South African Watchdog Accuses 17 Banks of Currency Rate Fixing

South Africa’s competition watchdog has accused 17 international and local banks of colluding to fix the price of the country’s currency, the rand, over the past decade.

The Competition Commission said in a statement Wednesday that workers at more than a dozen global banks, including Barclays, HSBC, JPMorgan Chase, were involved.

Workers used instant messaging to collude on when to begin or halt trading to change the value of the rand. They also manipulated the prices of bids and created fake bids at certain times.

ABSA Bank South Africa A member of the African National Congress Youth League protests in front of ABSA Bank against what they argue is the bank benefiting from an apartheid-era bailout, in Durban, South Africa, January 26. ABSA is one of 17 banks accused by the country's competition watchdog of conspiring to fix the rate of the South African currency. Rogan Ward/Reuters

The Commission recommended that South Africa’s Competition Tribunal prosecute the banks and fine them 10 percent of their annual in-country turnover.

There have been major cases of foreign exchange manipulation in other parts of the world in recent years: five of the world’s largest banks—including  JPMorgan Chase and Barclays—were fined $5.7 billion for rate rigging in the U.S. in 2015.

Several of the banks have said they will cooperate with South African authorities on the matter.

The findings, which come at the end of a two-year investigation, have provoked mixed reactions among South Africa’s political class. The ruling African National Congress (ANC) said it took an “extremely dim view” of the alleged price-fixing.

“The profit-driven assault on the South African rand through such collusion and corruption by the banks flies in the face of efforts by the South African nation to prosperity for all,” an ANC statement said.

The left-wing opposition Economic Freedom Fighters (EFF) said it would write to the country’s reserve bank to request that the banks involved have their trading licenses revoked. “We believe collusion around South Africa’s currency is treacherous and should be treated as such,” said the EFF.

But the main opposition Democratic Alliance, (DA) while condemning collusion as something that “ultimately hurts the consumer,” said the ANC had “prejudged the outcome of the case.” The DA’s shadow minister of economic development, Michael Cardo, said it “was clear” from President Jacob Zuma’s State of the Nation address on February 9 that he “intends to use the competition authorities as a tool of his populist and destructive agenda of ‘radical economic transformation.’”

Relations between the president and the banking sector are already tense after the banks closed the accounts of companies associated with the Guptas, a business family accused of using its close links with Zuma to wield political power.

South Africa’s economy recorded a sluggish 0.2 percent GDP growth in the last quarter, despite the country overtaking Nigeria in 2016 as Africa’s largest economy. Unemployment remains high and business confidence has reportedly been shaken by the unstable political situation.

Zuma has been implicated in multiple personal scandals over the past few years, including use of state funds to build a swimming pool and other amenities at his residence in Nkandla. The ANC also recorded its worst election result since 1994 in August 2016, when it lost control of the economic capital Johannesburg and several other key urban hubs.

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