Johannesburg - While many black economic empowerment (BEE)
deals are deep under water, Capitec Bank Holdings [JSE:CPI] black investors are smiling all the
way to the bank, thanks to a profitable investment they have made in the retail
Five years ago, a consortium led by Regiments Capital bought
a 12.2 % stake in the fast-growing lender for R300m, which was financed by the
state-owned industrial funder, the Industrial Development Corporation (IDC).
Litha Nyhonyha, the executive chairperson of Regiments,
revealed this week that the consortium, which includes Capitec staff, has since
paid off the loan to the IDC after selling about half of its shareholding in
Capitec to the Public Investment Corporation (PIC).
"The shares were deep in the money ... we remain a
meaningful investor in Capitec even though we have sold down our stake," said
Nhyonhya, whose consortium still holds roughly 5% of Capitec.
In just 10 years, Capitec has moved from being a microlender
to South Africa's fifth largest retail lender with 3.3 million customers and
500 branches across the country.
Capitec's share price was trading at R30 a share when the
consortium bought 10 million shares from the lender in 2007. Today, the share
is trading at around R212.46.
The consortium paid R300m for the stake, which was
equivalent to about 12.2% of the Stellenbosch-based lender.
Subsequent to the deal, Capitec concluded two transactions
aimed at raising capital for the fast-growing lender, which led to the BEE
consortium’s shareholding being diluted or reduced to 10%.
However, the rapid growth of the share price has ensured
that the value of the consortium's investment is not reduced.
Although, the consortium is now left with 5% of Capitec
after selling to the state-owned asset manager, the PIC, its current stake is
worth R1.1bn, up from R300m when it originally invested in Capitec.
Nhyonhya said the 5% stake it sold to the PIC was being
warehoused by the asset manager and would be offloaded to a new BEE consortium
At this stage, it is not clear whether the PIC is going to
sell the shares (also worth R1.1bn) at a discount to future Capitec black
Nhyonhya said the IDC made a decent return on the Capitec
funding of his consortium.
"The IDC is happy with the return it has made on the
(Capitec) investment," he said.
For the first time, the consortium received a full dividend
payout in March after the bank declared its dividends, which amounted to about
Before the loan was settled, the dividends were used to
repay it and never made it to the coffers of black investors.
In March, Capitec reported a 68% jump in annual headline
earnings to R1.1bn.
This growth was achieved on the back of a 35% increase in
the value of loan book from R14.3bn to R19.4bn in the previous financial year.
The rapid growth in South Africa's unsecured lending has led
to concerns that the market could end up creating a credit bubble, which could
in turn create a credit crisis for the country.
But these concerns have been dismissed by the Reserve Bank.
Nyhonyha also believes that there is no credit bubble
developing in South Africa because of the growth in the unsecured lending
market, where African Bank Investments [JSE:ABL] and Capitec are the dominant players.
"We have met with the management and its view is that there
is no credit bubble for Capitec.
"The management is not worried about its loan book because
it is lending responsibly.
"We still believe in the future prospects of Capitec because
it occupies a unique space in the market," Nyhonyha said.