Covid-19 a bit like an iceberg
Perhaps the most alarming feature of Capitec’s trading statement, in which it announced a loss of R404m for the quarter ended May 31, was the level of uncertainty it portrayed.
It’s a bit like the moment in Titanic when the captain realises he’s just ploughed the ship full speed ahead into a thumping great iceberg, but he hasn’t discovered the extent of the damage below the waterline, so he doesn’t know whether to slip into his dinner jacket or his swimming trunks.
Capitec has raised its provision for credit impairments by R3.3bn, on the back of R5.75bn of retail balances and R236m of business credit balances being rescheduled or granted payment breaks during the lockdown.
It is hoping that the risk here is less than normal with rescheduled balances, given that the clients were in good standing at the end of February, but it admits there is considerable uncertainty as to whether it was too conservative or too lenient in its provisioning.
Capitec states that the first payment due at the end of June was largely positive, but the full impact of the damage will be revealed only in July and August. It is abundantly clear that great swathes of the economy have taken a hammering, GDP is tumbling and unemployment out of control, and much will depend on the country’s success at adapting to the pandemic and getting back to some semblance of productive reality. Capitec is continuing to develop products and to grow its business book, but the sad reality is that if a company as well run as this is struggling, heaven knows what the rest are doing.