Wednesday 21 April 2021
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SME Bank could become ‘insolvent’

…as President breaks his silence



WINDHOEK, 23 OCTOBER 2013 - Governor of the Bank of Namibia (BoN) Ipumbu Shiimi gestures during the monetary policy announcement on Wednesday. (Photo by: Pearl Coetzee) NAMPA

simataa tawanda

Days after the central bank warned that SME Bank could become insolvent, the President finally broke his silence on the saga.
While delivering his third State of the Nation Address in the National Assembly yesterday, Geingob briefly spoke on the matter.
“While we cannot comment in detail on this matter, because it is sub-judice, Government did not intervene to stop actions taken by the Bank of Namibia against the SME Bank,” said Geingob, much to the dismay of those in attendance.
Despite dubious transactions amounting to close to N$200 million being discovered by Bank of Namibia, the dismissed SME Bank executives are trying by all means to poke holes into the findings of the central bank, saying there are no facts the money was lost.
In court papers filed last week, BoN warned that “SME Bank is likely to become insolvent.
“The third respondent[SME Bank] is conducting its business in contravention of the Banking Institutions Act as amended and in a manner detrimental to its customers or the general public. The Executive Officers listed may no longer be fit and proper to satisfactorily fill their position in relation to the third respondent, due to misrepresentation made to both the Bank of Namibia and its independent auditors BDO,” said BoN.
BoN also accused SME board chair George Simataa of using a demeaning ad derogatory tome in the replying affidavit, saying “it is not only uncalled for but also baseless.”
Simataa accused BoN in court papers of carrying out a flawed investigation, lacking knowledge of the investment transactions which the SME Bank made in South Africa, and of having acted in haste without first trying to understand the matter at hand.
In their papers filed last week Wednesday, former CEO Tawanda Mumvuma and other executives said: “the applicants had neutralized the respondents’ allegations that the investment concerned was lost. There are no facts to that effect.”
The applicants challenging BoN are former CEO Mumvuma, finance manager Joseph Banda; manager for treasury Alec Gore; vice board chair Enock Kamushinda; board member Ozias Bvute; and board chair George Simataa.
Bank of Namibia listed the Government Institutions Pension Fund (GIPF), the Road Fund Administration (RFA), Agribank, the Social Security Commission (SSC), NamWater and the National Energy Fund (NEF) as some of the state-owned entities that have invested with the SME Bank.
According to the central bank, the SSC invested N$150 million, GIPF N$100 million, and NEF N$260 million. NamWater initially invested N$140 million, but forced the SME Bank to pay back N$90 million. NamWater is still owed N$50 million.
BoN said it realised that the SME Bank was in trouble when its auditors BDO tipped off the central bank that it was concerned about the N$200 million invested in South Africa.
The bank’s beleaguered leadership also contend acting chief executive officer Benestus Herunga is running the affairs of the bank unlawfully.
“On that basis alone the eighth respondent[Herunga] is currently running (jointly with the third to seventh respondents) the third respondent’s[SME Bank] affairs unlawfully. It is an illegality that this court has a duty not to perpetuate,” they stated in the court papers.
They continued: “We contend, in the main, that given the glaring and material illegalities committed by the first and second respondents and the resultant continuous, harmful, stigmatizing and invasive consequences thereof to the applicants, the public and the third respondent, interim relief sought pending the finalisation of review proceedings in due course is inevitable as a refusal thereof will necessarily perpetuate and, with respect, sanction a continuing illegality.”
The BoN chairperson has also been accused of “gravely harmed his credibility as a witness through his conducts after 1 March 2017 through a series of correspondences.”
On that day, BoN announced that it has assumed control of SME Bank and that the Board of Directors of SME Bank will be disempowered and must therefore submit the property, business and affairs of the SME Bank to the control of BoN. Mumvuma, Banda and Gore were also removed.

The finances
The Minister of Industrialisation, Trade and SME Development Immanuel Ngatjizeko recently revealed that since the establishment of SME Bank, government has pumped about N$470 million into the bank.
He appealed to Chief Executive Officer (CEOs) of State Owned Enterprises at the time not to de-invest their deposits from the beleaguered bank saying it will “undermine the bank’s sustainability and existence.”
Ngatjizeko said should the concerned CEOs decide to re-invest their money from SME Bank it will “nullify” the N$470million that Government has invested in the bank.
“While Government fully understands the concerns of SOEs that have deposits with SME Bank at this difficult time, any decision to de-invest deposits from the SME will not yield the collective desired results. But would rather undermine the bank’s sustainability and nullify Government’s actions to support SMEs through the SME Bank,” he said.
Ngatjizeko added that the Bank of Namibia (BoN) decided to assume complete control of the SME Bank on the 1st of March this year based on “investment decisions” made by the bank and not liquidity concern.
Subsequently, Ngatjizeko told the CEOs that that SME Bank was well-capitalized according to information he received from BoN.
“I am encouraged to note that the Bank of Namibia has confirmed that SME Bank is well capitalized, with a capital position in excess of 68%. The bank has a surplus liquidity position of 155% or N$178 million above the statutory minimum. Both these ratios are also far above the Namibian banking industry average,” Ngatjizeko claimed.

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