Johannesburg - South Africa’s central bank has recommended rejecting a bid to buy Habib Overseas Bank’s local unit because of concerns about the source of the two businessmen’s income and tax declarations, according to government officials with knowledge of the matter.



The Reserve Bank has written a letter to Finance Minister Pravin Gordhan recommending that the merger between the Habib Overseas Bank unit and a South African company be blocked, said the officials who spoke on condition of anonymity because the decision hasn’t been made public yet. One of the businessmen is linked to the Gupta family whom President Jacob Zuma describes as friends.Salim Essa, a director of VR Laser Services, which is partly owned by the Gupta family’s Oakbay Investments, and Hamza Farooqui had bid to buy all of Habib Overseas Bank’s South African assets. Habib Overseas, which is owned by Luxembourg-based Pitcairns Finance SA, has about R1.1bn ($75m) in South African assets, according to one of the people.The deal would have merged Habib’s South African arm and Vardospan, a joint venture between Cinq Holdings and Pearl Capital, owned respectively by Essa and Farooqui.“We have received no communication that our application has been rejected,” Farooqui said Friday in an e-mail. “To be very clear, there is no information from our side that is still pending or that has not been provided to SARB.”Essa expressed confidence that the deal will be approved.“Our agreement with Habib Overseas Bank remains strong and in place. Vardospan continues to engage with the regulator and our application remains under consideration,” Essa said by e-mail on Thursday. “We are confident in our application and look forward to a positive conclusion, allowing us to fulfill our vision of a 100% black-owned bank.”South Africa’s biggest lenders closed the accounts of Gupta-owned companies last year. The Guptas have alleged that the lenders, including Standard Bank Group, Barclays Africa Group, FirstRand and Nedbank Group, colluded when they decided to close their accounts. The banks deny the accusation. Gordhan, in a court application, identified allegedly “suspicious transactions” totaling R6.8bn by the companies.“The application is still under consideration,” the central bank said in an e-mailed response to questions. “The South African Reserve Bank does not comment on the specifics of the application or the application process,” it said in an e-mailed response to questions.