Meshack Mabogoane and Reg Rumney
If any government aid is granted to the closed African Bank (AB) it will not come from the Reserve Bank.
Pressure built up this week to throw the AB a lifeline, but Registrar of Banks Christo Wiese is adamant the Reserve Bank will only lend support to solvent institutions — AB’s liabilities exceed its assets.
He told the Mail & Guardian this week that the bank has been put under curatorship at the request of the Afbank board of directors because the capital has been depleted.
The Reserve Bank stance, he said, was that it provided only short-term liquidity support as a lender of last resort against a deposit of securities.
He said the AB had put up R30-million of securities eligible in terms of the Reserve Bank Act.
“African Bank has depleted that reserve. We cannot provide any future liquidity support.”
The curator put in charge of managing the bank, he says, can sell the bank as a going concern, or he can sell off the assets to other banks to repay creditors.
Asked whether a depositor who withdraws money from a bank because of a tip-off that it is in trouble could be guilty of a crime, Wiese said the issue was whether a creditor of an insolvent institution had been given undue preference.
It is reported that the Nelson Mandela Children’s Fund withdrew funds from the bank the day after the President had been informed of the bank’s troubles.
Any action, Wiese said, would have to be taken in terms of the Insolvency Act. However, he added, that banks were obliged to repay deposits they had accepted, and this made the issue difficult.
“We are looking at amending the Insolvency Law,” he said.
Other developments this week include:
* Fearful and distressed depositors stampeded outside some branches demanding their money; the government has given the African Bank R36-million to enable withdrawals of R500 each to depositors with less than R10,000 ;
* Chairman of African Bank, Dr Sam Motsuenyane has called on debtors to pay though he still expects the government to come to the rescue. There are reports that he is under pressure to resign as deputy speaker of the Senate if this is not forthcoming;
* Revelations that former Chief Executive Jack Theron owes R3,5-million and that he authorised several loans to whites whose applications had been declined by senior black managers. The bank is proceeding with legal action against Theron;
* Disclosure that Dr Nthato Motlana’s New African Investment (Nail) and its subsidiary, Metropolitan Life, knew about the bank’s irregularities for over a year yet went ahead to pump R4-million and R5-million. respectively. When the bank approached both companies for more investment funds they re-examined its affairs, stumbled against irregularities and blew the whistle.
* Auditing firm Deloitte and Touche had long informed both the AB’s Board and Reserve Bank about bad debts and malpractices; the Reserve Bank (RB) made investigations but took no action. Only a month later Deloitte warned the RB. Christo Wiese of the RB says the matter was taken up with the AB’s board and management; however, there was no action then as they expected the ongoing negotiation between the AB and the Nail/Met Life to come up with a rescue package;
* Curator John Louw says “prospects are good” for a deal to salvage the AB. A Malaysian consortium, spearheaded by Tiny Naidoo’s African Development Corporation, is cited as main suitor.
* South African Commercial and Catering Workers Union, Saccawu, which has been monitoring the situation and in the past raised alarms within AB has called for the government to step and save the AB citing the examples of the previous government’s role in Trust Bank’s past liquidity problems. Saccawu’s spokesperson, Stanley Mngomezulu, told the M&G that ” they are seeking a meeting with the government for the recapitalisation of the AB and that the State should play a “pro- active and leading role” in any salvage operation. Saccawu is pressing for a commission of enquiry to re-examine the role of the Reserve Bank in the debacle in particular and its overall position.
* Emotions and sentiments are running high in black business circles about charges of “sabotage” as Theron was seconded by the RB and that the heaviest debtors were whites whose loan application had been declined and Theron overrode these decisions.