There are 19.69 million active credit consumers, of which 53.1% are considered to be in good standing. The number of consumers with impaired credit records has slowly been deteriorating from only 37.7% (in late 2007) to the current level of 46.9%.

Importantly, a credit amnesty was applied in June 2007 just prior to the inception of the National Credit Regulator’s (NCR) reporting on the level of good standing of consumers. The 2007 credit bureau amnesty applied resulted in the automatic deletion of certain judgements. Research undertaken by the Credit Bureau Association on a sample of 600 000 affected consumers revealed that 64% of these consumers who benefited from the amnesty entered into new credit agreements and 74% of the individuals who obtained credit had bad (3+) or adverse accounts.

This exposes a crucial consideration, did the 2007 amnesty result in credit granting to consumers who were stilled stressed but not reflecting such in their credit profiles putting further strain on their monthly repayments; and did affected consumers benefit from any key learning’s regarding how to manage their credit and their credit profiles?

There are currently consultations underway to assess a second credit information amnesty. The Department of Trade and Industry (dti) and NCR recently provided interim feedback on the key findings of an impact assessment.

Some of these key findings include:

• The need for appropriate affordability assessment guidelines
• Appropriate credit literacy programme
• Any amnesty should take place after affordability assessment guidelines have been implemented and should include a consumer education process highlighting the amnesty does not result in a writing off the debt nor the obligation to pay but merely expunges the display of the judgement or adverse information on the credit bureau

The findings seem to relate to the removal of judgements, dormant accounts and adverse information under R10 000. Specifically the removal of adverse information under R10 000, that would benefit 86% of people earning less than R15 000.

The final report is expected sometime next month; which will give clarity on what the final amnesty will include.

There has been significant interest among the smaller to medium sized (R500-million to R1-billion) corporate business segment in South Africa opting to go to the bond market to raise funding since the start of 2013.

This is according to Eyal Shevel, Head: Corporate Ratings at Global Credit Ratings (GCR), who says there has been a noticeable increase in interest in bond issues among smaller to medium sized corporates over the last 8 weeks. “While the larger corporates have successfully approached the bond market for issues in recent years, there is an emerging trend of smaller companies also choosing to raise capital through the bond market.”

He notes that these companies have made great strides in realigning their businesses since the global recession in 2008, with the result that many are now emerging much stronger. This is also reflected by the number of downgrades among this group having decreased significantly since 2008.

“Companies within the corporate sector have been forced to take some very large write-downs over the last few years and as a result have focused on cleaning out their books, cutting out unnecessary costs and getting back to basics by focusing on their core business. These companies are now more effectively managing their operating costs and their operating income, whilst identifying ways to better structure their balance sheets in order to reduce their interest charge.”

Shevel says that while smaller corporates may often have to sweeten the package to attract investors, as they are not necessarily investment grade companies, they can offer a package of securities as collateral such as bonds on properties or their debtors’ books.

He adds that while some companies may be looking to raise capital in order to fund expansion, others are simply looking to refinance their debt. “During the tougher economic climate, some companies had to take on debt at onerous interest rates; however, having streamlined their operations and improved their balance sheets, many are now in a stronger financial position to be able to refinance their debt.”

“The bond issues that are taking place are also getting placed quite comfortably – and there is a clear demand among investors for higher yielding bonds. While bonds remain a comparatively safer investment to equities, investors looking for yield enhancement can often obtain a higher return from bond issues by smaller corporates, as the interest earned is higher as a result of the increase in perceived risk.

Shevel cautioned that GCR has only noted this trend among the stronger corporates that have managed to clean out their books. “For those companies that have taken the pain in recent years, there are excellent prospects for them to achieve good solid organic growth of between 8% and 12%.”

“Clearly there may be a number of other companies who are not in such a strong position, and are therefore unable to raise further capital. However, this also presents acquisition opportunities at fair prices for those companies that are still able to raise funding,” concludes Shevel.

UK bank NatWest, a member of the Royal Bank of Scotland (RBS) group, suffered its second major IT system collapse in nine months last week, with the result that many of the 7.5 million customers affected threatened to cancel their accounts on social networking sites.

Ray Stride, Managing Director of Global Continuity South Africa - a group company of JSE-listed Metrofile Holdings Limited – says such incidents can cause severe reputational damage for businesses that do not ensure appropriate Public Response protocols are incorporated into their Business Continuity Management plans.

“Hours after the incident occurred, NatWest customers had still not received any feedback about the cause of the IT glitch or whether they would receive compensation. During times of crisis, it is imperative for any organisation with a large clientele base reliant on immediate access to critical services – especially the banking and telecommunications sectors - to ensure effective Public Response protocols are in place to mitigate the risk of reputational damage and the subsequent financial losses due to lost clients.”

Despite the financial losses, the reputational damage NatWest will suffer may be irreparable, says Stride. “Clients and staff could migrate to other banks, shareholders may dump their stock, public confidence in the brand will take a significant knock providing a perfect environment for competitors to take advantage of the situation and the banks could be heading for a rating downgrade which will increase interest rates and hammer profits and competitiveness. Certainly, since this is the second time that this has occurred, probably no public statement, however well crafted, will placate irate clients.

“At the heart of the matter is an inability to adequately manage the risks which give rise to these outages.”

These severe repercussions could easily have been avoided had the banks implemented effective Public Response plans that focussed on providing customers with a clear understanding of the situation and solution to their problem, says Stride.

“The lesson to be learnt from the NatWest disaster is that all industries and organisations that are heavily reliant on real-time service delivery must ensure an appropriate Public Response to disasters is incorporated into a sound Business Continuity Management plan to mitigate reputational, legal and financial damage,” said Stride.

FNB eWallet Solutions and Cash Converters today announced the launch of the ‘Cashies Card’ which will, over time, replace in-store cash payouts to customers.

From this month, Cash Converters’ PayDay Advance customers will have the option to receive their loans on an electronically loaded prepaid VISA card as an alternative to cash. Benefits of this card include the safety of PIN protection and convenience of unlimited free point-of-sale swipes as well as the ability to withdraw money at any ATM. The first cash withdrawal is free at any FNB ATM.

“A cashless platform has numerous benefits to both Cash Converters and our customers. We will be able to reduce our costs and offer our customers greater convenience,” says Richard Mukheibir, MD of Cash Converters.

FNB has provided an alternative payment platform called eWalletPRO to Cash Converters to help simplify the payment process to its customers.

FNB eWalletPRO is an enterprise payment solution that allows businesses to pay multiple beneficiaries through online banking or a host-to-host solution.  The recipient can receive the funds through a cellphone or prepaid card. This is a safer, easier and more convenient disbursement of funds, particularly cash.

“We aim to drive alternative cashless transactions for companies through eWalletPRO. The benefits to a business such as Cash Converters are numerous, as store owners no longer have the expense of transporting and holding cash,” says Yolande van Wyk, CEO of FNB eWallet Solutions.

Cash Converters customers will now have the choice of receiving their PayDay Advance on the ‘Cashies Card’.

Not only can the user withdraw cash from the card they have access to a variety of eWallet transactions such as buying prepaid airtime, data and electricity, send money to other people, transfer to SA bank accounts as well as make certain bill payments.    

There is no monthly fee, balance enquiries for the card and SMS transaction notifications from inContact are all free, as is the first cash withdrawal at an FNB ATM.