NBFIRA steers clear of the FirstCred mess

The Non-Bank Financial Institutions Regulatory Authority (NBFIRA), which regulates pawn- shops, insurances and several other, non-bank financial institutions like the trouble-ridden FirstCred, says it will not comment on the ongoing mess at FirstCred so as to allow shareholders to resolve their issues. In an interview with The Business Weekly & Review , Boa Ntebele, Head, Communications & International Affairs, said the regulatory authority confirms that it regulates FirstCred and that the Authority is aware that the creditors of FirstCred have had differences that resulted in court action between them and FirstCred, which further resulted in a judicial management order by the High Court. [ihc-hide-content ihc_mb_type="show" ihc_mb_who="1,2,3,4" ihc_mb_template="1" ] FirstCred was, placed under judicial management after some creditors had initially applied for its liquidation. The Business Weekly & Review approached the Authority for a clear update on the state of FirsCred at present. This publication’s curiosity was prompted by what unfolded in court where FirstCred was said to have been insolvent and that it was struggling to meet its financial obligations. The Business Weekly & Review wanted to establish whether NBFIRA was not obliged by law to carry out an investigation or assessment of the state of FirstCred and make a decision that favours investors, creditors and the general public. Currently, it appears that some investor funds are at risk at FirstCred. This is informed by an affidavit filed by the CEO of FirstCred, Dudu Garekwe, which opposed a petition to liquidate the company by a group of creditors of FirstCred. Garekwe has blamed the company’s former directors and shareholders for the micro-lender’s cash constraints and declared herself and current management free of any wrongdoing. In her submission before court, she sought to, and successfully blocked, the liquidation of the lender, arguing that the company’s cash crunch is in “no way attributable to the business management and acumen of the current directors and shareholders”. Significantly, Garekwe testified that, “the cash constraints experienced by FirstCred are the result of maladministration by the company erstwhile directors and shareholders, led by the original CEO David Van Niekerk”. Van Niekerk has denied this saying he left the company in sound financial position. FirstCred had issued a note programme of P500 million, guaranteed by its mother company, MyBucks SA Luxembourg. Garekwe told the court that the first tranche of notes was in an aggregate of P200 000 000. The funds were primarily raised from AS Mintos MarketPlace and from a listed bond on the Botswana Stock Exchange whose investors included ALCB Fund managed by Lions Head and Ecsponent Limited (now Afristrat Investment Holdings Limited). The creditors ALCB Fund and AS Mintos Market Place approached the High Court seeking to wind up the company, arguing that it is unable to repay its debts because it is burning cash. In their petition, the creditors stated that it came to their attention that the company had instituted a forensic investigation into how the proceeds received by the company in terms of the bonds note programme have been utilised. “There is an allegation that the proceeds were improperly diverted from the accounts of the company to those of the parent company,” the petitioners wrote. They said the real risk that the assets of the company were being dissipated, dictated a provisional liquidator to be urgently appointed in order to assess the position of the petitioners and take control of the assets for the benefit of all the creditors. According to Garekwe, forensic examinations have established that P160 million was raised between 2017 and 2019 and that “a considerable portion of the funds raised by GetBucks Botswana was misappropriated by its former board of directors, led by the original CEO, Dave van Niekerk”. “P120 million of these funds was grossly and inappropriately misused and this resulted in its loss,” she said. “Such was the level of malfeasance that investor funds only spent two days in the then Getbucks Botswana bank accounts before they were taken out of Botswana and spent.” As a results of “misdeeds by previous management”, said Garekwe, it is almost “impossible for the now FirstCred to repay investors who became victims of previous management’s mismanagement and poor governance practices between 2017 and 2019”. She asserted: “We have reported the findings of the forensic reports to the regulatory authorities for investigation and have retained counsel with a view on legal action against individuals implicated.” The Business Weekly & Review asked NBFIRA if indeed what Garekwe said in court and what was contained in the petition, in terms of the regulator’s findings, was correct. However, NBFIRA chose not to respond specifically regarding what their own assessment of the state of FirstCred is/was. NBFIRA said in order to grant the shareholders space to resolve their issues, the Authority prefers not to comment further on questions raised by The Business Weekly & Review , lest it prejudices their reconciliation efforts. Influenced by the fact that NBFIRA is mandated by the Act that establishes it to act in a manner that protects investors, creditors, members of the public and public funds, The Business Weekly & Review asked the Authority what it was doing to ensure that investor (public) funds are secure at FirstCred, or at least to recover those that are alleged to have been siphoned off. Further, this newspaper wanted to know if FirstCred will be restored to normalcy. In response, Ntebele had this to say: “The Authority has been assured that the creditors are working on a plan with a view to honouring existing obligations and restoring the company to normalcy”. NBFIRA did not respond directly as to whether it has undertaken a thorough investigation to ascertain if there was mismanagement and whether some elements of financial crime may have been an issue at FirstCred. This is because the current CEO says there was mismanaged and that funds were not used for their rightful purpose. Further, there is a forensic report by Grant Thornton that also showcases how the funds were spent and not in alignment with the purposes of the bond programme. But the former CEO maintained they were used as per the purpose of the bond programme which he said was to pay existing loans to mother company. The Business Weekly & Review asked NBFIRA as how exactly NBFIRA intervenes in accordance with its Act where funds are/were allegedly used in violation of their purposes. However, the Authority avoided answering this question. Further, before licensing companies to operate in the non-bank financial services industry, it is mandatory for NBFIRA to vet key persons associated with the company as a way of protecting the public and investors. This is in terms of the law. Such key persons can be key employees, shareholders and directors. The Business Weekly & Review asked such a question because one of the former directors, Van Niekerk, was the original CEO and was/is a key figure in GetBucks/FirstCred. Van Niekerk is also linked to Blue Financial Services, a company that was ran aground through similar circumstances. The man is also linked to Bluthorn Fund Managers while his other companies regionally are surrounded by controversy of mismanagement and disappearance of funds. The Business Weekly & Review wanted NBFIRA to respond as to whether it was aware of this history, which is public information. This publication wanted to know whether it was not risky to license a company associated with key people who are not without controversy. Specifically, The Business Weekly & Review wanted to know if in the case of FirstCred (formerly GetBucks), there was a thorough vetting of key individuals associated with the company in order to minimise risks and thus to protect the public and investors by ensuring that key individuals and directors were fit and proper. The idea was to establish if NBFIRA was aware of David Van Niekerk’s profile and the controversy that surrounds companies that he is associated with across Africa, and whether their fit and proper vetting had cleared him. “The assessment of the fitness and propriety of individuals includes the consideration of any adverse information regarding the individual’s activities in related or external businesses, personal activities that result in criminal or civil litigation or media attention, and any attempts by the individual to conceal such information from the licence holder,” Ntebele said in a response that sounded straight out of Central Casting for skirting issues. 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NBFIRA steers clear of the FirstCred mess

While the questions were as clear as daylight, getting answers to them has proved akin to looking for a needle in a haystack.

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NBFIRA steers clear of the FirstCred mess

While the questions were as clear as daylight, getting answers to them has proved akin to looking for a needle in a haystack.

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