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SME Bank partners can shut down the bank

Fri, 16 June 2017 17:20
by The Villager Reporters
News Flash

The SME Bank Zimbabwean partners, Metbank, can shut down the bank if they demand management fees that have not been paid since 2012.

Information on hand also shows that Metbank can withdraw the core banking system being used by the SME Bank which is vested in the company called World Eagle that belongs to the minority shareholder, Enock Kamushinda.

Currently, The Villager understands that the two Zimbabweans who were trained on how to operate the core banking system, T24 R10, have also left without passing on the knowledge. This could be the reason why the system at the SME Bank has not been working properly ever since the Bank of Namibia moved in and fired the top management that was made up of Zimbabweans in February this year.

An investigation by The Villager revealed that some of the Zimbabweans who have been denied work permits bought houses and cars through the SME Bank. Initially, The Villager gathered, the loan book was held by Nedbank but the SME Bank management paid off and took over the management of the loans.

Although The Villager could not verify it, sources said some of the properties are registered in the names of the owners who can easily dispose of them. It has also emerged that the SME Bank does not have rights over the banking system and that currently, they do not have anyone trained to work with the system.

The Villager further understands that there were only two Zimbabweans who went to train on how to use the system called T24 in Kenya. These two have since left the country without passing on the knowledge to locals. In addition, most of the Zimbabweans who have been asked to leave had bought cars and houses through the SME Bank.

The loans were initially held at Nedbank but the SME Bank transferred the loans after paying off the debt. Although the Bank of Namibia refused to answer questions sent on Monday, The Villager understands that most of these properties are in the names of the owners. This means that the owners can dispose of the properties without worrying about paying back the loan to the SME Bank.

A report compiled by Deloitte last year says that the SME Bank was supposed to pay its Zimbabwean partner, the Metbank, management fees. At the time of the release of the report, 12 December 2016, the fees had not been paid and Deloitte expressed fear that if the Metbank demands to be paid, the SME Bank would be exposed. Metbank was appointed the SME Bank’s technical partner and manager for five years from 20 March 2012. “We have noted a management agreement between the SME Bank and the Metropolitan Bank of Zimbabwe Limited, according to management no management fees have been paid to date since inception.

It is not clear whether such fees could be charged retrospectively in an event of a dispute between the parties,” the Deloitte report said. Deloitte noted that discussion with the SME Bank management revealed that Metbank did not enforce the fees agreement.

“The agreement remains a legally binding document which could have an impact on the SME Bank financial performance,” Deloitte said. The report further said that the core banking system license is owned by World Eagle, which means that the SME Bank could be exposed if the licence lapses or is terminated. The core banking system used at the SME Bank is called T24 R10, which was acquired from Temenos on 31 March 2014 and will expire on 31 March 2021.

T24 R10 system provides banking solution that serves up the right customer insights at the right moment, via the right channel, at the same time as driving massive efficiencies in the back-office: in short, they offer front office differentiation with back office automation.

“Temenos may terminate the sub-license agreement should World Eagle become delinquent in making payments due to Temenos or World Eagle becomes insolvent, enters liquidation or ceases to do business. “Upon termination, SME Bank will immediately lose the right to use the software, thus SME Bank does not have any protection should the sub-license be terminated for whatever reason,” Deloitte said.

To fix this problem, Deloitte suggested that the SME Bank should engage Metbank to ascertain whether Metbank would retrospectively claim their management fees or obtain a waiver indicating that they will not claim the management fees. “We further recommend that SME Bank engages Temenos and World Eagle in order to ensure that the licence of the core banking system can vest in the SME Bank directly instead of having a sub-license agreement,” the audit firm further said.

 It is not clear whether any of these suggestions were done since the SME Bank management did not respond to questions sent early this week. Work Permits All but two of the Zimbabweans who were working at the SME Bank were seconded from the MetBank in Zimbabwe.

These revelations come after 21 Zimbabweans have taken the government to court for denying them work permits. The 21 are claiming victimisation despite being more qualified than locals. The issue of work permits that is now before the courts has been a burning one ever since the SME Bank became operational. Immigration has been rejecting several applications for work permits because the jobs could be done by Namibians.

 The reason why the issue of work permits was not dealt with in the early stages was because the government has been putting pressure on the immigration ministry to issue permits. In a letter dated 8 October 2014, Immigration Selection Board chairperson Ambassador Patrick Nandago made it clear that there was no way the ministry would issue work permits in some cases where Namibians can be employed. Nandago’s letter was addressed to the former SME Bank board chairperson Frans Kapofi who had written querying why some of the foreign workers at the bank had been denied permits.

Kapofi  wrote on 12 May 2014 to Nandago pleading brotherhood between Namibia and Zimbabwe. According to Nandago, SME Bank workers were initially granted three months’ work visas in 2013, while they applied for work permits.

When the three months expired, Nandago said, the selection board granted eight work permits. These were for the chief executive officer, the general manger for treasury, chief internal auditor, manager compliance, and three IT managers as well as for the administrator.

On 23 April 2013, he further said, 22 more applications for work permits were submitted and the selection board that sat on 4 June 2013 turned all of them down. After the applications were turned down, all the applicants were asked to leave the country within seven days. Nandago added that despite the order to leave the country, the unsuccessful applicants chose to stay and kept on working after appealing the decision.

The former SME Bank chief executive offi cer Tawanda Mumvuma, according to Nandago requested a meeting on 12 July 2013 to justify why 22 should be given work permits. “In that letter, due to the timeframe given for the employees to leave the country, I was given a deadline of before close of business on the same day or by 11h00 on Monday 15 July 2013 to respond.

 “I then called for a meeting which was held in my office on 15 July 2013 between a delegation from the SME Bank, a few members of the ISB and members of the ISB secretariat. “At the said meeting, the CEO, who was accompanied by among others legal practitioner Mr Elias Shikongo, appealed that the applicants [should] be granted permits because they form part of his core team to set up the bank,” Nandago wrote.

He further said that he informed the CEO that the decision was made by the selection board and that he should address his concerns to the same for consideration.

Nandago said since he knew the position of the selection board, he advised Mumvuma that he should provide the selection board a workable handover/ takeover plan for the positions concerned. The selection board also sat on 3 December 2013 to reconsider another 20 applications for work permits. Only one person was granted permit while the other 19 were denied.

 “The unsuccessful applicants were given between three to six months to leave the country,” Nandago said, adding that reasons for every rejection were furnished. Nandago said there was non-compliance with Section 27 of the Immigration Control Act of 1993 that sets out the requirements for the granting of employment permits. “The ISB is aware that the applicants did not comply with the directive of the board to leave the country up to date. They have continued working illegally,” Nandago told Kapofi .

When the SME Bank management realised that they could not have their way with immigration, they approached the trade and industry ministry and also sought Kapofi’s help. The then trade minister Calle Schlettwein, Nandago said, wrote to immigration minister Pendukeni Iivula-Ithana seeking an extension of the employment permits. “The main reason for seeking reconsideration was that there is an agreement in place between the shareholders which makes provision for Zimbabweans to be employed at the Bank. This led to the applications being considered again for the third time,” Nandago said. He said the selection board sat on 30 September 2014 and once again could not agree on granting work permits to the 19 applicants because they did not meet the requirements. However, he said, the board decided to give the workers shorter periods of approvals in order to wind up and leave the country.

 “Others were granted 24 months as requested for and the 24 months were backdated to cover the period they have been working illegally. “This is so because the expatriates have been working, albeit without work permits. For others a few more months were added to go beyond the 24 months calculated retrospectively,” Nandago said. Some of the reasons Nandago gave for denying work permits were that:

• All the positions in question were not advertised to afford Namibians an opportunity to compete.

 • The management agreement makes provisions for the appointment of regional and international appointees with banking expertise to occupy strategic positions where such expertise is not available in the local market.

• Contrary to the management agreement, even non-strategic positions are occupied by non-Namibians. • There were neither job descriptions nor minimum requirements provided for the positions concerned.

• There was a mismatch between the applicants’ qualifications and the positions they occupy, with some applicants having no banking qualifications.

• Some of the applicants were applying as trainees when in actual fact they were already qualified.

Nandago said: “Accept, dear comrade, my assurance that the Immigration Selection Board is not opposed to Zimbabweans working at the SME Bank but is opposed to the granting of permits to persons who do not meet the requirements of Section 27 of the Immigration Control Act.” On the issue of brotherhood between Namibian and Zimbabwe, Nandago said such brotherhood out to be enjoyed within the confines of the law. “It is the view of the selection board that respect for Namibian laws should take precedence. If we relax the law for the expatriates in question then we must do so in similar cases; this will be bad precedence and tantamount to intentional disregard of the law,” Nandago said.

QUESTIONS SENT TO BANK OF NAMIBIA AND SME BANK

The Deloitte report says that Metbank was never paid management fees. Is the Bank of Namibia aware of this?

If so, how much are the management fees to date?

This question is best responded to by the SME Bank directly as it deals with operational issues in their domain. The T24 system the SME Bank uses is managed by Metbank.

 What is the Bank of Namibia doing to rectify this and avoid a possible system shutdown?

This question is best responded to by the SME Bank as it deals with operational issues in their domain. Does the SME Bank have trained personnel to manage the T24 system now that the two Zimbabweans who went to Kenya for training have left?

The question is best responded to by the SME Bank as it deals with operational issues in their domain. Could one be right to conclude that the Bank of Namibia was not proactive enough to avoid the SME Bank fiasco?

 For example, how was such huge amounts moved out of the country without the central bank getting wind of it?

 And why did the central bank wait until the situation at the SME Bank had deteriorated? This matter is subject to a legal challenge and therefore the Bank is constrained by the subjudice rule from commenting on this issue.

Finance minister Calle Schlettwein suggested that it would be better if the SME Bank shuts down. What is the central bank’s position on this?

The Bank prefers not to comment on this matter. Is the central bank aware that most of the Zimbabweans who have left had their housing mortgages transferred from Nedbank to the SME Bank and now that they have left, how is the money going to be recovered? The question is best responded to by the SME Bank as it deals with operational issues in their domain.