Monday, September 21, 2020

Conflict of interest rocks BIFM board of directors

Once the darling of the investment community, Botswana Insurance Holdings Limited has had a rough time lately.
At the bottom of the crisis are accusations of conflict of interest.

As a result, the blue chip stock-listed on the Botswana Stock Exchange, has been forced to restructure its board and recruit a new set of independent nonexecutive directors following a disputed acquisition of shares in the company’s asset management wing by a consortium owned by directors and executive management team.

BIHL has had to implement an embarrassing reversal and clean up of its corporate governance following a P30 million purchase of shares by nonexecutive directors in BIFM (an asset management subsidiary.)

The group is also in the process of recruiting a Chief Executive who will be at the apex of the holding company.
It is expected the new CEO will provide a bulwark against what is seen as a corporate governance deterioration.
All along BIHL did not have a Chief Executive Officer but was managed at subsidiary levels.

Victor Senye is Chief Executive of BIFM, while Regina Vaka is the Chief Executive of Botswana Life.
The two executives are part of a consortium that bought 10 percent of BIFM.

The transaction was masterminded by Absa Capital as Financial advisors while Armstrong Attorneys presides as Legal advisors.

In another related development, it has just surfaced that a further 7.5 percent of BIFM has been sold to a group of executives working for Sanlam in South Africa.

Sanlam is majority shareholder of the pyramid structure that owns BIHL.
As it happened with the Botswana consortium, minority shareholders were not informed.

Sanlam, which facilitated the deal and helped secure the financier in Barclays, sold the shares without notifying the other minority shareholders, among them Botswana Public Officers Pension Fund.

Analysts and staff at BIFM were this week worried that the now close relationship between Sanlam and the nonexecutive directors does not only go against the King governance code but also brings the new danger that BIFM will now be run for the benefit of Sanlam as a benefactor rather than for the benefit of minority shareholders.
Last week, Senye confirmed to Sunday Standard that, together with some directors, he bought 10 percent worth of BIFM from the majority shareholder, Sanlam.

He, however, did not mention that a further 7.5 % of BIFM which he heads had been sold to Sanlam executives in South Africa, including his former boss at BIFM, Sanjiv Gupta.

Senye said because of the low value of the overall stocks, they did not have to inform the Botswana Stock Exchange about the transaction.

Observers were this week pointing out ethics dictated that Sanlam should have informed their partners in BIHL about the transaction, especially because it had ramifications on the group’s corporate governance.

“Through this self dealing transaction, fiduciary officers of BIHL have usurped corporate assets. Shareholders, apart from Sanlam, were not aware that any piece of BIFM was up for sale. No cautionary or shareholder letter or circular was sent out to alert other shareholders that part of the assets they own were being carved out to a special group of the company’s officers,” said one shareholder of BIHL who talked to Sunday Standard on condition of anonymity.

“The price paid by Sanlam and this group of officers for the piece of BIFM, whether fair value or not, is not the biggest issue. The real issue is why would profitable and well reserved BIHL secretly sell part of its core assets to a select group when anyone can get exposure to those assets through holding BIHL shares? What should have happened is that all shareholders were to be alerted that pieces of assets they own were up for sale, whether majority shareholder consent is needed or not. This then should be announced in the papers to attract as many buyers as possible so that the assets are sold at the best possible price,” continued the shareholder.

Sanlam owns 54 percent of BIHL with the remaining 46 percent owned by such investors as the Botswana Public Officers Pension Fund.

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