It is too early to panic and judge Capitec Bank harshly over allegations made by short-sellers "enjoying the benefit of the doubt" over the Steinhoff saga.
This is according to financial and economic experts who spoke to HuffPost on Tuesday, after damning allegations against Capitec Bank were posted by Viceroy Research – a small team of foreign independent investigators.
Viceroy Research made headlines last year when it unearthed accounting irregularities at global furniture giant Steinhoff. In its latest report, Viceroy called on the SA Reserve Bank (SARB) and Finance Minister Malusi Gigaba to immediately place Capitec into curatorship.
Viceroy claimed the reconciliation of loan-book values, maturity profiles and cash outflows imply Capitec is allegedly either fabricating new loans and collections, or refinancing about R2.5-billion in principal per year by issuing new loans to defaulting clients.
Legal documents – which Viceroy claims to have – allegedly show that Capitec is advising and approving loans to delinquent customers in order to repay existing loans. These documents reportedly show Capitec engaging in reckless lending practices, as defined by South Africa's National Credit Act.
Economist Mike Schussler, referring to Viceroy Research, said it is "concerning" that "people with very limited knowledge of South Africa's economy make such huge statements".
"We have a large general debt market, but it is not excessive in relation to the size of our economy... There are far fewer people now [who] can't pay their debt, compared to a few years ago. I notice my employees open Capitec accounts because it is cheaper and more effective in the banking services it delivers," Schussler said.
"The bank is growing in newer markets, and a lot of younger people prefer it over other institutions. It is a cheaper transaction bank... I doubt Capitec will go under. The South African Reserve Bank [SARB] and the National Credit Regulator regularly check up on Capitec."
Schussler said Viceroy Research made a broad statement that he doubts is true.
"South Africa's banking system has a lot of role players doing their job. Our regulators would have been all over this," he said.
Chief executive of Pan-African Investment and Research Iraj Abedian said Viceroy Research's credibility must be questioned.
"Viceroy Research seems to be exploiting the gap in the broader political economy in South Africa... A regulator's job is to monitor the expected level of bad debt and the provisions a bank has made for such. Viceroy is then also putting into question the credibility of South Africa's regulators," he said.
"Our banking regulators have had an impeccable track record. There were no underlying issues at Capitec. They have been given a clean bill of health over and over again... This seems like a financial manipulation of the markets by Viceroy."
Acting CEO and chief strategist for the South African Savings Institute, Gerald Mwandiambira, said the markets are responding to Viceroy's allegations because they got it right with Steinhoff.
"The report is concerning, because if indeed Capitec is practising reckless lending, it will have a detrimental effect on the banking sector... But these allegations are completely new. Every report from Capitec has shown growth and stellar results. We have to see if there is any substance to Viceroy's claims," he said.
"Viceroy's credibility is hinged on their Steinhoff report, and [it is] enjoying the benefit of the doubt because of it. It is a wait-and-see game now."
In a statement on Tuesday, shortly after the 33-page report by Viceroy was released, the SARB said it monitors the safety and soundness of all banks, including Capitec.
"According to all the information available, Capitec is solvent, well capitalised and has adequate liquidity. The bank meets all prudential requirements," the SARB said.
In a tweet, Capitec said it had taken note of the allegations, and is currently in the process of investigating the report in detail, so that it can respond appropriately.