BEE debt defaults sting banks, say analysts

March 27, 2009

The dramatic increases in impairment charges at South Africa's big four banks could be attributed to bank-financed black economic empowerment (BEE) transactions on which debt payments were falling behind because of sliding share prices and the economic downturn, analysts said on Thursday.

Kokkie Kooyman, global fund manager at Sanlam Investment Management (SIM), said: "Investing, as a rule, should not be financed by debt. The BEE deals were financed by debt which was going to be repaid from cash flows from future earnings and selling the shares at higher prices.

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