It has been a whole month and a half since the NCA has taken its' full force and affect and the horror stories are starting to pour in.
I think that the whole picture of the NCA is not fully clear yet, but the effects have started to take shape.
Some comments, stories and situations have brought to the sad and hopefully wrong conclusion that the NCA has the full capability to bring the country down to its' knees. Lets hope we are totally wrong.
Many estate agents are complaining the their bonds just don't get approved. Some say only 10% of they normal rate is being approved and some say around 30%. That is a reduction in income of a minimum of 70% for estate agents, as not many people buy cash deals these days.
Some Bond submissions with exemplary buyers, have been rejected bonds and estate agents where in shock to these outcomes. People that have a squeaky-clean credit history and the affordability of the 30% to income ratio have been rejected. Others in the same exemplary clean credit history have been asked for sureties from other people, when in the past this wouldn't occur as they could buy in their own right without a problem.
Juristic entities with over one million rands in assets have been treated exactly the same as natural persons, when the act says that the NCA does not apply to juristic entities and to assets over 1 million.
I am selling now one of my old cars and got a chance to speak to a few car dealers. That is when I got the bigger picture of the NCA, to my own shock. Some are complaining that their sales have gone down by 50% and more. The Finance is just not being approved right now.
A while ago on the Property Investor Network forum I wrote that 'all hell will brake loose temporarily', but I didn't think of the situation in big picture terms, I was only referring to property investing. After my chats with car sales people and the stories that come to our estate agency affairs, I realized that the problem is FAR more complicated than it seems at first glance.
If car sales are going down by large percentages, then the furniture sales must go down and many other items in the economy that people by on credit. Where does that put the economy? How many stores, shops, will be affected? How long will it take until they won't be able to hold their businesses open? How many people the economy will bring to redundancy due to lower revenues? How will this credit lending affect the banks revenues if they can't meet their targets? How will this affect the share of listed companies if their projected revenues are going down? And if it affects their shares how will this affect the stock market? Has the NCA shrunk the purchasing power in the economy? And if so, by how much? These questions are mere domino affect questions, how one thing may influence another in the economy.
I don't think it takes rocket science to identify that we may just have a major problem to deal with. I just don't think anyone knows the size of the problem, for how long and what will be the overall after effect?
Though I don't think there are any real conclusive answers now, as there are more questions than answers, the effects are starting to show their ugly head and it may take some time until someone can estimate the damage. Maybe it won't be that bad and business people with far reduced revenues are just over reacting, but if it will be worse than estimated, who is going to do the damage control?
