The Malawi Law Society (MLS) and Sunduzwayo Madise, an expert in financial services regulation, have said Parliament has no legal basis to challenge the proposed sale of State-owned Malawi Savings Bank (MSB).
The two parties argue that such an action by Parliament would be tantamount to usurping the powers of another arm of government, the Executive.
The Public Private Partnership Commission (PPPC) has opened bids for the sale of MSB where FDH Bank was the only bidder amid a challenge the Budget and Finance Committee of Parliament is leading to stop the sale until they consult stakeholders, including ordinary Malawians.
The parliamentary committee hinted it would seek legal redress if government went ahead with the transaction.
But MLS secretary Khumbo Bonzoe Soko said in an interview on Sunday that much as members of Parliament (MPs) had the competence to demand accountability from the Executive on the sale of MSB, the Executive remained the shareholder of the bank.
Said Soko: “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 their shares in the bank.”
However, Soko asked the Executive to live up to its obligations because it holds its stake in the bank on behalf of and for the interest of all Malawians.
Madise, who is also an expert on corporate finance law, said MSB was registered under the Companies Act, but it was not a statutory entity created by a Statutory Act of Parliament for the MPs to have a say on its sale.
He said: “It does not matter who owns MSB. For purposes of corporate law, it is a private company. Now, if we compare it to the old Post Office Savings Bank, that one was created by an Act of Parliament. Therefore, Parliament had a role in whatever happened to it.
“But Parliament has no direct role [to approve or otherwise] the sale of a company registered under the Companies Act.”
Madise said had it been that MSB was created as a statutory corporation, the Minister of Finance could have been held accountable to explain why shares were sold and whether due diligence was conducted before and during the sale.
Emphasised Madise: “But Parliament has no business approving the sale of government shares in a private entity. It boils down to the doctrine of separation of powers.”
Madise, who teaches law at Chancellor College in Zomba but currently pursuing further studies in the United Kingdom, also criticised government for not privatising the bank when it was first created, saying government had no business operating a commercial bank to avoid political meddling as it has happened with MSB.
“Political meddling affected its performance and even when it flouted the Basel Capital Adequacy Requirements, the Governor of the Reserve Bank could not do much really. His hands were tied.
“Now it seems the governor has had his hands loosened to fully act on the bank and demand that it complies with minimum capital adequacy rules,” he said.
Madise also described as an exercise in futility the move by the Budget and Finance Committee to seek views from people on whether the bank should be sold because the Minister of Finance had not flouted any laws.
The Budget and Finance Committee had placed adverts calling for submissions on the sale even after hearing reports that bids had already been opened.
Peter Chakwantha, chairperson of the Legal Affairs Committee, which is also challenging the sale, said much as government had not flouted any law, there was need to review the legislation which empowered the Executive to get rid of a national asset without consulting Malawians.
“We believe there is a need to back to the people and reengage them so that recommendations towards its sale should be inclusive,” he said.
A member of the Budget and Finance Committee, Peter Dimba, who moved a motion in Parliament to halt the sale, has said if government was sincere about raising capital to save the bank then it could do so through an initial public offer (IPO) on the Malawi Stock Exchange (MSE) to enable all Malawians participate in the running of MSB.
“Through this process, one investor is simply robbing Malawians of their asset,” Dimba said.
Besides MSB, government is also offloading its shareholding in Indebank Limited where five bidders were shortlisted.