Dear Reader: From Russia with love?

It took just three happy sessions with Vladimir Putin – no doubt exchanging anecdotes about their youthful days in the spy business and how handy they both still find their spook connections in advancing their careers – for Jacob Zuma to forget about the South African Constitution and get his dumb but still trying for sexy lackey Tina Joemat-Pettersson to sign South Africa up for a (sort-of secret) trillion-dollar nuclear deal.

May we remind him: Section 217 of the Constitution requires an organ of state to contract for goods and services “in accordance with a system which is fair, equitable, transparent, competitive and cost-effective’’.

The third President of a newly liberated South Africa also appears to have forgotten that for centuries Russia has been – and continues to be – a pretty ruthless and corrupt imperial power that takes large profits but no crap from its vassal states.  Those that don’t deliver get killed.

The vodka obviously did the trick. In negotiations with Russia, South Africa is at a grave disadvantage; the capacity to manage such negotiations in a hard-nosed way is not there. Zuma and his ministers are out of their depth. (Joemat-Pettersson is the Minister of Energy and signed the contact… puhleeez!) Frighteningly, the capacity to manage a fleet of new-technology nuclear power stations – and maintain it for the next 40 years – is not there.

(Forget Eskom; for a decade we have found it impossible even to manage and maintain a single laboratory that measures the alcohol content of blood samples needed to convict drunken drivers.)  
If the Russians are to supply as well asmanage and maintain our proposed new fleet of nuclear power stations, what’s that going to cost? (In the arms deal, South Africa notoriously omitted to establish the ongoing operating costs of the fancy equipment they bought at fancy prices, so the navy has lovely ships but no budget for diesel to run them, and the air force has a whole lot of planes in storage which they’re hoping to sell.)

The crunch question: where will the money come from? South Africa has neither the cash on hand, nor the creditworthiness to borrow it. Eskom’s income could, in any event, never service the debt.
Russia, too, has neither cash on hand, nor creditworthiness to be able to finance the deal.  It has had to cancel or stall the construction of several of its own nuclear power stations because it can no longer afford them. It’s blown all its reserves on the war with Ukraine and on propping up the rouble in the face of international boycotts. Meanwhile the price of oil and gas (its primary exports) has plummeted. Its financial prospects are looking so dire that its corrupt community of oligarchs have thought it prudent over the past two months to shift US$358 billion into Swiss bank accounts.

So where is the money going to come from? Some disturbing clues emerged at the recent mining indaba in Cape Town, where there was talk about creating a sort of sovereign fund or “national champion”, which is somehow related to the powers of the minerals  minister to declare any mineral a strategic resource and then appropriate a certain amount of it from the producer, at well below market price. It’s beginning to sound like a more serious version of spaza shop looting. But more about that later.  

In the meantime, see Could South Africa run on batteries? in this issue.

Class action

Last month the New York Times reported that banks in Russia, Japan, the US, and Europe have fallen victim to a massive, sophisticated malware hack, with upwards of US$300 million (R3.5bn) stolen in the process. The suggestion is that the problem is ongoing.

Apart from the obvious newsworthiness of the scale and nature of the theft, two statements in the report are worth highlighting. The first: “No banks have come forward to acknowledge the theft.” The second is found in the final paragraph: “The Financial Services Information Sharing and Analysis Center states that the industry has been alerted to the breach. Customers, however, have not.”

These extraordinary frauds have been taking place since 2013; why are we only hearing about them in 2015? Why have no banks come forward to acknowledge the theft? Why has the Financial Services Information Sharing and Analysis Centre seen fit to alert the banking “industry” to the breach in their security – but not the banks’ customers?

All this scheming to preserve ignorant consumers’ faith and trust in banks and the banking system, no matter the awful truth, is not only dishonest; in the 21st Century it’s absurd.  

Dishonesty does not encourage trust. In any event, all moderately informed citizens of the modern world know that healthy caution and a big dose of skepticism is what’s called for when dealing with any bank. Everyone we know who has placed their trust in their bank manager has come to regret it.

Surely the security that banks offer and we pay for, the banks must deliver – or else pay for their failures?

In recent years clients of local banks have been pressed to convert to online and cellphone banking, without sufficient consideration having been given to the security risks involved. They, too, now face a wave of cyber fraud never imagined.

Local banks, too, are anxious that their customers should not get to know the nature and extent of it, just in case you should start asking inconvenient questions, or suggest your bank is liable for having embraced the new technology without proper caution.

Ask all those Nedbank clients who in recent months have discovered their bank balances mysteriously shrinking overnight.

Clearly the banks have made inadequate provision to cover the risk, leaving them with only one defence strategy: denial. They appear to show no interest in establishing who the thieves are, or are in any event in no hurry to do so. (In case they’re found to be in-house?)  They determinedly deny their victim customers access to any relevant information – and then simply insist “it’s your fault – and your loss”.

Nedbank, which for the moment appears to have been more vulnerable than the rest, now faces a class action brought by several of these unfortunate clients – thanks to the information they were able to gather from Noseweek reports and letters. If you are also a victim and haven’t yet joined them, do so. It’s about time some of these issues were thrashed out in the open.

The secretive but critical role of the South African Reserve Bank in these matters is deserving of a closer look too. But then it has itself, in the past, been known to act more like the headquarters of a criminal syndicate than a watchdog of the public interest.

The Editor

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Submitted by : Clive Varejes of GALLO MANOR on 2015-03-02 17:11:25
I am appalled.
How can you even suggest that the banks in South Africa have made inadequate provision to cover risks of internet fraud, theft, larceny et al and then, when clients have monies removed from their accounts that their banks would have the temerity to deny such an event could have been the bank's fault, in spite of the fact that clients had notified them continually that weird and wonderful things were happening to their accounts?
Noseweek, how can you even intimate that this could possibly be the result of incompetence and continual denial in our banking system?! You simply have to be wrong.
True and factual maybe, but nevertheless obviously erroneous, as we all know that clients are the lifeblood of a bank's business, so banks will go out of their way to make sure that they always treat their clients with the respect that they deserve!
Yea right....


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