Finance Minister Pravin Gordhan, in a meeting with Oakbay Investments in May, suggested that, if the company believes it has been unfairly treated by the commercial banks, it should take the matter to court, which is the only recourse available to medium to large companies.
All the major South African banks suspended their services to Oakbay Investments, owned by the controversial Gupta family, in April. The company is having to pay its employees through an international bank. The bank is thought to be Baroda, an Indian-headquartered bank, which has two branches in South Africa, one in Johannesburg and the other in Durban.
Last week, in answering questions in Parliament, Gordhan confirmed he had met the chief executive of Oakbay Investments, Nazeem Howa. The finance minister said, in his view, the only option available to Oakbay was to approach a competent court.
Oakbay said that a court action wasn’t out of the question and was perhaps something it could go back to. “However, the inevitably long lead time of any court action means the most rational strategy to date has been to explore all possible alternative solutions,” the company said.
But approaching the courts would appear to be the only recourse in this case.
The ombud for banking services can deal only with complaints from individuals, small businesses (with an annual turnover of less than R5-million) and trusts or associations.
The Financial Services Board and the office of the ombud for financial service providers are also not empowered to deal with such a complaint, although the FSB said the South African Reserve Bank could. But the Reserve Bank refuted this.
“The South African Reserve Bank regulates and supervises banks in South Africa to achieve a sound, efficient banking system in the interest of depositors and the economy as a whole. It is not the mandate of the [bank] to intervene in dealings between banks and their clients,” said its spokesperson, Jabulani Sikhakhane. “Medium-sized and big corporate clients must, as some have, turn to the courts for recourse.”
Gordhan, responding to questions in Parliament, warned, however, that if Oakbay goes to court it should have nothing to hide.
As individuals, none of the Gupta brothers has laid a complaint with the ombud for banking services.
“Banks, from time to time, close the accounts of clients,” the ombud said.
The code of banking practice stipulates that banks can close accounts, without necessarily giving notice, if the bank is compelled to do so by law (or by international best practice), if the account has not been used for a significant time, or if the bank has reason to believe the account is being used for illegal purposes.
Oakbay has not launched any legal action, but the Gupta family did file a complaint with the national consumer commissioner in April.