Pages

Friday, 14 August 2009

Nedbank you will be real dummies not to accept my offer

Hi Nebank Board of Directors,

I see you intend to issue R1 billion non-core Tier 1 perpetual, non-cumulative, non-redeemable, non-participating Nedbank preference shares on which you will pay a dividend of 75% of the prime interest rate or .75 times 10.5% times R1 billion = R 78.75 million per annum - ceteris paribus.

Well, here is my deal for you:

I will show you how to increase your equity by R2.285 billion in perpetuity - AT NO COST.

Here it is: Simply measure your financial capital maintenance in units of constant purchasing power as authorized by the IASB in the Framework, Par. 104 (a) twenty years ago. It is compliant with IFRS. Your auditors will still sign your accounts as normal.

Your total equity at June 2008 was R33.127 billion. Updating that at 6.9% to June 2009 will add R2.285 immediately to your equity.

Nice and easy, isn´t it. AT NO COST. (Your accountants are very bright people and will pick up Constant Item Purchasing Power Accounting very quickly.)

[Well, there is a small cost involved: you have to promise to buy a copy of my soon to be finished book for every member of your staff in South Africa.]

Nedbank, you will be real dummies not to accept my offer.

Kindest regards,

Nicolaas Smith