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. 

Startling rise in chartered accountancy failure rates

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared in Moneyweb.

The embattled South African Institute of Chartered Accountants (Saica) – already under unprecedented professional criticism for the role CAs played in corporate scandals at Steinhoff, VBS Bank, KPMG and elsewhere – is now under attack for flunking nearly a third of candidates who sat the board exams late last year.

Some 32% of candidates failed the exams last year, a big increase on the 20% and 11% who failed in each of the previous two years.

The clear aim is to clean up the profession’s image after CAs were found at the centre of a string of corporate scandals. Several aspiring CAs who flunked the exams seem mystified by the outcome, particularly as they had aced all previous exams – both at Saica board and university levels.

One candidate, who asked not to be named, says the results are suspect for a number of reasons. “My real gripe is the lack of transparency in marking. No percentages are given, just letters such as C (Competent) and BC (Below competent). So we never quite know what was expected of us.”

Candidates in the dark

Candidates also complain that they have no idea what weighting is attached to these different markings, nor how they should prepare for the repeat exams.

What has alarmed some is the 48% pass rate for African candidates in 2018, as opposed to 86% for whites, 78% for Indians and 73% for coloureds. This compares with a pass rate in 2017 of 69% for Africans, 89% for whites, 84% for Indians and 80% for coloureds.

A letter from several dozen affected candidates from each of the Big Four accounting firms – EY, PwC, Deloitte and KPMG – challenges Saica on steps taken to address the “unique and complex” issue of the high African failure rate, and argues against generalised solutions to remedy the specific socio-economic factors behind this failure rate.

The candidates also question Saica’s motive for reducing the pass rate, given the deluge of recent corporate scandals, often enabled by CAs. The clear aim is to raise the bar to professional entry, but candidates who failed see it differently: a far higher percentage of candidates who took their study course through University of Johannesburg (UJ) failed than did those who studied at University of Cape Town, the two universities where most CA candidates prepare for the exam. “We were told at UJ to answer questions with less technical language, and communicate as if we were speaking to someone on the street – which we did. Then we failed,” says one. “Those of us who failed have to sit the exam again at the end of the year, but we don’t know what is expected of us.”

This fear appears grounded in fact: 45% of repeat candidates who sat the exam in 2018 failed, while 71% of first-time candidates passed.

Marking strategy ‘allows for manipulation’

The candidates who wrote to Saica claim the accounting body has been less than responsive and forthcoming to opinions and inputs from various stakeholders, and has instead blamed the candidates for the high failure rate. They claim Saica has not adopted a transparent marking strategy, and that this allows for manipulation by individual exam markers.

In reply to questions from Moneyweb, Saica’s head of communications and marketing, Willi Coates, says the body’s training and examination processes are “rigorous, robust and fair and are in line with international best practice”, as outlined by the education and training standards of the International Federation of Accountants (IFAC).

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“These processes are also reviewed by our peer institutes for reciprocity purposes to ensure these standards are being met and maintained. In addition, Saica is recognised by the Independent Regulatory Board for Auditors (Irba), which undertakes regular and detailed reviews of the Saica qualification process.

Many checks and balances, says Saica

“In particular, there is significant emphasis on processes governing the Saica examinations, with many checks and balances in place. This includes evaluating the standard of the paper year on year. There is, therefore, no substance in your stated ‘reasonable conclusion’ that Saica might have taken a decision to raise the academic bar in light of the CA designation being somewhat tarnished by recent corporate scandals.”

The Saica examination is written electronically and marked using an electronic tool, which provides real-time and granular information throughout the marking processes, in line with worldwide CA Institute best practices. This tool has many benefits for the marking process including identification of inconsistencies in marking during the process.

Adds Coates: “Importantly, all candidates’ scripts are anonymous, thereby removing any assumed prejudice, as markers do not know which candidate’s script they are marking, from which training office they emanate, or which professional programme they have completed.

“All markers are appointed by Saica and are required to have marking experience. The process starts with extensive training for all markers and all markers are required to mark a benchmark examination script before they are eligible to start marking.

Saica provides the following responses to questions from Moneyweb:

Question 1: Can you explain the reason for the lower pass rate this year?

There is no single reason for the lower pass rate in the November 2018 APC [Assessment of Professional Competence]. The explanations are complex, interrelated and currently being carefully analysed. Preliminary findings are set out below. Declines in pass rates should be assessed against the background of the following subsets of the exam-writing population where there was an:

1. Increased number of repeat candidates (previously unsuccessful) writing the November 2018 APC. Consider that repeat candidates generally receive reduced support from their employers in terms of (a) being given less time off for study leave as well as (b) no longer paying for candidates’ examination fees/professional programmes;

2. Increased proportion of candidates writing the APC who completed their Saica-accredited postgraduate degree through a distance learning institution;

3. Increased number of repeat candidates who wrote the APC November examination (a practical examination assessing professional competence). They did so three months after writing and passing the theoretical June Initial Test of Competence (ITC) examination. As such, these candidates may not have been adequately prepared for dealing with the APC, which by its very nature is different to the ITC, as it assesses professional competence; and

4. Appreciable number of trainees who may not yet have received sufficient practical experience (depth and breadth) to enable them to fully prepare themselves for this APC.

Further, please note that in order to obtain an in-depth understanding of all the underlying factors that could have contributed to the declining pass rate, Saica is undertaking a number of initiatives to explore and better understand the challenges faced by the failed 2018 APC candidates – initiatives that include a survey of failed candidates as well as meetings with Saica accredited training offices and professional programme providers. The outcomes of these engagements should help Saica provide candidates a better opportunity to achieve success when they next attempt the APC. 

Question 2: How is Saica endeavouring to achieve uniformity among markers where no percentage scores accompany the pass grades (HC, BC etc)?

Please refer to the introductory part of this response, which sets out Saica’s rigorous examination and marking process.

Question 3: Are there any avenues for candidates to appeal where they have failed?

Due to the rigorous marking process already followed, Saica’s examination regulations do not enable candidates to appeal the outcome of their APC result. However, candidates can, for a fee of R230 (including Vat), request a copy of their script and mark plan, which reveals their level of competence by task. A more detailed report, providing detailed reasons for that candidate’s failure, can be compiled at an additional fee of R2 875 (including Vat). This fee covers the cost of having one of the senior markers drafting a comprehensive report on the individual candidate’s script by task. 

Question 4: In light of (Comair CEO) Erik Venter’s public resignation from Saica, can you give some indication of how many others have resigned or failed to renew their membership over the last 12 months?

Our membership resignations over the past 12 months are in line with the number of resignations in previous years and are, therefore, insignificant. Indeed, our 2019 resignation statistics indicate that only 109 resignations during this period can be directly attributed to members’ unhappiness or discomfort as to the state of the chartered accountancy profession and/or the value of their Saica membership. The other resignations, small in number, stem from reasons such as death, ill health and disciplinary matters. Saica’s membership continues to grow by, on average, 4% per annum. We can also confirm that, to date, Mr Erik Venter has not resigned as a Saica member. Taking a line through the several factors above discussed, we can categorically state that no individual or group can influence the percentage pass rate. Your objective assessment of our analysis will surely persuade you to the same conclusion.

Willi Coates Saica Senior Executive: Brand, Communications & Marketing Division

Lawyers fight for their lunch in abusive lending case

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared in Moneyweb.

An interesting battle between lenders and the University of Stellenbosch’s Law Clinic, joined by Summit Financial Partners and a number of clients, is about to get underway in the Western Cape High Court.

The case will decide what charges lenders are allowed to load onto the accounts of defaulting borrowers. The National Credit Act (NCA) says lenders cannot recover more than double the outstanding debt at the time of default – an old Roman legal principle known as in duplum (‘double’).

For example, assume you borrow R1 000 and are expected to pay back R1 300 after interest, administration and other charges are added. You then default after repaying R600, leaving an outstanding debt of R700. The law says the lender may only recover double this amount, or R1 400, regardless of the amount of interest, administration and other fees accumulated from the time of default.

The banks, represented by the Banking Association of SA (Basa), have come out swinging, arguing that they are within their rights to charge administration, service and legal fees, even when these costs far exceed the in duplum limit.

Not so, says the Law Clinic’s Stephan van der Merwe. ”We argue that the intention of the NCA is to provide protection against unscrupulous collection practices for borrowers, especially the poor. The NCA, however imprecise in wording, clearly intended to include legal and other fees as part of collection costs in the in duplumlimit.”

Read: Landmark court case seeks to stop overcharging by creditors 

What’s really happening here is that lawyers are fighting for their lunch.

SA’s legal system feeds off the banks, to the point where anyone seeking legal representation against the banks is politely informed of the potential conflict of interest in representing anyone challenging the banks in court. To do so would kill the law firms’ meal ticket.

“Most of the cases you see coming before the courts each day involve the banks,” says King Sibiya, head of the Lungelo Lethu Human Rights Foundation (LLHRF), which fights unlawful evictions by banks around the country. “They keep the court system and the law firms financially afloat. They have captured the justice system.”

Forget cigarette smuggling. The big money is in stealing coal

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared in Groumdup.

We’ve heard about gold theft, but coal theft is the biggest game in town. It’s costing Eskom and coal companies billions of rands a year. It’s highly organised and a major concern to police.

You might wonder who would bother stealing coal, rather than gold or platinum. But precious metals are highly controlled and not easy to steal. Coal is a cinch. Steal enough of it and you can make a fortune – and many people do.

Coal theft is highly organised and backed by big money. The gangs behind the theft have sufficient cash to invest in fleets of trucks.

Thousands of trucks deliver coal each day from the Mpumalanga coal mines to Eskom, or to the railway sidings for eventual delivery to the Richards Bay Coal Terminal for export. The better quality coal goes to the export markets, the lower quality coal to Eskom power stations.

The most common way of stealing coal requires the connivance of security and machine operators within the mines. A 28-ton or 34-ton truck turns up at the coal mine, usually at night when the security presence is more low-key, and is loaded with coal. Then, with the help of company insiders, the truck by-passes the weigh bridge, which is a crucial control element in all mines where the weight and identity of the truck is recorded. The truck drives out and delivers its cargo to an undisclosed buyer, who often re-sells the coal to Eskom. This can happen several times a day at the dozens of coal mines across Mpumalanga and elsewhere, according to Mike Elliott, business rescue practitioner for the Gloria Coal Mine.

Zimbabwe inflation hits 50% as Zanu-PF big-wigs milk crisis

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared in Moneyweb.

South Africans tuning into the Zondo Commission of Inquiry into State Capture may be horrified at the depth and extent of corruption alleged to have infested our government – but Zimbabwe is at a whole different level.

To take just one example: those with access to foreign currency allowances approved by the Reserve Bank of Zimbabwe, mostly those with top level Zanu-PF connections, were able purchase fuel at US$0.45 a litre in Zimbabwe and sell it in South Africa at US$1.20/l and in Zambia at US$1.10/l.

It doesn’t take long to become a dollar millionaire with that kind of arbitrage opportunity. It is the same story with maize meal, bread, flour, cooking oil and other basics. Connected Zimbabweans are making millions while ordinary people – or at least those with fixed salaried jobs – are paying 50-100% more for basic goods. They can barely feed their families.

This explains the recent rioting and violence in the country, says Bulawayo-based economist Eddie Cross. The country is a cesspool of infighting and intrigue, with President Emmerson Mnangagwa fighting rearguard action against his enemies who see an opportunity to unseat him.

“One of the problems we have here is open conflict between the ministry of finance and the Reserve Bank of Zimbabwe,” says Cross. “The Reserve Bank recently announced it is taking 50% of export proceeds from companies like Zimplats and offering them artificial exchange rates which are less than a third of their real value.

Export industries’ hands tied

“As a result, all export industries are effectively going bust. The biggest ferrochrome producer in the country, owned by Chinese investors, says it will have to suspend operations because a large part of its revenues are effectively confiscated by the Reserve Bank.”

Gold sales are down nearly 50% as a result of the Reserve Bank’s confiscation, so gold is now being marketed informally on the black market.

These dollars confiscated by the Reserve Bank are then allocated to the politically connected, who use them to arbitrage fuel, food and other commodities. Most Zimbabweans are forced to use so-called ‘real-time gross settlement’ (RTGS) dollars, which are worth less than a third of the value of US dollars.

Zimbabwe’s finance minister Mthuli Ncube is taking heat for the current economic crisis as inflation soars to 50%, raising fears of a return to the country’s hyper-inflationary past when consumer goods prices were doubling every few hours. That was a decade ago. The crisis was brought under control by introducing US dollars and South African rands as the accepted payment method. Almost instantly, inflation reduced to less than 3% a year.

Ncube’s economic reforms seemed sound enough. Public sector wages swallowed more than 90% of revenues, and the fiscal deficit was running at 40% of the budget. Something had to be done to fix this. In August last year he announced a roadmap of reforms, including lowering government expenditure and additional sources of revenues.

One of the new sources of revenue was a 2% tax of all money transfers. This is expected to generate US$2 billion on the roughly US$120 billion from electronic money transfers each year. Announcing these reforms in August 2018, Ncube also allocated hard currency accounts to all Zimbabweans, allowing them to receive payments in dollars, rands or other hard currencies.

It’s do or die time for one of SA’s oldest gold mines

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared in Moneyweb.

Every mining accident is a tragedy, but few compare to the horror of the collapse of a supporting pillar at Lily gold mine in Mpumalanga in 2016 which claimed the lives of three workers operating the lamp room in a shipping container on the surface.

The collapse of the pillar buried the container under 60 meters of rock and debris. The bodies of Solomon Nyirenda, Yvonne Mnisi and Pretty Nkambule remain buried there.

This tragedy brought an abrupt end to mining operations at Lily and its sister mine, Barbrook, one of the oldest gold mines in the country. The mines are owned by Vantage Goldfields, which has been in business rescue for three years. The nearby town of Louisville was devastated by the loss of nearly 1 000 jobs when the mines were shuttered.

Earlier this month a glimmer of hope returned to Louisville when Vantage Goldfields cleared a major hurdle in its path to recommence mining operations after Siyakhula Sonke Empowerment Corporation (SSC) and its subsidiary Flaming Silver were granted approval for the transfer of control of mining rights by the department of mineral resources (DMR).

Last week Flaming Silver announced that its offer to purchase Vantage Gold had become unconditional.

“This is a historical and transformational event in the history of the 52 year old Vantage Goldfields Group, whereby control of the company will for the first time change to black ownership,” said SSC in a statement.

But the deal is far from in the bag, according to business rescue practitioner Rob Devereux.

Straight-out street fight

There’s no doubt the Vantage business rescue has been a straight-out street fight. Nor is there doubt that the relationship between SSC head Fred Arendse and Devereux has been anything but smooth. This is not uncommon in business rescue, where creditors continually weigh the pros and cons of liquidating rather than saving the company.

Read: One of SA’s oldest gold mines fights for its life

The chief bone of contention in the Vantage case is how SSC will come up with the R50 million equity capital needed to trigger R190 million in loan funding from the Industrial Development Corporation (IDC) which would allow the rescue to proceed.

Arendse says Devereux failed to timeously disclose additional mineral assets capable of generating revenue of about R550 million over three years, and accused him of “capturing” Vantage, effectively delaying its return to operations for three years. “Creditors’ businesses would have been saved and a lot of people’s livelihoods would have been saved by them continuing to be employed on the mines,” said Arendse, adding that Vantage had been subjected to “attacks, sabotage and interferences.”

Devereux was recently joined by fellow business rescue practitioner, Daniel Terblanche, who appears more to Arendse’s liking.

Are you suffering from corruption fatigue yet?

Written by Ciaran Ryan. Posted in Uncategorized

This article first appeared in Accounting Weekly.

Suffering from corruption fatigue yet? You better get used to it, because it looks like the Zondo Commission of inquiry into state capture is just getting started.

This week the commission heard from Angelo Agrizzi (pictured), a former executive with Bosasa and, boy, did he name names.

Bosasa (now called African Global Group) paid R50,000 a month to Communications Minister Nomvula Mokonyane, as well as truck loads of whiskey and liquor. The good people at Bosasa also paid money for funerals for Mokonyane’s family members. Mokonyane, now environment minister, has called the bribery claims “preposterous”.

Agrizzi said no financial benefit was received by the company as a result of these bribes. When he raised this point with his boss Gavin Watson, he was told: “You are in Africa, do as in Africa.” The Watsons, for those too young to know, were treated as heroes in the apartheid years for refusing to play rugby in racially segregated teams. They clearly capitalised on their fame when the ANC got into power.

Who else is alleged to have received money?

R500,000 a month went to officials at the Department of Justice and Correctional Services. This increased to R750,000 a month when former SA Revenue Services (Sars) head Tom Moyane was head of correctional services. (Bosasa supplies food and other services to prisons).

Vincent Smith, ANC MP and co-chair of the constitutional review committee looking at the issue of land expropriation, was paid R100,000 a month.

The former CFO of the Department of Correctional Services, Patrick Gillingham, as also on the payroll.

Agrizzi testified that former President Jacob Zuma was paid R300,000; former SAA chair Dudu Myeni received a designer bag stuffed with money.

It was also claimed that former National Prosecuting Authority (NPA) bosses Nomgcobo Jiba and Lawrence Mrwebi were also apparently bribed.

Let’s bear in mind these are untested accusations at this point so the presumption of innocence must be respected. But what a list of names Agrizzi provided. This is starting to show how potentially rotten HMS South Africa has become.

Transnet’s R100bn dagger pointed at the heart of SA

Written by Ciaran Ryan. Posted in Uncategorized

 

 

 

 

 

 

 

 

 

 

 

This article first appeared in Moneyweb.

Transnet pensioners have fought a decade-long battle to get their former employer to cough up an estimated R100 billion in benefits as a result of a 1989 promise made in the dying years of apartheid as Transnet assumed the legal responsibilities of SA National Transport Services.

This staggering sum of money is sufficient to sink the economy should Transnet lose the case, says Advocate Anton Alberts, chairperson of the Freedom Front Plus, which has campaigned on behalf of pensioners. “Transnet is holding the country to ransom. If they lose this case, SA is finished. We will straight away be downgraded to junk.”

Not that Transnet would have to pay out R100 billion in one go. But it would have to fork out several billion rands a year to top up the pension funds, putting additional strain on its already tattered balance sheet.

While the case has careened through the courts, the number of pensioners has declined from 80 000 to 50 000. According to some estimates, they are dying off at the rate of 300 to 400 a month. The question some pensioners are asking is whether there will be any pensioners alive to witness the successful conclusion of the case.

The case originates with a promise made by management in 1989 to top up the pension funds by 70% of the rate of inflation plus 2% each year, as was the case in the years prior. This promise was upheld until 2003 when all but the 2% annual payments were stopped. With inflation running at about 6%, this meant pensioners’ benefits were sliding back at the rate of about 4% a year. The pensioners’ lawyers, based on 2013 figures, claimed 80% of pensioners were receiving less than R4 000 a month.

“Some pensioners have nothing left at the end of the month after paying their medical bills. Now it seems that Transnet is reneging on its responsibility,” says one of the pensioners, Nicky Oelofse.

Transnet has fought the case every inch of the way, first by contesting the right of pensioners to be recognised as a class of claimants with substantially similar arguments. The case has been mired in technical argument and exceptions raised by Transnet, all of which were struck down in the Constitutional Court in April. The ConCourt case dealt mainly with exceptions raised by Transnet, rather than the merits of the pensioners’ claims.

Time running out

Pensioners saw this as a major victory and it looked for a time as if they were close to settling the case a few months ago, as Transnet itself reported to Parliament. But this turned out to be false. This means the case must go back to the High Court for argument. This is likely to happen next year, by which time a few more thousand Transnet pensioners will likely have died.