In his Budget speech this week, Finance Minister Trevor Manuel criticised the auditing profession for the part it has played (or perhaps failed to play) in the collapse of businesses in South Africa and abroad. He said the Nel Commission, which investigated the Masterbond scam, had highlighted how auditors had not properly done their job of protecting shareholders.
One of the recent business collapses has been Saambou and associated with it is that of financial services company Fedsure. Individual policyholders and depositors had little or no inkling of what was happening in those companies because the auditors appear not to have done their work thoroughly.
Manuel says draft legislation drawn up in part by the auditing profession to overcome problems does not go far enough and the bill needs revision.
This week Personal Finance received a simplistic explanation of the role of the Reserve Bank in regulating banks and protecting depositors.
It read like a cop-out to me, particularly as Saambou is the third bank to have collapsed in less than 12 months.
I also received a rude note from Saambou's so-called communication officer, Suzette Plantema, blaming the media for the chaos in payments to Saambou depositors.
This was a bit rich coming from someone who actively misled this publication the week before. This and any other missive from her will be treated with contempt.
Personal Finance has been inundated with calls from Saambou depositors seeking clarity on the security of their savings. They have been unable to get through to the Saambou call centre, which has apparently been swamped by confused and angry depositors.
With the potential losses faced by Saambou depositors, and the losses faced by many Fedsure policyholders because of its significant stake in Saambou, it is imperative that Manuel appoints a commission of inquiry into Fedsure and Saambou.
The loss of R600 million to the retirement savings of many people, particularly in the building industry, as a result of the unwise investment policies at Fedsure, is very significant.
If Manuel does not appoint an investigation in the face of the apparent inaction by the regulators, I fear many people will walk away scot-free. At the very least, the names of those people, who were cavalier with the savings of ordinary, hard-working individuals, should be tarnished in the history books of corporate South Africa.
More importantly, an inquiry is also needed to show up any shortcomings in the regulatory systems, which are there to protect investors and depositors, as well as maintain confidence in our financial institutions - both the banks and the life assurance industry.
The Fedsure/Saambou collapse dwarfs the Masterbond scandal in size. A proper inquiry will help set things right and improve public confidence.
How about it, Trevor? If I may suggest it, Judge Nel, who headed the Masterbond inquiry, would be a good and experienced person to use.
Perhaps Barbara Hogan, the chairperson of Parliament's Portfolio Committee on Finance, could consider a public hearing into the two companies?
Incidentally, in the next 10 days watch out for reports on the collapse of Regal Bank, and the controversial way that the Reserve Bank saved Bankorp in the eighties.
These reports may shed some light on the need for depositor insurance and on what type of bank the Reserve Bank considers to be worth saving and which can be left to collapse.