SME Bank - How the government was robbed by both parties

March 30, 2017, 3:37pm

 

 

One of the board members of the trusts that hold government’s shares in the SME Bank said there is more than N$83 million that appears on an audit report which cannot be traced because there is neither a date nor details about where the money came from and went.

Petrina Nakale, who sat on both the boards of the Namibia Financing Trust and then chaired the board of the Namibia Financing Trust (Pty), also told The Villager this week that N$2 million earned after the trade ministry had given the SME Bank N$30 million as capital in October 2014 when the bank was experiencing cash flow problems could not be traced.

She also said that they were not able to trace the interest that accrued from another N$190 million that was transferred into the SME Bank account in August 2014. This revelation comes a few weeks after the SME Bank was placed under the management of the Bank of Namibia after it was discovered that one of the shareholders, the Zimbabwean banker Enock Kamushinda and management had invested about N$200 million without following procedure. Kamushinda owns 5% in the bank, while his Zimbabwean-based bank Metbank owns 30%.

The rest is held by the Namibia Financing Trust (Pty) for the government. Kamushinda and some of those who were dismissed have since taken their case to court arguing that the Bank of Namibia had no right to dismiss them. Nakale, a director in the industrial development directorate at trade ministry, left the Namibia Financing Trust (Pty) in 2015, said that most of the money was “stolen” from the SME Bank after she left.

 The Villager’s investigation in the past few weeks revealed that the issue of the N$200 million was melting point for the SME Bank that was bedeviled by problems from conception until now.

To be Namibia Financing Trust or Namibia Financing Trust (Pty)

The bone of contention was the use of two trusts as vehicles of setting up the SME Bank by trade ministry officials. The first was the Namibia Financing Trust (a Sec. 21 company) that was not for gain. This trust, according a letter dated 20 October written by former trade ministry permanent secretary Malan Lindeque, had the following people as directors:

• Munu Kuyonisa, a finance and administration director at the trade ministry;

• Andrew Ndishishi, former trade permanent secretary;

• the late Ignatius Kamati Mutilitha, who was deputy director, business and entrepreneurial development and promotion;

• Postrick Mushemdami;

• a P M Mweya;

• Nakale nee Tobias;

•  and O P Upindi.

Lindeque noted that he was informed that since the Namibia Financing Trust was not for gain, it could not, according to law, declare dividends. This, he said, would affect the SME Bank’s operations especially when it came to distributing dividends to the shareholders. “The NFT was to be wound down and replaced by a public company wholly owned by the government – this is how I have been briefed and as was also explained to the minister,” Lindeque wrote. He further said that the NFT was not wound down neither was it deregistered but the name was changed to Namibia Entrepreneurial Development Trust “with what appears to be very different objectives to those foreseen for the original NFT”.

 “I have not seen any authorization to have such a trust and believe that we accordingly would need to close it down. If there is a case to be made to retain this trust then we need to obtain approval from Cabinet after consultation with treasury and Office of the Attorney General,” he advised. While Lindeque said that there was nothing wrong with the formation of the Namibia Financing Trust (Pty), he admitted that the change of name was delaying the auditing of government funds and the issuance of the share certificate because the SME Bank gave the certificate to the Namibia Financing Trust. “If this is the case,” Lindeque wrote, “immediate action must be taken to correct the problem.

 That is the directors of the NFT (Pty) with their auditor must take this up with the SME Bank company secretary,” he further said. It was not clear whether this was ever done because one of the issues that have been spoken about is that the government has not yet received the share certificate. Lindeque also raised concern with the fact that some of the directors of the Namibia Financing Trust were also the directors of the Namibia Financing Trust (Pty). These were:

• Kuyonisa,

• Ndishishi, Nakale, and

• a J.M Hausiku.

 According to Lindeque, the directors of the Namibia Financing Trust (Pty) had not been reporting to either to the shareholder or the accounting officer who has to authorise fund transfers to their company. Lindeque said he was surprised that the NFT (Pty) held a large amount and suggested that an explanation should be given on the use of funds before any the trade ministry makes any further transfers to the company.

Apart from suggesting that the directors of the NFT (Pty) should sign performance agreements with the finance minister, Lindeque also said that those who sit on this company’s board should not sit on the SME Bank board. When Dr Malan Lindeque spoke to The Villager in a telephonic interview this week, Dr Lindeque could not confirm having sent the letter to Calle Schlettwein saying that he has been away from trade from a long time and that he has sent many emails during his time and cannot recall the contents of the letter The Villager inquired about. He directed The Villager to the ministry to see the records of emails to verify if he had sent an email regarding that. “This is now a long time ago and I do not have access to any records. I am no longer there. Of course I wrote many things to him,” he said. Kamushinda, through his South African lawyers DM5, however said that the initial agreement did not create room for the Namibia Financing Trust (Pty). In a letter dated 28 October 2013 the lawyers wrote to Schlettwein, Kamushinda said the attempted change of the Namibia Financing Trust an association not for gain to a (proprietary) Limited a profit making entity was “absolutely unnecessary”. “Honourable minister an attempt to change the NFT to a (proprietary) Limited profit making entity is a material deviation from the business plan, business model of the SME Bank and Cabinet intentions,” Kamushinda said. He further said the formation of the Namibia Financing Trust (not for gain) was a foundational consideration to the viability of the SME Bank business model. Even Swart Grant, from Swart Grant Angula the lawyers for the Namibia Financing Trust said when the SME Bank was incorporated on 23 March 2011, the government was represented by the trust (95% shares) and World Eagle that have 5% by Kamushinda. Another agreement, according to Grant, was signed on 20 March 2012 where the government was represented by the Namibia Financing Trust (Pty) and World Eagle by Kamushinda. “On inspection of the instruction confirmed from the Cabinet approved by the Minister of Trade and Industry, it was confirmed that the Government of the Republic of Namibia should be represented by Namibia Financing Trust. The use of the company instead of the trust should be clarified,” the managing partner Swart Grant said in his letter dated 29 April 2013 addressed to the SME Bank board of directors. Grant added that all decisions taken by the Namibia Financing Trust (Pty) should be ratified by the trustees of the trust. Although the reasons given for creating the Namibia Financing Trust (Pty) was that the Namibia Financing Trust was not gain, the company that drew up the SME Bank business plan, Shangelao Capital, also said it was not necessary. Writing to the then SME Bank board chairperson Frans Kapofi in June 2013, Shangelao Capital said although it “is correct that the NFT is an association not for gain and therefore the income, if any are to be restricted towards the furtherance of its aims and objectives, it is however not precluded or restricted from making any profit”. “The restriction relates to how the said profits are applied and the requirements that such profits are to be applied for the promotion of its aims and objectives. “With reference to the SME Bank, it should be taken into account that although the SME Bank as per the Companies Act is an institution capable of making a profit, the prime aim and objectives are related to the facilitation of access to financing for small and medium enterprises,” Shangelao wrote. The company denied being informed about the change of name from Namibia Financing Trust to Namibia Financing Trust (Pty). Furthermore, Shangelao said the change of name was noticed during the perusal of documents that had been submitted by Grand Namibia.

The issue of the banking hall

Earlier media reports had indicated that the SME Bank building was bought by the Namibia Financing Trust for N$25 million. A copy of the SME Bank financial plan drawn by Shangelao Capital obtained by The Villager a few weeks ago show that the Namibia Financing Trust’s money used to buy the building would be converted as capital, while World Eagle’s contribution in setting up the systems within the bank would also be considered as capital. Kamushinda’s lawyers in their letter to Schlettwein said the issue of transferring the building into the name of the SME Bank was taking long and that it was eroding confidence in the bank. The lawyers said that the government and World Eagle agreed that the building would be transferred before the bank started operations. When the letter was written on 26 October 2013, the building, according to the lawyers had not been transferred. The lawyers said the failure to transfer the building was disregarding shareholders agreement; the board of directors’ resolution and disregarding ministerial instructions. “Through your letter dated 6 September 2013, you provided the consultants with an official instruction for them to attend to the matter which they agreed would take a day or two. Despite your instruction for the building to be transferred to the SME Bank, the government representatives still have not complied,” the lawyers said. As a result of failing to transfer the building into the SME Bank, the lawyers said the:

 • SME Bank could not finalise its financial statements

• SME Bank has contravened the Banks Act by failing to comply

• SME Bank cannot obtain deposits from large quantities

• SME Bank cannot obtain credit lines for on lending and that

• There was a possibility of a qualified audit

• There will be loss of credibility

• There will be loss of profit Grant suggested that the building can be transferred directly from Rentmeester (Pty) – the former owners – to the SME Bank as was stipulated in the original shareholders agreement. Shangelao Capital said that it has always been the intention for the SME Bank building to be eventually transferred to the Bank as per the original agreement. “We take into account in this instance that it is quite conceivable that the NFT may have resolved subsequently not to proceed as per original intent and to rather retain the building,” Shangelao said, adding if that was the case, this was not communicated to them. Ndishishi maintained that the building was transferred to the SME Bank.

“Why speculate about the ownership of the building when you can go to the deeds office?” he asked this week.

Ndishishi & Nakale explain why they registered a Pty

Two people who were involved with the creation of the SME Bank from the beginning, Ndishishi and Nakale said there was nothing wrong with changing the name of the Namibia Financing Trust to a Namibia Financing Trust (Pty). Ndishishi said they realised that the Namibia Financing Trust was a company for no gain, there was need to create a public entity to hold shares for the government. He also said nothing happened apart from adding Pty to the Namibia Financing Trust and that government shares are held by the new entity. “Government cannot own a bank. It must be a business, a commercial entity and that is why we formed a Pty. it’s the same we only added a Pty to make it commercial so that it can qualify because trusts are regulated under the Trust Act at the High Court, while banks are regulated by the Bank of Namibia.  As for the Namibia Entrepreneurial Trust, Ndishishi said that did not exist for long because it was a substitute name as required by when one registers a company they submit two names. Ndishishi further said President Hage Geingob was aware of the Namibia Financing Trust (Pty) because he was the one he signed it after a Cabinet resolution. Nakale said they changed the name from the Namibia Financing Trust to the Namibia Financing Trust (Pty) after they were informed that a section 21 was not an appropriate vehicle to hold shares in the bank. “We were given the legal opinion that what we were doing was illegal. Since the name NFT was already in the public domain, we chose another name - the Namibia Entrepreneurial Trust - until the name NFT became available. Once it became available, we then applied for NFT Pty Ltd,” Nakale explained.

Capitalisation

Nakale said the Namibian government pumped in N$370 million for the capitalisation of the SME Bank and that the Metbank that later took up 30% shares appears to have contributed nothing. Documents obtained by The Villager breaks down the contributions from the government as N$496, 496, 882. There is an amount of N$82 million which Nakale said was fictitious because there is no date of transfer and no details of the depositor. This money, she further said, could not be traced. Nakale also said the SME Bank experienced cash flow problems from time to time and that they had to transfer money from the Namibia Financing Trust’s call account with NamPost. At one time, she said they transferred N $30 million that generated about N $2 million but that money was never traced and nobody knows what happened to it. “All this stealing started probably after some of us who were critical left,” she said. Shangelao, however, said that Kamushinda made three transfers as his capital contribution for World Eagle.

These were:

• 11 November 2011          N$14,249,993

• 2 April 2012           N$  7,997,516

• 31 March 2012           N$  9,999,260

The Namibia Financing Trust paid:

• N$7,000,000 on 15 November 2011

• N$6,082,283 on 16 November 2011

• N$7,000,000 on 16 November 2011

• N$7,000,000 on 16 November 2011

• N$13, 000, 000 on 31 March 2012

 As Nakale said, there was nothing from Metbank. Ndishishi said Cabinet wanted an investor to bring in money because it could not put in everything. One of the board members of the Namibia Financing Trust said the government had to buy the building alone because the foreign investors did not bring in their entire share. “The total contribution of the government exceeds that of the investor but the idea was that the investor should bring in money and not to take out money. “There was no resolution that says the money should be invested outside the country because the target was the SMEs within the country,” the board member who declined to be named said. Nakale also told The Villager that the share certificate for the state’s 65% stake in the SME Bank was not issued even up until the time that she left the institution.