Friday, June 21, 2024

BBS Act Transition Draft Bill ready for publication

The ball for the transformation of the Botswana Building Society (BBS) from a property financier to a fully fledged commercial bank is set to land on the parliamentary floor with the publication of the Building Society’s Act Transition Bill this month.

Informed sources close to the transaction have confided in this publication that the process for the demutualisation of the society to a fully fledged commercial bank are at an advanced stage as the drafting of the transition bill has been completed.

If the bill gets the parliamentary nod and is signed into law by President Ian Khama, the next stage would entail an application for a commercial banking license with Bank of Botswana (BoB), as the licensing authority for commercial banks.

┬á“A draft transition bill has been completed. It is only awaiting publication in the Government Gazette before it is tabled in this winter’s parliamentary session. The bill was drafted by the Attorney General’s Chambers in conjunction with BBS lawyers,” said a source close to the transaction but not authorized to speak to the press.

The source added that while the decision to demutualize has been approved by the board and shareholders, there is no guarantee that parliament will approve the intended transformation.

The other hurdle could come in the form of rejection by the central bank to grant the society a commercial banking license.

“It is not a given that parliament will pass the transition bill. The legislators may approve or reject the draft bill. Once published in the Government Gazette, it will be incumbent upon the BBS executive management to lobby legislators for approval. Since the bill seeks to amend the Building Society’s Act and pave way for transformation into a fully fledged bank, it remains to be seen whether parliament will endorse the bill taking into account the fact that government is a shareholder in the institution,” said the source.

The intention to demutualize has already been approved by the board and shareholders who in this instance include government.

“Bearing in mind that government has, through its shareholding, approved the demutualization intent, it would be hypocritical of parliament to reject the transition bill. Unless the legislators strongly feel that the commercial banking market is saturated, there would be no justification to reject the bill. BBS will certainly broaden its product offering once its Act has been amended to allow for further activities as opposed to its current legislative framework,” said the source.

Inherited from the United Building Society of South Africa in 1976 with an asset base of P4.1 million, the society has grown in leaps and bounds with its assets reaching over P2 billion in 2012.
During the first 10 years of operation, the society was initially restricted by law under the Botswana Society Act to lend only against security of immovable urban property.

The Act was amended in 1986 to permit lending in rural areas and since then, the number of mortgages has grown to over 5 400 residential and commercial mortgages in its books while Paid Up shares stood at P487 million, Indefinite Period Paid Up Shares in which government has invested are at P484 million and savings and deposits at P439 million.

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