R699 Deal Was Destined For Doom

You did not have to be a rocket scientist to know that Albert Venter's "buy a new car for R699" scheme was going to end in tears, says WesBank CEO Chris de Kock.

Yet FirstRand's WesBank was the only South African bank that refused to have anything to do with it. Standard Bank, Nedbank and Absa fell for it hook, line and sinker, leaving thousands of consumers high and dry. "I'm not even a clever numbers person, to be honest," says De Kock, 46 . "You just had to sit down with a spreadsheet and do the maths."

Even that is overstating it. When Venter, who reportedly enjoys an imperial lifestyle in Pretoria in his R11.5-million mansion, approached WesBank in 2009 to approve him as one of its dealers, it did not even look at his business model. It just picked up the phone. "We phoned around in the industry as we always do with a new dealer," said De Kock.

"If the references are positive, we take that into account. Likewise if they're negative." The references for Venter, who had been in the industry for more than 10 years, were "not positive". So WesBank said thanks, but no thanks. It was a no-brainer, says De Kock. "I would love to tell you that when this thing came I had all my risk guys and actuaries analysing it. But it never got past our most basic processes."

The other banks had no such qualms and Venter started signing up pensioners, widows, students, receptionists and anyone else desperate or gullible enough to believe his sales pitch. He approached WesBank again in 2011. I've got this great scheme, said Venter. This is how it is going to work. Please consider approving me. Again, it did not even get to head office. WesBank's Northern Transvaal regional office took one look and said it was not going to work.

"They felt uncomfortable with the dealership and with the mechanics of the scheme," says De Kock. "They've been operating in this region and this industry for 30 years and they know what's going on." In 2012, as the R699 scheme started to gather momentum, Venter came back - this time using the argument that all the other banks had approved his scheme.

"He was putting pressure on them, maybe even threatened to go over their heads to head office." That is when De Kock saw the scheme for the first time. He sat down with a pen and paper and calculator to try to understand how the scheme was going to work over time. "You didn't need to be a rocket scientist to know that it was not," he says.

"The principle of it, which jumped out at me right from the beginning, is that, as the scheme grows, you very soon get to a situation where - like all typical Ponzi schemes - the thing very quickly starts to turn in favour of the early adopters making a killing and the later adopters getting sidelined. By doing the numbers I could see it would take less than two years for this to happen." So why did the other banks not do the numbers?

"I don't think they even looked at it."

All that seemed to matter was that here was a dealer bringing them customers. How the contract with the customer worked, whether it would be good for the customer or bad for the customer, whether sustainable or not, they do not seem to have cared. Venter and his company, Satinsky, approached WesBank again last year.

WesBank was missing out, Venter told them - were they sure they did not want to participate in his scheme? De Kock, as the head of sales and marketing for WesBank, said he had been taking heavy criticism from loyal WesBank customers demanding to know why he was refusing to finance cars from this dealer.

"I had to justify to them why we were not participating in the scheme, so I had got very close to this thing by then." Among other things that made him suspicious was that the company doing the marketing, consent and structures for the scheme was based in Hong Kong. Satinsky seemed to be little more than a front for this Hong Kong outfit.

He asked to see the balance sheet to find out whether Venter was reserving enough from the profits of his car sales to honour his obligations to customers in terms of the scheme. "We wanted to see if he was keeping any reserves."

The answer was no. "The balance sheet of the company here in South Africa had nothing." As if this was not bad enough, the agreement customers signed with Satinsky and/or its subsidiary, Just Cars, was "the most one-sided agreement you're ever going to find".

It contained - very much in the past tense now because, as De Kock predicted, the scheme has collapsed - all sorts of trivial conditions that, if not meticulously adhered to, disqualified customers from claiming the financial subsidies the scheme promised. Without these subsidies, there was no way most of them could make their monthly repayments to the banks that so eagerly participated in their misfortune, which is why they are bringing a class action against them.

"It was clear that his model was based on finding ways to get rid of 80% of his customers through these sorts of technicalities," says De Kock. "Their model relied on 80% of their customers not claiming, or being able to claim, any of this money."

-Chris Barron