The current ABIL (African Bank) debacle!

The weekend had some devastating news in that a bank that has more than 3,5 million clients/customers, now finds itself in a position where its Chief Executive Officer and founder of the Bank, resigned and that the Bank needs a capital injection of more than R 8 billion in order for it to sustain.

Its share price plummeting from a previous trade of R 40.00 to a mere R 0.90 having dramatical effects on investors and shareholders in the bank.

On closer scrutiny it became known that the Public Investment Corporation (PIC) is one of the biggest investors and shareholders in the business, and that it would be severely affected by this disastrous set of circumstances.

The PIC (Public Investment Corporation) also administers funds from various pension funds, and one of these funds, the GEPF (Government Employees Pension Fund) has also therefore become a victim to loose in this debacle.

The South African Reserve Bank then came to the rescue of the Bank, and a consortium of other banks and financial institutions taking up stock and shares within the bank to avoid it from being liquidated. It now is being administered and controlled by a curator as appointed by the Reserve Bank from Price Waterhouse and Coopers.

One would imagine that one of the reasons why the South African Reserve Bank intervened in the matter, was that it affected one of the biggest pension funds that are being administered by the PIC and would ultimately effect the pension benefits that would be payable and due to its members mostly civil servants.

ABIL having major shareholdings in Ellerines, Wetherleys, and other retail outlets and millions of clients/customers having outstanding liabilities to these businesses which due to the slump in the economy has resulted in them defaulting on payments and the bank accordingly suffering major financial losses in recent times.

Within Ellerines alone the debtors book stands at R 17 billion and this irrespective of Ellerines having applied for a rescue package in terms of the companies act, is disastrous to say the least for the group.

This is but one of the financial institutions that have vast exposure in the unsecured lending spectrum in society, and with the economy being what it is at the moment, we can be assured that similar situations would arise in the future, as people in the country are being given unsecured credit to sustain, and then defaulting on payment thereof.

The economy of the country will still have its disastrous consequences and that is no maybe! 

slipslidinaway 2014/08/14 10:00:12 AM
Ho-hum... Some narrative on the by now well known situation and no point made. Just another putz making the everyday and mundane of as profundity.
Reality 2014/08/14 10:54:47 AM
> The South African Reserve Bank then came to the rescue of the Bank you are saying a group of private investors (that is what the SARB basically is), felt complied to purchase all the bad debts of the Abil while the good part was allowed to continue with investments from other banks. So, these private investors are willing to take a hit of a few billion rand just because they felt sorry for Abil? ..or is the taxpayer footing the bill?
Bolsheviks Partysa 2014/08/14 12:45:46 PM
The ANC has openly said they want to create the 6 million jobs through infrastructure development. To do this they need funding which they cannot get from outside sources and the user pay system like etolls is not working. The solution is to "borrow" money from the many pension funds through legislation forcing the pension funds to invest a certain percentage in this infrastructure fund. I theory this may work but in practice this money will just be squandered like all other taxes and the pension fund will not get their money back never mind a decent return. This is why the ANC is busy with the process to "reform the retirement industry"
Bolsheviks Partysa 2014/08/14 12:47:27 PM
They just want to get their dirty hands on the pensioners billions, I want my full contributions when I resign. I already have plans for it, travel the world etc. when I am 60 I wont need it much and with the crime in SA and the poor justice system its not even guaranteed that I will reach 60
Bolsheviks Partysa 2014/08/14 01:19:38 PM
It is not good to resign and collect future Benefit but this Government is in a Debt trap and desperate after mismanagement of the Nation's Resources.The Public Debt is fast approaching R2 Trillion and the spending of the Government is yet not under control.Officials are still living in a luxury madness. But if you don't have a good Business Plan please do not as running business in this country needs tons and tons of capital.You need millions to run simple Mochacho Take away Franchise.Elect patriotic people and not those who are burnt on destroying this country and that's the only safe guard.
Marius van Newcastle 2014/08/15 09:51:49 PM
And ABSA Clients has the privilege to make a contribution to the bail-out package. The message below appears on ABSA's Internet Banking........ Based on the announcement by the South African Reserve Bank placing African Bank under curatorship and following the guidance provided by the Financial Service Board the value of the Absa Money Market Fund will be reduced by 0,3% due to its holding of Abil assets. Consequently your Absa Money Market Fund statement will reflect a 0% interest rate for 11 August 2014 as well as a reduction in the actual Rand value. The interest rate will normalize from 12 August 2014. For further information please speak to your financial advisor or call 0860 111 456.
Jan Richter 2014/08/18 06:18:56 PM
The role of Leon Kirkinis, former CEO and founder of Abil is largely underplayed in The African Bank saga. He built enormous personal wealth for himself and Abil shareholders between the time it listed in 1998 and the crash last week. A couple of weeks back, Kirkinis was “worth” half a billion rand and he was head of a business which employed 13 000+ people. Some commentators suggested Kirkinis is somebody we should be celebrating as an entrepreneur. This is a very debatable position. Following Sunday’s Carte Blanche exposures by the Bank’s customers of their unsavory lending practices display highly questionable ethics and reckless business practices. It leaves no debate that such behavior borders on criminality and cannot be merely viewed as an unintended consequence of entrepreneurship. A serious case can be made out that Kirkinis is an opportunist and villain praying on the poor and uninformed. Kirkines (and the Abil board of directors) should at the very least be brought to task and stripped from the excessive wealth they gathered and from the extravagant lifestyles they are continue living. Of greater concern like in most other matters involving business practices to the detriment of consumers, the legislator (NCR in this matter) is again proven to be incompetent to prevent or curb business practices such as these!