20 February 2018

Namibia: Enquiry Ordered Into SME Bank Collapse

The High Court has ordered the setting-up of a commission of enquiry that should investigate the financial collapse of the Small and Medium Enterprises Bank and the suspected disappearance of nearly N$175 million that the bank supposedly invested in South Africa.

High Court deputy judge president Hosea Angula on Friday granted an order establishing the commission of enquiry in terms of the Companies Act of 2004. The enquiry is to be headed by legal counsel Natasha Bassingthwaighte, who is practising law as a member of the Society of Advocates of Namibia.

The order granted by the deputy judge president authorises Bassingthwaighte to summon witnesses to be questioned before her about their knowledge of the affairs of the SME Bank and its business dealings with the South African company Mamepe Capital; VBS Mutual Bank, which is also registered in South Africa; the companies Tulive Capital and Moody Blue Trade & Invest 14; Asset Movement Financial Services; DMA Consultants; Transparency.com; and the Lebanese company Rawfert Offshore. The order also authorises Bassingthwaighte to summon a number of specific witnesses for questioning, including the SME Bank's former chief executive officer, Tawanda Mumvuma, and former finance manager Joseph Banda, Mamepe Capital's chief executive officer, Mauwane Kotane, and the directors or owners of Tulive Capital, Asset Movement Financial Services, DMA Consultants, Moody Blue, Transparency.com, and Rawfert Offshore.

The two liquidators put in charge of the SME Bank's affairs when the High Court ordered the provisional winding-up of the bank in July last year, David Bruni and Ian McLaren, applied for the order establishing the commission of enquiry.

In terms of the order granted by judge Angula, the enquiry to be carried out by Bassingthwaighte would not be done in public, but its proceedings should be kept private and confidential, unless the court or Bassingthwaighte permits disclosure.

The date when the commission of enquiry would start its work has not been decided yet, Bassingthwaighte said yesterday. However, it is expected that the enquiry would be moving ahead with some urgency, she indicated.

In an affidavit signed on Thursday last week, Bruni stated that he had reason to believe the liquidators, in their attempts to trace the investments that led to the winding-up of the SME Bank, would not get the full cooperation of the bank's directors, employees and other people involved in those investments, and that the necessary information should be obtained through having witnesses interrogated under the authority of a commission of enquiry.

The Bank of Namibia took over the management of the SME Bank at the start of March last year, after discovering that a large investment which the SME Bank had placed with Mamepe Capital appeared to have been lost.

As a result of the expected loss of the investment, the Bank of Namibia asked the High Court in early July last year to order the provisional winding-up of the SME Bank. An order for the provisional winding-up of the bank was issued on 11 July, and on 29 November, the court found that the SME Bank was factually and commercially insolvent, and ordered that it should be finally wound up.

The bank's Zimbabwean minority shareholders, who opposed the application to have it closed down, have subsequently lodged an appeal to the Supreme Court against the judgement in which the final winding-up of the SME Bank was ordered.

The Namibian government, through the company Namibia Financing Trust, has 65% of the shareholding in the SME Bank, while the Metropolitan Bank of Zimbabwe is a 30% shareholder, and the Zimbabwean company Worldeagle Properties has a stake of 5%.

In his affidavit, Bruni recounted that the SME Bank invested N$10 million in Tulive Capital. Of that amount, N$6,7 million was invested in a speculative equity investment in South Africa that was worth only about N$48 300 by late July last year.

He also noted that the former management of the SME Bank informed the Bank of Namibia that the SME Bank had made an investment of N$196 million in Mamepe Capital, and that N$150 million of that amount was then invested with VBS Mutual Bank. However, according to VBS Mutual Bank, the only investment the SME Bank made with it was a deposit of N$10 million made in August 2016, and withdrawn after only one day.

VBS Mutual Bank has confirmed that near the end of March last year, it held only about N$459 000 in the name of the SME Bank, Bruni stated. That money has in the meantime been returned to the SME Bank.

Bruni also recounted that the Bank of Namibia established that N$167 million of the money the SME Bank supposedly invested with Mamepe Capital was paid into accounts in the names of other beneficiaries, namely Asset Movement Financial Services, DMA Consultants, Moody Blue Trade & Invest 14, and Transparency.com.

Bruni further stated that according to Mamepe Capital's Kotane, N$175 million of the SME Bank's money had been invested in a consumable product in the form of fertiliser, alleged to have been sourced from Rawfert Offshore.

However, according to the Bank of Namibia, Rawfert Offshore has denied dealing with Mamepe Capital, and confirmed that a consignment note presented as proof of the investment in fertiliser was fraudulent.

A report by the Bank of Namibia has put the SME Bank's estimated investment losses in South Africa at about N$174,4 million.

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