RBM nods to FMB, OIBM merger

The Reserve Bank of Malawi (RBM) has permitted the merger between First Merchant Bank (FMB) and Opportunity International Bank of Malawi (OIBM) to go ahead.

The Malawi Stock Exchange (MSE)-listed FMB announced in June this year its intention to fully take over Opportunity Bank of Malawi (OBM). However, the deal was subject to regulatory approvals from the central bank.

FMB’s transaction is second major deal this year, after FMB also acquired a stake in Barclays Bank of Zimbabwe.

In an interview on Thursday, RBM spokesperson Mbane Ngwira said in granting the approval, the Registrar considered interests of depositors and financial stability.

According to Ngwira, the sale of the bank was a least cost resolution option for OIBM considering its dismal financial condition.

“With the sale, OIBM’s depositors’ funds have been protected and the bank’s customers will continue to enjoy banking services previously provided by OIBM,” said Ngwira.

The central bank spokesperson further said in granting the approval, the bank also took cognizance of the impact of the acquisition on competition.

“In our assessment, the impact would be minimal, if any, as OIBM was not offering any unique products/services in the market. While competition from the perspective of fewer institutions could be an issue, competition in terms of product scope and pricing is not expected to be significantly different with the acquisition,” said Ngwira.

He said from an intermediation perspective fewer but stronger banks are better placed to be competitive than many but weak and fragile banks.

This means only Competition and Fair Trading Commission (CFTC) is yet to approve the deal as a regulator.

According to CFTC’s director of consumer welfare and education, Lewis Kulisewa, the assessment is underway and will be completed within the 45-day statutory period for assessing mergers and acquisitions.

As at the end of 2016 FMB’s total assets were at K327 billion. The bank posted a K7.3 billion profit last year.

FMB’s market share in terms of assets as of July 2017, was 15.3percent while that of OIBM was 1.5 percent which according to RBM after the merger, the market share will not change significantly.

The deal ends OIBM’s 14 years’ presence and cuts the number of commercial banks to nine.

Besides Zimbabwe, FMB has operations in Mozambique, Botswana and Zambia where it trades as Capital Bank.

In the meantime, the bank plans to transfer its shares in FMB to Mauritius-based FMB Capital Holdings (FMBCH) in a move that will see FMBCH listing on the MSE and FMB delisting from the local bourse. n

No governance sense in four-year-old audit reports

With Ephraim Munthali

We are in 2017—well, towards the end of 2017—and what are our legislators, specifically those in the Public Accounts Committee of Parliament (PAC) doing?

They are busy scrutinising four-year-old audit reports. Most of the folks who were in charge of the Ministries, Departments and Agencies (MDAs) have been moved around or left government service altogether.

These meetings are four years late and one wonders how this discussion of near half-decade old accounts will help the suffering taxpayer footing the bill for these endless grand-standing at the Chinese-built Parliament Building in the capital, Lilongwe. Going by this trend, it means the accounts of 2017/18 financial year—and all the thieving and mismanagement mess currently going on—will only be questioned by the oversight third arm of government somewhere around 2022?

And by then, half of the current principal secretaries and MDA leaders will have gone farming or whatever retired civil servants do after decades of public service—which can sometimes be self-service—to their country and, who knows, themselves.

Apart from fattening the wallets of members of Parliament (MPs) for asking obvious and sometimes not-so-thoughtful questions, what purpose will these parliamentary talk-shows serve?

Sometime last year, we reported that government had since 2011 spent K3 trillion without being externally scrutinised. And this period without the annual audits—a crucial part of the financial reporting process—covered most of the era in which a PricewaterhouseCoopers (PwC) report the other year said K577 billion—later reduced to K236 billion—may have been stolen during the five years up to December 2014.

At the time we published the story, experts said the lack of the Auditor General’s (AG) annual audits further compromises the integrity of public finances already on trial following Cashgate—the systematic plunder of public funds which continues to cripple government through the multi-billion kwacha heists and resultant direct budgetary support freeze by donors angry at the blatant fiscal sleaze.

One of the reasons for the AG’s report blackout is the delay by the Ministry of Finance, Economic Planning and Development in submitting consolidated annual accounts to the supreme audit institution.

Yet, Section 83 of the Public Finance Management Act (PFMA) stipulates that the Secretary to the Treasury shall, as soon as practicable, but not later than 31 October of each year, send to the Auditor General the financial statements of that year.

The second is gross underfunding of the National Audit Office (NAO). Don’t get me wrong. PAC still has to go through these accounts and hold the controlling officers—at least whoever is occupying those offices today even though they may not have been in office at the time the funds were being appropriated—accountable. On the other hand, we know that no one gets penalised after these hearings.

But my point is that PAC should haul Treasury and NAO to explain why it takes so long for the committee to have audited accounts.

Second, the committee should also push for better funding to NAO so that they cut on the time it takes to audit government accounts. It is disappointing that the MPs only seem to spend weeks nit-picking issues from old accounts instead of demanding timely reports.

Last year, corporate governance expert Anthony Mkumbwa and the then Institute of Chartered Accountants in Malawi (Icam) chief executive officer Evelyn Mwapasa said government is putting taxpayers’ money at grave risk by not having its accounts externally audited in time.

“The above scenario [four years without AG’s annual audits] is unbelievable. If this is the state of affairs then the country is in a big crisis. Integrity of financial reports coming from an accounting system that is not audited and accountability of tax payer’s money is under serious question,” is what Mkumbwa said.

On her part, Mwapasa had said the AG’s annual audits are at the core of good governance; hence, a serious oversight whenever they have not been carried out [in time].

“Government is a business for the people.  The officials running the Government of Malawi are stewards of the resources of the people of Malawi. Stewardship means the acceptance of responsibility to shepherd and safeguard the valuable resources of others.  Every steward has an obligation for financial reporting.

“The financial reporting process includes the production of financial reports by the stewards themselves and the independent audit of those reports. The audit is a very important part of the financial reporting process because it provides independent assurance on the reports to the owners,” she said.

When The Nation first reported the issue, both PAC and its sister body, the Budget and Finance Committee of Parliament, declined to comment on the matter.

But they are happy to sit for weeks in Lilongwe to discuss four-year-old audits.

Maybe it makes personal financial sense as it gets them allowances.

But there is no governance sense whatsoever in this. n