Johannesburg - Dave van Niekerk, the man who has been blamed for the woes at
Blue Financial Services [JSE:BFS], will still play a pivotal role in the future of the microlender despite agreeing to step down as its chief executive.
This week, the pan-African microlender told the markets that it had made a R1.03bn annual loss after massive loan write-offs in its South African operations, including Credit U, which it acquired last year.
The axe was destined to fall on Van Niekerk after private equity firm Mayibuye agreed to inject a R463m rescue package in return for a 65% controlling stake in the ailing low-end lender.
Mayibuye, headed by Johan Meiring, has made it clear that it will implement a turnaround strategy that will see Van Niekerk relinquishing his chief executive post. The Blue founder will remain on the board as a non-executive director.
Meiring said the transaction was not cast in stone as it still had to be sanctioned by Blue shareholders and the country's competition authorities.
"The best thing to do now is to look at the cost structure of the company. We will have to implement a cost-cutting exercise. Secondly, we need to start new lending, and review Blue's credit policies because its default rate is just too high," said Meiring.
He confirmed Van Niekerk would step down. However, the outgoing chief executive's right-hand man and financial director, Shaun Strydom, would keep his job.
There are rumours that Meiring may take over the reins from Van Niekerk.
"We want to retain Van Niekerk's African experience so that we don't have to relearn the lessons he has learnt," Meiring explained.
Van Niekerk said the wheels came off for Blue when the global economic recession dried up funds that it badly needed to roll out new loans over its vast African footprint. Making things worse, the acquisition of Credit U proved to be costly because many people who took out loans with the microlender started to default on their repayments soon after the paperwork was signed.
The company's financial results for the year to end-February showed that bad debts increased to 25% this year from 10% of the overall loan book last year.
The South African loan book was the worst hit, with bad debts jumping to 34% from 16% last year.
If South African operations are excluded, bad debts stood at 20% of the book this year compared with 5% last year. In the period under review, the overall loan book fell from R1.49bn to R1.12bn. Last year, the lender made an after-tax profit of R111m.
"We experienced a notable decline in the quantum, quality and performance of the loan portfolio," said Van Niekerk, who owns 20% of Blue.
Pakie Mphahlele, managing director of Mafori Finance, Blue's Pretoria-based competitor, said: "Continuous exponential growth of a lender always hides the rot that resides in the management of the loan book. It is only when such growth stops that the rot gets exposed.
"Many of the microlenders, including African Bank, Capitec Bank and my company, are growing and profitable, yet we are operating in the same conditions as Blue.
"When Blue bought Credit U, it was a profitable business, so what happened?" asked Mphahlele.
- City Press