Msb sale saga refuses to die

The controversy surrounding the sale of majority stake in State-owned Malawi Savings Bank (MSB) refuses to die, with opinions from legal practitioners clashing as the government moves to move on with the sale by Monday.

A legal opinion by renowned lawyer, Kamudoni Nyasulu, sought by the Budget and Finance Committee of Parliament, argues that the divestiture of MSB without parliamentary approval cannot go beyond 49 percent.

Government, through the Public Private Partnership Commission (PPPC), is in the process of disposing of controlling stake in the struggling bank to find a strategic partner, and it is only FDH Bank Limited that has expressed interest to buy a stake.

Minister of Finance, Economic Planning and Development GoodallGondwe told the media in Lilongwe two weeks ago that FDH Bank Limited is offering K4.9 billion to buy 75 percent stake in the banks.

At a press conference yesterday in Blantyre, PPPC chief executive officer, Jimmy Lipunga, said the value of MSB needs to be revised.

“We believe the value should be pushed upwards,” he said.

But in a legal opinion seen by Weekend Nation, Nyasulu, who is managing consultant at KamudoniNyasulu, Law Consultants, opined that as a statutory body, MSB was “commercialised” and is therefore a “company” as defined by Section 2 of the Companies Act and or “State-owned enterprise” as defined by Section 2 of the Public Private Partnership Act.

It said the bank is incorporated wiststoryth 100 percent shares owned by government, its money, 100 percent shares, and assets are public money, public funds, public resources and of public interest.

“MSB is, therefore, subject to Public Finance Management Act, Public Audit Act and Public Procurement Act, which are subject to parliamentary oversight. Public property shall be disposed of by an Act of Parliament,” he said.

“The Executive cannot make law, but changing MSB from a statutory body to a private company without government controlling share, the Executive will be making law. Divestiture of such a body without parliamentary approval cannot go beyond 49 percent share. How much space was given to the consultation on public interest in this divesture?” queried Nyasulu.

However, recently, the Malawi Law Society (MLS) and a legal expert in financial services regulation SunduzwayoMadise said Parliament has no legal basis to challenge the proposed sale of MSB.

They argued that such an action by Parliament would be tantamount to usurping the powers of another arm of government, the Executive.

“Our [MLS) view is that there is no legal basis for the legislators’ insistence that they approve the MSB sale. And while as people’s representatives, members of the National Assembly are competent to demand accountability from the Executive on this issue, they cannot strictly and legally speaking usurp the shareholders’ powers to decide on what to do with the shares in the bank,” said MLS secretary KhumboSoko in a recent interview with our sister paper, The Nation.

On his part,Madise argued that MSB was registered under the Companies Act, but it was not a statutory entity created by a Statutory Act of Parliament for the members of Parliament (MPs) to have a say on its sale.

“It does not matter who owns MSB. For purposes of corporate law, it is a private company. Parliament has no direct role [to approve or otherwise] the sale of a company registered under the Companies Act,” he said.

On Constitutional dictates, Nyasulu’s legal opinion said courts can declare invalid, not just laws, but also decisions of the Executive that are inconsistent with the Constitution or any law.

It further said that legal and political authority comes from the people and must be exercised “solely to serve and protect their interests”.

“These, and all principles of national policy, can be applied by the court in determining the validity of decisions of the Executive. Among powers conferred by the Constitution, Parliament can, debate and vote motions relation to any matter, take all actions incidental to and necessary for the proper exercise of its functions,” he said.

Nyasulu wondered whether Parliament was entitled to debate and/or vote on sale of MSB, and if at all the action taken to suspend the sale was “incidental to and necessary for the proper exercise of its functions?”

The legal opinion also tackled on the process that has to be followed and objectives of the objective of Public Private Partnerships (PPP), which, among others, are to assist in achieving better value for public expenditure by government; promote private sector investment in infrastructure and services. It also encourage sparticipation by resources owners in public-private partnerships and provide assurance for private interest in those partnerships.

He said the objectives of the divesture such as in the PPP of MSB are, among others, to foster increased efficiency in the economy; increase competition and reduce monopoly in the economy and promote participation by the Malawians public in infrastructure and state owned enterprises.

The legal opinion queried whether enough was done to promote and comply with the process and whether the process complied with the Public Procurement Act.

Lipunga said MSB’s toxic assets and bad debts were taken away from the negotiations over its sale.

“There is suggestion to engage an independent evaluation committee to come up with a proper pricing. Issue of toxic assets will be discussed by MSB, the government and the Ministry of Justice on efforts to recover the debts,” Lipunga said.

He further disclosed that the companies that did well on Indebank, another State entity in which government wants to dispose of its shares, were National Bank of Malawi, FMB, Prudential Holdings of Mauritius, Mulli Brothers Holdings and Commercial Bank Africa of Kenya.

However, PPPC has been unable to designate the preferred bidder on Indebank because of material issues that came out during the bidding process. n