Saturday, January 16, 2021

Bifm in ethical dilemma

When launching impressive year-end results of the Botswana Insurance Holdings Limited recently, the Chief Executive Officer of the country’s largest asset management company ÔÇô Bifm ÔÇô Victor Senye, found himself more between a rock and hard surface situation. This is because, when announcing the results, he is bound to share trade secrets with his competitors who, in turn, would use the information to compete against his company. Impressive as the top line may be, he noted, “the problem is that some shareholders keep on cutting the bottom.”

Amongst those cutting the bottom are members of the public, as evidenced by the last quarter of 2007, when the market’s momentum dipped due to profit taking and sell off in preparation for the Christmas festivity.
That is amongst the least of Senye’s worries though.

“The problem is that when we announce results, it is just like being called before a panel of judges to come and lay the secrets of the business and the same judges happen to be your direct competitors,” he said in interview with The Sunday Standard.

Direct competitors who could find Bifm’s figures useful are asset management companies ÔÇô Investec and Fleming Asset Management. The two are by far significant investors in Bifm’s holding company ÔÇô BIHLÔÇô through management of the much contested Botswana Public Officers Pension Fund (BPOPF). Bifm also manages the portfolio ÔÇô the largest fund by far in the country.
“They have all the rights, as shareholders in BIHL, to say open your books,” he said.

He clarified the dilemma. “For instance, let’s say Jumbo Wholesale buys Sefalana shares, as shareholders they are entitled to a lot of information. But, would it be fair to Sefalana if Jumbo were to say ‘let me see rebates for your Cornflakes or milk?’ That would be a disadvantage for Sefalana because the information might be used against them when tendering. Sefalana, in turn, is not entitled to know Jumbo’s rebates because they are not listed and are not bound to disclose such information.”

To address the situation, which he believes could be a disincentive for a majority of companies to list in the domestic bourse; he suggests that a package could be designed for the main board counter. Such package could be in the form of tax reduction, even by a small margin or price preference when tendering.

“I believe that can encourage a lot of companies to list. Right now we’re forced to open our skeletons box and go to tender with companies that have theirs hidden,” he elaborates.
Apart from raising capital, he argues, there are few incentives to attract companies to list.

“Even for us, we don’t raise capital, we manage it. If you are a mining company, then incentives are enormous because you need to raise capital in order to finance exploration,” he said.

Despite the challenges, Senye is, however, impressed with the returns they have ploughed into the economy.
“We are proud of the benefits we’ve put into the economy, either in the form of tax to government, dividends declared to shareholders or real wealth realized due to growth in capital value appreciation.”

For the year ending 31st December 2007, BIHL declared dividends of 24.65 thebe per share and a further special dividend of 5.1 thebe per share.

Tax that accrued to government is P49.8 million albeit lower than P77 million that was declared the previous year. This is, however, due to the tax claim that BHIL had tomake.

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