Author Archives: bankelele

Receiver to salvage Imperial Bank

Today the Receiver Manager of Imperial Bank, the Kenya Deposit Insurance Corporation and the Central Bank of Kenya issued a notice of, and a timeline for, the recovery of Imperial Bank.

This is a suprising about-turn from the perception for much of period since Imperial Bank was suddenly closed in October 2015, in which there appears to have been a leaning by the receiver-manager that Imperial was beyond recovery and that it should be liquidated. Today’s notice comes exactly a year after NIC Bank was appointed to liquidate Imperial bank assets and pay off Imperial’s depositors.


Now, the envisioned recovery process is similar to one being used for Chase Bank which is open, but still in receivership. Expressions of interest are invited from strategic investors. They will be evaluated and the short-listed ones will be given further confidential data to enable them to do due diligence and come up with formal offers that they will present to the to the receiver-manager to decide on. The process will take about a year.

This is a nice sign, but is it one that should have happened earlier? In the same period the fate of other troubled banks in the region has been concluded – in Uganda (Crane and Imperial) and in Rwanda (Crane, which was bought by Kenya’s CBA last week from DFCU of Uganda.

Sports Betting – Part IV: Gambling Companies Protest Kenya tax

Today brought some shocking news that, following the passage into law of the 2017 Kenya Finance Bill, in which the President had amended an increase in the tax on gambling to 35% tax, in place of an earlier 50% one proposed at Parliament, Sportpesa, the apparent industry leader of sports betting and gambling would be ending all its local sponsorships.

Sportpesa has a sizeable local sports sponsorship portfolio, supporting several local sports ventures; In rugby (the Kenya Rugby Union, Kenya Harlequins), and in soccer (Kenya’s premier league, a Super 8 tournament, Football Kenya company, as well as individual teams of Gor Mahia, AFC Leopards, Football Kenya, Nakuru All Stars).

Sportpesa started operating in Tanzania just two months ago, but recently hosted a soccer tournament in Tanzania featuring top Kenyan and Tanzania teams, which was won by Gor Mahia, earning them a pre-season match with Everton, the English premier league team, on July 13 in Dar-es-Salaam.

The strong-arm tactics of Sportpesa look similar to ones tried by Kenyan banks before the President went ahead and signed an interest capping bill into law that the banks had strongly opposed. The effects they warned about now seem to becoming true with reduced lending to businesses, and liquidity in the economy.

The sports betting and gambling companies push back also comes at a time when Kenyan sports face myriad issues like doping allegations, an ineffectual sports minister and fatigue and funding cutbacks by other large sports sponsors including Multichoice (DStv), EABL, KCB and Safaricom over management issues with different sports associations and teams. While gambling companies like Sportpesa had stepped up, the sports’ funding sources now appear in limbo.

Concern about Kenya Banks

Jaindi Kisero writes about Kenya banks this week with a note of concern:

I have been reading through data based on a review of the Q1 2017 regulatory disclosure that banks must publish quarterly in fulfilment of the requirements of prudential guidelines by the Central Bank of Kenya. The statistics make for very depressing reading.

  • Big banks are not lending to smaller ones; they are concentrating on lending to their fellow tier 1 banks.
  •  Small banks are lending to one another at rates more than double what the big one are doing among themselves.
  •  A number of small banks have been taking deposits at rates higher than the 7%  limit set by the rate-capping law.
  • The number of banks that are utterly dependent on the Central Bank window have increased to four.
  • A number of the small banks are yet to reprice their loans and are, therefore, still charging customers rates above the rate cap of 14%, running the risk of regulatory penalties.
  • Banks have continued to lend money to companies that are not able to pay back. The banks are usually reluctant to discontinue lending out of the fear that such action will recognise their own losses on the loans.

In sum, the data reveals that too many of our small banks are facing a dangerous cocktail of declining margins, declining liquidity, and deteriorating asset quality.

Tegeta Escrow

Yesterday Harbinder Singh Sethi and James Buchard Rugemarila were charged with obtaining $22 million and 309 billion Tanzania shillings from the Bank of Tanzania in what’s been dubbed the Tegeta Escrow case.

Perhaps the best summary of the Tegeta Escrow case comes from Africa Confidential (Vol 55 – N° 19) dated 26 September 2014 –

  • Heads may be about to roll after revelations about the contested transfer of 200 billion Tanzania shillings (US$124 million) from an escrow account in the central bank, the Bank of Tanzania, to Harbinder Singh Sethi’s Pan Africa Power Solutions Tanzania Limited (PAP, AC Vol 55 No 13). The complex details of how Sethi acquired Independent Power Tanzania Ltd. (IPTL) and then raided the BoT account have now been pieced together by two opposition members of parliament, Zitto Kabwe and David Zacharia Kafulila, with the help of The Citizen and Mwananchi newspapers.
  • If Sethi’s critics are proved right, this is the country’s biggest corruption scandal to date. Based in South Africa, Sethi is a Tanzanian-born businessman with a reputation for dubious past dealings in Tanzania, Kenya, South Africa and the United States. Sethi claims to have bought 70% of IPTL’s shares from Malaysia’s Mechmar Corporation, now in receivership. Yet Standard Chartered Bank Hong Kong (SCB-HK) claims to have purchased IPTL’s debt for $76 mn. in August 2005 and says Mechmar was already in liquidation when Sethi claimed to have acquired the shares.
  • The Tanzanian behind IPTL, former BoT employee and self-styled international consultant James Rugemalira, is also under investigation over the $75 mn. that he was paid by Sethi for his company’s 30% share in IPTL.
  • Both Sethi and Rugemalira have lived up to Kabwe’s description as ‘aggressive litigators’. Their strategy has been to steer the acquisition of IPTL away from non-Tanzanian jurisdictions (Malaysia and Britain), from other interested parties (SCB-HK) and lawyers, receivers and liquidators in Malaysia and Hong-Kong. In this way, SCB-HK’s property rights in IPTL have been summarily dismissed and attempts by SCB-HK’s lawyers to negotiate a compromise with Tanesco have all been blocked. Furthermore, the findings of the International Centre for Settlement of Investment Disputes over IPTL’s overcharging Tanesco for power supplied and the proposal for a solution involving SCB-HK claims have been ignored. Tanzanian courts have been complicit in rubber-stamping IPTL’s transfer to Sethi’s PAP. None of this helps improve the country’s image abroad.

Other

  • The unfolding details about the Tegeta Escrow case resulted in the removal of four ministers back in 2014. On Saturday, the energy minister, Sospeter Muhongo, resigned over his alleged role in the affair last year that saw $180m (£116m) taken from the country’s central bank. The move follows the removal from office of the attorney general, Frederick Werema, the energy secretary, Eliakim Maswi, and the housing minister, Anna Tibaijuka, who was sacked over the transfer of $1m to her private bank account Chairs of three parliamentary committees have also resigned following the scandal: Victor Mwambalaswa, energy and minerals committee; Andrew Chenge, parliamentary budget committee; and William Ngeleja, legal affairs and governance committee.
  • Back in December 2014, Stanbic Bank Tanzania released a short statement on the-then parliamentary report on Tegeta Escrow and their role.

 

Kenya Bank Receivership Updates: June 2017

Chase Bank: The Business Daily has unveiled the results of the bidding for Chase Bank in an ongoing receivership exit process that has been organized by the Central Bank of Kenya (CBK) .. “France’s third-largest bank by assets, Societe Generale, and Mauritius-based SBM Holdings are the frontrunners to acquire troubled Chase Bank and its subsidiary, Rafiki Microfinance.. The two have emerged top of the list of investors, including KCB Group, I&M Bank, Stanbic Bank and South Africa’s First Rand, who had expressed interest in taking over the Kenyan lender.”

Dubai Bank: The bank is in liquidation and the Kenya Deposit Insurance Corporation is calling on all depositors and creditors of the bank to show up and file their claims. During the court process, before liquidation, few depositors showed up after bad debts stalled the closed bank.

Imperial Bank: A court has just granted a 90-day extension of the receivership. It is “without prejudice” which means that the extension does not imply an endorsement of any the ongoing discussions between the shareholders of the bank, the CBK, and the KDIC. The statement ends with “a tentative timeline will be issued in the coming days.”