Government is set to sell part of Malawi Savings Bank (MSB) to the private sector in a move aimed at saving the wholly-owned State bank amid concerns about the strength of its capital base, documents The Nation has seen show.
And in moves that inside sources link to expected private sector participation in MSB, government has since transferred to the Office of the President and Cabinet (OPC) the bank’s chief executive officer (CEO) Ian Bonongwe and ordered management to stop making daily decisions, a development employees say has brought tension at the financial institution.
In a December 22 2014 letter, Secretary to the Treasury (ST) Ronald Mangani ordered the Finance and Audit Committee of the MSB Board, through its chairperson Jimmy Lipunga, to take over the daily operations of the bank.
But two days after the ST’s directive, Lipunga tendered his resignation from the board effective December 31 2014.
The resignation has technically rendered the bank leaderless as Lipunga, who is also chief executive officer of the Public-private Partnership Commission (PPPC), is yet to be replaced as committee chairperson, according to a source.
Explaining his resignation written on December 24 2014, Lipunga said he feared conflict of interest as it is the PPPC that will facilitate the bank’s capitalisation process.
According to Mangani’s November 21 2014 letter to MSB board chairperson Dr. Graham Chipande, Bonongwe was moved to OPC as an adviser with immediate effect.
However, impeccable sources at the bank confided that as of January 7 2015, Bonongwe, currently on a week-long leave, was still reporting at MSB in his capacity as CEO.
In a telephone interview on Thursday, Bonongwe said he was not aware of his secondment to OPC.
He could not comment further on the developments taking place at the bank, saying he was on leave.
But in the letter by the ST Ref no. ST/3/60, Mangani said Bonongwe should be informed of his secondment to OPC.
Reads the letter in part: “I write to inform you that government requires the services of Mr. Ian Bongongwe in the Office of President and Cabinet as an adviser.
“Accordingly, Mr. Bonongwe should be seconded to OPC with immediate effect. During the duration of this secondment, Mr. Bonongwe will continue to receive his remunerations and benefits from [MSB] in accordance with his running contract. The government will reimburse those expenses to MSB on a quarterly basis.
“You are, therefore, kindly requested to inform Mr. Bonongwe about this secondment so that he may take it up immediately.”
In the other letter of December 22 2014 to Chipande—Ref no. ST/3/60 and seen byThe Nation, on the way forward, Mangani said government had resolved to proceed with recapitalisation of the bank by inviting private sector participation.
Further reads the communication: “In this regard, I wish to instruct that the MSB board, through its Audit Committee, should assume responsibility for the day-to-day operations of the bank. Further, the chairperson of the Audit Committee should report to my office in respect of all major decisions being undertaken.
“MSB management should implement decisions only after consulting with the Audit Committee chairperson and/or my office.
“To the extent possible, the Audit Committee chairperson should be a person who will not be involved in any way with the implementation of the recapitalisation resolution.”
Technically, this meant that Lipunga, by virtue of heading the PPPC, was ruled out from making day-to-day decisions of the bank as the chair of Finance and Audit Committee of the board as per ST’s instructions.
With Lipunga out and no one replacing him, a source at the bank said it was strange how the bank was going to operate. Apparently, Lipunga was the only one among the board members with an accounting background.
Said the source: “Even if Mr. Lipunga was not a director on the board, by virtue of the privatisation exercise, he is automatically supposed to sit on the board. He was initially appointed in his personal capacity. We are faced with a crisis and complete disregard of corporate governance principles.”
However, a financial expert with knowledge on how banks are supposed to operate said any change in the management of the bank is supposed to be reported to the Reserve Bank of Malawi (RBM). We could not immediately get the position of the central bank on the matter.
One of the board members, who did not want to be mentioned, said the board of directors of the bank only received the letter of instructions for management to stop making daily decisions on January 7 2015.
Said the board member: “As a board, we are yet to meet and discuss the way forward, probably next week. At the meeting, we will discuss whether to respond to the ST’s directive or seek clarification as regarding what the ST meant.
“Much as the ST represents the shareholders of the bank, it is the requirement that the Reserve Bank of Malawi is supposed to know and vets all the people who manages the bank on daily basis.”
Ministry of Finance spokesperson Nations Msowoya said the bank was not going through recapitalisation, but rather restructuring to play an important role in Malawi’s financial market.
The development has come against the background of government pondering on its resolutions to recapitalise MSB to meet the Basel II recapitalisation requirement.