State entities to retain control of African Bank

SOUTH African taxpayers are seemingly not footing the bill for the revival of African Bank, according to curator Tom Winterboer.

Winterboer revealed that the South African Reserve Bank would control 50% and the Public Investment Corporation 25%.

This will give the government 75% of South Africa’s largest provider of unsecured loans through the two entities, both of which fall under the Department of Finance.

The new structure will be implemented after the formation of the “good bank”.

Winterboer also moved the official launch of the “good bank” under its new executive board to February next year from the initial deadline of next month.

It will still be under curatorship until then.

This is not the first time that the curator has extended the deadlines for resuscitating African Bank, which collapsed in August last year.

He had previously said the bank would relist on the JSE in the first quarter of this year, but then postponed this indefinitely.

The publication of the company’s 2014 annual results ending in September was also delayed until June this year.

When Winterboer was questioned on the period of the “nationalisation” of African Bank, he said he did not expect the government to be involved in the long term.

He likened the situation to the UK government rescuing Royal Bank of Scotland.

As a consequence of the 2008 subprime crisis, the British government bought into the bank in a rescue mission. It later sold its stake.

Winterboer said he believed that the Reserve Bank would ultimately do the same when African Bank eventually returns to the bourse.

“One does not expect the state to be involved in banking in the long term. I don’t think it is the state’s objective,” Winterboer said.

Wayne McCurrie, Momentum portfolio manager, had similar sentiments.

“I have no problem with the government controlling the bank.

“Over time they should exit their holding. I don’t think the government would want to own a bank.”

McCurrie said he believed that the ANC’s rhetoric on nationalising banks was just that — rhetoric.

He noted that the government already owns several banks, such as the Development Bank of Southern African, the Land Bank and the Industrial Development Corporation.

“I don’t think [the government] needs a commercial bank,” McCurrie said.

Through the Government Employees Pension Fund and the Public Investment Corporation, the government controls a large chunk of the financial services sector: 8% of FirstRand; 11% of Standard Bank; 5.2% of Barclays Africa; 11.9 of Investec; 6.3% of Capitec; and 6% of Nedbank Group.

Among insurance companies, government entities control 11.8% of Sanlam, 11.02% of Old Mutual, 8.6% of MMI Holdings and 3.8% of Liberty Holdings.

David Gard, senior adviser in business restructuring at PwC, said the Reserve Bank’s loans to African Bank would be based on commercial terms.

The curator insisted that the ownership was part of the deal from the outset, after the group collapsed.

Under the plan, African Bank is expected to have an opening cash balance of R20.5-billion.

Winterboer said he believed that this would spare the bank having to raise debt until the fourth quarter of 2018.

Over time they should exit . . . I don’t think the government would want to own a bank