Can Zuma afford to pay R80,000 a month for his home loan?
Given his age, and the structure of his income, it’s difficult to make a case for president Jacob Zuma to afford a R7.8 million loan, according to a financial expert.
The presidency announced on Monday that Zuma, with the help of a home loan from VBS Mutual Bank, paid back the sum of R7.8 million for upgrades to his private residence in Nkandla.
The terms of the deal have not been disclosed; however, CEO at Galileo Capital, Theo Vorster, believes there are enough details to make some deductions about the loan.
In an interview with Talk Radio 702, he said that if you need a loan of R7.8 million – and you assume that the loan is linked to prime over a period of 20 years – your monthly repayments will be in the order of R78,000, under normal circumstances.
“The president will have to fork out R78,000 every month for the next 20 years in order to service this loan of R7.8 million,” Vorster said.
Talk Show host Bruce Whitfield questioned how many banks would provide a 20-year loan to a 74-year old person of R7.8 million.
Vorster noted that when a bank approves a loan – he said two elements stand out – security and surety.
From a surety point of view, the financial advisor said that the bank would want some kind of bond over Nkandla. He pointed out that the president already has some kind of a bond at First National Bank for Nkandla.
The second point is affordability – serviceability. In terms of public information, the president’s salary is at R2.87 million annually – or approximately R240,000 per month.
Vorster noted that because of his age, president Zuma gets certain rebates – tax benefits. As a result, his after tax income is somewhere in the region R140,000 per month.
“Of that R140,000, he now has to fork out R78,000 to the bank, which means his after tax income – his take home pay drops by about 60%, and that makes the affordability quite difficult,” Vorster said.
The financial advisor raised the question of president Zuma’s age and whether he can service a bond over 20 year, while his after tax income is also questionable.
“Is there reckless lending involved in this?” Vorster asked.
VBS Bank, which approved the loan, has three branches in the Limpopo province, a branch in Johannesburg, and a head office in Sandton. The bank is part-owned by the Public Investment Corporation.
The company has the following shareholding structure:
More on president Zuma
Zuma has paid back the money for Nkandla
This is how Zuma will pay back the money for Nkandla
Loading ...