Capitec: who to believe?

IT’S A MINEFIELD

The opening paragraph states the belief that Sarb “should immediately place Capitec into curatorship”. The first page claims “we believe Capitec is simply uninvestable and accordingly have not assigned a target price”. In other words, Viceroy suggested it’s worth nothing. These statements have been condemned as irresponsible, or deliberately malicious at worst.

“It is ironic that Viceroy pretends to fight for the plight of SA borrowers who are being abused by the so-called predatory behaviour of a ‘loan shark’, while they themselves seek to profit by attempting to create panic in a bank with systemic importance to the SA financial system,” noted Sanlam Private Wealth’s Renier de Bruyn.

However, others have cautioned against dismissing it in its entirety too quickly.

Remember that when Manager Magazine raised questions about Steinhoff’s accounting practices, Christo Wiese immediately called them “devoid of any truth”.

Therefore, when PSG reacts within hours to say the Viceroy report “is on the face of it filled with factual errors and misleading information”, and Capitec CFO Andre du Plessis tells Bloomberg the allegations are “totally unfounded” and he’s not worried, one hopes that they, too, won’t live to regret speaking too hastily.

As Benguela Fund Manager’s meticulous analysis shows, there may be reason to be concerned about Capitec’s rescheduling of arrears loans. Although Benguela notes that even with worst-case assumptions, it can’t arrive at the Viceroy R11 billion impairment provision, this isn’t an issue the market should ignore.

As Viceroy notes “South Africa’s microfinancing sector has been the graveyard of numerous Capitec competitors”.

So far, Capitec has survived the minefield, but it’s not inevitable that it’ll keep it up. So when potentially material issues are raised, they deserve proper scrutiny.

That doesn’t justify Viceroy’s approach or all of its findings. It’s simply good sense.