African Bank Investments Limited (Abil) said on Monday that the corruption debacle involving its Gilt Edged Management Services (Gems) subsidiary is an isolated issue and will not affect the group’s ability to deliver on its financial targets.
Last week, Abil announced that Gems — a subsidiary of the group via Theta Investments Limited — was investigated under various charges of corruption resulting from payments made to union officials.
Gems agreed to plead guilty and accept full responsibility for the actions of the officials concerned. Gems also agreed to pay reparations to customers who may have been prejudiced by these actions, it said.
“Whilst an unacceptable scar on the closure of the financial year for the Abil group, the financial effects of this court order has not affected the group’s ability to deliver on its financial targets for this year or future years,” Abil said on Monday.
The bank, the country’s biggest micro lender, added that it remains committed to upholding the highest levels of ethics and integrity, and is confident that this is an isolated issue.
Abil announced last week that it has agreed to help compensate potential claims valued at up to R60,1-million related to wrongdoing during the period 1999 to 2002 by employees of Gems, a discontinued business.
Abil said Gems had agreed to plead guilty to two counts of corruption and pay a fine of R5-million related to misdeeds by Gems employees.
This followed two years of investigation into transgressions by certain officers of Gems, involving payments to officials of the South African Municipal Workers’ Union (Samwu) for assistance provided in the sourcing of loan business with union members for the company.
In terms of the plea-bargain agreement reached with the state, Gems had pleaded guilty to two counts of corruption, as the officials concerned committed the offences in their capacity as employees of the company.
The banking group explained that, prior to it becoming aware of the allegations, the decision had already been taken to close down the Gems business, and the process of winding down the Gems operation had been initiated.
After being made aware of the allegations, Abil had taken the following steps: all payment arrangements between Gems and union officials were terminated with immediate effect, a new management team was put in place, and the business had since been closed down.
As certain Gems clients may have taken loans on potentially less favourable terms from Gems than competitive offers available to them at the time from Samwu preferred providers, Gems has further agreed to compensate all municipal clients who had taken out loans during the period based on interest-rate differentials ruling at the time.
The matter involves 34 000 clients and a potential cumulative claim over the past five years of R60,1-million.
As Gems has a net asset value of R23-million and will therefore not have sufficient financial resources to deal with the entire claim, and in the interest of justice to consumers, Abil has agreed to ensure that it covers Gems obligations to the extent necessary.
Abil has approximately 1,5-million clients on a group-wide basis. — I-Net Bridge