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SME Bank: Untold sufferings of small and medium enterprises

2018-08-08  Staff Reporter

SME Bank: Untold sufferings of small and medium enterprises

‘This issue has history’. That was my first statement when I was interviewed on Radio Energy this past month about small to medium enterprises who have their money stuck in the defunct SME Bank as recently reported in New Era.

The SME Bank is owned by the Namibian government, through the company Namibia Financing Trust, with 65 percent of the shareholding, while the Metropolitan Bank of Zimbabwe is a 30 percent shareholder. Zimbabwean company Worldeagle Properties has a stake of five percent.

It was reported that SMEs have no access to their money, more than one year after the closure of the bank by the Bank of Namibia. The closure came about after approximately N$200 million that the SME Bank Namibia ‘invested’ with South African entities vanished in thin air. Interestingly enough, a lot of the SME Bank funds were deposited into Venda Building Society (VBS) Mutual Bank, a South African Bank which is also now under curatorship.

The South African Reserve bank has already ordered that all the depositors should be allowed to withdraw their money up to the guaranteed N$100 000 which is according to the South African company law, barely two months after the VBS bank closed. On the other hand, the Namibian law guarantees depositors N$25 000 only of their money deposited in case of liquidation. This means that anything above N$25 000, depositors are bound to lose it or get a fraction of it. It’s scary for the SMEs with money in SME Bank.

The reasons for the Bank of Namibia to not order the liquidators to pay out the N$25000 can only be left for speculation. Enock Kamushinda, representing the minority Zimbabwean shareholder, has opposed and appealed the courts liquidation orders. Like the South African Reserve Bank who ordered VBS Mutual Bank to pay the depositors, the Bank of Namibia can also order the liquidators to pay the SME Bank depositors because they have legal muscle to do it, as they had also the power to take over the bank.

The N$25 000 is guaranteed by law so why can’t the Bank of Namibia order it to be paid out. After the liquidators were even granted the authority to effect payment of deposits less than N$25 000 to depositor by the court, they have not done so apparently because the Zimbabwe shareholders appealed the liquidation order. The argument here is that no matter the appeal or no appeal the N$25 000 is guaranteed by law and it should be paid out.

SME Concerned Depositors is a group of small companies consisting of close corporations and sole traders who do not owe the SME Bank, but they themselves are owed millions of dollars by the bank. This group has come together to demand their money from the bank shareholders. They seek to engage the government through negotiation to get their money instead of resorting to strikes and violent demonstrations.

The group consists of about 100 members who are owed close to N$45 million by the bank. The fiduciary winding up of the SME Bank brought about a ‘concursus creditorium’, which created a creditors group that ensures that the interests of all the SME Bank creditors enjoy preference over the interests of any individual creditor.

The SME Concerned Depositors have been adversely affected by the closure of the bank. Two depositors are building contractors, whose money which is stuck in the bank was paid by their clients just hours before the bank closed as upfront payment for them to be able to buy materials. They have not been able to complete the contracts they had entered and the clients are demanding refunds and compensation.

The SME Concerned Depositors are continuing to retrench employees, with 1500 employees estimated to have lost their jobs since the bank closed its doors. In July alone 15 SMEs from this group are closing businesses because all their working capital is stuck in the SME Bank. Most of these entrepreneurs had their cars, houses and properties repossessed by other banks. Some who had children at private schools, colleges and universities have their children suspended from school due to non-payment. To try to assist each other, the group has also now engaged the services of psychologists as some of its members contemplate committing suicide.

What is clear in this saga is that the Namibian government owns 65 percent of the shareholding of SME Bank, making them technically the owners of the bank and obviously the government is not being liquidated together with bank.

It makes perfect sense then that government can pay out the SMEs to avoid further economic suffering of many Namibians affected by the saga. The government can then ‘sort’ each other out with its partners.

It was government, after all, who allowed the bank to operate with an illegal shareholding structure. It is the government who appointed the board running the bank. It is the government through the Bank of Namibia who closed the bank.

2018-08-08  Staff Reporter

Tags: Khomas
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