BBS DEPOSITORS UNEASY ABOUT SAFETY OF THEIR P2.5bn
• Commercialisation process likely to be delayed • BSE stops trading of BBS shares • Depositors panic over BBSL wars • Financiers also jittery
The ongoing boardroom brawls at aspiring commercial bank, BBS Limited, are escalating instability, with investors and depositors alike panicking over the safety of their money, The Business Weekly & Review has established.
In an interview, Head of Marketing and Communications/Company Secretary Sipho Showa said the “selfish and illegal” decisions taken by the board are creating instability within BBS Limited, calling the decisions unnecessary.
“As we speak, BBS Limited shares have been suspended from trading by the Botswana Stock Exchange Limited,” Showa said in an interview. “Financiers are jittery and depositors are also panicking and calling non-stock. We are working around to clock to stablise the situation.”
As at 31 December 2020, BBS total savings and deposits amounted to P2,494 billion after declining by 14 percent from a balance of P2,885 billion as at 31 December 2019. Total balance sheet reported was P4.088 billion as at 31 December 2020.
On Wednesday this week, the Chief Executive Officer (CEO) of the BSEL Thapelo Tsheole halted trading of BBS Limited shares on the Serala OTC Board in terms of Section 8.3.1(c), generating heated debate over whether the BSE was overreaching in exercise of its oversight. Although this was a corporate governance issue, some argued that this was an internal matter that did not warrant such action by the BSE.
Observers argue that the discretion should have lied with BBS itself to halt its shares. Others say if the market was left to play out itself on its own, it would have sparked a depreciation of the share price. While some investors would sell off, others would have taken the opportunity to buy low.
But it is important to understand that with the objective of maintaining a fair, efficient and orderly securities trading environment, the BSE is empowered to impose a trading halt or trading pause on one or more securities in order “to obtain a clarification from the company concerning a rumour or report regarding the company which has been brought to the attention of the Exchange and which may have an effect on the price of a listed security”.
The BSE moved to halt trading after a full scale brawling between the board chair and the MD emerged on social media on Tuesday night. The BBS Limited board of directors moved to dismiss Managing Director (MD) Pius Molefe and Showa purportedly for insubordination and failure to obey the board’s instructions.
Molefe and Showa had treated as “unlawful” two resolutions by the board to extend their expiring contracts as board directors by 90 days and to postpone the Annual General Meeting (AGM) by 90 days. About five board directors will see their terms end on 26 April, four days before a scheduled AGM. The board members were allegedly against inclusion of other candidates to compete for nomination as board directors, hence their decision to want to postpone the AGM and extend their terms.
When Molefe and Showa failed to oblige, it is said that their employment was terminated, albeit unlawfully, according to Molefe and Showa’s attorneys. The attorneys have since told Molefe and Showa to ignore their dismissals and to instead carry on working. However, a public spat has ensued between the executive managers and the board.
Although there were some delays, BBS Limited was just about to clinch a commercial banking licence, which was expected to make it more competitive as Botswana’s only and first indigenous commercial bank. According to a capital market analyst who prefers anonymity, the commercialisation of BBS Limited was going to make it highly profitable.
“As the first Botswana owned bank, BBS Limited was going to get preference from government institutions, the private sector as well as Batswana in general,” said the analyst. “The diversified commercial banking product offering was also going to bring in a lot of revenue. The boardroom wars and legal battles will likely drag the commercialisation, which will affect investor confidence.”
Similarly, the analyst noted, depositors may become uncomfortable with having their funds housed in an unstable financial institution. “With the infighting, even the management is likely to lose focus on key issues. Some investors and depositors may have had confidence in the current leadership but lack of a smooth transition may lead them to think otherwise,” the market analyst pointed out.
After demutualisation, BBS Limited commenced trading on the Botswana Stock Exchange’s Serala OTC board - which is a platform meant for small and medium enterprises to facilitate for the secondary trading of shares in companies who list not to raise capital but to familiarise themselves with the stock exchange regulations - on 4 September 2018.
BBSL recorded a loss of P14.652 million compared to a loss of P35.761 million for the year ended 31 December 2019. Since April 2020 up to the end of December 2020, Botswana Building Society Limited (BBSL) says it assisted 555 mortgage customers with a payment holiday.
Efforts to reach the BBS Limited board chair, Pelani Siwawa-Ndai, proved futile.