Termination of Nedbank/Transnet mediation
Published - 28 May 2024
- Nedbank has participated in a mediation process with Transnet in good faith to resolve a long-standing and widely reported dispute between the parties in respect of swap transactions which Transnet regards as tainted by corruption;
- To date, no evidence has been found, or presented to Nedbank, of any Nedbank staff dishonesty, corruption or collusion. To the extent that there was corruption, this was on the part of the Regiments Group and Transnet’s staff members, not Nedbank;
- Nedbank was unable to agree to any settlement on terms that in any way could allow it to be portrayed as a participant in any corruption that it was not and could not have been aware of at the time;
- Nedbank will not be held liable for any governance failures at Transnet and Nedbank will strongly defend any litigation against it.
Mediation between Nedbank and Transnet, inrespect of interest rate swap transactions (swaps) between the parties that took place in December 2015 and March 2016, and which have been widely reported in the media for many years, has ended after it became apparent that there is no likelihood of resolving the matter amicably despite extensive engagements.
Nedbank participated in the mediation process (which was a confidential, facilitated negotiation) in an attempt to resolve the dispute between the parties amicably and to avoid potentially drawn-out and costly litigation, for both parties, over transactions which Transnet regards as tainted by corruption.
The bank’s willingness to discuss any potential settlement in mediation has always been exclusively on the basis that any settlement should never be construed as being an admission of guilt or involvement in corruption on Nedbank’s part. As a matter of principle, Nedbank is not prepared to settle on any basis where this could be inferred.
Nedbank has previously alerted its shareholders, in its 2022 and 2023 Integrated Reports, to the risk of litigation by Transnet should mediation fail. Nedbank will strongly defend itself in any litigation proceedings that may follow.
Nedbank is not aware of, nor has it been provided with any evidence of collusion or corruption on the part of Nedbank or its staff, despite numerous requests for disclosure of such evidence, should it exist. Nedbank rejects any attempt by Transnet to blame the bank for its own governance failures. Nedbank was not and could not have been aware of the apparentcollusive relationships that the Regiments Group had forged with senior officials at Transnet, or the links that the Regiments Group apparently had with the Guptas, which were first reported in the media around May 2016 – after the swaps had been concluded.
Regiments Capital, and not Nedbank, was the appointed adviser to Transnet. Nedbank did not advise Transnet on the swaps at all and did not pay any fees to the Regiments Group in respect of the swaps. The swaps were authorised by Transnet’s mandated officials, were documented using industry standard ISDA legal agreements and confirmed and settled directly between Transnet and Nedbank. Nedbank believes the swap transactions were commercially sound and the bank’s margin was reasonable for the risks assumed.
Considering internal and independent external reviews commissioned by them, the Nedbank Board and management remain satisfied that Nedbank internal governance procedures were followed in respect of the transactions and that there is no evidence of any Nedbank staff dishonesty, corruption or collusion.
Nedbank stands by its previous statements on the matter (available here and here).
Note to editors: Transactional details
Transnet raised loan financing at Jibar-linked variable interest rates from Nedbank and other third-party funders to fund its locomotives procurement deal. The floating interest rate risk on these loans was hedged with interest rate swaps.
The swaps were equal and opposite trades that formed part of a structure where Nedbank was the credit intermediary between Transnet and its own pension fund, in December 2015, and between Transnet and its pension fund alongside another third party, in March 2016. The pension fund, which forms part of the Transnet Group, and the third party both honoured their contractual obligations in respect of the swaps.
Transnet has reported the swaps as highly effective hedges for the underlying loans in its audited financial statements since their conclusion and continues to do so as disclosed in Transnet’s 2023 Audited Annual Financial Statements (available here). This disclosure by Transnet accords with Nedbank’s understanding of the swaps as serving their intended purpose.
Subsequent market interest rate movements, which could not have been predicted at the time, have affected the cashflows and close-out value of the Transnet swaps. Nedbank did not make any profits, at Transnet's expense, from the decrease in interest rates over time. The loans and swap transactions were commercially sound and the return on equity - a key measure of bank profitability - earned by Nedbank on the loans and swaps was fair, reasonable and appropriate at 15,5% over the life of the transactions.
Contact: Nedbank Group Communications
Annaleigh Vallie
Phone: +27 (0)66 479 0936
Email: annaleighv@nedbank.co.za
Joanne Isaacs
Phone: +27 (0)78 800 4989
Email: joannei@nedbank.co.za
About Nedbank Group
Nedbank Group is a bank holding company listed on the JSE Limited, with a market capitalisation of R106bn as at 31 December 2023. Nedbank is one of Africa’s largest banking groups, with operations in South Africa, Namibia, Eswatini, Mozambique, Lesotho and Zimbabwe, and offshore in the Isle of Man and Jersey. It also has representative offices in other Africa countries, including Kenya, and has key global financial centres to provide international banking services for SA-based multinational and high-net-worth clients in London and Dubai. The group is a diversified financial services provider, offering a wide range of wholesale and retail banking services, as well as insurance, asset management and wealth management solutions. www.nedbankgroup.co.za
