THE RECENT demise of African Bank can solely be blamed on the former chief executive of the bank, Leon Kirkinis. He took decisions that ensured that his pockets were filled with millions of rands in performance bonuses while ignoring the plight of his customers by charging exorbitant interest rates over long repayment terms.
The bank offers loans to the lower end of the market, the so-called unbanked market. What is the rationale for charging the “poor” an interest rate of 32 percent if you consider the fact that such market is struggling already? The problem is compounded by high credit life premiums on these loans.
I believe that this market should be segmented in order to charge interest rates that vary with the risk at hand rather than charging a blanket rate as is the case at the moment. These loan repayment terms become a life burden on the shoulders of low-income earners.
I don’t believe that the government is doing enough in regulating this market in terms of the interest rates. The rates should at least be capped at around 20 percent, especially if one considers the repo rate is at 5.75 percent and the prime lending rate at 9.25 percent. You can imagine the whopping profits that these guys are making; they are making a killing indeed, hence the Bentleys that they drive. The same profits find their ways into the pockets of the executives while the poor suffer in silence.
I am in favour of the free market system where demand and supply determine the price but also believe that we do need government intervention in ensuring that the lower end of the market is not taken for a ride by these bullies.
Siyabonga Brian Mabaso
Africa brings a lot to the world stage
IT WAS a pleasure to read Tony Elumelu’s piece on US-Africa relations (“US must see continent as partner, not beggar”, Business Report, August 22). Like him, I’m optimistic about what Africa can bring to the table. But I’d say that the continent has a real chance to be not just a partner to the US, but to the world.
In PwC’s August edition of Global Economy Watch the report stated that “chief executives are increasingly recognising the untapped potential of the sub-Saharan African countries”. The report forecasts that sub-Saharan Africa will by 2040 have the largest labour force in the world.
All this bodes well for the continent as arguably the world’s last economic frontier. While constraints exist, and the report mentions just a few of them, Africa’s future lies in overcoming these constraints. If the continent can do that, we’ll no doubt be on the path to unlocking the continent’s true “growth potential”.
But Africa is already well on its way and like Elumelu suggests, holding out the hand is better in the long term than the bowl.
Byron Messaris Cape Town
Parliament must pay for costly Noakes diet
IN ALL the debates about Tim Noakes’s new diet little is said about comparative costs between high fat and high carb diets. Noakes’ high-fat diet is more expensive.
It is all very well for Parliament to decide to go for the high-fat diet. Increased costs will be carried by their easy source of money – the taxpayers.
What about poor fat people whose condition may be aggravated by being poor? For the working class theirs is a need to eat carbohydrates because it is cheaper. Will the fat poor and workers, in the interests of good health, become entitled to a state subsidy to meet the cost of this new diet?
If not then the well-off politicians and state employees in Parliament should be required to pay the full amount for this more costly diet.
The new Noakes diet has the potential of growing the agrarian economy as the demand for livestock and feed would be boosted to benefit the economy.
Plenty of products go into CPI calculation
YOUR headline to a letter last week, “CPI and real inflation are different animals” (Business Report, August 18), reminds me of the Indian fable of the six blind men who attempt to discern the nature of an elephant by each feeling a different part of the animal.
One concluded that an elephant was like a wall, as he felt its side, another thought it like a spear, as he felt its tusk, and so on. The poem concludes:
“And so these men of Indostan
Disputed loud and long,
Each in his own opinion
Exceeding stiff and strong,
Though each was partly in the right,
And all were in the wrong!”
The consumer price index (CPI) is based on 393 product groups for which about 65 000 prices are collected each month.
It is compiled according to international standards by Statistics SA, not the Reserve Bank, as supposed by Mr Van der Merwe. The CPI is designed to represent the collective inflation experience of all South African households. Most people’s perspective on inflation is influenced by price increases in items they buy regularly, such as groceries, and they ignore infrequently purchased items such as durables, which may have a different price trend.
House prices as such are not included in the CPI, but rather a measure of the cost of accommodation based on rentals. Statistics SA has a personal inflation calculator on its website which will provide an estimate of an individual’s unique inflation profile.
The July CPI, published on August 20, is available on www.statssa.gov.za. I encourage your readers to take note of the varying inflation rates of all product groups.
Diligent savers will get a shock in old age
I HAVE a question for David Neves (“‘Save, save’ mantra ignores the way the poor are milked”, Business Report, August 19). There is another shock for Petrus at age 65. If he buys a pension with the R242 000 payout from his “investment”, he might receive, say, R1 100 a month.
When he applies for an old-age pension from the state, which should be about, say, R1 150 a month, I have been told that his private income of R1 100 a month will be deducted from the R1 150, and he will be paid a net R50 a month.
Meanwhile, his friend Johannes, who made no effort to save during his working life, will be paid the full State pension of R1 150 a month – and Petrus will be no better off. Where is the justice in this?
I am currently trying to find a solution for another “Petrus”, who is in the same position. Is there any way that his savings can be converted into a guaranteed monthly pension from which he, and not the state, will benefit?