31 Jan

South Africa Boutique Investor Joins Viceroy in Questioning Capitec

Benguela Global Fund Managers (Pty) Ltd. wrote to Capitec Bank Holdings Ltd. earlier this month questioning its loan practices, even before a short seller alleged the South African lender was concealing write-offs.

Benguela, which manages 3.6 billion rand ($301 million), raised concerns about Capitec’s “aggressive practice of rescheduling arrear loans and advances,” according to a letter dated Jan. 19.

In a separate letter to its investors, Benguela said it had “serious reservations” about Viceroy Research’s approach and its assertion that Capitec should be put under administration was “shocking and irresponsible,” after the short seller released a report about the allegations.

Capitec, which makes unsecured loans mainly to low- and middle-income households, posted its biggest-ever intraday share drop on Tuesday after Viceroy alleged it was hiding write-offs by refinancing defaulted loans with new debt.

It then recovered most of those losses after South Africa’s central bank said it has no evidence to suggest the lender’s stability is in question.

“Benguela totally condemns the Viceroy approach to raising governance issues and it appears to be motivated by pure greed than actual interest in the company,” Chief Investment Officer Zwelakhe Mnguni said in his letter on Tuesday.

Full Disclosure

Speaking at a press conference in Cape Town late Tuesday, Capitec Chief Executive Officer Gerrie Fourie declined to answer questions about whether it had received a letter from Benguela and said he would respond next month. Fourie also denied the allegations made by Viceroy and said the report was full of inaccuracies.

A spokesman for Capitec said on Wednesday that the lender is busy with its response to Benguela. Viceroy didn’t immediately respond to an emailed request for comment.

Capitec discloses “all our figures of rescheduling in a transparent way,” Chief Financial Officer Andre du Plessis said in an email on Tuesday. The company has “absolutely” no plans to take any additional writedowns because it already does a detailed analysis of its book at a weekly credit committee, he said.

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