3 things that may have sunk African Bank


To a casual observer it is shocking, but to a discerning follower of financial trends the occurrence of the train smash that is the collapse of African Bank as a business model was a matter of when not if. Now the institution is either haemorrhaging or in urgent need of financial life support. Transform SA has compiled the following points as possible causes of its collapse:
1. As if it were a charity organisation – putting on ice all requisite due diligence basic in any banking business – it doled out loans as if they were social grants to anyone with a green bar-coded ID document. Any banking business would conduct a risk analysis of a potential client, which, now on evidence, African Bank didn’t do thoroughly.
2. As commercial banks are primarily in business to add as much value as possible to shareholder funds, not to combat poverty, they usually treat the lower end of the market as an area that won’t help them achieve this objective. But African Bank thought it would flout this, make its own banking business principles and still remain viable.
3. Having the Public Investments Corporation (PIC), the custodian of 1 trillion rand of public pension funds, as a second biggest shareholder must have given the institution assurance that once the wheels come off a bailout will always be on hand.

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