Sekunjalo group fights to keep bank accounts open

Sekunjalo Investment Holdings appeared before the Competition Tribunal on Thursday, arguing that the decision by several major banks to shut down its banking services constituted an abuse of dominance or collusive conduct.

In 2022, the tribunal issued an interim order against three banks – Standard Bank, Mercantile Bank and Bidvest Bank – preventing them from closing Sekunjalo accounts.

Another five banks – Nedbank, Absa, FirstRand, Sasfin and Access Bank – were ordered to reopen the bank accounts that had already been closed. 

Read: Banks colluded to shut down Sekunjalo accounts, Competition Tribunal told

The six-month interim order was extended for another six months. Sekunjalo is now asking the tribunal for another extension, arguing that closing its bank accounts will do irreparable harm to its businesses.

Standard Bank, FirstRand, Access Bank, Mercantile Bank (now part of Capitec), and Nedbank are opposing the application for another extension. 

Reputational risk

The banks’ claims of reputational risk stem from the 2020 Mpati Commission of Inquiry’s report into the Public Investment Corporation (PIC), which found the PIC had disregarded its policies and procedures in making investments in Sekunjalo subsidiaries. The report recommended a forensic review of all PIC transactions with Sekunjalo.

Read:
More evidence of Matjila overriding the PIC’s investment processes [May 2019]
PIC and Sekunjalo: a bizarre, value-destroying relationship [Mar 2020]

Advocate Vuyani Ngalwana, arguing for Sekunjalo, told the tribunal that the Competition Act grants it the power to extend interim orders. “If banks were genuinely concerned about errors in granting of interim order, they should have appealed the first extension. They didn’t.”

He added that the banks would suffer no prejudice should they be ordered to continue offering banking services to Sekunjalo on an interim basis and that the claim of reputational risk is being selectively applied. For example, FNB still continued to bank JSE-listed EOH despite it being cited prominently in the Zondo report into state capture.

The banks have argued in other cases that they continue to bank other scandal-plagued companies, such as Tongaat and Steinhoff, largely because the executives responsible for wrongdoing had been fired or replaced.

Read: When and how to unbank the ‘undesirable’?

In the tribunal case, the respondent banks pointed to a Competition Appeal Court (CAC) ruling that the tribunal had erred in granting an extension in the first place. On that basis, there was no case to be made for a further extension, which had, in any event, lapsed.

Case after case after case …

This is the latest in several cases involving Sekunjalo in the high courts, Equality Court, the CAC and the Constitutional Court (ConCourt).

In 2022, the Equality Court ruled in favour of Sekunjalo chair Iqbal Survé and 43 other respondents from the group, granting an interim order preventing Nedbank from closing its accounts. The judge agreed with Sekunjalo that a prima facie case of unfair discrimination had been established. Nedbank is appealing this ruling.

In October 2022, Standard Bank, Access Bank and Mercantile appealed the tribunal’s interim order and filed reviews with the CAC. Those reviews were finally decided in July this year when the CAC set aside the tribunal’s interim order insofar as it relates to Standard Bank, Access Bank and Mercantile Bank. That ruling is being appealed in the ConCourt.

In yet another case, this time before the ConCourt, Sekunjalo brought a case to stop Standard Bank from closing its accounts after it issued a notice to close its accounts on 21 August 2023.

The high court placed a temporary freeze on Standard Bank closing the accounts, pending the outcome of other cases still to be determined.

In an affidavit before the Western Cape High Court, Survé argued that the decision to close bank accounts has far-reaching implications for those involved.

“It prevents them from trading freely as guaranteed by section 22 of the Constitution. Without banking facilities, no person can meaningfully take part in the economy of the country,” he said.

“Such action as serious as terminating banking facilities cannot be implemented on flimsy and irrational grounds. It has dire consequences for thousands of employees and companies who have separate legal personality and [are] governed by independent boards in which I do not participate at all.”

Irreparable harm?

The banks challenged the claim of irreparable harm before the tribunal this week, arguing that Sekunjalo had not argued this point persuasively and that group companies could use third-party payment providers.

Advocate Jerome Wilson, arguing for FirstRand Bank, pointed to a September Sens notice by JSE-listed AEEI (African Equity Empowerment Investments), part of the Sekunjalo group, that contingency plans are in place in the event that the company or its subsidiaries become unbanked.

The Competition Commission is still investigating the complaints made by Sekunjalo, which blamed the banks for delays in supplying the commission with information – a claim rebutted by the banks.

Advocate Matthew Chaskalson, arguing for Standard Bank, said the CAC ruling against Sekunjalo was binding on the tribunal, which should be the end of the matter.

Advocate Adrian Botha, representing Access Bank, said the account for Sekunjalo’s company, AfriNat, was still open despite the bank’s success in the CAC case. It was wrong to treat all banks as a group. They should be treated separately, he argued.