African Bank obtains R8 billion support deal from shareholders

African Bank, the entity that arose from one of South Africa’s biggest banking collapses, has entered into an up to R8bn support programme with shareholders as it seeks to manage its finances and enter South Africa’s funding market.

Shareholders including South Africa’s largest banks and the Reserve Bank have undertaken to support bond issuances by African Bank over three years and four months, commencing in December, and in proportion to their current shareholdings.

African Bank was formed in 2016 with a R10bn injection from the Reserve Bank, the Public Investment Corporation (PIC), and a number of other SA banks, which followed African Bank Investments’ collapse under a mountain of bad debt in 2014.

The Reserve Bank took a 50% stake and the PIC 25%, while numerous other banks also provided capital.

African Bank said the financing agreement will help it in reestablishing  itself as a reliable and accepted party in the domestic wholesale funding market.

Regarding any supported issuance of corporate bonds by African Bank, any shortfall will be taken up by the shareholders, other than the Reserve Bank, subscribing for bonds alongside the rest of the market investors in their shareholding proportions.

The Reserve Bank will provide assistance to the Bank through a collateralised loan.

African Bank CFO Gustav Raubenheimer said: “The bank does not immediately require any additional wholesale funding or increased liquidity and we do not anticipate a requirement to enter the domestic wholesale funding market in 2020 for any listed issuance, despite the Covid-19 pandemic.

“However, these support arrangements should provide further comfort and confidence to SA funders for future funding requirements,” Raubenheimer said.