Pretoria | Wednesday
THERE was a strong likelihood that petrol producer Sasol and Deutsche Bank colluded to cause a drop in the value of the rand, alleged SA Chamber of Commerce (Sacob) chief executive Kevin Wakeford in a letter to President Thabo Mbeki.
The letter published in the latest copy of Financial Mail said the two companies could have caused the drop to strengthen their economic position in relation to falling oil prices, where a weaker rand would boost resource stocks and commodity prices for companies in the local market.
”Deutsche Bank could also speculate against the falling rand during this process and hence enrich themselves. This could have induced market manipulation and insider trading,” the letter read.
The letter, dated January 8, 2002, inspired Mbeki to set up a commission, headed by senior Advocate John Myburgh, to investigate the rapid fall of the rand in 2001. The currency lost nearly 40% of its value in the last quarter of 2001. The commission kicked off on March 4 and after two weeks of hearings, adjourned after hearing little evidence from economic experts about dubious transactions.
In the letter that was not signed by Wakeford, he said the original deal was for Sasol to buy German chemical company Condea – an offshore deal for which Sasol obtained SA Reserve Bank (SARB) permission a considerable time ago.
He said sources began raising concerns ”two to three months ago” when Sasol announced it had managed to shift in a structured financial product deal, which domestically funded 40% of the original value of the Condea acquisition.
”This move seemingly was not compliant with the original Reserve Bank authorisation,” the letter read.
While examining Sasol’s announcement, Sacob allegedly came across a dubious and peculiar share transaction structured by Deutsche Bank.
According to Sacob, the transaction unfolded in the following manner:
– Sasol bought back a portion of their shares from the market.
– Sasol then obtained Reserve Bank approval to issue new shares and sell them offshore to Deutsche Bank UK. This deal was about R6-billion. (The letter said it had been difficult to verify the figure.)
– The foreign capital obtained from the sale of the new shares issue assisted Sasol in funding the Condea acquisition, potentially under false pretences.
”This left Deutsche Bank over-exposed to the rand via rand-denominated Sasol shares. This induced the sale of rands by Deutsche bank into our domestic market – these actions obviously contributed to the rand’s depreciation,” the letter reads.
Wakeford said Deutsche Bank had also issued a market commentary via their bulletin titled ”Capitulation of our rand view – finally”.
He said the markets took the commentary very seriously because Deutsche Bank’s credibility was reinforced by its core management members who have very strong links with the Department of Finance and the SARB.
”Market jitters at that stage set in and the rand began reaching an all time low of R13,59 to the US dollar in December 2001,” said Wakeford.
He said this was confounded by Deutsche Bank’s dumping of rands in the local market due to their over-exposure to rand-dominated Sasol shares.
”In addition, the SA currency market was technically vulnerable with fairly thin trade due to the SARB governor’s public warning in October that more vigilance would be applied when inspecting transactions.
”Strangely this statement effectively locked out speculators who would have bought an undervalued rand and thereby could have strengthened our rapidly ailing currency,” said Wakeford.
Wakeford said Deutsche Bank was potentially left with a monopoly situation to manipulate the currency due the absence of a significant challenge from the usual speculation.
”Further to this, Deutsche Bank UK could now start selling their strengthening Sasol shares, which they had purchased and paid for offshore,” Wakeford’s letter read.
He said this would cause further capital outflows if these shares were sold in the domestic market. When Finance Minister Trevor Manuel appeared at the commission he said he was never approached by Wakeford with evidence of dubious transactions that led to the fall of the rand.
Manuel told the commission that had Wakeford approached him he would have taken the matter seriously.
The letter alleges it was rumoured that Nampak, M-Cell and Billiton were currently following similar strategies.
The letter said that reasons given for the rand’s fall like the Argentinean debt crisis, the Zimbabwean situation, slow privatisation in South Africa and Aids were priced into the market over a considerable period and were now only ”muddying the waters” when analysing the demise of the rand.
Wakeford did not want to comment further. He said he would give his evidence when he appeared at the commission into the depreciation of the rand on April 2.
”God only knows how Financial Mail got that letter,” he said.
Sasol, commenting to Financial Mail, refuted Wakeford’s allegation, saying an appropriate statement would be given to the commission.
Deutsche Bank told Financial Mail that the allegations were completely incorrect and defamatory. They too were co-operating fully with the Myburgh commission. – Sapa