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Blacks pay for apartheid banks

I love a good puzzle and in today`s economic and political climate, it seems there are plenty abound. Here`s one that you are welcome to solve at your own leisure.

It is 1991. Apartheid is in its last days. The economy is on its knees. The Reserve Bank`s repo rate is 17 % and prime interest is a staggering 22 %. Consumers are buckling under the pressure. One bank has 91 000 debtors who are defaulting on their loan payments. It is a catastrophe. They approach the government, who loans them R 1.2 billion with the following instruction;

"Listen, Bankorp, we are loaning you the R1.2 billion at 1 % interest on the condition that you buy government bonds which will give you 16 % interest. The 15% profit you make, you have to use to write off your toxic debtor’s balance sheet."

Move on to 1992. The writing is on the wall. A new government and a new era is waiting. One of the companies responding to this with haste is the newly formed Amalgamated Banks of South Africa. ABSA offers to buy many banks to form one super bank. One of their take-over targets are still struggling Bankorp whose valuation is dismal anyway. ABSA offers to pay a R 100 million PLUS the liability of R 1.2 billion as buy-out price. The purchase price will be R 1.3 billion. All parties sign. Money exchanges hands. Everyone is happy.

Fast forward to 2017. South Africa is in the throes of yet another political mammoth gasping its last breaths. Change is in the air. But the old struggle stalwart is yet to give up the fight, as there is much to lose. One of the last, freshly kitted out soldiers of the fumbling government is Public Protector Busisiwe Mkhwebane.  In her attempt to please her dictator-to-be boss and a burning yearning to be as politically relevant as her predecessor, Me. Mkhwebane cuts-and-pastes a report in the language and flavor of the moment: White Minority Capital Must Pay Now!

She orders that ABSA must pay back to the Reserve Bank the monies it illegally begot via the Bankorp transaction of 1992. Plus, interest.

Here is the glaring facts Me. Mkhwebane forgot in her haste to strike the iron while it is still hot;

1. ABSA's purchase price for Bankorp included the R 1.2 billion that Bankorp owed to the Reserve Bank.

2. ABSA could not dictate to Bankorp's shareholders how to use the R 1.3 billion it paid for the struggling bank.

3. Me. Mkhwebane must identify and pursue the shareholders of Bankorp who received the monies ABSA paid for the group.

4. The Reserve Bank should have surely acted, if the R 1.2 billion it was owed, was not paid back to it after the Bankorp sale.

5. Bankorp bought Government Bonds with the money. So. The government, in alias, benefited from this transaction. Where are these bonds today?

6. Regardless that ABSA is now expected to pay twice for one transaction, Me. Mkhwebane is punishing today`s shareholders for 1991`s shareholders.

7. The only way for shareholders to recoup a financial loss is to raise income. They do that by increasing product pricing. Me. Mkhwebane is, in effect, expecting the majority of ABSA`s client's in 2017 to fork out higher fees for Bankorp`s clients of 1991.

8. The majority of ABSA`s clients are black.

Thank you, Me. Mkhwebane, for making black people pay for Apartheid`s crimes. Might I suggest a new direction and a new boss... before your boss is no longer a boss?

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