The sale of Ubank, the sole black-owned private bank, to the African Bank, whose shareholders include large commercial banks, may come as a huge blow to a much-needed attempt to transform the country’s banking industry.
The African Bank had recently revealed that it was a successful bidder to acquire part of the Ubank, which has been under curatorship since May this year. The African Bank would pay R80 million to buy the assets of the mineworkers’ bank.
This followed the announcement by the SA Reserve Bank (SARB) in March this year that it would soon sell its 50 percent shares in the African Bank to avoid a conflict of interest as the SARB, as the regulator, cannot be a referee and a player.
It acquired this share after the African Bank was placed under curatorship in 2014 following the financial crisis due to the failure to correct debt from borrowers.
The SARB had not yet revealed who would be the potential buyer or buyers of its shares although it invited local and international bidders. After scrutinising all bidders for its stake at African Bank, SARB concluded that none of them were suitable.
SARB senior media relations co-ordinator Ziyanda Mtshali said this week that SARB was still using an Initial Public Offering (IPO) to sell its African Bank shares after it had previously failed to find a suitable investor. “The SARB has begun with its preparatory work to sell its stake in ABHL via the IPO on the Johannesburg Stock Exchange.”
When asked if selling Ubank to African Bank would not be a setback to the effort to transform the banking sector, Mtshali’s response was: “A broad-based black economic empowerment offering will be considered as part of the IPO process and, should it be successful, will change the shareholding of the bank.”
When they rejected Sekunjalo Investment Holdings’ offer to recapitalise Ubank, curator Zola Beseti and SARB said only a banker could recapitalise the bank.
Sekunjalo chairperson Dr Iqbal Survé had pledged R250 million and also offered to help raise another R250m towards the recapitalisation, which would have seen Ubank remaining in the control of black people. He had also promised that Sekunjalo and subsidiaries would move their combined revenue and assets of about R10 billion to Ubank.
Currently, FirstRand Bank, which is the owner of FNB, owns 7 percent of the African Bank, Standard Bank 6 percent, Absa 5 percent, Nedbank 4 percent, Investec 2percent and Capitec 1percent. SARB owns 50percent, which is the biggest stake, followed by the Government Employee Pension Fund (GEPF), which controls 25percent.
Recently there has been growing concern about black people being deprived of ownership in the financial sector. This is because all major banks are largely white-owned.
Following Sekunjalo’s offer, Black Business Council (BBC) vice-president Yvonne Maitin, who is the chief executive of One Africa Capital Partners, said black businesses needed a bank that would look after their interests because any attempt to transform traditional banks had been a futile exercise despite their having black people in top positions.
Ubank had been the pride of mineworkers whose majority is black. The history of Ubank reflects that it was established to counter the reluctance of major banks to accommodate mineworkers.
In the early 1990s, the Godsell Motlatsi Commission led to the commercialisation of the institution, which was granted a banking licence in June 2000 under the name Teba Bank with the National Union of Mineworkers (NUM) and the South African Chamber of Mines being the trustees. In 2010 it was renamed Ubank.
African Bank, which seems to be now falling into the hands of the white-owned commercial banks, carries the legacy of black businessmen Dr Sam Motsuenyane and Dr Richard Maponya, whose dreams were to see black people having a bank that would appreciate black people’s needs for financial services.
There exists a revolving door between the SARB, the National Treasury and the commercial banks, which creates an extremely cosy relationship between the entities. It should therefore not be a surprise that there is no competition in the sector, whose regulation makes it extremely difficult for new entrants to join this “exclusive club” and remains one of the most profitable for retail banking globally.
SARB will not support Ubank and Ithala with capital injection
SOUTH African Reserve Bank (SARB) governor Lesetja Kganyago recently told Parliament’s standing committee on finance that the central bank would not take part in financially rescuing Ubank and Ithala.
Kganyago was responding to a question posed by committee chairperson Joseph Maswanganyi about the plight of the two black-owned banks and transformation in the financial sector. He said SARB’s intervention into the bank’s affairs was, according to the law, limited to protecting depositors’ interests.
“We do not have the regulatory strategy that says we have got to prevent banks from failing because we do not have the ability to prevent them from failing,” he said.
He said “banks can fail” and, if that happens, the SARB has a responsibility to make sure that they do not take with them the assets of the depositors “meaning that the depositors’ interest must be protected”.
Kganyago said SARB’s responsibility was to license and supervise the banks and “control entry and exit”, and ensure that when someone starts a financial institution, he or she brings enough capital into the institution.
“We cannot give you additional capital because that is not what we do. However, during the supervisory process, we will point out certain gaps or failings and ask that management, the board and shareholders remedy those,” he said.
Before posing the question, Maswanganyi had expressed concern that the collapse of Ubank and Ithala, following that of VBS, would lead to five white-owned major banks, which control almost 90% of the sector, ending up controlling almost 100% of the sector.
As a resident of Limpopo, Maswanganyi said he had seen the bad effect of the demise of VBS. “I have seen the pain of people who were clients or customers of VBS. Others have even died because of what happened.”
He said it would be wrong to see Ubank and Ithala collapsing under the watch of the democratic government. He said the committee had previously raised its concern about the lack of transformation of the financial service sector with the minister.
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