Cape Town - The Eastern Cape government had agreed to sell its share in Meeg Bank because the bank did not have sufficient reserves and there had been concerns that there would be a run on the bank, Eastern Cape finance MEC Billy Nel has reported.
Thoraya Pandy, a spokesperson for the finance minister, Trevor Manuel, confirmed that Manuel had urged the sale of the share to Absa after empowerment interests failed to raise the necessary capital.
Meeg Bank developed in the old Transkei homeland to finance mainly migrant workers.
Nel was responding to a report in the Daily Dispatch that Manuel had pressured the provincial government to sell its stake, and that the Black Management Forum (BMF) and the National African Federated Chamber of Commerce and Industry (Nafcoc) had been outspoken in their opposition to the sale because Meeg Bank had been a black-owned bank.
Pandy said the minister had to recommend a course of action that best served the fiscus. The decision had followed two years of consultation.
Nel said the Banking Council had pointed out that the bank's reserves were too low.
He said that after the province had placed its finance superintendent-general, Newman Kusi, on the bank's board, various courses of action were identified. They included selling it outright to Absa, which had the largest share, or selling to interested black parties with the needed capital.
Noting that Manuel had considered the bank "jittery", Nel argued that the government should, in any case, not have been involved in banking in competition with the private sector. Ultimately, Nel said, the decision had been made to sell the 23.2 percent stake in the bank to Absa.
The price of the shares still had to be negotiated, but it was estimated that they were worth R53 million.
Nafcoc and the BMF said events leading to the government selling the shares indicated that the provincial government "had done so under duress". Nel said this was not the case: "We were overtaken by events."
The decision to sell the shares to Absa meant its stake would increase from 49.7 percent to 74.5 percent. Nel noted that Absa had put R40 million into the bank to boost reserves.