Nedbank faces a potential repayment to Transnet of R10.5bn relating to the commercial bank’s role in executing questionable financial transactions on behalf of the state-owned entity (SOE) during the state capture years.

The Special Investigating Unit (SIU) and Transnet have joined forces to sue Nedbank at the Gauteng High Court (Johannesburg), accusing it of carrying out financial transactions that were allegedly corrupt and cost the SOE billions of rands in losses.

In court papers obtained by Daily Maverick, the SIU and Transnet have asked the court to set aside a series of financial transactions, known as interest rate swaps, and declare them void and unenforceable under the Public Finance Management Act.

The SIU and Transnet want the court to set aside all the interest rate swap transactions, which were executed between December 2015 and March 2016, which will then pave the way for Nedbank to ‘be liable to repay the full amount’ plus any further payments made to the bank after May 2024.

The R10.5bn equates to about 61% of profits that Nedbank generated in 2023 and could arguably affect the bank’s financial sustainability.

In these interest rate swap transactions, Nedbank was essentially involved in restructuring the interest on the debt that Transnet used to fund its freight rail and port operations, and the bank received fees for doing so.

DM notes that from 2011, Transnet approached a consortium of lenders (including Nedbank, China Development Bank, Absa and others) for a loan facility of about R12bn to fund the modernisation of its fleet of locomotives.

On 1 December 2015, Transnet secured the loan, with a 15-year repayment term, and procured 1 064 locomotives from Chinese manufacturers. 

Nedbank’s role in the interest rate swaps at Transnet is detailed in the State Capture Commission reports, which also examined the bank’s relationship with Regiments Capital, a financial services firm that was linked to the Gupta family.

In court papers, the SIU and Transnet have included, as evidence, email exchanges between Nedbank’s head of balance sheet management, Moss Brickman, and Phetolo Ramosebudi, the SOE’s then head of treasury, indicating that the pair allegedly colluded to design the terms of the 2016 interest rate swaps.

DM notes that the emails indicate that Brickman and Ramosebudi were in regular communication to redesign the terms of the swaps when Nedbank initially flagged them as ‘large and unusual transactions’.

Eventually, the swaps were approved by the bank and Transnet.

Nedbank has, instead, laid wrongdoing at the doors of Regiments and Transnet: ‘To the extent that there was corruption, this was on the part of the Regiments Group and Transnet’s staff members and not Nedbank. Nedbank will not be held liable for any governance failures at Transnet.'

Full Daily Maverick report