The High Court in Blantyre has allowed government to proceed with the sale of State-owned Malawi Savings Bank (MSB).
The court vacated an injunction the bank’s employees obtained earlier, stopping the sale of the beleaguered bank riddled with ‘toxic’ loans, arguing the employees had no sufficient interest in government’s decision.
This follows government’s move, through the Attorney General’s (AG) office, to challenge the employees’ decision and applied for the discharge of an order that was granted allowing judicial review of the decision to sell the bank.
But the MSB employees, through their lawyer Lusungu Gondwe, have said they are leaving all options on the table, including an appeal against the latest ruling.
High Court judge Kenyatta Nyirenda, in his ruling delivered on April 30 2015 said the applicants (the employees) lacked locus standi (interest) to pursue an application for judicial review of the challenged decision to sell the bank.
Nyirenda said: “In the final analysis, the court rules that the leave that was granted herein cannot stand. It is, accordingly discharged.
“The upshot of the court’s ruling is that there is no basis for the sustenance of the order obtained by the applicants staying the challenged decision. Consequently, the order staying the challenged decision is also hereby discharged.”
Government’s winning argument, presented in court——where three respondents namely Minister of Finance, Public Private Partnership Commission (PPPC) and MSB were dragged by AG Kalekeni Kaphale——was that the MSB employees did not demonstrate that any of their rights or freedoms had been or would be violated by the proposed divestiture of government’s shares in the bank.
Kaphale argued that the judicial review the employees were seeking were frivolous, vexatious and an abuse of the process of the court because under the Public Private Partnership (PPP) Act, there is absolutely no need, in the case of a divestiture, for the particular business sector to be identified in the Act as a key priority area, as was argued by the applicants.
Kaphale argued: “Under the Public Finance Management Act, the decision to divest only needs Cabinet approval and not parliamentary approval.
“Under the Public Finance Management Act, there is no requirement for parliamentary approval before a decision to divest is made and carried out and failure by the minister to give annual reports of the performance of a statutory body does not prevent the implementation of a divestiture decision.”
He argued that under the Malawi Stock Exchange listing rules, a financial institution that has not made profit for a continuous period of three years cannot be allowed to list on the local bourse and invite the general public to acquire shares in it; hence, there is no alternative way to recapitalise MSB other than to bring in a strategic equity partner.
Lameck Ntoza, Chifundo Kalimbakatha and Sarah Ligomeka, were pursuing the matter in court in their capacity as MSB employees, excluding executive management of MSB.
As it stands, government, through PPPC, is free to go ahead and negotiate with the preferred bidder, FDH Financial Holdings Limited.
PPPC unveiled FDH Financial Holdings Limited as the preferred bidder to become the strategic partner after offering K4.9 billion for the 75 percent of the bank’s shares.
Government, seemingly desperate to sell the bank, is likely to move on with speed and continue with the transaction unless the employees take another legal option such as an appeal in the Supreme Court.
MSB, struggling to meet some of Reserve Bank of Malawi (RBM) requirements under Basel II to operate, has stirred heated debate after government issued K6 billion promissory notes for the so-called toxic assets.
The issuing of the promissory notes has been perceived as a bailout for 13 private sector players, some of whom are politically connected to the governing Democratic Progressive Party (DPP), who failed to service their loans.
Treasury spokesperson Nations Msowoya recently told our sister paper The Nation that government took over the MSB toxic loans because the bank failed to recover the debts for a long time, adding that the decision was to deal with the toxic loans pragmatically; “not protecting any individuals”.
Msowoya said government was creating a Special Purpose Vehicle/Debt Collection Unit to ensure that the loans are repaid.
But some commentators, including leader of Opposition in Parliament and MCP president Lazarus Chakwera, have faulted the decision by government to take over individual loans owed to the bank.
Meanwhile, some Malawians under the banner of ‘Concerned Citizens’ will this Friday demonstrate and petition Speaker of Parliament in Lilongwe over the impending sale of MSB.
The ‘Concerned Citizens’ are also against government’s move to clear toxic loans totalling K6 billion owed to the bank by private sector players.
Billy Mayaya, one of the organisers, said in an interview on Friday they want to demand transparency and accountability regarding the sale of MSB.
Mayaya said: “We want to protest in the strongest terms the disposal of toxic assets which is in essence a cover up of huge loans made out to high level politicians and businesspersons with connections to government.
“We are perturbed by the fact that banks normally hound customers who have defaulted on their repayments yet here we have a scenario where people with political power and connections want to offset these loans using taxpayers’ money.”
Mayaya said as citizens and civil society, they are not going to let this happen on their watch, arguing this is a scenario similar to Cashgate—the systematic plunder of billions of kwacha from Treasury.
He said they want Parliament to investigate the matter fully and bring the culprits to book.
Mayaya said: “We demand that those who defaulted must repay their loans, failing which their assets must be seized.”
The activist said the demonstrators would gather around Area 18 Roundabout and proceed to the Capital Hotel Roundabout and make a U-turn up to the National Assembly where a petition will be read out and handed over to the Speaker, Richard Msowoya.
“From there, we shall proceed to Capital Hill to the Ministry of Finance where we shall read out another petition, which will be handed over to the Secretary to the Treasury Ronald Mangani. Thereafter, demonstrators will peacefully disperse.”