Namibia: The Fall From Grace of the African Bank

13 August 2014

Windhoek — African Bank Investment Limited (Abil), the owners of Ellerines Furnishers and the African Bank, are the latest reminder of just how easy a multi-billion dollar empire crumbles when the executives refuse to wake up and smell the coffee. Or executives too comfortable to realise that the business model that made the bank worth billions has become a dinosaur and a new model in sync with evolving market is urgently needed.

Thus, Abil, which in 2010 was valued at N$31 billion, was put into curatorship last week Friday, at that time with a market value of less than half a billion dollar, of N$465 million. Most, or about 90 percent of its share value depreciated in about three days, the fastest downward spiral spurned by the announcement days earlier that its once fledging furniture unit, Ellerines, is halfway down the drain, and requiring a monthly bail out of N$70 million just to stay afloat. It was indeed a spectacular fall, that saw a group of private banks rushing to extend a N$10 billion lifebuoy to Abil in less than 48 hours from Friday - the specifics were announced on Sunday - in an attempt to salvage the "good" part of the embattled bank from the "bad" bank, as Gill Marcus, the South African Reserve Bank (SARB) governor, put it the statement issued on Sunday. The reasons for Abil's failure, says Marcus, were "largely specific to their current business model, which does not include a diversified set of products and income streams, nor does it offer transactional banking services. This has made African Bank and the ABIL Group uniquely vulnerable to a changing or challenging business environment, such as currently prevailing."

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