Experts: How the rand was fiddled

Although banks implicated in the rand manipulation saga may be expected to pay hefty fines, consumers may have suffered, according to experts.

They say if the manipulation severely affected the exchange rate, there would be consequences, including the inflation of prices for imported goods such as fuel, which would in turn accelerate the cost of living.

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Inflation is one of the reasons the SA Reserve Bank would have increased repo rates, which pushed up the costs of buying a house, bank loans or a car via credit.

There were 28 banks involved and prosecuted by Competition Commission for manipulating the rand against the dollar.

These included Standard Bank, Absa, Investec, Citibank, First Rand Bank, Barclays, Merrill Lynch, HSBC and Standard Chartered. Evidence pointed to a network of well-coordinated corrupt activity.

In February 2017, the commission referred these banks to the Competition Tribunal for price fixing of the rand.

Method to the madness

The commission then brought 28 banks under investigation, in what it was called the “Forex Cartel” case. This was seen as anti-competitive behaviour.

It was understood these alleged corrupt acts were supposedly carried out through bilateral and multilateral communications, using instant messaging and other modes of communication.

Admitting liability for manipulating the rand between 2007 and 2013, Standard Chartered was fined R43 million.

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Independent economic analyst Bonke Dumisa said while people were not happy about the fine imposed on Standard Chartered, it was important to note there was no way money could be returned to those affected and only a higher fine could be imposed.

“[To] prove class action in any field is very difficult,” he said. But the reality is that the rand manipulation issue is not new.

“When one says the rand has significantly weakened against other currencies, it means, for the very same dollar, you are now getting more from South Africa because the South African currency has weakened,” he said.

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Dumisa said when looking at SA’s inflation rate in the years, it moved from around four percent two years ago and went up to over eight percent.

“It is being tamed at 5.9% and we’re not happy, but it’s comparatively not as bad as other countries where the inflation rate is much higher. We must look at the big picture and not fall into this frenzy,” he said.

“We must condemn rand manipulation but we are now making too much of a cry at the wrong time because this is something which happened between 2005 to 2013.”