South Africa’s ruling party will discuss whether it “makes sense” to bank with Nedbank Group Ltd. (NED) after the lender’s chairman said the “moral quotient” of the nation’s political leadership was “degenerating.”
“Insulting the political leadership in annual reports is taking things too far,” African National Congress Secretary- General Gwede Mantashe said today in an editorial in the Johannesburg-based New Age newspaper. “When business develops unpatriotic tendencies through their reckless pronouncements, their sentiments are used by potential investors to measure the wisdom of investing in their country.”
Nedbank Chairman Reuel Khoza, who was a presidential adviser to the previous government of Thabo Mbeki, said in the lender’s annual report last month that the administration of Jacob Zuma was “losing the checks and balances that are necessary to prevent a recurrence of the past.” Zuma, who ousted Mbeki in 2007, is preparing to fend off a challenge to his leadership of the ANC at a party conference in December.
Today’s comments on Nedbank come as the government also expressed concern about the wider banking industry, after unsecured loans rose 53 percent to 101.1 billion rand ($12.8 billion) by the third quarter of 2011 from a year earlier.
“There is a huge crisis developing in the South African banking industry,” Blade Nzimande, South Africa’s minister of education, wrote in a separate editorial in New Age, citing the jump in unsecured lending. “It is likely to lead to a serious bubble, not dissimilar to that of the rest of the global banking and financial sector, unless drastic action is taken.”
Linking the “alleged problems” of the banking industry to the issues raised by Khoza leads to “uncertainty and speculation,” said Cas Coovadia, managing director of the South African Banking Association.
“We should, as a country, be ensuring we don’t jeopardize” bank stability, said Coovadia, adding that more data must be gathered to understand the increase in unsecured lending. “It is inappropriate to make public comments like the banking industry is ‘facing the eye of a storm’ and that ‘there is a huge crisis’.”
Since Khoza’s annual report comments, Nedbank, which is controlled by Old Mutual Plc (OML), has been publicly criticized five times by the government. The ANC must consider its relations with Nedbank because the lender “sees government as foolish and insane,” Mantashe said today.
Government contracts changing hands have “never caused any bank to fail” and should not do so in the future, Rene van Wyk, South Africa’s Pretoria-based banking regulator, said in an e- mailed response to questions. “All the major rating agencies recently re-affirmed the financial strength of the major South African banks on a stand-alone basis.”
Khoza’s comments came as the ANC prepares to debate changes to South Africa’s constitution in June, City Press reported last month, citing party documents. The ANC last year pushed a law that proposes jail sentences of as long as 25 years for anyone obtaining classified information, even if it’s in the public interest.
“We observe the emergence of a strange breed of leaders who are determined to undermine the rule of law and override the constitution,” Khoza said in the report. “This is not the accountable democracy for which generations suffered and fought.”
Zuma’s lack of a formal education and training in intelligence services haven’t prepared him to lead South Africa, Khoza wrote in his 2011 book “Attuned Leadership.” Zuma doesn’t have the “complexity that is demanded of leadership in the 21st century,” Khoza wrote in the book.
“People are uncertain and are searching for what this country wants to be when it grows up,” Nicky Newton-King, chief executive officer of JSE Ltd., which operates the country’s stock exchange, told reporters in Cape Town today. “You should be allowed to say what you want to say. You have the choice as business as to whether you want to speak on the front page” of newspapers or whether you “make the points you want to make vigorously behind the scenes. Our particular style is to make it vigorously behind the scenes.”
Nedbank doesn’t plan to comment further today, said Thulani Sibeko, a spokesman for South Africa’s fourth-biggest lender.
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