Nedbank’s top-secret settlement over its role in Gupta-linked state capture deals

The Nedbank Group has agreed to pay state-owned logistics group Transnet R600 million in a confidential commercial settlement relating to state capture-era interest-rate swap deals.

The confidential settlement, announced in a joint statement between the two parties, noted that the Special Investigating Unit (SIU) and Transnet will withdraw an application in the Gauteng Division of the High Court of South Africa in Johannesburg.

“Nedbank’s payment to Transnet is made without admission of liability and in full and final settlement of the dispute,” the two said in a statement.

They added that they both stand by their respective previous statements in terms of their litigation.

“Transnet and Nedbank have a long-standing relationship, and the settlement of this litigation allows them to continue to develop this important relationship in the national interest and for the furtherance of infrastructure investment and economic growth.”

The litigation arose from interest-rate swap deals concluded in 2015 and 2016 during Transnet’s multibillion-rand locomotives procurement programme, a key focus of the state-capture inquiry.

Nedbank had been preparing for a lengthy court battle after Transnet and the SIU moved to recover R2.7 billion that they claimed were unlawful proceeds from the swaps.

Transnet and the SIU argued that the interest-rate swaps were part of a wider state-capture scheme that channelled public money to Gupta-linked companies, with Nedbank expected to answer for its involvement.

The deals were arranged on the advice of Regiments Capital, the Gupta-associated consultancy accused of using political influence to sidestep procurement rules and secure lucrative state work.

While the state-capture inquiry flagged the swaps as potentially corrupt, Nedbank insisted it had no knowledge of any collusion between Regiments, Transnet officials, or the Guptas.

At the time, the banking group stated that the sales margin it earned on the swaps was market-related and amounted to less than R43 million.

Interest-rate swaps are standard financial instruments used by major companies and banks to manage interest-rate exposure, involving only the exchange of interest-payment obligations, not principal.

Testifying in 2019, Transnet governance executive Peter Volmink said the utility’s capture was enabled by deliberate efforts to bypass internal controls, including avoiding open bidding.

According to Transnet and the SIU, the swaps were one such mechanism used to misappropriate state funds.

SIU supports the move

This agreement “formally concludes the civil claim phase related to the SIU’s implementation of the investigation of the outcomes and consequent management,” said the investigating unit’s spokesperson, Kaizer Kganyago.

“The settlement agreement makes business sense for Transnet, is in the public interest and most importantly, ensures actual cash recoveries and prevention of future losses to the state,” added Kganyago.

The SIU stated that the settlement between Transnet and Nedbank does not absolve any individual or entity from potential criminal liability, a matter that resides exclusively within the domain of the National Prosecuting Authority (NPA).

Additionally, the SIU is currently investigating similar interest rate swap agreements at Airports Company of South Africa.

This investigation aims to address allegations of maladministration and financial mismanagement in relation to interest rate swap agreements with various banking institutions, as highlighted by the Judicial Commission of Inquiry into State Capture.