JOHANNESBURG, January 30 – Capitec Bank of Tuesday “strongly refuted” allegations made by US researcher Viceroy that said it had compiled evidence suggesting the company must take significant impairments to its loans.
Shares in Capitec Bank tumbled as much as 20 percent on Tuesday after the announcement by Viceroy which said it had done extensive due diligence and that the company would likely find itself in a net-liability position.
But Gerrie Fourie, CEO of Capitec Bank, said in a statement: “We have been informed of the allegations which Viceroy has made against Capitec Bank. We strongly refute these allegations and are in the process of gathering information to respond to the claims made in the report with facts. We are committed to providing clear and transparent information that will show that these claims are baseless.”
Capitec was set to hold a media briefing in Cape Town on Tuesday afternoon to address the issue.
Viceroy said its research showed that Capitec “is a loan shark with massively understated defaults masquerading as a community microfinance provider” and said the South African Reserve Bank and Minister of Finance should immediately place the bank into curatorship.
“As a consequence of re-financing delinquent loans, Viceroy believes Capitec’s loan book is massively overstated,” said Viceroy, which wrote a similarly damning report about Steinhoff before accounting irregularities were revealed at the retail company last December.
“We think that it’s only a matter of time before Capitec’s financials and business unravel, with macro headwinds creating an exponential risk of default and bankruptcy.”
Earlier, Capitec chief financial officer Andre du Plessis told Bloomberg News the allegations were “totally unfounded”
“It’s very surprising that someone writes a report who knows nothing about us,” Du Plessis was quoted as saying.
Reacting to the report, the Congress of South African Trade Unions (Coatu) said that allegations of reckless lending against the bank should be properly probed.
Cosatu’s spokesperson, Sizwe Pamla said that if the allegations are proven to be true, this will have a devastating impact on the poor workers.
The organisation said it was worried about “systemic failures” that led to companies such as African Bank nearly collapsing due to financial problems.
” COSATU is wary that if these allegations are proven to be true, they will have a disastrous impact on the poor workers and the millions of low income workers who bank with Capitec and owe loans to them. We have noted the reassurances coming from both Capitec Bank and the Reserve Bank that Capitec is solvent but we are worried by the systemic failures that have resulted in the African Bank and Steinhoff situations,” Pamla said.
Pamla said that high levels of indebtedness had left millions of consumers battling to make ends meet.
He said that creditors imposing high interests on their loans were exploiting consumers.
“South African workers are already highly indebted and they are victims of reckless credit providers. The levels of reckless lending in the country have left many low income earners saddled with loans they cannot afford.
Credit providers prey on the poorly paid and desperate workers and impose unreasonable interests on their loans, and sometimes they hide some of their fees and extra charges behind unclear calculations,” Pamla said.
– African News Agency (ANA)