Crypto pioneer buys a R600k house with crypto and it ends up costing R200k

Written by Ciaran Ryan. Posted in Uncategorized

Using a smart contract, with no ID, email or customer information required. From Moneyweb.

AltCoin Trader founder Richard de Sousa purchased the property ‘completely outside of the banking system’. Image: Supplied

AltCoin Trader founder Richard de Sousa purchased the property ‘completely outside of the banking system’. Image: Supplied

Richard de Sousa founded crypto exchange AltCoin Trader in 2015 and has been a pioneer in bringing crypto to the broader South African market.

He lives, eats and breathes crypto. He decided to start exiting the traditional financial system several years ago – going off the grid, if you will, though says he still has several trusts and bank accounts.

He started buying bitcoin when it was $6 (around R91); today it is close to $20 000 (R303 805).

When bitcoin reached R10 000, he figured it was a good time to convert some of his gains to property.

He purchased a R4.3 million property for 420 bitcoin, which at today’s valuations is close to R128 million. He sold more than 90% of his bitcoin – something he regrets to this day.

“We all made mistakes when it came to crypto. When bitcoin hit R10 000 I thought I had done well out of it and I wasn’t sure where it would go next, so I decided to pour some of my profits into property. In retrospect it was a mistake, but I’m okay with it.”

A story to shake the banks

De Sousa has another story to tell that should have the banks very worried indeed.

He recently spotted another property for sale on the West Rand with an asking price of R650 000.

He jumped onto the Oasis.app website, which offers crypto-based financial services, including loans.

He decided to borrow the money for this house using his Ethereum crypto coins as collateral.

He then applied for a loan from Oasis, without having to go through the Know Your Customer (KYC) routine, nor did he have to provide an ID or an email address.

Here’s where it gets interesting: there are no monthly repayments.

In fact, you can choose to defer any payments for 20 years, or 40 years, if you so wish. When De Sousa took out the loan, the interest was 0%. Today it is 2%.

This is a mortgage lending model that could smash the banks’ hold on this market over the next few years.

He goes over the loan process in this Youtube video:

De Sousa’s loan was based on a smart contract, which is a type of contract linked to the blockchain, where certain conditions must be fulfilled before the collateral is called in. In this case, he had to provide roughly R1 million Ethereum as collateral to cover a loan valued at R650 000 to buy the property.

Should the Ethereum price drop below R650 000, the “smart contract” would automatically liquidate his Ethereum, deduct a 13% liquidation fee (or penalty) plus the loan amount, and refund him the balance.

Read: The future of money and payments

It took De Sousa less than 10 minutes to apply for the loan and place his collateral in the form of Ethereum coins into a vault at Oasis. He retained custody of the coins for the duration of the loan. Only the smart contract had the right to call on his collateral, and only under the conditions outlined earlier.

He wrote to the home seller’s attorneys and told them he would make full payment in cash into their trust account within seven days. “I gave myself seven days to do this, but in reality I only needed a couple of days.”

The loan for R650 000 was made in a crypto currency called Dai, which is backed 1:1 by the US dollar. He moved the Dai to the AltCoin Trader platform, sold it for rands (and made an extra 4-5% on this leg of the transaction because US dollar-linked cryptos typically sell for a higher price in SA due to local exchange controls, making it more expensive to acquire hard currencies).

With the Dai now converted into rands, Da Sousa transferred R650 000 to the house seller’s attorneys, and the deal was concluded.

The seller had no idea of the novel funding structure that took place in the background.

At this point, De Sousa was under no obligation to make monthly instalments on the loan.

He could ignore this for the next 20 years, or longer – the only risk he faced was that Ethereum’s price would drop below 66% of his collateral requirement, at which point his crypto would be liquidated under the terms of the smart contract.

One way to avoid your collateral being compromised in this way is to top it up with more Ethereum should there be a severe price drop.

Read: Six bitcoin will buy you a R1.4m house

De Sousa was under no obligations to make any monthly repayments on the loan, so he left it for several months. Seven months later, the Ethereum price had gone up three times, so he was now sitting with R3 million in collateral instead of the original R1 million.

At this point he decided to settle the loan in full. In effect, he paid about one third (or R200 000) of the house’s asking price by simply waiting for his Ethereum to increase in value. The house is now tenanted and earns a monthly income.

“I did all of this completely outside of the banking system, which is fraught with risks,” he says.

“You miss two payments under a mortgage contract and the banks have their lawyers all over you. This way I avoided the banks altogether, and that makes me extremely happy.”

It’s the ability to take out loans like this that should encourage mass adoption of cryptos. Smart contracts are backed by cryptos such as bitcoin and Ethereum. Rands and US dollars (unless in the form of Dai or any other so-called ‘stable coin’ backed by actual fiat currencies) won’t get you far in this world.

You have to exit the matrix and enter the crypto universe. Then all sorts of possibilities appear, says De Sousa.

Data dump ‘spills the beans’ on Mirror Trading International

Written by Ciaran Ryan. Posted in Uncategorized

Suggests MTI has taken in deposits of R4bn, while founders reportedly received R309m. From Moneyweb.

All bitcoin transactions are visible on the blockchain, so it is possible to trace where MTI-invested bitcoin came from and where it went. Image: Shutterstock
All bitcoin transactions are visible on the blockchain, so it is possible to trace where MTI-invested bitcoin came from and where it went. Image: Shutterstock

A group called Anonymous ZA dumped what it claims to be the entire transaction history of Mirror Trading International (MTI), which has been accused of being a Ponzi scheme – a claim denied by the company’s management.

MTI disputes the accuracy and completeness of the data dump. The Financial Services Conduct Authority (FSCA) says it is aware of the data leak and is looking into it. Last month the FSCA said it was investigating the activities of MTI for conducting unlicensed forex trading, and its claims of returns as high as 10% a month. The FSCA advised MTI members to ask for their money back.

Read: FSCA investigating Mirror Trading International

MTI’s argument

MTI’s head of marketing Cheri Marks confirms there was a security breach of the company’s administrative portal. “Yes, it was a criminal act. Yes, we will be pressing charges and everyone publishing the personal information illegally obtained we will refer to our legal counsel. The security breach has been fixed and the information leaked is inaccurate and incomplete at best.”

Marks says MTI is fully compliant with all relevant laws, and is the subject of unwarranted smears and rumour mongering over its referral marketing methods (where commissions of 10% are paid for introducing new members). These commissions are paid by MTI and are not deducted from members’ deposits.

“We have 170 000 members worldwide with roughly 17 000 bitcoin. There is nothing in law that prevents us from using referral marketing. No-one has ever asked for a withdrawal and not received it. We get people daily asking us for withdrawals and we honour all of them without fail.”

She adds that the FSCA has been given access to live trades to prove that profits are generated by trading rather than new bitcoins receipts, as has been claimed by some. “We don’t make promises about returns, and we explain the risks, which is what any responsible company should do.”

The company has an 18-month verifiable trading history with only one negative day of trading, she adds. Some have questioned whether this is possible, to which Marks replies: “The bot is an amazing development. Sure, it makes many losing trades and results vary, but only one day since we started has it ended in a loss.”

When MTI stopped trading forex, it shifted to crypto trading and “our members are happy and informed,” says Marks. “We chose to be in relatively unregulated markets like crypto for the very reason that we cannot suddenly be stopped from trading and have our accounts frozen. We are helping over 170 000 people grow their bitcoin portfolios at a time when governments have failed them, the banking system has failed them, employment is at an all-time low and businesses are failing by the minute.”

Warning signs

However, FSCA is sticking to its guns.

“Our advice had not changed since we issued our statement on MTI last month,” says Brandon Topham, head of investigations at the FSCA. “We recommend clients ask for their money back without delay. Our investigation into the company is ongoing.”

The fact that MTILeaks was able to grab the entire transaction history, apparently without hacking, points to “low budget” and shoddy website security, according to one source who asked not to be named.

“All data was acquired using simple enumeration and scraping techniques on the mymticlub.com site. No hacks were performed because the lack of basic security did not require it,” says a statement by MTILeaks.

“If your bank gave you access to any other customer’s data in such an insecure fashion, would you trust them to trade with your Bitcoin?”

But what’s inside the database may be of greater interest: it suggests the company has taken in deposits of more than R4 billion since inception and paid out R309 million to the founders. Total withdrawal requests by members reportedly total R2,9 billion, leaving “money in the bank” of R1.3 billion after withdrawn amounts and cancelled withdrawals are accounted for.

Members push on

Several MTI clients contacted Moneyweb when we previously reported on the company to reassure us they were receiving returns as promised.

Read: Get-rich-quick scheme pulls a crowd, despite regulators calling time-out

One MTI client says he was able to verify forex trades reported by the company as accurate. The company says it has stopped trading in forex in an effort to remain compliant with regulators and switched to trading bitcoin using computerised algorithms. That claim has also raised eyebrows in the crypto community.

Switching from trading one asset class to another virtually without pause – and apparently without a break in profits – has the skeptics is disbelief.

In a statement issued last month by Globalcrypto, MTI refuted allegations that MTI’s multi-level marketing systems is a Ponzi scheme, and that “members are able to add or withdraw their funds (bitcoin) at any time, with no complication or fees.” CEO Johann Steynberg added that MTI wants to change the reputation of the online passive income generating industry and ensure that the company is professionally managed and complies with all regulations.

Yet regulators in Texas and Canada recently sounded the alarm over MTI’s business practices. The company is accused of making misleading claims about its returns, while the Quebec Financial Market Authority listed MTI as a company that solicits investors illegally. MTI clients are rewarded with 10% commissions of new sign-ups.

Read: Joining MTI may end in tears

A separate analysis of MTI by South African blockchain researchers shows that by the first week of August 2020, a total of 15 351 bitcoin had been sent to various addresses controlled by MTI. That’s worth $170 million (R2.78 billion) at current bitcoin prices.

MTI only accepts deposits in bitcoin. Some local exchanges have reported a spike in demand for Bitcoin in recent months, at least some of which is destined for MTI. “We started to notice this some months back and began questioning people who appeared to be elderly and buying Bitcoin to participate in MTI. Though we didn’t have much information at the time, we advised caution,” says one crypto executive who asked not to be named.

All bitcoin transactions are visible on the blockchain, so it is possible to trace bitcoin destined for MTI and where it originated. The majority of these bitcoin are purchased on crypto exchanges such as Luno, VALR, Binance and Coinbase and then shipped to addresses controlled by MTI. Crypto exchanges have no control over the destination of bitcoin sent by customers, though some have started to question clients and advise them against it.

The data dump suggests that of the bitcoin received by MTI, a total of 3 755 appear to have been sent to online sports betting site Cloudbet.com and a further 845 to FXChoice, a Belize-based forex trading broker.

In June FXChoice said it blocked MTI’s trading account after investigating its high return claims and its use of multi-level marketing to attract new customers. “Before the account was blocked, [MTI] executed just a few trading operations, which were performed manually, large and incurred substantial losses,” says a statement from FX Choice, adding that it is still waiting for documents to confirm the source of funds.

Marks says the FXChoice statement is misleading. “We chose to move our funds to another broker who understands crypto before FXChoice made that statement. FXChoice is a forex regulated broker and it has frozen a few hundred bitcoin belonging to MTI shareholders – not member-owned bitcoin. We didn’t want to be at the mercy of a regulated broker that has to act on rumours generated in the press. We are in the process of supplying the financial information FXChoice requested.”

The MTILeaks database shows a payout of R1,45 billion to members, of which R360 million was in the form of bonuses for referring new members. Marks says this is also misleading since attributing a rand value to bitcoin withdrawals depends on the timing and the price of bitcoin, which is changing all the time.

“MTI has never and will never discourage members from withdrawing, we want them to see the fruits of our service to them. In August this year MTI effected 34 734 individual withdrawals to the value of 5933.85 bitcoin without any limitation. The fact that the biggest issue with MTI is our CEO’s willingness to share the bot’s functions with members is ridiculous to say the least.”

“The ‘shortfall’ in bitcoin claimed to be factual by Anonymous ZA is based upon the assumption that MTI is not trading, which is not the case. MTI remains focused on servicing its members and delivering on our brand promise, which we have done an exceptional job of to date,” Marks says.

In a statement issued to members last month, Steynberg writes: ”The time has come, to for once and for all, address and reframe the reputational perception issues of regulators, the media and potential members about this industry, through MTI demonstrating that a genuine bona fide business and brand using an innovative business model of integrity can exist and grow sustainably in this sector. I am personally very determined to see this through and together with and supported by MTI’s professional advisors, this process is now underway.”

MTILeaks is available here (you need the Tor browser to access it).

Is economic power shifting to the East?

Written by Ciaran Ryan. Posted in Uncategorized

Ciaran Ryan moderates a discussion between Michael Power, strategist for asset manager Ninety One, Jakkie Cilliers, founder of the Institute for Security Studies, and political commentator Moeletsi Mbeki. Michael Power says China will surpass the United States in economic size within the next few years – a trend accelerated by the coronavirus outbreak – and will in fact add 25% to its GDP in the next 3-4 years, while the US will remain relatively stagnant. Jakkie Cilliers says we should look out for the post-China story, which is India’s emergence as a global economic power. Moeletsi Mbeki agrees that China has grown phenomenally in the last 40 years, but asks: “So what?” Regions rise and fall in the economic terms, but we should be careful what lessons we learn from an authoritarian China that rides roughshod over its neighbours and trading partners.


Scientology volunteers using anti-germ warfare technology to decontaminate public spaces

Written by Ciaran Ryan. Posted in Uncategorized

Scientology volunteer decontaminating living spaces for at-risk people of Pretoria

Here’s a shout-out for the 200 Scientologists who are out from the break of dawn till sunset decontaminating public facilities across Gauteng province. I first posted the story here and the feedback was mind-blowing. It seems people are overdosing on apocalypse news and want something a little more cheering, so here’s an update.

While millions of South Africans are under lockdown due to the Covid-19 pandemic, teams of Scientology volunteer ministers are toiling away, decontaminating public spaces using an anti-germ warfare technology called Decon which was originally developed by the US military.

The millions under lockdown are fed a daily buffet of the most alarming news, and many are rightly fearful for their futures. The Scientologists decided they’d heard enough of this and applied for permission to be counted as essential service providers. “The one thing we can do right now is put our Decon technology at the service of the community,” says a spokesperson for the church. “Our aim is to help decontaminate areas of high traffic and unavoidable interactions, during lockdown.”

After decontaminating its own church facilities at Kyalami, Pretoria and Johannesburg, the Scientology volunteers spread out to neighbouring lodges, houses and public facilities.

Church spokesperson Theresa Hurter says the church’s international head office researched and located the most effective and non-toxic decontamination product available and settled on Decon 7. The product was developed in the 1990s by the US military to combat germ warfare and was later used to decontaminate food and food production lines in the US.

Since starting two weeks ago, the volunteers have decontaminated 111 buildings, and 78 essential services vehicles, creating sanitised environments for more than 15,000 at-risk people.

There hasn’t been a major disaster in the last two decades where the Scientologists didn’t respond, from 9/11 to the 2005 tsunami, the Fukushima disaster, and now this.

A nugget of good news in the midst of all the gloom.

Ciaran Ryan on SAFm: Court stops banks from taking money out of your account without permission

Written by Ciaran Ryan. Posted in Uncategorized

Ciaran Ryan talks to Nompu Siziba on SAFm about the court judgment handed down last week preventing banks from taking money out of your account in settlement of debts owed to it – a practice known as “set-off”. Billions of rands are potentially lifted from clients’ accounts each month due to the banks’ self-serving interpretation of the law.

I was groomed for corruption – Agrizzi

Written by Ciaran Ryan. Posted in Uncategorized

Daily prayer meetings and bags of cash: a day in the life of a Bosasa executive. This was first published in Moneyweb.

The whistleblower says he has received several death threats … and an offer of R60m to keep his silence. Picture: Siphiwe Sibeko, Reuters

Bosasa whistleblower Angelo Agrizzi says he has received several death threats … and an offer of R60m to keep his silence. Picture: Siphiwe Sibeko, Reuters

The day would start with a prayer meeting. Then the bags of cash would be arranged for delivery to the army of corrupt officials and politicians whose patronage built Bosasa into a multi-billion-rand-a-year enterprise.

This was a typical day at Bosasa, according to Angelo Agrizzi, former chief operating officer at Bosasa turned whistleblower. 

“No-one wakes up and decides to create a corrupt organisation,” he told Moneyweb on the sidelines of the CFO Talks anti-corruption debate in Sandton on Wednesday. “There is a grooming process that takes place.”

It starts with small gifts, then larger ones, until you are captured by the corrupt organisation and become part of the conspiracy of silence. “Then I got handed a envelope with R20 000 in cash and was told I should take my family to Mauritius for the weekend. The gifts keep getting bigger.

“Then one day you are asked to drop off a parcel for someone, and God help you if you don’t. You are told ‘if we go down, we’re all going down together’. There is a very clear threat in this, which is how they buy your silence.”

Agrizzi says he has received several death threats, as well as an offer of R60 million to keep his silence.

Capturing the captors

Earlier this year he told the Zondo commission of inquiry into state capture how bags of cash had been delivered to key correctional services personnel, including former correctional services commissioner Linda Mti and the department’s chief financial officer (CFO) Patrick Gillingham.

Read: SA cancels Bosasa prison contracts after bribe accusations

Agrizzi, Mti, Gillingham, and former Bosasa CFO Andries van Tonder were arrested by the Hawks in February on charges of corruption, money laundering and fraud. Numerous high profile ANC figures have been named by Agrizzi as recipients of bribes from Bosasa (later renamed African Global).

Speaking at the debate, Agrizzi said the system of graft at Bosasa was so endemic that staff turnover (out of 6 800 employees) was just 0.02%. Corruption was the business model, despite the existence of an ethics and governance committee that met once every four months. The 15-strong committee, populated by professors and PhDs, but was powerless against Bosasa’s “narcissistic leader” Gavin Watson, who surrounded himself with people who would do his bidding.

Read: Top prosecutors implicated in graft investigation

Watson boasted that Bosasa had a “flat organisational structure” but this was a euphemism for no structure at all. The company burned through 12 chartered accountants in two years, some of them because they could no longer stand being errand boys in a corrupt organisation.

Agrizzi bemoaned the lack of whistleblower protection in SA. “Protections for whistleblowers are non-existent. In fact, you get arrested [for blowing the whistle],” he said.

“How do you go about challenging CEOs who have captured the government?”

Under former president Thabo Mbeki, corruption was at “manageable proportions”, said Corruption Watch head David Lewis. “Under [former president Jacob] Zuma it consumed the state. The Arms deal under Mbeki was a serious episode, but it was discreet. The state capture project [under Zuma] involved the capture of the key decision-making structures of the state. State-owned enterprises [SOEs] were targeted because that’s where the money is.

”You had this dream team of Brian Molefe and Anoj Singh who came from Transnet to Eskom. The Zuma-Gupta syndicate was the best of the lot. Zuma had influence over the boards of SOEs and didn’t need to do anything else.”

Not enough to have captured No 1

But Zuma was only useful to the Guptas so long as he was president of the country, which meant the ANC itself had to be captured. This involved infiltrating local, provincial and national structures with bribable agents of corruption.

It’s time to prosecute individuals involved in corruption and send them to jail, said Lewis. The recent arrest of eThekwini mayor Zandile Gumede on charges of fraud, corruption and racketeering relating to a R208 million tender within the Durban Solid Waste unit was a good start.

Corruption is the CFO’s fault, added Agrizzi: “You are the ones who control the purse strings.”

Nicolaas van Wyk, CEO of the SA Institute of Business Accountants (Saiba), said corruption would be slowed if there was a change in the Companies Act, or a dedicated CFO Act spelling out the duties and obligations of the CFO.

Ethics training, legal counsel needed

“CFOs should be obliged to attend an ethics course once a year, and must make a declaration any time [they become] aware of an attempted or successful bribe or corrupt transaction. Furthermore, if the CFO resigns, [they] must state the reasons for resigning. This is similar to the obligation placed on an accounting officer in the Close Corporations Act.”

The question before the delegates was: What role did CFOs play in SA’s corruption scandals and what needs to be done to stop it?

“The King Report [on corporate governance] gives us guidance, and the Institute of Directors trains people on the expected role of board members,” said Sasha Monyamane, professor of governance and ethics at the University of SA (Unisa). “Every organisation proclaiming themselves as having good governance should send their people for training.”

Professional bodies need to provide more than just advice to finance executives reaching out for help in corrupt organisations. They need legal counsel and protection, said Van Wyk.

Dr Kelvin Kemm, suspended chairman of the Nuclear Energy Company of SA (Necsa), says there are far too many political appointees in state-owned companies (SOCs).

“Far too often we see ministers running the departments and SOCs. What’s the point of having a board if the minister has the power to override them?”

Standard Bank accused of ‘double dipping’ in home repo case

Written by Ciaran Ryan. Posted in Uncategorized

Outcome could be explosive for banks, opening the door to floods of claims.

Legal consultant believes tens of thousands of homes may have been unlawfully repossessed in SA since 2007. Picture: Shutterstock

Legal consultant believes tens of thousands of homes may have been unlawfully repossessed in SA since 2007. Picture: Shutterstock

This article first appeared in Moneyweb.

In a case due to come before the Eastern Cape High Court this month, Standard Bank is accused of double charging the arrears amount owed by a mortgage client, resulting in a guest lodge being repossessed and sold at auction for a fraction of its market value.

Guest lodge Homewood in Albany in the Eastern Cape was repossessed in January 2017 after falling R833 000 in arrears on an outstanding loan of R3.77 million.

The lodge owner is now asking the court to compel Standard Bank to provide a detailed breakdown of its arrears calculation, which he says was grossly overstated and resulted in him losing the lodge. He says he was forced to approach the court after the bank had failed to respond to several requests for this information. Standard Bank replies that the case has no merit, and has already been decided in its favour by the court.

Read: Are banks routinely overcharging on vehicle loans in arrears?

What is unusual about this case is that Homewood has accused the bank of ‘double dipping’ or charging twice for the same thing. This is believed to be the first time this has been argued in a South African court, though similar cases have been decided in favour of banking clients elsewhere in the world.

In its court papers, Homewood concedes that it fell into arrears on the mortgage loan after a fire broke out, prompting the bank to ‘accelerate’ the loan by calling up the full amount outstanding. Once a loan is accelerated (the full amount owing is claimed by the creditor), the law does not allow further instalments to be charged. Yet Standard Bank continued to add monthly instalments to his home loan account after accelerating his mortgage loan and obtaining judgment against him in January 2017.

Explosive admission

The bank concedes in its court papers that it made an error in calculating the arrears due to a computer glitch.

Legal consultant Leonard Benjamin, who is advising Homewood, says this is an explosive admission by the bank, and urges home owners to carefully interrogate their monthly statements if they have been sued by the banks after falling into arrears.

“I believe many people have had their homes repossessed when they were not in fact in arrears.”

Homewood claims in its court papers that each time the bank adjusts its prime lending rate, it automatically capitalises any arrears – in other words, the arrears are added to the full amount outstanding, to be repaid over the remaining term of the loan.

This has the effect of extinguishing any arrears and increasing the principal sum of the loan.

The ‘double dipping’ comes in whenever there is a change in the bank’s prime lending rate. When the prime lending rate is adjusted, the banks typically capitalise any outstanding amounts owed (which should extinguish the arrears), but in many cases continue to run parallel monthly instalment charges. In other words, banks are charging twice for the same thing.

Illogical jump

Benjamin came to this conclusion after Homewood’s arrears jumped from R833 000 to R1.39 million over a period of 18 months. The escalation made no sense, which is why Homewood is now asking for an exact breakdown of how the bank came to the arrears figure, which Benjamin says is possibly hundreds of thousands of rands less than what is being claimed.

The bank has conceded that it made an error in arriving at an arrears amount of R1.39 million, saying the correct figure was R833 000, though this too is disputed. The bank argues that it should not be compelled to provide the figures requested as the court has already ruled on the matter. It also denies that it’s arrears calculations on the adjusted figure of R833 000 is incorrect.

Yet it proceeded to cancel the mortgage bond based on an arrears amount that was more than R400 000 in error, claiming this is immaterial to its case. Homewood is asking the court to declare invalid the bank’s cancellation of the mortgage bond.

The bank then turns on Homewood and claims the lodge could not have been under any misapprehension that a mistake was made by the bank, and that the actual arrears amount was R400 000 less than originally claimed.

Going by this logic, every time the bank makes an error, it blames the customer for not picking it up.

In any event, Standard Bank argues, error or not, Homewood had stopped paying the monthly instalments and it was therefore within its rights to cancel the mortgage agreement. The bank also says it has supplied a comprehensive account statement. Benjamin says this is meaningless as it does not show how the arrears are calculated.

“I am astonished that double dipping has not been argued before in the SA courts,” says Benjamin.

“What this means is that possibly tens of thousands of homes have been unlawfully repossessed since the National Credit Act came into force in 2007, for two reasons: the banks have been incorrectly calculating arrears through double dipping, and then approaching the courts for judgment and sale in execution orders [giving sheriffs the right to sell repossessed properties at auction] based on this incorrect information. Secondly, once the bank adjusts its prime lending rate, all arrears are extinguished.

“The courts need to start paying much more attention to this, and the tremendous social upheaval caused by booting people out of their homes based on false figures and bogus legal arguments.”

The owner of Homewood also claims the bank has added unauthorised legal charges to his home loan account. Legal charges may not be added to a client’s bank account unless subject to ‘taxing’– in legal terms, this means costs must be authorised by an independent authority.

The bank is asking for the case to be dismissed with punitive costs, saying the allegations are speculative and unsupported by evidence.

Africa’s resource curse is more like a governance curse

Written by Ciaran Ryan. Posted in Uncategorized

SA’s huge offshore gas find could be a blessing or a curse.

This article first appeared in Moneyweb.

Total estimates that the recent gas discovery at the south of Mossel Bay is worth about one billion barrels. Picture: Shutterstock

Total estimates that the recent gas discovery at the south of Mossel Bay is worth about one billion barrels. Picture: Shutterstock

South Africa has just come into a huge gas find south of Mossel Bay, estimated by Total at about one billion barrels. That’s the good news. The bad news is that oil and gas are often accompanied by conflict and ‘resource curse’. That’s when an over-reliance on commodity exports leaves a country prone to wild cyclical economic swings.

Read: Brulpadda: Let’s not squander the ‘money toad’

SA has a sufficiently diversified economy to avoid resource curse, but any benefit to the economy from gas-related tax and royalties could be squandered if we follow the examples of other oil-rich countries such as Nigeria, Equatorial Guinea and Angola. All three have huge oil deposits and massive corruption. Nigeria’s discovery of oil in the Niger Delta in 1956 fuelled ethnic tensions and coups. The agricultural sector was neglected to the point where Nigeria went from food exporter to importer, as all attention went on the easy money to be made from oil exports. It still has to import refined fuel.

Good examples

If we are looking at good examples to follow, Botswana and to a lesser extent Gabon are two countries worthy of mention – Botswana for diamonds and Gabon for oil.

Gabon has been ruled by a single family since 1967. There was an attempted coup in January this year, but the government managed to avoid fiscal deficits until 2015, when the once-lofty oil price that sustained government spending came tumbling down.

Botswana, despite its massive reliance on diamond exports, has likewise avoided the resource curse. It did this by avoiding external debt and promoting economic diversification. Speaking at a recent International Mining and Oil & Gas Law, Development, and Investment conference in Brazil, Peter Leon, a partner at law firm Herbert Smith Freehills, pointed out that the Botswana government accumulated international reserves and ran budget surpluses earmarked for stability spending in leaner periods. “This policy avoided having to drastically cut expenditures during bad years and reduced inflationary pressures.”

Checks and balances

Another key factor in avoiding resource curse is maintaining strong institutional structures, with checks and balances to root out corruption and maladministration.

When Norway discovered oil in the North Sea in the 1960s, it put in place policies to ensure that there would be economic benefits long after the oil was gone. Key among these policies was an insistence on developing the local oil and gas sector, rather than leaving it all to outsiders. Petroleum accounted for 43% of exports in 2018, and great care is taken to ensure that exports exceed imports – which in turn provides currency stability. Compare this to Venezuela, where oil accounts for 95% of exports, a key factor behind its current political instability.

Leon says one way countries attempt to inoculate themselves against resource curse is by creating sovereign wealth funds (SWFs). These are state-owned funds that invest in real assets such as precious metals and real estate, and financial assets such as stocks and bonds.

Saving and diversifying 

Norway has been particularly adept at using its SWF to hedge against oil price volatility and as a means of saving wealth generated from its petroleum sector for use by future generations. Another benefit of SWFs is to diversify away from cash holdings or low-yielding US Treasury bills.

“A well-managed and effective SWF can help protect the economy’s non-commodity sectors from destabilising currency fluctuations while helping to spread the country’s wealth more equitably across generations,” says Leon. “SWFs help to achieve this by aiming explicitly at developing a broader base for economic growth. Developing an efficient and diversified economy reduces the impact of commodity price volatility and helps to prepare the economy for a post-commodity era.”

The danger in any country running budget deficits is the temptation to raid SWFs to plug budgetary gaps.

One way to overcome this is to set firm rules for the withdrawal of funds, and to create governance structures to keep greedy politicians’ hands off the loot.

All this is becoming relevant as some political parties have started introducing SWFs into their party manifestos as a solution to economic growth and job creation. But experience over the last decade shows that when the government runs out of cash, it starts looking in the wrong areas, such as the Reserve Bank’s accumulated assets which are (frustratingly for some) unavailable for state spending.

Read170 billion reasons why the state would want to capture the Sarb

A government will inevitably look to the country’s sovereign wealth fund to bail itself out of a tight fiscal spot. These funds belong to future generations and have to be kept well away from the transients who occupy political positions.

Claim that Standard Bank’s R5 overcharge on mortgages ballooned to R2bn

Written by Ciaran Ryan. Posted in Uncategorized

Usury expert Emerald van Zyl is waging a campaign for repayment of this overcharge.

Emerald van Zyl, the usury expert who is bringing a case of discrimination against FNB in the Cape Equality Court, has now trained his sights on Standard Bank.

Read: Claims of discrimination against black FNB customers heads to court 

He claims Standard has over-stated its financial statements by as much as R2 billion since 2009 through a R50 a month admin charge that was declared illegal by the Supreme Court in 2013.

The amount of money is small, you could easily miss it when checking your monthly statement. Who would quibble over a R50 admin charge?

Van Zyl says it actually started out as a R5 a month admin charge, which was introduced in 1990 under the Usury Act as a compromise to stop banks discriminating against the low-cost, predominantly black housing customers. Rather than charge low-cost (black) customers higher interest rates, banks were allowed to levy this R5 a month charge to compensate them for any financial harm they might suffer by treating customers equitably.

When the National Credit Act (NCA) came into effect in 2007, the banks were allowed to bump this R5 admin fee to a maximum R50 a month, which would henceforth be called a “service fee”, provided a new written agreement was entered into with the customer. Van Zyl says even though Standard Bank lacked written agreements, it went ahead and charged the R50 a month fee – in violation of the law.

In 2012 the National Credit Regulator took Standard Bank to court over this, and eventually won the case in the Supreme Court of Appeal. The court found that Standard Bank was violating the NCA and demanded customers be refunded by January 2013.

In a press release issued in January 2013, Standard Bank announced that all prejudiced clients had been refunded. In many cases, this monthly over-charge amounted to more than R10 000. Multiply that by several hundreds thousand mortgage clients, and the amounts involved potentially run into billions of rands.

But when Emerald van Zyl started taking a closer look, he concluded the bank was stretching the truth in claiming it had refunded clients. Based on a sample of 120 customers, he found only 50% had been refunded. And that the refunded amount was just 45% of what was due.

He says he wrote to the bank’s then CEO but did not get a reply. He then took up the case of a client, Ms G.N. Mathekga, whose mortgage statements reflected a “service fee” of R50 plus VAT before and after 2007, amounting to an over-charge of about R9 000.

When Van Zyl asked the bank to refund this money to the client, the bank replied that the term of her loan agreement had been extended as she was unable to meet her monthly repayments. As such, this amounted to a material change to the original agreement, and in terms of the NCA the higher fees were allowable.

Van Zyl points out that the only way the bank could continue to charge a R50 a month service fee was if a new written agreement was concluded with the client, as demanded by the NCA.

“This is in total contradiction of the Appeal Court judgment, and the directives op the Usury Act that determine that any administration fee must be agreed upon in writing in the instrument of debt,” wrote Van Zyl to the bank.

Based on an extrapolation of the R50 monthly over-charge spread across all the bank’s mortgage customers, Van Zyl estimates the bank may have over-stated its financials by about R2 billion since 2009. When he raised this with the bank’s auditor, KPMG, he was told the matter was being addressed by the bank.

In reply to Van Zyl’s claims of continuing over-charging, Standard Bank spokesperson Ross Lindstrom says the bank took the decision to credit the home loan accounts of a large number of customers six years ago in light of the Supreme Court decision.

“Standard Bank has had extensive engagements with Mr Van Zyl, in his capacity as a financial consultant, acting on behalf of some of our clients. On average, emails from Mr Van Zyl are acknowledged within 48 hours and a substantive response follows soon thereafter (if the information is easily located), or he is informed that Standard Bank South Africa is still collating the relevant information,” says Lindstrom.

“The amount of R2 billion suggested by Mr Van Zyl is without any factual foundation and is disputed by Standard Bank.”

Lindstrom argues that Van Zyl continues to make unfounded allegations against the bank and is trying to benefit financially by pursuing his claims of over-charging.

Says Van Zyl: “Despite what Standard Bank is saying, it is not correct to say that all affected clients have been refunded. I have presented them with numerous instances where clients have not been refunded. Why does it take someone like me to bring this to the bank’s attention? It shouldn’t be up to me to correct every unlawful charge levied by the bank, and the regulators certainly aren’t doing their job.”

Lindstrom says customers who feel they have been wronged can approach independent bodies like the NCR or the Ombudsman for Banking Services, which will cost the customer nothing.

“Despite this, Standard Bank will continue to engage with Mr van Zyl where our clients have mandated him to represent them. However, in line with various banking statutes and The Code of Banking Practice, Standard Bank cannot engage in a public debate about individual clients’ accounts or with third parties who are not mandated to represent our clients,” says Lindstrom.

“Standard Bank is happy to investigate any of our clients concerns with regard to the fees being charged on their home loan agreements at no cost to the client.”

Queries with regard to the fees being charged on home loans can be sent directly to Standard Bank at: complaint.resolutioncentre@standardbank.co.za or clients can call us on 0860 101 101.