Too good to be true

THIS week’s news that a South African burial society had raised M2.5 billion to bail out MKM should have triggered wild celebrations.
It didn’t.
Instead, it raised more questions than answers.
Ntsukunyane Matete, the chairman of Iketsetseng Family Life and Burial Cooperative Limited, said they had raised M2.5 billion through contributions from members.
He told reporters on Monday that each of the society’s 500 000 members had contributed M5 000 towards the bailout package.
Matete promised that the 400 000 people, who lost their monies when the central bank closed MKM in November 2007, would soon be paid their dues.
We have serious reservations about the veracity of Matete’s claims.
His statement at the press conference feeds this doubt.
He said Iketsetseng’s members were doing this out of compassion for MKM’s stranded investors.
As such, he said, Iketsetseng members were not expecting anything in return for their M2.5 billion.
It is highly improbable, if not impossible, that a group of people can contribute M5 000 each to bail out a company merely out of benevolence.
Matete further claims that Iketsetseng members are not bothered by the ongoing liquidation proceedings against MKM’s companies.
It beggars belief why any institution could have the nerve to pour M2.5 billion into a firm that has already been declared illegal and is being liquidated.
The amount of money he claims to have been raised only strengthens our scepticism.
Whichever way one looks at it M2.5 billion (US$350 million) is not a small figure by any stretch of imagination.
If Iketsetseng indeed has the financial muscle to raise such a huge amount then it should have bought a number of listed firms in South Africa by now.
Why they would opt to throw away that kind of money on a bust pyramid scheme no one knows.
Even the M5 000 that Matete claims each member has contributed to the cause sounds unbelievable, considering that this is a mere burial society.
We also still need to be convinced that it is rational for anyone to bail out a company worth less than M100 million with M2.5 billion.
We haven’t forgotten that MKM has led the nation on this path before.
In 2009 we were told that Channel Life, a South African firm, had agreed to bail out the troubled company.
Hopes were shattered when nothing came out of that deal.
Many will also recall that for the past four years MKM’s main line of defence against liquidation has been that it is solvent and has the money to pay out investors.
Why then does it now need a bailout from Iketsetseng if it is indeed solvent as its directors have claimed?
We are particularly worried that Iketsetseng’s so-called bailout plan has been announced days before the President of Court of Appeal, Justice Michael Ramodibedi, is due to preside over MKM’s appeal against liquidation.
We suspect this to be part of MKM’s elaborate plan to influence the court with false promises.
It comes across as yet another plan to get people to gang up against the courts.
By making such promises MKM is causing alarm and despondence.
We hope the central bank will not succumb to such mob tactics.
We hope the courts will see through MKM’s “schemes”.
The liquidation must proceed for it is the only way that depositors can get what’s left of their investments.
The rest are side-shows that will get us nowhere.