On a bright summer morning in the leafy Johannesburg suburbs, investigators from the Hawks – South Africa’s FBI – knocked on the door with a summons for the country’s Finance Minister Pravin Gordhan. He wasn’t there and his family rang him to say there was a brigadier on the doorstep. This just two weeks before the crucial medium-term budget statement. A delicate budget that the ratings agencies will scrutinize as they ponder whether to downgrade South Africa’s economy to the dreaded junk status; a move that could mean higher interest rates, inflations, and more economic misery for an economy that’s already been 12 rounds with Mike Tyson in his prime.
“Not having found me at home, they proceed to go to the Treasury and I am not sure what happened there. Given the fiscal austerity, they might not have been given a cup of tea,” says Gordhan wryly.
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“A date has been set to collect my fingerprints, they have been in the system for a long time, I suppose they need to freshen it up in some way. But this is a moment when South Africans should really ask themselves who are the Hawks, or these few people in the Hawks, really serving, where do they get their political instructions from and for what purpose? All we are trying to do within the Treasury is represent South Africa, make sure we manage its finances properly, present the best foot forward we can on behalf of the country and do that which is right whether it is in respect of university fees or more housing to be built or more money to be made available for the right kind of procurement purposes or anything that a treasury does in a normal country. It looks like we are in for a bit of excitement going forward.”
This was the avuncular Gordhan at his dry best at a Gauteng Province event, in Johannesburg, a few hours after the summons landed. The former Communist Party member is used to blows in a lifetime in politics. He became active in politics in the late 1960s and spent four years in the political underground operating around his birthplace of Durban, on the coast of KwaZulu-Natal.
Gordhan was an unlikely revolutionary; he trained as a pharmacist, but lost his only job in the trade through his political activities. He spent the rest of the struggle in politics and was detained by police a number of times.
“I have known him through the liberation struggle for many years and I have never heard anything critical of him in all that time,” says Denis Goldberg, one of the men who faced the death penalty with Nelson Mandela in 1964.
Between 1999 and 2009, Gordhan was the Commissioner for the South African Revenue Service in the healthy years when the government used to take out advertisements to trumpet how the increasingly efficient system was gathering ever more revenue. It is from this abundant time that the fraud charge emanates.
On November 2, Gordhan will be charged, along with former colleague Oupa Magashula, with the misuse of public funds, said to be around R1 million ($71,000), in granting his former deputy, Ivan Pillay, early retirement, in August 2010. Lawyers say the case is wafer thin, but the very fact that a finance minister will stand in the dock will be enough to cause disquiet among foreign investors watching from afar.
The markets plunged on the day. The rand fell more than 3% within minutes of the announcement by the NPA.
Shaun Abrahams, the head of the NPA, has given Gordhan, Pillay and Magashula an opportunity to make representations to review the decision to prosecute or not. Magashula and Pillay have done so.
“I am currently considering the aforementioned representations… I have learned, through media reports, that [Gordhan] does not intend seeking me to review the aforementioned decision, I nevertheless invite [him]to make representations… by no later than 17h00 on 18 October 2016,” says Abrahams in a letter to Gordhan’s lawyers.
Gordhan refused. He says he has no confidence in the NPA’s willingness to give him a fair hearing.
“We have seen the letter by Freedom Under Law and the Helen Suzman Foundation dated 14 October 2016 in which we were copied. We invite you to withdraw the charges against our client in the light of the grounds set out therein. Our client does not intend to make representations to you for the considerations previously articulated,” his lawyer, Tebogo Malatji, of Gildenhuys Malatji Inc, said in a letter to Abrahams.
Political analyst Aubrey Matshiqi believes November 2 is merely the beginning.
“I think there will be additional charges. I think this case is far from over,” he says.
Matshiqi believes the rule of law is important and scoffs at the picture portrayed in the press of this being a case of good and evil; fiscal discipline versus the removal of a minister to ease access to  state funds.
“I think the only thing we can quibble about is who, of the two, is the less evil. As far as I am concerned these are two wolves in sheep’s clothing. The only difference is one has better quality sheepskin.”
CEOs took out full page advertisements in newspapers in support of Gordhan; everyone from the Chamber of Mines, to Gauteng Premier David Makhura, to the short-term insurance industry, made statements backing the man.
Marches are also planned and hopes fanned that one of Africa’s biggest economies can paper over the cracks in time to avoid the dreaded downgrade at the end of the year. The reality is the damage has already been done.

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It’s bad news when a commercial bank collapses; it’s frightening when three of them go under within just eight months in a single market.
The back-to-back collapse of mid-tier Chase Bank, Imperial Bank and Dubai Bank sent chills across the Kenyan financial sector – eliciting a scramble for remedial measures, including consolidation and review of capitalization requirements for banks.
Chase Bank’s operations were taken over by the Central Bank of Kenya (CBK) in April after its management failed to declare KES8 million ($80,500) in insider loans, causing panic withdrawals and a run on the bank.
Imperial Bank was taken over in October after fraud was uncovered. Two months earlier, smaller lender, Dubai Bank, was put into receivership.
This state of affairs triggered anxiety on the health of the banking sector in Kenya even though regulators and the National Treasury have gone all-out to downplay the concerns, calling the bank closures “isolated cases”.
“I want to assure my fellow Kenyans that our financial sector remains strong and stable. The recent placing under receivership of three banks was due to specific factors related to these banks and not the whole banking sector,” says Finance Cabinet Secretary Henry Rotich, as he sought to calm nerves over the health of the East African nation’s financial sector.
But even with the assurance, Rotich and his team at the Treasury are not resting. They are planning a raft of strategies, including consolidation, in an attempt to clear weak lenders from the Kenya’s banking sector and help restore confidence through larger and better capitalized outfits.
Rotich plans to re-introduce higher capital levels for banks to guarantee their financial health.
“Last year, I did table in this house specific measures to increase the capitalization of banks in order to ensure we have a strong and stable banking system but our efforts were not successful,” Rotich told the Kenyan Parliament in June when he presented his budget speech.
In 2015, Kenya’s legislators shot down Rotich’s proposal to raise commercial banks’ minimum capital fivefold to KES5 billion ($50 million) within three years, after CBK Governor Patrick Njoroge said such a move would strangle smaller lenders.
Rotich, however, is keen to push through the higher capital requirements this time round and by extension trigger consolidation of weak lenders in an attempt to prevent further financial glitches among the 42 licensed commercial banks.
“I am seeking to introduce the proposals and I am hopeful that members will look at them more favorably in light of the recent developments in our banking industry,” says Rotich.
The impending changes in bank capitalization requirements have already triggered action among small lenders that are keen on complying.
Midsized lenders, presently feeling the pressure to consolidate to capitalize on economies of scale and remain relevant, have already taken to mergers or pacts with private equities to boost the asset position.
I&amp;M Holdings, which has stakes in banks in Kenya, Tanzania, Rwanda and Mauritius, is set to finalize a KES5 billion ($50 million) deal to merge Giro Commercial Bank with its subsidiary I&amp;M Bank.
“In our view, the acquisition will have minimal strategy disruption given similarities of the two banks – both have conservative balance sheets and mainly target middle- to high-income customers as well as SMEs (small and medium enterprises),” the listed lender said in a statement in June.
Small-sized Kenyan lender Oriental Commercial Bank formally rebranded to M-Oriental Bank in June following the acquisition of a 51% stake in the shareholding of Oriental by Bank M Tanzania.
The Kenyan banking industry has also witnessed several other acquisitions recently, including the 75% purchase of Spire Bank (formerly Equatorial Commercial Bank) by Mwalimu Sacco and Nigeria’s Guaranty Trust Bank acquiring Fina Bank.
In 2014, investment group Centum also completed the acquisition of K-Rep Bank (now Sidian Bank) in a deal that raised Centum’s shareholding from 7.54% to 67.54%, having been a minority shareholder in the bank since 2004.
Centum’s acquisition was effected through Bakko Holdco Ltd, a non-operating holding company, to conform to CBK guidelines.
Kenya’s largest bank by asset base, KCB Group, is also looking at medium-sized lenders to buy as part of an expansion plan and is building up capital to boost its acquisition war chest.
“We will look for businesses where there can be synergy, where there can be ability for us to scale up, so medium-sized banks will be areas that we are focusing on today,” KCB CEO Joshua Oigara told Reuters.
In May, KCB Group shareholders gave a nod to the lender’s plan to raise KES10 billion ($100 million) through a rights issue later this year to boost its capital levels. KCB’s total capital stood at KES79 billion ($795 million) at the end of 2015.
KCB Group is expected to acquire a majority stake in Chase Bank after it was recently appointed to manage the mid-tier bank that only re-opened after a brief closure due to liquidity problems following a run by panicked depositors.
The government is also considering merging National Bank of Kenya (NBK), Development Bank of Kenya and Consolidated Bank, which it owns, in a bid to take advantage of having a large lender.
“We are making progress on the issue of consolidation because we now have a consultant who will soon be advising us on how to move. We expect to consolidate the state banks into one or two banks very soon,” Rotich said in April.
The changes in bank capitalization have also seen an inflow of private equity to try and boost the books of Kenyan banks.
In March, Fidelity Commercial Bank announced British private equity and asset management firm Duet Group had acquired a significant stake in the small lender. In the deal, Fidelity Bank will receive KES1.9 billion ($19 million) from the sale and boost its capital position, which was narrowly above mandatory requirements following an increase in adequacy ratios in 2015.
Furthermore, Norway’s investment fund for developing countries, known as Norfund, in partnership with NorFinance, an investment firm created by Norfund and private investors, purchased a 12.22% stake in Kenya’s Equity Group Holdings for an estimated KES26 billion ($261 million) from private equity group Helios Investment Partners.

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