Real Estate Investor Magazine South Africa October 2014 | Page 20

COVER STORY

must be taken to task for its failure to properly
investigate African Bank, says theDCI.co.za. “African
Bank’s need to raise R8.5 billion in new capital due to
unsecured loans turning bad is not surprising following
the NCR’s finding of reckless lending last year when
one of the bank’s branches was fined R20 million for
breaking the reckless lending provision of the National
Credit Act. The reduction of the proposed R300 million
fine of African Bank to just R20 million was also not
acceptable and amounted to a slap on the wrist,” says
Solomon. “Over the past few years, debt counsellors
have lodged thousands of complaints, many relating to
reckless lending and breaches against the NCA against
the country’s major credit providers, including African
Bank. These complaints have repeatedly been sent to
the Regulator who has chosen to ignore them and the
plight of desperate consumers.”
It must also be asked what responsibility can be assigned
to Abil’s large shareholders? These shareholders are led
by South Africa’s large institutions such as Coronation
and the Public Investment Corporation (PIC), which
is, interestingly enough, wholly owned by the South
African government.
The R10bn capital raising by the major banks along
with PIC, is also interesting. Says Ndzamela, “The
point is that had the banks not intervened, they would
have been caught swimming naked. If you glimpse at
the Bank’s BA 900 returns, you will see that South
African banks were exposed to about R587m, of which
R430.8m was long-term money.”
Who will pay?
Everyone will pay. “Serious pain has been felt by equity
holders, all debt holders, money market funds and the
wider banking system,” commented Nomura economist
Peter Attard Montalto. Not to mention South African
taxpayers and the thousands of poor South Africans
enslaved to massive debt provided through the banks’
reckless lending.
Money Market clients were hit. For example,
following guidance from the Financial Services Board
(FSB), Absa had to adjust the value of its Money
Market by 0.3% after African Bank’s crash, effectively
swiping that value off of clients’ investments, providing
a 0% interest rate for the period. With a money market
value of R52.8 billion, Absa in effect swiped off R158.4
million in investments.
Shareholders who backed the R5.5bn rights issue
undertaken by African Bank in December last year are
cr Z[