South African banks are looking at options ranging from debt consolidation to new ways of leveraging equity to avoid defaults when coronavirus-related debt relief measures end, industry officials said.
The banks gave customers in good standing relief on loans during the pandemic, including payment holidays of up to three months. But some consumers are still in trouble.
Some banks have offered extensions, while others like Capitec offered to refund interest accumulated during payment holidays.
Jacques Celliers, CEO of FirstRand’s retail division, said the lender was worried about the impact of job losses and wanted to avoid a wave of property evictions that would affect prices.
Mortgages make up 59% of 489 billion rand ($28.88 billion) in loans considered at risk, according to the Banking Association of South Africa (BASA).
“We’ll have to be very clever between all of us as to how do we navigate the property game,” Celliers said.
Options could include leveraging the equity in properties, including family members’ properties, in new ways, using pensions or granting term extensions on mortgages, he said.
Anton de Wet, chief client officer in Nedbank’s retail and business bank, said debt consolidation on home loans was a possibility and that term extensions, as well as other solutions, could be discussed with customers individually.
Standard Bank also said its solutions were based on individual clients’ circumstances. Absa said it would make an announcement on its post-debt relief plans in the near future.
Banks have already warned of rising bad loans: Capitec, for instance, said its credit impairment charge was 145% above expectation and it had increased provisions by 3.3 billion rand since February.
Some banks have applied a less-stringent approach to provisioning for loans granted relief after regulators allowed more flexibility in strict new accounting rules.
BASA managing director Bongiwe Kunene said higher provisions could be triggered if consumers can’t keep up with payments following the relief period.
President Muhammadu Buhari has urged African leaders to ensure the immediate actualization of the Common African Position on Assets Recovery (CAPAR), as the continent celebrates Anti-Corruption Day, July 11, 2020.
In a letter to South Africa’s President, Cyril Ramaphosa, Chairman of African Union, the Nigerian leader asked for a re-commitment to the anti-corruption war by leaders on the continent to engender an “integrated, prosperous and peaceful Africa, driven by its own citizens, representing a dynamic force in the international arena.”
The President laments that “the massive corruption being perpetrated across Africa’s national governments has created a huge governance deficit that has in turn created negative consequences that worsen the socioeconomic and political situation in Africa.”
The letter by President Buhari reads in part:
“As Your Excellency is aware, the continental fight against corruption has been premised on an irreducible minimum that can pave the way for Africa’s transformation. In this effort, the emphasis has been on the continent’s collective determination to forge resilient partnerships among our national governments, civil society organizations and other interest groups, such as women, youth and the physically challenged, to ensure improved socio-economic, political and security development and ultimately, the improvement of our continent.
“The concern of the African Union is that the massive corruption being perpetuated across our national governments has created a huge governance deficit that has in turn created negative consequences that have worsened the socio-economic and political situation in Africa.
“Your Excellency may recall that these continental concerns led our colleagues at the African Union, to appoint my humble self as the African Union Anti-Corruption Champion. I believe that the efforts and focus of the Nigerian Government at home, partly informed this decision as well as the need for Africa, as a continent, to recommit herself to the fight against corruption and the imperative to free resources for meaningful development.
“I am, therefore, in full support of the call for the issuance of a continental message to commemorate this day, on July 11, 2020, to re-commit the African Union to the continental fight against corruption, including through a robust approach to assets recovery, hence the need for a strategic framework on a Common African Position on Assets Recovery (CAPAR).
“Happily, in February 2020, at the 33rd Ordinary Session of the Assembly of the African Union in Addis Ababa, CAPAR was adopted. In my view, the African Union must go beyond the mere annual celebration of the Africa Anti-Corruption Day by moving swiftly to operationalize the African Common Position on Assets Recovery by all member states. This is an excellent way to drive Africa’s Agenda 2063, for an ‘integrated, prosperous and peaceful Africa, driven by its own citizens, representing a dynamic force in the international arena.’
“As current Chair of our Union, I sincerely commend to you, this suggestion that seeks to call our leaders in Africa to recommit ourselves to this very important task of reclaiming our continent from the vice of systemic corruption.
“Please accept, Your Excellency and Dear Brother, the assurances of my highest consideration.”]
Credit: Daily Post