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Cape Town – Already in July this year African Bank Investments [JSE:ABL] indicated that it wanted to sell its loss-making Ellerine unit, a furniture selling business.
On August 7 Ellerine Furnishers announced that it had applied for "voluntary business rescue" under South Africa's Companies Act.
Under South African law, business rescue provides temporary protection of a company's property from creditors.
Abil has seen its bad loans spiral as its low-income client base struggles in the face of economic hardships.
Abil bought Ellerine in 2007 for R10.6bn to widen its product offering to include furniture sold on credit.
Abil makes most of its money from unsecured, higher risk, high-interest loans that are not backed by collateral.
Now that Abil has been placed under curatorship by the SA Reserve Bank (Sarb), many Fin24 users want to know what the impact would be on their relationship with Ellerine.
Fin24 asked Abil’s curator Tom Winterboer of PwC to shed some light on these matters.
Questions by Fin24 users who bought furniture from Ellerine:
Fin24 user Harbesh writes: I'm an Ellerine customer, what does this mean for me?
Fin24 user Nyathi says she is surprised that African Bank is making a loss together with Ellerine. A case in point is my contract with them.
I bought a bed from Ellerine worth R5 995 in 2012 June. My payments are up to date. So far I have paid around R12 000.
When I asked for a settlement amount last week, they told me that I still owed more than R4 200, an amount equivalent to two thirds of the cash amount of the bed I bought.
My question is: After ripping the innocent customer off with such an amount, how is the bank failing to reap super profits from its project Ellerine?
Fin24 user Llekoczulu writes: How is this going to help me as an Ellerine customer since I'm still paying off my bed?
Fin24 user Jennifer asks what will happen to the Ellerine group? Does it still get financed through Abil?
Fin24 user Salome writes: Are people still going to continue with Ellerine or are you leaving them?
The curator responds:
Although the furniture may have been bought at Ellerine on credit, the credit is with African Bank.
Whatever happens with Ellerine, the credit needs to be repaid. This is a legal obligation.
Now read:
- African Bank: Curator answers questions
- Hedge fund manager banks R100m on Abil
- African Bank suspends payment of certain debts
- Fin24
Disclaimer: All articles and letters published on MyFin24 have been independently written by members of the Fin24 community. The views of users published on Fin24 are therefore their own and do not necessarily represent those of Fin24.
