Rand manipulation: Treasury sets the record straight

 ·27 Nov 2023

The National Treasury has refuted allegations being made – largely from ANC politicians – that the so-called rand manipulation cases being investigated by the Competition Tribunal are the cause of South Africa’s economic woes and the depreciation of the local currency over the years.

UK-based banking group Standard Chartered Bank (SCB) recently admitted guilt in the investigation – which has been ongoing since 2017 – and paid a penalty. SCB and 27 other banks, local and multinational, have been implicated in the probe.

The alleged misconduct by the banks involved a handful of traders, who, between 2007 and 2013, assisted each other on risk positions instead of following normal trading patterns on the market.

The recent admission of guilt from SCB – even though it had already admitted guilt in the United States in 2019 – provided the perfect opportunity for politicking and misinformation from officials, however.

Responding to questions about the rand manipulation case, minister in the Presidency Khumbudzo Ntshavheni has used the case to make unfounded claims that the private sector has been engineering the collapse of government and South Africa’s economy.

These allegations were made despite the private sector working closely with the government to try and undo the damage done to key sectors due to self-induced service delivery failures, mismanagement, maladministration and sheer neglect by the state.

Other politicians also jumped on the case and have been falsely claiming – or repeating the false claims – that private banks were making trillions of rands in profit due to the manipulation, destroying the value of the rand.

However, in a statement on Friday (24 November), the National Treasury set the record straight, saying that the rand’s collapse over the years had nothing to do with the Competition Tribunal’s case or the misconduct involved. It said only individual clients were harmed by the activity, not South Africa as a whole.

The department added that the market manipulation being investigated ended in 2013 and that rules and regulations have long been put in place to mitigate and avoid this kind of behaviour.

“The reforms already undertaken since the Standard Chartered misconduct between 2007 and 2013 as well as the additional reforms proposed demonstrate Government’s commitment to fair, transparent, and efficient financial markets and rooting out any misconduct and unfair treatment of customers,” it said.

More importantly, however, “whilst the wrongdoing described by the Competition Tribunal harmed individual clients, it would not have influenced the depreciating trend of the currency since 2013, the
level of which is driven by broader changes in the global and domestic economy.”

“The value of the currency today, which has depreciated against the dollar, and the resulting impact on
prices, should not be attributed to these instances of misconduct between 2007 and 2013.”

The rand has depreciated against the dollar by 85% over the last decade, crippled by several key moments.

One of the key moments that stands out is the rapid deterioration of the economy in late 2015, when former president Jacob Zuma suddenly and unexpectedly fired former finance minister Nhlanhla Nene, replacing him with a loyalist comrade, Des Van Rooyen.

Arguably, this event triggered the ultimate collapse of what is known as the “state capture” period, as Zuma’s actions came under significant scrutiny and the wide patronage networks were uncovered over time.

However, as state capture and corruption were added to the rand’s risk premium, the currency never recovered to previous levels.

The next significant spike in the rand/dollar exchange rate came in 2020 after the world was put into lockdown due to the Covid-19 pandemic and markets were thrown into chaos. South Africa was not alone in this, but as a riskier emerging market, it suffered more than others.

Following a post-pandemic recovery, the rand’s more recent weakness – which pushed to record levels earlier this year – was driven by the ongoing electricity crisis and poor geopolitical positions from the government around the Russia-Ukraine war.

On top of its own missteps and homegrown crises, South Africa’s economy is also subject to global moves and market fluctuations, which have also impacted the value of the rand and its direction.

Most recently, the rand – which has a significant risk premium priced in – has been fluctuating based on global interest rate moves.

Read: Government’s state collapse delusion

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