Source: Supermarket & Retailer
The South African Reserve Bank (SARB), Financial Sector Conduct Authority (FSCA), Payments Association of South Africa (PASA) and the Banking Association South Africa (BASA) have jointly agreed that that the issuing and the acceptance/collection of cheques will cease from 31 December 2020.
The Reserve Bank said this decision was taken due to the numerous challenges associated with the usage of cheques.
It said that these challenges include:
- A lengthy processing period;
- Fraud perpetrated through the issuing of cheques;
- Cheques as an expensive payment instrument;
- The restricted acceptance of cheques;
- Declining usage;
- Limited education and protection for the consumer;
- Ageing interbank cheque processing infrastructure; and
- Impact of the coronavirus pandemic (Covid-19) outbreak.
“In this regard, South African banks will not accept any cheques for deposit or encashment after 31 December 2020,” the Reserve Bank said.
“Banks are expected to extensively communicate with their clients leading up to and beyond the discontinuation of cheques. Furthermore, to educate their clients on alternative electronic payment methods that may be used.”
The SARB said that affected stakeholders are requested not to write/draw or accept cheques after 31 December 2020.
“They are encouraged to approach their banks to be offered alternative electronic payment methods or to direct any queries they may have related to the process of termination of the usage of cheques,” it said.
You can read more about the phasing out of cheques from the national payment system in the SARB’s consultation paper here.
Speaking at the South African Reserve Bank’s (SARB’s) bi-annual Monetary Policy Review briefing earlier this week, Dr Christopher Loewald stated that early projections indicate that the 21-day lockdown, aimed at curbing the spread of the coronavirus, could see around 370 000 job losses and 1 600 businesses being declared insolvent in South Africa.
The Covid-19 lockdown may directly and indirectly result in a 2%-4% contraction of the economy in 2020.
Ratings agencies and the weakening rand
Ratings agency Moody’s downgraded South Africa’s credit rating to junk or sub-investment grade on Friday 27 March.
Subsequently, Fitch downgraded South Africa’s Long Term Foreign-Currency Default Issuer Rating (IDR) from BB+ to BB with a negative outlook. The agency is forecasting a 3.8% contraction for the South African economy in 2020.
As a result, the rand has plummeted to nearly R20/dollar, but has since recovered to R18,65.
Big business in SA to forgo bonuses
South Africa has looked to big businesses during this time to make every effort to keep their staff.
Woolworths yesterday announced its board and executive teams will forego up to 30% of their fees and salaries over the next three months.
The SARB’s Prudential Authority (PA) has asked commercial banks to put a freeze on paying out ordinary dividends or bonuses to executives this year.
IMF versus ANC
Finance Minister Tito Mboweni said last month that South Africa would approach the IMF or World Bank for help fighting the coronavirus “if we run out of finance for health interventions”. However, the ANC, the SACP and Cosatu have made it clear that they do not agree – and that South Africa needs to “safeguard [its] democratic national sovereignty”.
Asking multilateral institutions, especially the IMF, for cash is deeply unpopular with a radical faction in the ANC and trade unions the party uses to rally support ahead of elections, partly because of the stringent conditions that can accompany IMF lending programmes.
By Genevieve Quintal for Business Live
The VBS Mutual Bank is “hopelessly insolvent” and should be wound up as the purpose and object of the bank no longer exists.
This is according to the Reserve Bank’s Prudential Authority’s application to the high court in Pretoria.
The bank was placed under curatorship in March after looting by executives led to a liquidity crisis. A damning Reserve Bank report by advocate Terry Motau and Werksmans Attorneys, released earlier in October, detailed looting at VBS bank of nearly R2bn and identified the role of political players from the ANC and the EFF.
In an affidavit to the high court, Prudential AuthorityCEO Kuben Naidoo said the bank was hopelessly insolvent.
“Despite the efforts of the curator, the vortex of the black hole created by the role-players named in the investigator’s report, has resulted in the disappearance of VBS’s substratum and it being objectively impossible for VBS to achieve the purpose of its existence,” he said.
This decision will not sit well with various ANC MPs and those from the EFF who have called for the bank to be recapitalised.
During his maiden medium-term budget policy statement (MTBPS) last week, finance minister Tito Mboweni also indicated that the embattled bank could be saved. But Naidoo said the restatement of the 2017 financial statements, which were falsified and signed off by KPMG partner Sipho Malaba, was a monumental task for the curator, Anoosh Rooplal, to reconstruct the VBS balance sheet.
The results of this indicated that VBS’s liabilities exceed its assets and therefore it was “factually insolvent”. Naidoo said there was no possibility that VBS would be in a position to pay its debts and there was no possibility or prospect of the bank becoming a successful concern.
Rooplal also determined that curatorship was no longer viable for VBS.
It was necessary to bring an end to the curatorship as it would enable a liquidator to utilise the mechanisms provided by the insolvency and company law legislation, to recover monies from recipients in terms of void and impeachable transactions.
Naidoo said that after receiving a letter from the curator and after considering the investigator’s report he, in consultation with the governors of the Reserve Bank, determined that VBS must be placed in final winding up. “VBS is hopelessly insolvent and massive frauds have been perpetrated against it. There is no prospect of entering into any resolution plan in respect of VBS.”
The present activities relating to VBS are primarily directed at recoveries resulting from the thefts and frauds addressed in the Motau’s report, he said, adding that in the circumstances, it would not serve any purpose to grant a provisional winding-down order, as the conclusion of the “hopeless financial position” and the conduct of those who managed VBS, was unavoidable
He has asked the court to hear the urgent application to finally liquidate VBS on November 13, and has also asked the high court to appoint Rooplal as the liquidator as he has been inextricably involved in the affairs of VBS for the past seven months.