Reserve Bank should act on Absa’s interest mistakes

THE South African Reserve Bank seems to have little appetite to deal with the miscalculation of interest rates by Absa. The bank has been paying back its customers millions of rand because it overcharged them on their credit cards. I am told more than 50,000 clients were affected, with one client due a R90,000 refund.

One would have expected the Reserve Bank to move swiftly and assess how deep this goes. But the central bank’s response is that “in terms of section 33 of the South African Reserve Bank Act, (it) does not comment on individual entities. Complaints on interest rate charges are referred to the banking ombudsman as the (Reserve Bank), in terms of the Banks Act, does not have the legal powers to intervene between a bank and its client.”

I think the Reserve Bank is reading the act too narrowly. It does not know how widespread this problem is and immediately concludes that it should not intervene. What if it is widespread and affects other banks?

A few years ago, Absa miscalculated interest on a client’s car loan. A senior Reserve Bank official said — and I have it on record — that it was an “isolated incident”. I guess he was wrong, because it has happened again with another Absa lending product.

A miscalculation of interest can pose a risk to SA’s banking system. Imagine if a bank had overcharged clients interest to the tune of R2bn and these clients were suing to get their money back. This would be a problem for the bank as R2bn is a lot of cash.

Dealing with interest miscalculation should not be restricted to the National Credit Regulator and the banking ombudsman. The Reserve Bank is tasked with promoting the soundness of SA’s banking system, and should take on this battle.

Speaking of battles, all because of brinkmanship, about R500m owed to five large South African banks is now at risk and may not be fully recovered should there be a failure to sell African Bank Investments Limited (Abil) subsidiary Standard & General Insurance (Stangen). If other creditors are included, the sum owed to creditors is close to R1bn. Should Abil’s business rescue fail and a liquidation is granted, the biggest losers will be the creditors, including the banks.

The parties involved include Abil’s black economic empowerment (BEE) shareholders, business rescue practitioners and African Bank curator Tom Winterboer. Last week Winterboer, under pressure to create a “good bank” from Abil by February, walked away from acquiring Stangen.

Winterboer had offered R1.38bn for Stangen, but Abil’s BEE shareholders, Hlumisa and Eyomhlaba, thought they were being fleeced as Stangen produced half-year profits of R786m. The shareholders wanted at least R4bn for Stangen to recover something of the R1.5bn they had lost over the past nine years.

The sale of Stangen would have realised about R2.6bn for Abil shareholders if cash at Stangen is taken into consideration. The BEE shareholders, although they believe they are not the spoilers, essentially torpedoed the deal. They knew they stood to get nothing from Stangen and decided to play hard ball. Essentially, close to R1bn would have gone to the creditors and another R1.3bn would have gone to preference shareholders.

However, it seems that the parties who wanted the Stangen deal to go through for R1.38bn underestimated the hand of the BEE shareholders. Because Hlumisa and Eyomhlaba had already lost R1.5bn, they felt business rescue was aimed at helping creditors rather than ordinary shareholders.

Winterboer is not a loser. But the African Bank “good bank” has lost out on making close to R1bn in capital in the first two years, which is what Stangen was expected to bring in.

In Winterboer’s words: “The capital expectation over the first two years was a R955m contribution through recapitalisation of the bank. After taking account of other impacts of not needing to fund the acquisition of Stangen, the actual capital reduction is of the order of R640m, which will be compensated by the good bank taking a larger amount of cash across from the existing African Bank.”

Winterboer felt it was better to make an arrangement with another insurer to underwrite the unsecured loans advanced by African Bank, as he could not afford delays. That is his choice. He could not be forced to buy something he felt was too expensive.




In the matter between: ABSA BANK LIMITED, Plaintiff, and THULILE HAPPINESS MZIZI N.O., duly appointment
Executrix in the estate of the late VUSUMUZI THAMSANQA KHOZA in terms of section 18 (3) of the Administration of
Estates Act, No. 66 of 1965 (as amended), Defendant
In pursuance of a judgment granted by this Honourable Court on 25 October 2013, and a warrant of execution issued thereafter,
the undermentioned immovable property will be sold in execution without reserve by the Sheriff of the High Court Durban
Coastal, at the Sheriff’s Office, Durban Coastal, 25 Adrian Road, Windermere, Morningside, Durban, on 19 June 2014 at 10h00,
to the highest bidder.
Full conditions of sale can be inspected at the offices of the Sheriff of the High Court, Durban Coastal, address as above,
the Sheriff who will be holding the sale, and will also be read out by the Sheriff prior to the sale in execution.
The Execution Creditor, Sheriff and/or Plaintiff’s attorneys do not give any warranties with regard to the description and/or
188 No. 37704 GOVERNMENT GAZETTE, 6 JUNE 2014
This gazette is also available free online at www.gpwonline.co.za
A unit consisting of—
(a) Section No. 8, as shown and more fully described on Sectional plan No. SS183/1992, in the scheme known as Valence
House in respect of the land and building or buildings situated at Durban, Local Authority of Durban, of which
section the floor area according to the said sectional plan is 33 (thirty-three) square metres in extent; and
(b) an undivided share in the common property in the scheme apportioned to the said section in accordance with the
participation quota as endorsed on the said sectional plan, held by Deed of Transfer No. ST14038/1994 (also known as Door
4 Valence House, 53 Maud Mfusi Street, Durban, KwaZulu-Natal).
Improvements (not guaranteed): Lounge, kitchen, bathroom.
Take further notice that:
1. This sale is a sale in execution pursuant to a judgment obtained in the above Court.
2. The Rules of this auction are available 24 hours prior to the auction at the office of the Sheriff for Durban Coastal at 25
Adrain Road, Windermere, Morningside, Durban.
3. Registration as a buyer is a pre-requisite subject to specific conditions, inter alia:
• Directive of the Consumer Protection Act 68 of 2008.
(URL http://www.info.gov.za/view/DownloadFileAction?id=99961).
• FICA-legislation i.r.o. proof of identity and address particulars.
• Payment of registration deposit of R10 000.00 in cash.
• Registration of conditions.
The office of the Sheriff for Durban Coastal will conduct the sale with auctioneers GS Ndlovu and/or DM Dlamini (Deputy
Advertising costs at current publication rates and sale costs according to Court Rules apply.
Velile Tinto & Associates, Tinto House, cnr Solomon Mahlangu (previously Hans Strijdom) & Disselboom Streets,
Wapadrand; DX 178, Pretoria; PO Box 733, Wapadrand, 0050. Tel No. (012) 807-3366. Fax No. (012) 807-5299. (Ref: U15033/
DBS/D Maduma/A Smit/CEM.)

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