Groot k*k chickens heading home

The other day friends gave me a brilliant T-shirt. On the chest are four Scrabble blocks with the letters "HKGK".

It's a brilliant T-shirt because it draws the ladies' attention to my finely sculpted torso. It also helps start conversations. When I wear it I see people's eyes dwell on the letters on my chest. Then I see brows furrow as they try to figure out what my T-shirt is about. Eventually they ask. I tell them, and we all have a good laugh.

On the subject of good laughs, I'm sure you're enjoying the unsecured-lending comedy as much as the next guy. Unless you're invested in what is fast becoming a penny stock called African Bank Investments Limited - Abil for short.

Once upon a time we had the "unbanked" - millions of South Africans who had no access to banking services. They had no idea how lucky they were.

Being unbanked was a social problem, we were told, but, boy, did we make that problem go away. We so decisively kicked this problem into touch that today we are as banked as we could ever wish to be. Everyone has a savings account (something of an oxymoron) and as much credit as they want as quickly as they can buy a Samsung Smart TV. These days even the gardener has a Gold Mastercard. And the masses are all hocked up to their eyeballs. But at least they have flat-screen TV sets and plush lounge suites.

Last week the business of banking the historically unbanked was in the news with Abil downgraded by ratings agency Moody's to "junk" status. The news about what Moody's thought of African Bank chopped 7% off the Abil share price, just a few weeks after the company told the market it was expecting to make a loss of R4.3-billion plus loose change in the six months to March. That news promptly knocked a quarter off the share price.

A big part of Abil's problem is that it is in the furniture business. Sort of. Six years ago the boffins at African Bank realised that furniture retailers, of all people, were eating their lunch. The low-end chain furniture shops in every dorp were flogging beds, couches and fridges left, right and centre to poor people. But as much as they were awarding themselves fat mark-ups on tatty merchandise, those retailers were also charging customers an arm and a leg to pay off the stuff on credit, making almost as much money out of financing as they were from moving boxes and wardrobes. So Abil bought Ellerines because they reckoned they were the experts at charging consumers usurious amounts of interest to buy stuff.

But then Ellerines stopped printing cash, and customers stopped repaying their loans. The loans Abil was making were unsecured so they couldn't send in heavies to repossess the BMW in the garage - because there was no BMW. And there was no garage.

On Sunday I was intrigued - and amused - to read Abil's chief financial officer, Nithia Nalliah, quoted as saying he couldn't understand how African Bank's main rival in the unsecured-lending wheeze, those upstarts at Capitec, were making a mint while his bank was going down. "It may well be that [Capitec] management is that much superior," Nalliah told Business Times.

He also muttered darkly about disclosure at Capitec, implying that Abil shareholders were asking him and his fellow executives (like the parents of an underperforming pupil who go to the school prize-giving every year to see other people's children walk off with all the academic prizes) "Why can't you be more like Capitec?"

It may be that Capitec management is superior to the lot running Abil. Or it may be that the people writing the chancy loans at African Bank aren't being kicked in the butt hard enough when the loans they've written turn sour.

Meanwhile, those in the know are wondering what lies in store for Capitec which, two years ago, began lending risky borrowers more money over longer periods. When, people in the know are wondering, will their long-term chickens come home to roost?

As my T-shirt cryptically puts it, in the South African unsecured-lending business: HKGK - Hier Kom Groot K*k.