort to deny banking facilities to a black-owned and managed company.

Sekunjalo subsequently hired retired Judge Willem Heath to conduct an “independent factual findings report in relation to the Mpati Commission and the Sekunjalo Group”.

Standard Bank

Standard Bank, represented by Advocate Steven Budlender, argued that it was conducting a review of Sekunjalo’s accounts and had given it extensive opportunities to submit information on the concerns raised with it. Sekunjalo had yet to supply all the information requested. The bank had not yet taken any decision on whether or not to terminate the banking relationship.

“We submit that the application against Standard Bank is not merely unfounded but is an abuse of process,” argues the bank in its heads of argument. Sekunjalo provided no facts to support its claim that any decision to terminate the banking relationship could only be as a result of collusion with other banks. The group was using competition law to force Standard Bank to continue providing banking services, potentially circumventing the bank’s contractual right to close a bank account.

Ngalwana fired back, saying contractual law cannot escape constitutional scrutiny, while the Financial Intelligence Centre Act (Fica) allowed for the closure of bank accounts only under very specific circumstances, such as an inability to verify a client or perform ongoing due diligence.

Nedbank

Nedbank, represented by Advocate Alfred Cockrell, argued that Sekunjalo was attempting to do an end-run around the common law principle that a bank is entitled to terminate its contractual relationship with a customer on reasonable notice. Nedbank had nothing to gain by engaging in the anti-competitive behaviour of which it is accused, as the closing of Sekunjalo’s bank accounts would not allow it to raise the price of its services or to exclude competitors.

Nedbank says it engaged in good faith with Sekunjalo during 2021, asking for information on certain transactions, but the information supplied was inadequate. In February 2022, the Western Cape High Court dismissed an application by Sekunjalo to interdict it and Nedbank Private Wealth Stockbrokers from closing its bank accounts, pending the outcome of the case now being heard by the Competition Tribunal.

Subsequent to that ruling in the Western Cape High Court, Nedbank closed the bank accounts of several Sekunjalo business accounts.

“For a number of years, the Sekunjalo Group has been the subject of allegations of improper conduct. [Sekunjalo] seeks to characterise themselves as the victims of a widespread media conspiracy,” reads Nedbank’s heads of argument.

“It is common cause, therefore, that there are widespread allegations of malfeasance on the part of the Sekunjalo Group. These allegations have been referred to, and probed, by the Mpati Commission. The Mpati Commission had some negative things to say about the Sekunjalo Group.”

Ngalwana replied that the banks had repeated certain defamatory remarks about Sekunjalo, and cited the reputational risk as a reason for terminating banking relationships with the group. While this was a potential risk, there was a far greater risk to the 200 entities under the Sekunjalo umbrella, and the roughly 8 500 people it employed, as well as to the SME suppliers reliant on the group for business.

Nedbank leaned on a Supreme Court of Appeal (SCA) case where banks have the right to close a client’s account on reasonable notice, without having to demonstrate good cause. Where it perceives reputational and business risk associated with a client, a bank can close the account provided it complies with the notice requirements under the contract with the client.

Ngalwana replied that the SCA case relied on by Nedbank was of no assistance to it, since in that case the Bill of Rights was not engaged. The Sekunjalo case invoked the Constitution in several ways. Shutting down its banking accounts had the effect of strangling its business, notwithstanding the banks’ claim that alternative banking transaction facilities are available to it.

FirstRand

FirstRand likewise argued that Sekunjalo had failed to make out a case that it was engaged in a prohibited practice, and this should deny it the interim order it is seeking.

Absa

Absa was the first to terminate banking relationships with Sekunjalo in August 2020 on the grounds that it posed “intolerable reputational, commercial and legal risks,” according to the bank’s heads of argument. The group had failed to place convincing argument before the tribunal that the bank was engaged in a restrictive practice.

Ngalwana replied that Absa was the first to “trigger the guillotine” when it closed Sekunjalo’s bank accounts.

Absa argued that it had done so unilaterally, without consultation with other banks, and that in any event there was no scarcity of alternative banking solutions available to the group. Ngalwana rejected this argument.

Mercantile Bank

Mercantile Bank claimed that Sekunjalo had cited the wrong party within the banking group. “This is a technical nicety. We all know who is the interested respondent in this case. This is the kind of legal sophistry that the Constitutional Court says must be guarded against,” said Ngalwana.

Ngalwana also rejected those banks arguing that the tribunal cannot decide constitutional issues.

“There’s no constitutional challenge in this case – all we are asking is for the tribunal to interpret the law through the prism of Constitution.”

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