January 31, 2018 / 11:59 AM / 2 months ago

South African fund manager questions Capitec's business practices

JOHANNESBURG, Jan 31 (Reuters) - Benguela Global Fund Managers wrote to Capitec this month, questioning the South African lender’s policy on rescheduling problem loans, the South African fund manager said in a statement to its clients seen by Reuters on Wednesday.

Benguela’s concerns emerged a day after Capitec’s shares briefly slumped by 25 percent following allegations by U.S. firm Viceroy Research that the lender was overstating its assets and income.

The shares largely recovered their losses by Tuesday’s close after Chief Executive Gerrie Fourie dismissed Viceroy’s allegations.

Benguela wrote to Capitec on Jan. 19, almost two weeks before the release of Viceroy Research’s report on Capitec, to raise concerns around its rescheduling policy, the South African fund manager said.

“Benguela is totally against the possibility of Capitec clients being caught in a debt spiral as a result of Capitec’s rescheduling policy,” Benguela Chief Investment Officer Zwelakhe Mnguni said in the statement.

Capitec shares fell again on Wednesday and were down 9.6 percent to 828.36 rand at 1138 GMT.

South Africa’s central bank on Tuesday vouched for the financial health of the country’s No.5 lender by market value.

Mnguni said in the Benguela statement there appears “to be some inconsistencies between the rising percentage of the loan book classified as high risk and the impairments in all rescheduled loans.”

Capitec Chief Financial Officer Andre du Plessis told Reuters that immediately after becoming aware of the letter he called Benguela’s CEO to acknowledge receipt of the letter and said he would respond by Feb. 5, the deadline set by the fund manager for Capitec to respond.

“I have a problem with the fact they wrote us a letter requiring a response and then they leaked it out to the press and I’m not going to go there,” du Plessis said when asked what he thought about the fund manager’s concerns.

Founded in 2001, Capitec has grown rapidly by focusing on low income South Africans who use its branches to deposit their wages and take out unsecured loans.

Benguela said it did not own Capitec shares and had not owned any in the past four years. It also said it was a long-only fund manager which did not make money from falling share prices.

Viceroy alleged in its report that Capitec overstated its loan book by as much as 3 billion rand ($250 million) a year by issuing new loans to defaulting clients.

Viceroy came to prominence in December when it questioned the finances of Steinhoff , the South African multinational retailer which later revealed it had “accounting irregularities”. (Reporting by Nqobile Dludla; Editing by James Macharia and Adrian Croft)

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