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Some loss for investors

At long last the so-called new independent directors of Sharemax-promoted property syndications admitted last week that investors will – or already have – lost a large portion of their capital. That’s bad news for those financial advisers who have so far closed ranks in secret forums and tried to tell one another the Section 311 schemes were going to make capital losses disappear. Without capital losses they are, of course, free of any responsibility, as we reported a fortnight ago.

In a letter dated 16 May to investors, the new directors admit a R100 000 investment – in, say, Zambezi Mall – that’s now going to be repaid in 120 monthly payments (that is, 10 years), plus the balance after 10 years in a single payment, doesn’t have the same current value as R100 000 in a bank. In what amounts to a huge quantum leap, Dawie Roodt and former Judge Willie Hartzenberg admit the current value of the capital repayments to investors in terms of the A311 schemes aren’t worth as much as cash in the bank.

The current value of money after all means R100 000 now is worth more than R100 000 in 10 years’ time. The promise of a R100 000 IOU to be paid in 10 years’ time doesn’t amount to the same as a R100 000 investment or debt today.

That admission by the board has serious implications for all role players in the Sharemax syndications.

Financial advisers can now again be held accountable for the capital losses suffered, or to be suffered, by investors. Someone is going to sit down and try to work out how much that is. And even though it will only be an estimate – because it’s impossible to place a value on the concoctions offered to investors – it will be worth less – far less – than the original investment. The board admits as much in its latest letter and that admission is now an important legal document for any investor who plans to put his case to the ombudsman.

Roodt and Hartzenberg admit the debentures, or whatever they plan to call them, are worth less – a lot less (my emphasis) – than 100c in the rand. I still say they’ll be worth less than 20c in the rand and, especially in the case of The Villa, probably less than 5c in the rand.

Roodt would be just as well explaining that clearly to the financial advisers when he again addresses one of their closed meetings. And he could do the same at the proposed A311 meetings of investors coming up soon. Both Roodt and Hartzenberg should also give the assurance that the latter won’t be closed meetings but that the press may also attend.
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