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FINANCIAL RESCUE

The collapse of financial services company Fidentia was catastrophic for investors, but life-changing for employees too. Gideon Jacobs* (not his real name) had been the company’s IT manager for just 18 months when he found himself without a job and facing financial ruin. 

"“I was 45 when I got the job of IT and network manager at Fidentia. It was an exciting place to work. The company seemed to be doing so well: it became the headline sponsor of Boland Rugby and the EP Warriors cricket team and sponsored a cricket academy.

It went very well for a year-and-a-half and then, in February 2007, the curators walked in. We had no warning, no clue. I sat in meetings as group IT manager, but nothing was ever said.

It was frightening for everybody; no one knew what was going on. There were massive denials from J Arthur Brown and the head honchos. Then we were called in by the curator and told they were there to turn the company around. We were told categorically that no jobs would be lost.

On February 14 - Valentine’s Day - we were called in, one group after another, and told: ‘Sorry - here’s your letter, you’ve been retrenched’. The last salary we had received was at the end of January and we weren’t paid for the two weeks of February. They just handed us a letter so we could claim UIF. To this day I’ve never heard another word from the curators or anyone else.

Not only did we leave with nothing, but Fidentia had stopped paying our medical aid contributions, so we had to pay a three-month penalty for cancelling our membership without notice. I had a bond. I had accounts.

My saving grace was that two months before the curators walked in, I had extended my bond by R150 000 to pay for renovations. That kept me going for the five-and-a-half months it took me to find the job I have now. Without it, I would have lost my house. I would have lost everything.

That five-and-a-half months taught me a lot about myself and my family. The small start-up I joined had six employees at the time, so obviously they couldn’t match what I’d been earning at Fidentia and I took a R10 000 drop in salary.

A month after starting this job, having been positive all the way through, I went to my wife and said: ‘You know, you and the kids would be better off without me’. I still don’t fully understand why I fell apart then, when I had finally found a job.

My wife looked at me and said: ‘You’ve got two choices: either you see somebody about this and get help or I divorce you and take the kids. We can’t live with somebody who is in that frame of mind.’ So I went to see a clinical psychologist and it was the best thing I’ve done in my life. I saw him for 18 months and, to this day, I thank my wife for giving me the ultimatum; if she hadn’t, I don’t know what I would have done.

I’d reached the point where I was thinking the finances were just not working - I was in the red every month. My wife was a teacher, but her salary was already factored in. So to make ends meet, you max out your credit card, you have revolving credit, you have an overdraft and you try to work the money in such a way that you don’t hit the rocks. You feel like an island: isolated, you have nobody to reach out to and nobody is sending a rescue team to help you.

One thing that really got to me was that I had written letters to my bank explaining the situation and asking if they could help by dropping my bond rate. I still have the bank’s letter saying ‘Sorry, we can’t accommodate you’. I found out a year or so later that there was - and still is - a clause in my bond insurance policy that says my bond will be paid for up to 12 months in certain circumstances, including retrenchment. Nobody from my bank ever told me I had that facility. Eventually, I sat down with my wife and said we can’t live like this - we need to resolve all this debt. So we went into a branch of the bank together and laid it all out. That was the first time we sat down with somebody who took an interest in us.

They took our credit cards, revolving credit and overdraft and put them all together and said: ‘Right, this is the total. You can pay it back over five years and we will cancel all the credit facilities.’

So that’s what we did - we paid a lump sum every month. We learnt that you have X amount in the bank account; if that amount is zero, you can’t buy anything. I was fortunate in the attitude of the children. If we said ‘we can’t afford that this month’, there was never an argument.

My daughter, who was in Grade 8, went to the extreme for a while: she decided she could help us by eating less, which contributed to anorexia. She suffered through it for a year and it was terrible to see this sporty, confident child wasting away to somebody who weighed just under 40kg. But she’s fine now.

My son, who was in Grade 4 then, had to live through both the money angst and the emotional stress of his sister’s illness. He dealt with it by getting ‘2007’ tattooed on his chest. He says it’s to remind him that if we as a family could get through that year, we could get through anything.

This kind of experience strips you of all your illusions. You have to look inward and say ‘You know what? We lived the life of luxury and now it’s time to face reality’.

Five-and-a-half months of unemployment might not sound all that serious, but the implications can be huge. It took me seven years just to get back to the point of having money left over at the end of the month: two years more than the five years we spent repaying the debt.”

ADVICE: Don’t wait for a crisis

Gideon’s shocking experience and his sense of isolation as his debts multiplied highlights the unpredictability of life and the value of having a financial plan in place when circumstances change, says Eric Jordaan, a certified financial planner with Crue Invest in Cape Town.

“Retrenchment can derail your financial future,” he says. “Luckily Gideon had access to funds in his bond, but this could very easily not have been the case.

“Having a financial plan ensures that the financial risks you take on are appropriate, whether you are investing or making use of credit. The planning process asks questions about your spending patterns, so you can avoid getting stuck with costly debt repayments. It also highlights areas where your financial position is vulnerable and provides for safeguards, such as an emergency fund.  

“Then, by analysing the impact of a setback, a financial planner can help you revisit your financial goals, reset your priorities and make the changes in your money management that are needed to prevent crises in future.”

PERSONAL FINANCE