Registered users can save articles to their personal articles lists. Login here or sign up here
 
  Author profile
 
  5 COMMENTS

  There's a SPECIAL place for them reserved in hell...  

 Registered users can save articles to their personal articles lists. Login here or sign up here

George residents stand to lose millions on Bridge investment

Liquidation of NIFLAS Silhouette Platform launched.

JOHANNESBURG – Some 380 George residents stand to lose R150 million after investing in a platform that in turn invested into beleaguered microlender, Bridge, among other investments, as allegations that the platform contravened the Banks Act surface.

The NIFLAS Silhouette Platform (NSP), which invested R63 million into Bridge Corporate, was placed into business rescue shortly after Bridge’s own financial woes landed it in business rescue in September last year.

NIFLAS is a financial services business based in George, a popular holiday destination along the Garden Route. It is owned and managed by husband and wife team, Pieter (CEO) and Carina Strydom (executive director of financial services).

When Bridge was placed into business rescue, the annual interest rate of 19% that it was paying its more than 1 600 investors was slashed to 6% and has since dried up altogether. A recently instated compromise plan now promises to reinstate a 1%-per-annum dividend from January 2016.

NSP appears to be in large part a casualty of Bridge’s demise and, like Bridge, was mis-sold in many cases to older, return-hungry investors.

According to NSP’s business rescue practitioner, Koos van Rensburg, promoters of the NIFLAS scheme (who received commissions for attracting client capital) recruited investors who then became non-exec directors of “co-directorship companies” that were incorporated as PTY’s and received said investor funds.

This step was introduced to circumvent the Banks Act, Van Rensburg argues, in particular the prohibition on conducting the “business of a bank”, as it made investors directors of the CDCs to which their money was transferred and later redistributed to microlenders – the “borrowing entities”.

Using the money they earned from income and interest (presumably from their own lending activities), these borrowing entities then repaid NIFLAS at “extravagant rates which were not sustainable,” according to Van Rensburg.  

In this way the scheme recovered its expenses and used surplus income to pay the CDC companies at interest rates higher than market-related rates. The CDC companies in turn paid this back to individual investors.

There are 78 CDC companies in total with names such as K2011106238 (PTY) LTD or Silhouette 001 through Silhouette 047.

Liquidation application filed

Alongside the investments into Bridge, Van Rensburg claims that funds were given to entities in which NIFLAS management had a direct or indirect interest, mostly property investments.

“None of these loans made any sense if one takes into account that the underlying investments of these loans were immovable property that would not generate sufficient income to pay an interest obligation of 19% per year,” according to Van Rensburg.

“These were all arms length and above board, reflected in the financial statements of the company,” counters George Nell, former Bridge business rescue practitioner and now representing NIFLAS management.

NSP invested more than R4.6 million into Cambist, a platform selling debt contracts. However, following the uncertainty surrounding emoluments attachment orders (EAO) in recent months, average monthly repayments from Cambist have fallen from R146 700 a month to R87 000, says Van Rensburg.

Considering Bridge’s dire position and the outlook for other NFS investments, Van Rensburg does not believe that there is any reasonable prospect of rescuing the company and has duly applied for its liquidation.

A group of creditors, however, plan to oppose the liquidation application. “We don’t agree with Van Rensburg on liquidating or what Strydom has done with Silhouette. We are interested only in getting investors’ money back,” chairperson of the creditors’ committee, Charlie Breed, tells Moneyweb.

Nell notes that the NFS suspended its investment activities some time ago and any repayments of loans from microlenders or realisation of assets will be used only to repay investors.

He notes that in terms of an amended business plan, which has the support of the majority of investors, a new company will be created to wind up assets over a period of time, yielding a better return for investors than a costly liquidation process.

Nell first became involved in the matter as a mediator between Van Rensburg and NIFLAS management and was later asked to represent NIFLAS “on full disclosure to investors and Van Rensburg,” he says.

A number of years ago and before launching, NSP received legal opinion from ENSAfrica to the effect that it was not in breach of any laws. According to banking and finance executive at ENSAfrica, Angela Itzikowitz, on the facts presented to ENSAfrica there was no contravention of the Banks Act or other relevant legislation.

The liquidation application is set to be heard on November 2 in the Western Cape High Court, says Nell.

It’s impossible to know how many other platforms like the NSP pooled investor funds and invested in the likes of Bridge and Cambist, but this does suggest that there may be many more individuals affected by the collapse of these investment opportunities than previously suspected.


   5 comments

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up here

Investors who most definitely would not make a loan to their own domestic worker or gardener, lent money through Bridge/Cambist to somebody else’s domestic worker and gardener.
Investors knew that their own domestic worker is unable to repay large loans, but somehow they believed that a “guarantee” from Bridge meant that somebody else’s domestic worker will repay large loans.

The moral of the story is – If you consider an “investment” in anything else than JSE listed instruments, rather donate the money to your gardener. You will at least have a happy gardener.

Let me tell you this: if there is one thing that the public should know about investment is that returns over and above that of government bond, like magic, always come at a price and that price is risk. If there is one thing they should remember, this is it.

My heart goes out to the gullible who were suckered in and have lost fortunes in the scheme. I nonetheless, wonder if they ever stopped to think that the seller of a financial instrument that pays 19% per annum could have doubled his money if he sold the instruments with a return of 9.5% (still ‘healthy’ returns) at twice the price. Why did he not do this? the reason is that he couldn’t. The only way one could dispose of them was at a low price and commensurate high yield. The real question one should be asking is why someone is dumping these investments at such a low price?

One could buy Greek Euro bonds with a yield of 20 + per cent a while ago. High yield, nope, just a fire-sale price.

There always seems to be a common denominator in all of these schemes, which is that investors/victims are always hapless pension-rich older people.

Older people are likely to not be tech-savvy, and would be less inclined to read-up, investigate, research, do the calculations etc etc to fully grasp the complexities of exactly what they are getting themselves into, hence them being easy targets.
This is where the FSB should start.

Draw up laws to curb this, somehow make it compulsory to have these investments approved by someone or the FSB themselves, compel these funds to make declarations with the funds, place them under heavy scrutiny etc, ensure that every investor has a thorough and realistic understanding of the product.
Yes, greed will stay play a part, but then every investor must know that they are investing knowing all the risks and not ‘cry victim’ when they get burnt.

Ah, more laws and regulations. Because the existing ones are being enforced so well, right?

Latest Currencies

ZAR / USD
ZAR / GBP
ZAR / Euro

SEARCH CLICK A COMPANY
Enter company name or share code:

MARKET INDICATORS

JSE ALSI
DAX
CAC40
NasDaq
Gold / oz
Silver
Platinum / oz
Brent
Rand/Dollar
Rand/Pound
Rand/Euro
Dollar/Euro

Podcasts