This is how fragile the fractional reserve fiat banking system is. Something as run-of-the-mill (in SA) as a truck driver strike, strikes at the core of the system. Business Report reports that:

Cash is running out at ATMs and there could be further shortages as consumers “panic buy” because of the ongoing transport strike, experts have warned…

On Friday, as the Road Freight Employers Association (RFEA) was granted an interdict forbidding further violence and intimidation, Capitec bank sent an SMS to its clients warning of limited cash at ATMs.

“Each ATM has an amount of cash in it and you basically have to refill it on a continuous basis,” said Charl Nel, the bank’s spokesman.

“Those that needed to be refilled after the strike started, now there is no money in them. It’s not only us being affected, it’s the whole cash-in-transit sector affected.

“On the one side you don’t get cash from the ATM, and on the other side, retailers do not get their cash collected from them. The impact is risk. The cycle of money is being disrupted by this strike.”

The bank had advised its clients to buy and pay accounts by card as well as draw cash at supermarkets.

“Either swipe your card and help retailers by drawing money from the tills. That can help solve the problem in a small way.”

Russell Berman, of Spark ATM systems, agreed. “We sit in a dangerous situation. It’s month-end and people have been paid their salaries, but can’t get access to cash to pay school fees or food.”

The reality is that Capitec has R8 billion worth of client deposits, but only R935 million of actual note and coin to service these claims. See the Reserve Bank data for yourself. In other words, if shortages of cash at ATM’s were to result in larger than normal or even panic withdrawals of cash, which then turn into rumours that Capitec does not have the cash on hand to pay out all its clients claims (which it doesn’t), this could turn into a bank run.

If it goes this far, Capitec would need to start selling other assets, such as loans on its book, to service customer withdrawals and prevent going insolvent.

In any case, this is not a prediction, but a warning that if you have large amounts of cash on deposit with Capitec bank that you cannot afford to lose, you need to be aware of these developments, and probably even keep a close eye on them.

It happened at Northern Rock bank in the UK in 2007, so don’t say it can’t happen in South Africa too.