Events unfolding at the SME Bank have raised questions on whether the Bank of Namibia (BoN) Governor Ipumbu Shiimi faltered to political pressure and delayed dealing with the rot at the institution in time to avoid Government’s shareholding plunging into a questionable position leaving depositors’ funds exposed.
Even more worrisome is that the central bank could have hastily instituted action late to save skin after picking that close to N$200 million given to Enock Kamushinda, a suspended director of SME Bank – supposedly as a loan – had left the country.
However Shiimi refutes this.
Despite Shiimi being adamant, a chronology of events at the public-private partnership institution (SME Bank) shows that several engagements between the SME Bank Management and BoN were instituted between May and November, although the central bank only moved in last week.
While Shiimi was swift to institute investigations at SME Bank last week, thereby claiming the scalps of the board of directors and their senior management, including Chief Executive Officer Tawanda Mumvuma, the central bank has not convincingly explained why it took more than three months to act.
“The Bank of Namibia refutes this allegation categorically. The Bank did not take the decision to assume control of the SME Bank with any external party in mind nor did the Bank succumb to pressure, directly or indirectly, in order for it to arrive at the course of action it deemed appropriate to deal with this situation.
“Additionally, the decision was taken after an assessment of the facts, as elaborated earlier in a timely manner,” Shiimi told The Patriot through the central bank Deputy Director for Corporate Communications, Kazembire Zemburuka
Shiimi, however, raises irony revealing that constant engagement with directors of the SME Bank had been made but continued to give them a grace period, he emphasises that this is a normal practice in the industry.
“The Bank of Namibia regularly engages the management of the various banks under its stewardship on routine compliance matters. The detection of the investments in question formed part of such regulatory engagements.
“The Financial Intelligence Centre of Namibia (FIC) is an independent arm of the Government responsible for combating money laundering, financing of terrorist and proliferation activities, and other financial crimes. On the other hand, as a supervisor of commercial banks, the detection of irregular or unsound investments made by commercial banks falls within the purview of the Department responsible for Banking Supervision within the Bank of Namibia.
“Therefore, these investments were detected, as they should have been, by the correct department that deals with such matters in line with provisions of the law,” BoN said.
An uneasy relationship between SME Bank and BoN started in earnest last May when the SME Bank submitted a hastily produced annual report under pressure to meet a strict central bank deadline. The report showed serious loses, which both Mumvuma and Simataa said were well expected bearing in mind the institution was still a new entrant into the competitive environment.
A banking source told The Patriot that the central bank also failed to pick systematic flaws facing the SME Bank last year when the bank failed to finance a few loan proposals because of a cash squeeze.
“It is strange that BoN failed to pick it last year when the SME Bank failed to finance small to medium scale businesses and the reason given was that they had lent money to many people with Government projects who were taking long to pay back. The SME Bank management actually fooled the public by painting a picture that Government was failing to pay its clients on time, hence affecting their ability to reimburse their loans while money was already given to Kamushinda through a board resolution which was also shared with the central bank at the time,” the source said.
However, Shiimi dug in his heels saying, “On the matter that occasioned the assumption of control of SME Bank, it should be noted that the Bank of Namibia acted timeously after inspections in September 2016 detected that certain investments did not conform to sound investment principles. Additionally, the auditors of SME Bank flagged the investments in question during this period.
Subsequently, several presentations were made by the SME Bank management in relation to these investments to the Bank of Namibia, said Shiimi, adding that the SME Bank’s Board was also requested to make representations to the Bank of Namibia, which were not to the satisfaction of the Board of the Bank of Namibia.
“The Bank of Namibia provided SME Bank ample time and opportunity to submit complete answers regarding these investments. It is only after this process failed to yield the desired results that section 56 of the Banking Institutions Act was invoked,” Shiimi said.
Power politics at play
Power struggles within the bank were such that although Ndishishi had left the bank he felt let down after being relieved of his duties as chairperson sooner than he expected, hence he continued to play politics against Kamushinda.
While others believed that the power dynamics at the SME Bank were rather intense, a close source at the bank said most of the Zimbabwean managers felt the comfort of doing as they pleased because of a supposed close relationship between Kamushinda and the President.
Kamushinda is accused of using his access to State House as a way of showing power and in the process used that as a shield against urgently complying with the basic banking principles.
“This is all politics, there is no issue here,” one of the senior executives told The Patriot on condition of anonymity.
One of Kamushinda’s close allies and CEO of the Metbank in Zimbabwe, Ozias Bvute, was also quoted in the local media recently questioning the logic behind the BoN forcing them to comply with legislation that other bigger banks took longer to adjust to.
He also came short of labelling the immigration officials in the country xenophobic for their unpopular raid at the institution last week on the suspicion that some of the expatriates might have been working illegally.
Insiders at the bank also believe that most of the expatriates enjoyed unaverred protection from the previous Chairperson and Presidential Affairs Minister Frans Kapofi who penned a letter to his counterpart at Home Affairs and Immigration pushing for the allocation of visas to some of the SME Bank expatriates staff that had their applications rejected on the basis that Namibians could fill those positions.
Winding off investigations
The central bank also added that they are not certain on when the investigations on suspected unsound investments at the SME Bank will be concluded.
“The Bank of Namibia is unable to state with certainty how long the assessment period will last.
This is determined by the assessment period underway, which depends on a number of contingencies, the third parties involved and the complexity of the matter.”
However, the Bank has undertaken to finalise this matter swiftly in keeping with the public pronouncements.
Consequently, the SME Bank will be returned to its shareholders when the risk to its stability is mitigated. It should be stressed that the SME Bank is fully operational and continues to serve its clientele with no disruptions,” BoN said.