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!