The Chief Executive Officer at Facilities Management (FMG) Group, Graham Philips, is liquidating a subsidiary of his company ÔÇô Shield Security – less than a month after the Competition Authority rejected a proposed merger of his company with another international company with a local presence.
The proposed Shield Security/G4S merger was rejected last month by the Competition Authority on the grounds that the facts, analysis and conclusions of the merger assessment showed that there were competition concerns that arose in the security services industry in Botswana.
Some 1300 employees ÔÇô a figure provided by Shield Security Human Resources Department – will be lost at the end of this month.
Shield Security General Manager, Rockie Mmutle, wrote to employees on 27 April 2012 informing them of retrenchments effective end of this month. This after the Competition Authority had turned down his company’s proposed merger with G4S on April 10. Three days later on 30 April, FMG’s Chief Executive Officer, Graham Philips, wrote to employees informing them of ‘Closer (sic) of Business’ effective 1 May.
In rejecting the merger, concerns were raised by the Competition Authority that on account of the acquisition of 100 percent issued shares in Shield Security by G4S (Botswana) Limited and that the acquiring enterprise was considered to “have substantial market power in view of the market structure for security services in Botswana”.
The Authority said then that G4S is a well-resourced entity that can grow its market share organically without the proposed takeover. The Authority also raised fears that the proposed transaction was likely to result in the removal of a “small but significant” competitor, particularly in the alarm and response services market of Botswana.
The Competition Authority said on Friday it was aware that FMG is liquidating its subsidiary – Shield Security. The same Friday, officials from the Competition Authority were scheduled for a consultative meeting to discuss issues surrounding the liquidation process with a view to explore options, which could benefit both the owners of Shield Security and its employees according to a letter seen by the Sunday Standard written by the acting Chief Executive Officer, Duncan Morotsi, dated 2 May 2012.
The meeting notwithstanding, it has become apparent Shield Security may be in breach of the law by liquidating without informing the Authority.
“We would like to bring to your attention the fact that, Section 2(a) read along with Regulation 16(3)(b) of the Competition Act, indicates that a transaction in which an enterprise disposes (sic) its assets through a liquidation process, should be notified to the Authority in the prescribed manner,” wrote Morotsi the Authority’s acting CEO.
The Authority officials, who said they were not informed of Shield Security’s intentions, had their hands full on Friday engaging FMG management.
“The Competition Authority was not informed [about Shields intention] but when we learnt that there is an intention to liquidate, we moved quickly to engage management. Ever since we became aware of the alleged liquidation, we are constructively engaging the company management. Part of the reason why we proactively engaged Shield Security Services was to ensure that public interest issues, such as job losses, are comprehensively addressed. We are engaging them on these issues,” said Gideon Gobusamang Nkala, Director of Communications and Advocacy, on Friday.
Shield General Manager, Rockie Mmutle, said his company has no comment while CEO┬á Philips was said to have flown to the United Kingdom.
The company is among the top three security firms in Botswana.
A Shields Security employee in the Administration Department said she does not know how she is going to cope without a job having been informed at short notice. The employee said she is the bread winner and looks after three siblings and two children.
Chairperson of the Security Association of Botswana, Gaolathe Mudongo, said the security company has not informed the association of its intentions to liquidate.
“We are concerned about the plight of workers. We will have to ask for union intervention to see to it that workers are not given a raw deal,” said Mudongo.
Amongst its clientele other than the Government of Botswana, Shield Security has contracts to render security services with at least two of the country’s commercial banks – Barclays Bank of Botswana and First National Bank of Botswana. Both banks did not wish to be drawn into their contracts with the company.
A security insider said it was baffled by Shield Security in closing business when the company has running contracts with many clients.
“What do you tell a corporate client? I am closing down business in three weeks? Company so and so will in the meantime takeover?” wondered a source.
Barclays Bank of Botswana confirmed it is aware of closure by Shield Security.
“We would like to assure our valued customers that we have a robust contingency plan in place to ensure business continuity,” says the bank’s Acting Head of Corporate Affairs, Grace Mosinyi.
First National Bank Botswana’s Communications Manager, Kemiso Ben, says her bank “prefers not to comment on the matter”.
FMG did not notify licensor – the Ministry of Defence, Justice and Security ÔÇô of its intention to liquidate.
“We are not aware that Shield Security is closing down. Procedurally they have to inform us as the controllers. If the company is liquidated, the licence will fall away,” said Secretary of Defence, Justice and security, Augustine Makgonatsotlhe.