Microlenders suffer, but big banks weather platinum strike

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Ayanda Mdluli

While microlenders and loan sharks operating in strike-hit Marikana are going out of business as employees enter the 18th week without pay, none of the country’s major banks has indicated sizable exposure to the worst strike in South Africa’s history.

Moody’s Investors Service bank analyst Nondas Nicolaides said on Friday that the banking sector was likely to have exposure of less than 1 percent of total loans to the platinum sector, leaving it comfortably placed to weather the storm in the short term.

However, Nicolaides warned that if the strike continued on an unprecedented scale, banks would experience a certain degree of pain, which might cause problems in the long run.

The mining sector in its entirety accounted for 4 percent of total loans.

African Bank Investments Limited (Abil), which recently posted losses of more than R4 billion in the year to March, said its exposure to the overall mining sector was about 5 percent of its R60bn loan book.

Abil executive director Nithiananthan Nalliah estimated that the platinum industry accounted for less than 2 percent of the bank’s exposure.

“But even if those workers on strike were not able to pay, they would have been covered by insurance,” he said.

He added that Abil was willing to help the striking workers restructure their debt and get longer terms on their loans if they were not able to afford the repayments.

FNB had limited credit exposure to the affected platinum mining companies and had adequate credit risk provisions for the current economic climate, chief financial officer Gordon Little said.

Nicolaides told Business Report that it seemed the platinum producers had been able to absorb the shock so far, having a small impact on banks’ liquidity profiles and asset quality. The big banks were very liquid and diversified, so the platinum industry exposure was limited.

During the three months of the strike, the lenders had been able to weather problems without using additional credit or liquidity lines, which had contained the impact on banks.

In addition, producers were not paying wages, which constituted a significant part of their costs. The banks might start to feel the pinch only if the strike was prolonged but so far they had been able to absorb the shocks.

“However, the problem is that if it prolongs there will be a chain reaction as suppliers face problems and small businesses operating in the areas of the mines get negatively impacted,” Nicolaides added.

Additional reporting by Londiwe Buthelezi

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