Nedbank to pay Transnet R600 million in confidential settlement to end swap litigation

South African state-owned logistics firm Transnet and Nedbank said on Tuesday they have reached a confidential commercial settlement to end their ongoing litigation, with the bank agreeing to pay Transnet R600 million. Both parties said the settlement was made without any admission of liability.

Transnet and Nedbank said the agreement was aimed at avoiding lengthy and costly court proceedings and preventing damage to their long-standing commercial relationship. They said they continued to stand by their previous statements on the dispute.

The litigation stems  from interest-rate swap transactions concluded in 2015/16 during Transnet’s multibillion-rand locomotives procurement programme, which featured in the judicial inquiry into state capture. A year ago, Business Report reported that Nedbank had been preparing for a protracted legal battle with Transnet and the Special Investigating Unit (SIU), which sought to recover R2.7 billion it alleged were proceeds from the swaps.

Transnet and the SIU previously said the transactions formed part of a broader scheme that diverted public funds to Gupta-linked entities, and that Nedbank should account for its role.

Interest rate swop transactions are typically concluded by large companies, banks and financial institutions to manage interest rate risk. No principal capital amount is exchanged; only the interest payment obligations are made.

Transnet’s executive manager for governance, Peter Volmink, testified in May 2019 that the capture of Transnet happened through a process that was designed to override controls such as deviating from open bidding processes.

As reported by Business Report previously, Transnet and the SIU said the interest rate swop transactions featured under the report of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector formed part of a greater scheme to misappropriate and divert public funds from Transnet to Gupta-linked entities.

“There is sufficient basis for the sought relief and Nedbank must account for its involvement and conduct in the swop transactions. Transnet and the SIU collaborated closely in preparation of the court proceedings, and this included SIU’s uncovering of evidence critical to the case,” they said.

Nedbank has said to date, no evidence has been found, or presented to it of any staff dishonesty, corruption or collusion.

“Nedbank stands by its previous statement on the matter Termination of Nedbank/Transnet mediation. 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,” it said in a statement when the litigation was announced.

Legal experts had expected the matter to be complex and lengthy, with potential interventions by multiple parties, extensive document discovery and expert testimony. Attorney Rob Thackwell said last year the case could prove legally novel and might take years to conclude, possibly reaching South Africa’s Constitutional Court.

Nedbank also faces a similar complaint from Airports Company South Africa, which referred the bank to the SIU over interest-rate swap dealings.

BUSINESS REPORT