Interest paid: R229,306.15
A R100,000 house bought 30 years ago with a 10.5%
per annum home-loan from any of South Africa’s banks would cost, after 360 instalments,
a grand total of R329,300[i].
R229,306 minus a few minor odds disappeared
into the pockets of the owners of the private banks.
It is a nationwide legal sting. South Africans
are conditioned to paying out their hard-earned cash without question to
support the system.
Had the same house been bought in Malaysia or
Australia where the rate is below 5% the interest paid would have been less
than $unit 90,000.
With South African car loans the interest rate is higher still because the asset is
not as resalable and as vehicles quickly lose value the repayment period is
shorter; typically 3 to 5 years. Using the FNB Repayment Calculator at 12% over
5 years an R100k car will cost R139218[ii].
Whatever the loan the principle is the same. For
the privilege of going into debt to participate in the economy the borrower
pays into the banks’ private-members box.
Clearly the ANC doesn’t understand
It is ‘… a cruel irony,’ said (then ANC
General Secretary) Blade Nzimande in 2009, ‘… after more than 15 years of
democracy … why do we still live in a society in which the legacy of apartheid
appears to be constantly re-produced and even expanded?’[iii]
10 years further
on and the ANC still battles to distinguish between apartheid and Greed
Capitalism and fails to grasp that although all have a vote there is no
democracy while a Greed Capitalism system is in place. It is an elite-group-run
financial dictatorship.
The goal of Greed Capitalist corporations is the
maximisation of profits no matter the cost to humanity or the environment[iv].
Capitalism is the best system we have.
Communism (in all forms) failed. Socialism without an ownership component has
only succeeded where powerful-accepted leaders direct.
But the current variant - Greed Capitalism as described
in my O.B.E.S.E. post – is destroying South Africa. The destruction is visible
as daily the difference in fortunes between powerful ANC cadres and their corporate
business pals and rest widens. South Africa is already the most unequal of all
societies.
It has nothing to do with white supremacy … it
is elite – black and white – greed made legal by a system managed by private
business, authorised by government.
Private banks thrive
A
Standard Bank share bought in July 2002 and sold in (February 2018) appreciated
by over 700% (Google charts). The profits supporting the share rise comes out
of some customers depositing and others borrowing money.
Share
owners don’t have to do any work. They profit merely by buying into the sweat
and tears of South Africans who have little option but to use banks. The investor[1]
doesn’t have to fix broken pipes, cut any lawn or pay levies, maintain the car/save
taxi fare or negotiate with the hospital or school uniform supplier. All they do
is collect dividends on top of the spectacular share price rise. Their agony lies
in deciding when to sell – or hold.
The
dividends rose too: Nedbank paid dividends to shareholders of R8.02 in 2013, (2014)
9.65, (2015) 11.05, (2016) 11.40 and in 2017, R12.40 (see Morningstar 5-year
history). From the same banking-hall Nedbank JustSave offered customers with deposits of R1000 - R9 999 a measly 2.90%
interest (April 12 – Nedbank page).
Generosity
for “investors”, a slap in the face for those who make the banks’ profits.
The
customers are struggling South Africans while Nedbank’s biggest shareholder
with over 50% is (ultimately) Old Mutual Plc. That’s the company that left
South Africa for London when “democracy” came in 1994.
Standard
Bank has now the giant Chinese ICBC Bank holding 20% with other foreign
institutions (Old Mutual is there too) having nearly 9%. It’s complicated but
it seems First National Bank is ultimately controlled by Remgro[v]
of the Rupert family – that’s how private these banks are. And foreign.
Barclays Plc, 17th biggest in the world[vi],
is parent to Barclays Africa and is the daddy of Absa Group Limited
(Wikipedia).
On one hand …
At
nation-level the effects of money flowing out of RSA verges on the
catastrophic: Professor Patrick Bond
(Wits University) noted in 2016 that the “balance of payments deficit that
results from profits, dividends and interest flooding out is the main reason
that we have such a huge current account deficit”[vii] [viii]. It is also one of the reasons the Rand was
crashed … from R8.92 to the USD in 2013 to R14.30 in November 2017.
As money
leaves, the home-situation gets more desperate. Money must stay to circulate …
the concept is simple: What one person spends becomes another’s income.
As the
ANC with its open (financial) border policy[ix] has
allowed the money to fly away that money is here to be spent IN SOUTH AFRICA. It
is likely circulating on the Isle of Man, London, Bern …
Disappearing
money raises living costs, pressurises wages, and still the high interest on
loans has to be paid. And that’s not the full story.
Tribute
The
interest demanded was never money in the first place. The bank simply declared
(because it can, because we allow it) “R100k is credited to your account to pay
for the house. You must pay it back.”
“That’s
reasonable” thinks the borrower.
But the
bank continues, “plus R229k in interest and fees!”
Surely
the word “interest” is wrong. “Tribute” is an older word which broadly means the
tax or plunder due to the stronger for allowing the weaker to live.
That
R229,000 isn’t real money. It was never worked for or manufactured in a
factory. In fact it doesn’t exist until
the borrower pays. That’s damaging enough.
The
crippling blow is two-fold: The borrower pays back real money, money that is
only found within the community he or she lives. Every tribute payment takes
hard-earned money out of South African societies’ economy. Instead of spending
the money in the community to make someone else’s income it is being given for
no logical reason to the bank. It is the system South Africans voted for.
Why 10%?
The two examples, Malaysia and Australia
rank in the top 10 for safest living: South Africa suffers from endemic poverty
and crime that make Gaza appear tame. Rather than fix the problems (and one way
is to introduce more money into society) the government message to investor-speculators
is
“Don’t worry, be happy – you’re getting a risk
premium of 10%. Our poverty struck, sunk in crime, South Africans will pay.”
We’ll pay all right because with the
system we can only sinker deeper.
“So what. My R100k is now R1m”.
Applying a 7.5%[2]
inflation rate a R100,000 home bought in January 1988 would be worth R867,213.11
in February 2018[x].
Selling for R1 million puts you slightly ahead but if you are of a class whose
budget has a higher ratio of food, housing, transport and other basic costs your
inflation rate was likely closer to 9%. Selling at R1 million would make you a
loser, perhaps by as much as R250,000[xi].
And the children
In the 30 years the kids have grown up. They’re looking for a similar house but it will cost R1
million plus. They’ll need a minimum monthly income of around R30 000, and
they’ll pay over and above the purchase price an extra R2 million 159 thousand[xii] by
the end of THEIR 30 years.
Credit is needed to make capitalism work
The
banks are doing well – for themselves. Revenue
earned per employee for Nedbank (for example) amounted to R3 million (Barron’s).
What if it was recognised that …
Citizens need work to
pay for housing, transport, education and so on, because they need housing as a family base to get work to earn
money. They need transport to get to work. They need half decent food/medical
and so on to be able to work productively. They need to improve themselves and
to educate their children so that those children will be equipped to fight for
the few jobs available so that one day they’ll be in a position to have a house
near to work to work … and so the cycle should repeat. But it doesn’t.
The system devalues
the remuneration paid for the work done, the inflation component makes it
harder for all. What was once just a cabbage is now a buy-leave decision.
“We have nothing. No houses. No good schools. No hospital.” … North West resident in May 2018[xiii].
Whichever way the
issue is examined all South Africans from Middle Class down are under the whip held
by those occupying the owner/share-owner/manager seats of the system. It is a
system that demands the maximisation of profits. The system drivers are private
banks.
Isn’t it time to support community banking?
South Africa is not a
super-rich, highly productive 1st World nation. South Africa has
been stripped of resources, left totally unable to compete and when it wants to
do anything it is cajoled to borrow 1st World money on 1st
World conditions. The country cannot afford it – collapse draws daily nearer.
But - South Africa can
start to change all of that. It can initiate change at the individual–community
level and there is a feasible and sensible alternate:
Community Banking[xiv].
Even if initially the
only change made is that the tribute paid on those home and car, medical and
schooling and so on loans goes into the community - into local
clinics-schools-roads-environmental protection and job-creation – then forming
Our Bank, a public bank, to do that is worth discussion.
“Of course, there are critics... They argue that public banks
would put public money at risk. Would you be surprised to know that most of the
critics are bankers?” said David Weidner, financial advisor at Morgan Stanley.[xv]
[1]
They’re not investors. They’re owners as long as the money returns are good.
[2] It
is an average and its low when considering Middle income level food, (say) car
repairs, medical don’t you think? A beer now costs over R17. In 1990 bread cost
around R1.10 - Over 1200% increase?
[iii] Martin Plaut and Paul Holden’s ‘Who rules
South Africa’.
[iv] The
Corporation
[v] Remgro owns
1/3rd of Rand Merchant Investment Holdings Ltd and 28% of RMB Holdings which in
turn owns 1/3rd of FirstRand Limited … see 4-traders
[vi] http://uk.businessinsider.com/the-biggest-banks-in-the-world-2017-4
[vii]
https://medialternatives.com/2016/04/15/patrick-bond-responds/
[viii] South African tax services are sweating to
nail taxpayers who have taken much needed capital out of the country illegally
while laughing legally though clearly as immorally, are the banks and the
shareholders.
[ix] http://www.douglasschorr.com/2017/05/zumas-not-junk-hes-just-lost-our-marbles.html
[x] https://inflationcalc.co.za/?date1=1988-01-01&date2=2018-04-10&amount=100000
[xi] http://www.calculator.net/future-value-calculator
[xii] https://www.property24.com/calculators/bond#mortgage
[xiv] Ellen Brown
… https://www.youtube.com/watch?v=5H2klRvaXrE
[xv] https://www.huffingtonpost.com/ellen-brown/occupy-protests-banks