Bank failure not a risk

SIR — In his latest column (Bail-out not for sake of depositors like you and me, August 12), Phakamisa Ndzamela exposes his limited ability to understand the weary South African taxpayer. How could he even begin to justify a bail-out as necessary to shore up what is clearly an imaginary “systemic risk” to our banking system?

Why should the government (read the taxpayer) bail out a business when the CEO himself didn’t think it a business worth saving?

Most commentators are unanimous in the view that African Bank’s failure posed no risk to the wider banking sector because it is alone in its model of funding consumer spending. Not only did it pose no risk, any first-year commerce student could tell you its fate was absolutely not unforeseen but rather completely self-inflicted.

In addition to the bondholders and other “corporate gamblers” (Mr Ndzamela’s term), the other major benefactor is retailer Ellerines, which so glibly provides its wares to unwary consumers and then serves as an agent for African Bank, applying for this ridiculously expensive credit on behalf of consumers. This business model is unsustainable, and the banking regulator must surely have known this.

The sad reality is that nothing about this debacle should be a surprise to anyone with a cursory interest in our banking sector. What is a surprise, though, is the speed with which the government acted to preserve the interest of the privileged class.

To argue that the bail-out is in the best interest of all South Africans, the way Mr Ndzamela does, is a slap in the face of every casino pundit who lost money on the slots. Gasant Jacobs Johannesburg