/ 29 March 2017

Gupta-linked bank bid faces collapse

The Habib Overseas Bank head office is at the Oriental Plaza in Johannesburg.
The Habib Overseas Bank head office is at the Oriental Plaza in Johannesburg.

An ambitious bid to buy Habib Overseas Bank may collapse in the next 48 hours unless Vardospan can secure a high court order to compel regulators to rule on its application for a banking licence.

Vardospan owners Hamza Farooqui and Salim Essa filed papers seeking an explanation for why the Reserve Bank, the Registrar of Banks and the minister of finance have been dilly-dallying on their application for the past seven months.

“We have complied with everything yet they have not given us the courtesy of explaining why they are unable to make up their minds,” a fuming Farooqui told the Mail & Guardian on Wednesday morning. “If you have a problem with me, say so. If you have issues with my partner, say so, but remove the politics and treat my application on merit.”

READ MORE: Gupta allies trying to buy a bank face intense scrutiny

He has previously said his intention is to turn the tiny Habib Overseas Bank into South Africa’s first black-owned bank.

Farooqui immediately denied that this court challenge was linked to the current tension regarding the fate of Finance Minister Pravin Gordhan, who President Jacob Zuma on Monday morning unceremoniously called back from an investor trip to the United Kingdom.

“It would not be in my interest to get involved in the politics. I am going to court because I have no other way to get answers out of them,” Farooqui said.

Farooqui and Essa obtained Competition Commission approval for a merger in January, paving the way for the regulatory process that has seemingly come undone.

Their deal with the foreign owners of Habib Overseas Bank dates back to August last year and was subject to Vardospan acquiring regulatory approval. They have already missed one deadline at the end of January and, unless they get a decision out of the regulators by March 31, the entire deal is likely to crash.

In an affidavit filed in support of the urgent court case — scheduled to be heard on Thursday — Farooqui said they believe they have ticked all the boxes in pursuit of regulatory approval. He confirmed that he had contacted the Reserve Bank as early as January about apparent “public utterances” he feared may have a negative effect on Vardospan’s application getting “unbiased” consideration.

The Reserve Bank failed to respond, so their lawyers wrote another letter in February, this time asking for a meeting to clear up any outstanding issues. He said Vardospan had also submitted an independent audit report providing details of the finances and funding of this transaction, court papers state.

READ MORE: Reserve Bank opposes Gupta associates’ bank bid

The final communication, he said, was a lawyer’s letter to the Reserve Bank on March 14 in which the Reserve Bank was informed that any further delays were prejudicial to Vardospan and the transaction. They gave the Reserve Bank 10 days to respond and, because none was forthcoming, Vardospan filed the urgent court application.

In the sworn statement Farooqui contends that the regulators’ failure to reach a decision in a reasonable period of time is reviewable by a court in terms of the Promotion of Administrative Justice Act.

The Reserve Bank, the Registrar of Banks and treasury, who are cited in the application, are scheduled to file responding papers ahead of the matter going to court on Thursday afternoon.

“The South African Reserve Bank is opposing the application,” said Kuben Naidoo, Deputy Governor and Registrar of Banks.

In November the M&G revealed details of the bank purchase — a move that was widely seen as a potential saviour for the embattled Gupta family after the country’s major banks shut their accounts, blocking it from the formal banking system in South Africa.

Farooqui has repeatedly denied any Gupta links to the purchase but suspicion was triggered by Essa’s extremely close business ties with the powerful family.

Farooqui said the timing of this court bid has nothing to do with the case currently unfolding in the high court in Pretoria, where Gordhan is seeking a declaratory order that he cannot intervene in the decision of the banks to terminate the Guptas accounts.