Public incredulous that RBM failed to detect red flags that led to collapse of Alliance Capital Limited

Billions of kwachas have been lost which many government institutions, private Limited companies invested into financial service provider, Alliance Capital Limited, which the High Court Commercial Division has ordered that it should be liquidated as petitioned for by the Reserve Bank of Malawi (RBM) as the Registrar of Financial Institutions.

According to the court records, the government entities that invested in Alliance Capital include MRA (K1 billion); Export Fund (K7 billion); Malawi Police SACCO (K1 billion); MACRA (K500 million); MERA (K500 million); MEC (K800 million); Gaming Board (K800 million); Water Board (K600 million) and MUSCO (K500 million).

Some notable private companies and individuals include Nico Asset Managers (K3 billion); Zamara Pension Fund (K2 billion); Open Connect  (K2 billion); Britam (K500 million); Reunion (K500 million); Jimmy Korea Mpatsa (K2 billion) and several others.

In making the ruling on Friday in Blantyre, Justice Masauko Msungama was of the view that the Registrar of Financial Institutions proved on the requisite standard of proof that the company is insolvent and not likely to return to solvency within a reasonable time”.

“I, therefore, order that there be wound up,” ruled Msungama and went on to appoint RBM, as the Registrar of Financial Institutions, to be the liquidator of Alliance Capital Limited with immediate effect.

Justice Msungama made the determination in line with the provisions of the Financial Services Act and added that since RBM ordered shareholders, directors and senior management of Alliance Capital Limited from moving the companies assets and their personal assets outside the jurisdiction or disposing or transferring such assets without the prior notice and approval of the Registrar.

“I do hope that the Registrar is ensuring compliance with this restriction by the concerned parties regard being had to way the company conducted its affairs and the way it handled finances belonging to its clients.

“This restriction will help to ensure that there is a reasonable prospect, on the part of the company’s clients, of recouping funds which may have been wrongly utilised for the benefit of the shareholder, directors and Senior management of the company.

“I have deliberately avoided discussing the roles of other important players in this affair (such as the external auditors of the company and the Regulator himself) in order to avoid making conclusions (on whether they diligently performed their duties) without giving them an opportunity to be heard and also to avoid pre-empting the options of the company’s clients in relation to their efforts at recovering their dues from the company.”

Writing on his Facebook page, private practice lawyer, Joseph Kamkwasi was incredulous that as a Regulator, RBM never saw the red flags of mismanagement at the company and was concerned that taxpayers’ money would be used to pay back to all clients affected by this liquidation.

He hinted that RBM “should not regulate other banks and financial institutions” and suggested that the industry should have “an independent regulator” to also “regulate the Reserve Bank”.

He described the fiasco as grand larceny, while saying the public shouldn’t be surprised of scarcity of fuel and forex, challenges of electricity — saying appointments at these industry players are “strategic and cronyism”.

He described this is a very sad development, saying the loss of life savings in this manner is very depressing as old people’s lifetime savings were lost, saying he knows of a widow who came to his office “crying all the time she was there”.

Seasoned journalists and social issues commentator, Idriss Ali Nassah agreed, saying this is really “grand larceny and no less” with Davie Tambala saying: “This country is rotten to the core.”

Vinnie Shabani: “It’s always people who portray others as lacking integrity and themselves being decent who are stealing from Malawians”, while Inno Morgan Pondani wondered if investment companies have some liquidity reserves with the Central Bank and “if they do, is it enough to pay back to the entities owed?”

To which Duncan Msonthi said pensions funds are also regulated by the Central Cank but “only to be stolen by a fund manager — also regulated by the same Central Bank”.

Stain Mabangwe wondered “why it is so easy for Malawians to break the law. It’s as if we do not have a government with laws. Where is our capacity to enforce the law?”

Austin Kamanga was of the view that RBM ”itself is laden with internal frauds” and yet it is mandated to regulate another bank — “it doesn’t come as a surprise”.

Last month, RBM awarded all of its information and communications technology (ICT) tenders worth over K4 billion to foreign companies at the expense of competent Malawian-owned ICT service providers.

RBM announced its intentions in the print media to award tenders for Swift Infrastructure Upgrade to be shared between Technet and Mitra at a total value of close to K750 million.

Reliable sources in the industry reveal that Technet is a Zambian-owned company while Mitra is owned by a Rwandan Robert Benimana and Zimbabwean, Martin Masawi — which was recently under spotlight when RBM dubiously awarded them a tender despite revelation that they did not qualify.

RBM’s other intention to award a tender is for the Central Bank’s local area network (LAN) upgrade which has gone to Globe Internet Limited at close to K1.5 billion.

Tender for Automated Transfer System, e-Business Suite and Flexicube Upgrade has been given once more to Mitra Systems for US$1.7 million — which is over MK1.7 billion.

Thus giving all of the ICT services that Central Bank needs upgrading to non indigenous black Malawians at a total cost of K4 billion.

This is against what President Lazarus Chakwera campaigns for, that 60% of government business contracts should be given to competent Malawian-owned companies and a source within the ICT industry is of the opinion that “the President’s directives are just talk shows”.

“Private limited companies are offering business to Malawian-owned companies in support of President Chakwera’s campaign but it seems the Government agencies do not want to support the President,” said our source.

“We have competent Malawian-owned ICT service providers, who need to be supported for them to grow and for the government and the rest of the business industry to be supplied with best services.”

Just recently there was a public outcry on social media when Malawi Revenue Authority (MRA) published its intention in print media to award for Microsoft Windows Licenses to Dimension Data of Botswana for US$1 million.

Our investigation — based from comments on social media — supply of Microsoft licenses are a basic ICT skill requirement and according to an expert in the industry “even someone who has just finished their university education can do and yet MRA wanted to award a contract of US$1 million to a Botswana company against the background of the number of competent ICT companies in Malawi”.

Recently, Malawi Communication Regulatory Authority (MACRA) suspended the award of tenders to a value of K14 billion to non-Malawian companies by Public Private Partnership Company (PPPC) because the companies did not meet the requirements of having at least 20% local shareholding.

PPPC decided to forsake both this 20% requirement and the President directive to give 60% busineses to locals.

Chakwera made it compulsory that there should be deliberate policies to protect the local players in the business after observing that the local players are at the mercy of foreign firms.

RBM’s decision is also coming at a backdrop of the legal tussle that the Attorney General Thabo Chakaka Nyirenda has gone into with Fischer Consulting — a South African firm that was awarded tender to Malawi Traffic Information System (MalTIS) — an IT system which even a competent Malawian company could have supplied.

In conjunction with Motor Vehicle Spares and Accessories (Movesa), Fischer Consulting is failing to handover the system, five years after agreed initial handover time.

Last month, the AG was incredulous that an ICT contract was given to Movesa, a company with no ICT expertise, that subcontracted the deal to Fischer Consulting.