Windhoek-The fate of the SME Bank was essentially sealed yesterday, with the main shareholder – the Namibian government – announcing that winding up operations was the best option as opposed to injecting an additional N$359 million into an institution that is allegedly damaged beyond repair by mismanagement.
With this bold declaration by government, which is the majority owner, the bank’s continued existence now hangs by a thread after the Bank of Namibia (BoN) had initially sought closure of the bank through courts.
Treasury yesterday threw its weight behind the reserve bank’s decision to apply for the certificate to wound-up the entity from the Master of the High Court.
“We believe it would be irresponsible to use taxpayers money to compensate for money that was irregularly taken out of the country. We are aware of the job losses [but] we have an economy that is under pressure, a failure by the [SME] bank would further weaken the economy,” says finance minister Calle Schlettwein, adding that government has over the four years been injecting millions of dollars into SME with no better results.
BoN governor Ipumbi Shiimi presented to the court that SME Bank is now ‘commercially insolvent in that it is unable to pay its debts as they fall due’.
Its financial books show that it would not be able to pay back its depositors money – a situation BoN does not tolerate under any circumstance. Documents filed with the court indicate that SME Bank only had assets worth N$997,966 million, while its liabilities are at about N$1,2 billion.
“The solvency is not expected to improve as the bank continues to incur operating losses,” says Shiimi.
Shiimi said the SME Bank found itself in the present position after it made questionable investments involving nearly N$200 million, which had not been recovered and which had not paid back any returns when they became due this year.
The minority shareholders in SME Bank, are going down swinging, and yesterday presented their arguments challenging the closer of the beleaguered bank, telling the court yesterday that Bank of Namibia did not follow the procedures when it obtained the certificate to wind up the SME Bank on 04 July.
The Namibian government holds 65 percent of SME Bank and Schlettwein yesterday said the fight by the minority Zimbabwean shareholders has ‘become academic’ than substantive.
Lawyer representing BoN, senior council Andrew Corbett, told the High Court as much yesterday, saying the arguments by Sisa Namandje, who represents the minority shareholders, is of someone ‘grasping at straws’. Namandje is representing Metropolitan Bank of Zimbabwe, which holds 30 percent, and Zimbabwean company World Eagle Properties which holds five percent shareholding.
Namandje is objecting relief that is sought from the High Court – to grant final order for BoN to execute the certificate to wind up SME Bank, on the basis that the certificate should be made at the Master of the High Court, and not at the Registrar of High Court as BoN did.
He also says there is an error in that the Bank of Namibia did not deliver the application itself but was delivered by the deputy sheriff.
Documents submitted to support the BoN winding up application k show how SME Bank executives invested in shady and illegal business ventures, which are neither allowed by the Namibian banking act nor were they investment entities.
Further, when the maturity date arrived for the N$200 million invested with South African institutions, the money did not yield a single cent. It was also revealed that some N$175 million was invested in fertilisers with a Lebanese company, and channelled through to other accounts belonging to unknown beneficiaries who had no investment contracts with SME Bank.
Also most of the true information regarding the more than N$200 million that SME Bank lost only came to the fore after the matter was referred to the Namibian police and the South African prosecuting authorities, who assisted in the investigations through that country’s ‘International Cooperation in Criminal Matters Act.’
Schlettwein also said SME Bank has never served its mandate to finance SMEs development in the country, and “if we put more money it would still not serve that.”