MSB sale faces legal hurdles

Barely one week after a bidders’ conference for prospective investors, the transaction to sell Malawi Government’s wholly owned commercial bank, Malawi Savings Bank (MSB), is facing legal hurdles which may delay its disposal.

Parliament has accused government of bypassing the National Assembly by putting up for sale the troubled bank without consulting the Legislature as the bank was established by an Act of Parliament.

However, Ministry of Finance, legal owners of the bank, say they have to consult the Attorney General (AG) on the legal implications of selling the bank before the bank is finally sold.

The Public Private Partnership Commission (PPPC) expects to sell the bank within a period of three months.

MSB risks closure by June 2015 if it does not raise K23.7 billion (US$50 318 471) for recapitalisation to meet Basel II requirements.

The bank is on its knees following its exposure to bad loans to “people who are politically exposed”, politically motivated government programmes and adventures as well as regulators’ blind eye to poor banking practices.

MSB evolved from the Post Office Savings Bank (POSB) founded by an Act of Parliament.

Since the establishment of the bank in 1995, MSB has been using the Malawi Post Office Savings Bank Act as Parliament was yet to enact the bank’s own Act.

Ministry of Finance, through the PPPC, announced the intention to sale the bank that is facing capitalisation challenges due to bad loans guaranteed by government.

One member of the Legal Affairs Committee of Parliament said government never took to Parliament the issue of selling the bank.

The parliamentarian said the committee would summon the Secretary to the Treasury, the Solicitor General and the Post Master General to explain the transaction.

Said the source: “They [officials] will have to explain what is happening to the bank, who will benefit from the proceeds, what would happen to the bad loans.

“The committee’s position is [for] government to stop the sale of the bank. If they [government] want, then they will have to repeal the Act first and deregister the bank and reregister it as a private entity and sell it. The committee finds it disgusting that government continues making decisions on public assets without involving Parliament.”

A finance law expert in the public service, who opted not to be mentioned, observed that government intentions to sell the bank flouted the Act that established POSB.

“MSB was founded on the Act that established the Malawi Post Office Savings Bank and it would not be sold without Parliament approval,” observed the finance law expert.

Government has already taken steps to sell the bank by engaging the PPPC which hosted a bidders’ conference in Blantyre on January 27 2015 to explain to the potential investors bidding procedures pertaining to the ongoing competitive tender involving Indebank and MSB, according to PPPC chief executive officer Jimmy Lipunga.

He said it was the desire of the commission to see the process completed as soon as possible; “perhaps no more than three months. We are confident that the process will not be a protracted one.”

However, Ministry of Finance spokesperson Nations Msowoya told The Nation that with regard to the law that established MSB and POSB, his ministry sought the opinion of the Attorney General.

He said: “[The Attorney General] which will advise us on the best legal route to follow. We hope to get the legal opinion before we start making evaluations on the expressions of interest that the PPPC is advertising.”

MSB is a successor bank to the POSB incorporated in 1910. The bank was established following the unbundling of the Malawi Posts and Telecommunications Corporation into two units—Malawi Posts Corporation (MPC) and Malawi Telecommunications Limited (MTL).

It was incorporated into a limited liability in June 1994 licensed to carry out commercial banking business.