- VBS applies ‘proven’ credit policies no matter who the client
- Lender won’t release details of any of its customers
A South African bank that gave President Jacob Zuma a mortgage to settle a Constitutional Court order to repay taxpayers the money spent on upgrading his residence said it sticks to loan processes no matter who the client is.
“In granting a loan, the usual processes and conditions apply no matter who the client may be,” VBS Mutual Bank Chief Executive Officer Andile Ramavhunga said in an e-mailed statement on Wednesday. “VBS Mutual Bank applies proven and approved risk-management processes, risk appetite and credit policies. This is what guides all credit approvals irrespective of whom the applicant is.”
Zuma, 74, raised the 7.81 million rand ($545,000) to pay for non-security-related features, including a swimming pool, amphitheater, chicken run and cattle enclosure to his Nkandla residence in the KwaZulu-Natal province through a home loan from VBS, the presidency said on Sept. 12. The nation’s top court ruled in March that Zuma had violated the constitution by not abiding by a graft ombudsman resolution that he should pay toward the more than 200 million rand spent on the property.
VBS’s criteria stipulates that a mortgage can’t exceed the market value of the property and installments can’t be more than 30 percent of gross income, the CEO said.
Zuma received a 4.4 percent pay increase on April 1, taking his annual salary to more than 2.87 million rand, according to Johannesburg-based internet news service, News24. Excluding rounding, his monthly earnings equate to 239,571 rand, while a 20-year mortgage to cover the amount, at a typical 10.5 percent interest rate, would amount to 77,970 rand, or 33 percent of his gross income, according to Bloomberg calculations.
The Johannesburg-based lender won’t release details of clients, Ramavhunga said, citing confidentiality agreements. The presidency didn’t give details of Zuma’s home loan and VBS didn’t mention Zuma by name in its statement.
The policies of FirstRand Ltd.’s First National Bank prevent the lender from providing home loans to anyone over the age of 75, at which point all mortgages need to be fully paid up, Tommy Nel, the head of credit at FNB Homeloans, said in an e-mailed response to questions. It also doesn’t provide mortgage finance for properties on tribal land, he said.
Barclays Africa Group Ltd.’s Absa unit said in an e-mailed response that it “will only consider lending over property against which the applicant can obtain full title and a bond could be registered to use the property as security for the loan.”
VBS focuses on traditional communities that own land and has been granting full-title and so-called permission-to-occupy loans since its inception as a building society in 1982, the CEO said. The lender is one of only a few financial institutions that offer home loans in respect of land owned by traditional authorities, Ramavhunga said.
The Public Investment Corp., which oversees South African government workers’ pension funds among the $124 billion in assets it holds, owns 25.3 percent of VBS. Dyambeu Investments, which owns 25.2 percent, has no direct involvement in the day-to-day running of the bank, Ramavhunga said. Dyambeu, under the leadership of Toni Mphephu Ramabulana, who is king of the Venda people, bought a stake in 2013, according to the annual report of VBS.
VBS’s total assets climbed 156 percent in the 12 months through March to 1 billion rand, according to the lender’s annual report.
Impairment charges as a percentage of total loans worsened to 0.36 percent from 0.31 percent a year earlier, mainly because of losses in its contract-finance unit, VBS said. Impaired advances of total loans across South Africa’s banks improved to 3.12 percent at the end of 2015, from 3.21 percent a year, according to central bank data.