riskregulation,Risk and Regulation,SME Banking,

riskregulation,Risk and Regulation,SME Banking,

The Bank of Namibia has taken over the SME Bank following the discovery of what appeared to be unsound investments of close to N$200 million allegedly made in South Africa.

The take-over announcement was made by BoN governor Ipumbu Shiimi in Windhoek yesterday, at a media briefing at which he also announced the summary dismissal of the bank's CEO, the finance manager and the head of treasury.

Shiimi also announced the immediate removal of the SME Bank board, chaired by presidential affairs minister Frans Kapofi, and the installation of an interim board.

Shiimi said the three senior executives were fired because of their direct involvement in the authorisation of the “unsound” investments.

At the time of his sacking, CEO Tawanda Mumvuma was also the chairperson of the Bankers Association of Namibia (BAN).

Shiimi said the BoN, through its banking supervisory section had picked up suspicious money transfer transactions to South Africa and when the SME Bank management were questioned about these supposed investments, they could not provide satisfactory answers.

“We are still trying to figure out what the figures involved are but at the moment we are looking at something between N$181 million and N$196 million,” said Shiimi.

He said the central bank was in the process of figuring out what exactly these “investments” were because all they know so far was that the money was “invested” in some banks in South Africa.

As to the removal of the board, Shiimi said: “The board was supposed to make sure the bank is managed properly.” He added that the BoN was empowered to do what it did under Section 56 of the Banking Institutions Act 1998 (Act No.2 of 1998). The dismissed board consisted of Frans Kapofi (chair), Petrina Nakale, Theofelus Mberirua, Milka Mungunda, Enock Kamushinda, Ozias Bvute and bank CEO Tawanda Mumvuma.

The BoN governor was quick to point out that the SME Bank would continue to operate as normal while under the central bank's control.

“Those who have loans [should] continue making your payments. Those who have deposited their money with the bank, be guaranteed that your money is safe. Do not withdraw your money thinking anything is wrong,” Shiimi said.

“The Bank of Namibia undertakes to restore ownership of the SME Bank within the shortest time possible. Once the assessment of the investment portfolio is completed, and the investments are secured and the potential risk to its stability is mitigated, the institution will be handed over to its shareholders,” Shiimi added.

In 2014 government had tried to tighten its grip on SME Bank when mounting losses, the absence of audited financial statements, weak management and the murky ownership of technical partners could no longer be ignored.

At that stage The Namibian reported that government had decided to closely scrutinise the bank and instructed the central bank to move in and clean up the mess.

Consideration was also given, at that stage, to bringing in international banking experts, from institutions like the World Bank, while the Office of the Prime Minister was constantly briefed on developments.

SME Bank's troubles started barely three months after its launch, when it appeared to have run out of cash and was unable to issue loans to small businesses.

That was after most of the bank's start-up capital of N$60 million was spent on buying a building [said to have cost more than N$15 million] and on generous staff salaries.

The Namibian also reported previously that the SME Bank had incurred about N$182 million in losses since inception, effectively running at a loss for over four years.

In 2012 the bank made a loss of N$4,2 million, and the loss grew to N$37 million the following year. In 2014 the loss ballooned to N$69 million, and reached N$72 million in 2015.

In March last year the SME Bank published their audited financial statements for the first time in four years. Financial results are normally released within three months of the end of the financial year.

Government has pumped millions into the bank since its creation. According to the 2016/17 budget, the bank was supposed to get N$271 million over the next three years for “recapitalisation and operating expenses”.

Due to its precarious financial situation, the bank has not paid taxes since 2012.

In the financial statements for the year ended 28 February 2015, CEO Tawanda Mumvuma and then board chair George Simataa said losses were anticipated as per the bank's business plan.

“A turnaround plan is in place, through which the group expects to break even in the 2017/18 financial year and be profitable thereafter,” they said.

The SME Bank is a joint venture between the Namibian government, the Metropolitan Bank of Zimbabwe and controversial Zimbabwean businessman Enoch Kamushinda.

Government owns 65%, Metbank 30% and Kamushinda's Worldeagle Investments 5%.

Re-disseminated by The Asian Banker from Namibian