Smell something funny here?
Deutsche to Boost S.Africa Reserves in Deal-Papers
Mon May 27, 6:12 AM ET
By Ed Stoddard
JOHANNESBURG (Reuters) - An agreement announced on Friday with South Africa's central bank will involve Deutsche Bank doing some $100 million worth of deals that will be positive for the country's foreign reserves, local newspapers said on Monday.
An official at the central bank said the Reserve Bank could not comment on the reports and Deutsche could not be reached immediately for comment.
South Africa's central bank and Deutsche Bank said on Friday they had reached a closed agreement related to complex offshore deals Deutsche structured last year that triggered an inquiry into the rand's 37 percent slide against the dollar in 2001.
The inquiry, headed by former labor judge John Myburgh, was set up earlier this year by President Thabo Mbeki in response to allegations by business leader Kevin Wakeford that there had been dubious manipulation of the market.
Wakeford's original letter to Mbeki highlighted a 350 million euro asset-swap deal set up to help fuel group Sasol refinance part of its 1.3 billion euro purchase of German utility RWE AG's Condea chemicals unit in 2001.
Deutsche also arranged corporate asset swaps for packaging group Nampak and mobile operator M-Cell . The Business Report newspaper, citing unnamed sources, said that Deutsche admitted to no wrongdoing and that the bank was given an unspecified period of time to do the billion rand worth of foreign exchange boosting transactions.
Business Day said that the central bank and Deutsche both believed there had been no wrongdoing and said the agreement was a symbolic gesture to settle the dispute.
The central bank said in April that the initial disclosures by Deutsche Bank related to the deals were "inadequate." The probe will present its final report to Mbeki by the end of June.
WORKABLE DEAL?
Analysts and the local press have slammed the secrecy that surrounds the deal and question if Deutsche -- whose first priority is to its shareholders and not South Africa's Reserve Bank -- could honor such commitments as have been reported.
Pointing out that Wakeford's allegations against Deutsche stemmed from a secret source, Business Day said in an editorial that "neither secret is in the public interest."
"I don't know how you can call this a public hearing and in the end have a secret agreement," said S&P MMS analyst George Glynos.
Analysts said Deutsche could probably only honor its reported commitment through portfolio investment or trade-related finance.
"They can advise their clients to buy South African stocks or bonds...or do something related to trade-finance. Beyond that I don't think they can do very much," said PSG Investment Bank analyst Noelani King Conradie.
The one billion rand sum that has been reported is also a drop in the bucket of the liquid South African economy, which has the second most traded emerging market currency after Singapore's.
The commission released an interim report earlier this month but said at the time that it was premature to make any findings.
Some banks and analysts have said that steps taken by the Reserve Bank to enforce existing exchange controls more strictly contributed to the rand's unprecedented slide last year as liquidity dried up, making the currency vulnerable.
Other factors cited as likely to have contributed to its fall included economic disturbances in fellow emerging market Argentina and political troubles in neighboring Zimbabwe.
The rand has clawed back about 15 percent of its value against the dollar so far this year, boosted by a higher gold price, an upturn in the commodity cycle and the return of emerging markets to investor favor.
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