The collapse of a giant
The government is still dealing with the aftermath of the collapse of one of the island’s biggest conglomerates after a major scandal
The dismemberment of the British American Investment (BAI) Company, one of the largest conglomerates in Mauritius, is in its final phase. The government took over the company in April 2015 after discovering that it ran a Ponzi scheme that paid investors from the money of other investors rather than from its profits. BAI had its origins in the insurance business before diversifying over the years into a broad range of businesses including banking, financial services, healthcare, transportation, retail and the media in various parts of the world. But the government found fault with two of its products. Bai-owned BA Insurance offered the Super Cash Back Gold policy and Bramer Bank issued Bramer Property Fund Preference Shares, promising high returns to lure investors. After discovering the fraud, the Bank of Mauritius revoked Bramer Bank’s licence. BAI owned 74% of the financial institution, and Bramer Bank’s closure had a rapid domino effect on other BAI entities. The holding was placed under administration then in liquidation in order to reimburse the Ponzi scheme’s victims. Prior to BAI’S collapse, the conglomerate had been showing signs of extreme financial difficulties. Between 1 January 2010 and 31 December 2013, BAI lost some Rs14.7bn ($410.3m). “Even the best capitalised corporate groups in Mauritius would stagger under such losses, and the BAI Group was not one of the best capitalised corporate groups in Mauritius,” wrote ntan Corporate Advisory in a report published last year. The Bank of Mauritius chose the Singaporean firm to investigate BAI’S operational systems. As of 31 December 2010, BAI Group’s liabilities exceeded its assets by some Rs1.2bn. Three years later, this shortfall ballooned to some Rs12bn, says the report. The majority of the 126 minority entities and investments held by the BAI in Mauritius and abroad have been put up for sale by the authorities. The government appointed a special administrator to manage recover y and transfer procedures. After the revocation of the first administrator, Mushtaq Osman of the firm PWC, Yacoob Ramtoola of the firm BDO took the position. “My role is to transfer the group’s assets to the National Insurance Company (NIC) and to the National Property Fund Ltd. (NPFL),” Yacoob Ramtoola tells The Africa Report.
NO SMOOTH RIDE
The asset sales have not all gone smoothly. BAI’S stake in Britam in Kenya was finally transferred to existing shareholders for Rs2.9bn, netting the government less than expected in June 2016. A first offer of 4.3bn from MMI of South Africa had originally been accepted. MMI went ahead with their lawyers to conclude the deal with the existing shareholders of Britam in Kenya, but the shareholders decided not to give their consent. “An agreement was even signed between the potential purchaser and the NPFL. As the deal is quite large, the South African firm had to do due diligence in Kenya. But the entity in Kenya did not want to have a South African partner. They wanted to have people from Kenya,” says Ramtoola. Finally, the shareholders went to Mauritius and made an offer that the government accepted. Bramer Bank – after being suspended from the Stock Exchange of Mauritius in 2015 and wiping out more than Rs4bn in market capitalisation – was nationalised before being merged with state-owned bank Mauritius Post Cooperative Bank (MPCB) to form the Maubank. Before the merger, Bramer and MPCB held toxic assets of Rs5bn and Rs1.7bn, respectively. The government injected Rs3bn to get the new bank going. It now has deposits of Rs25bn and total assets of Rs32bn, and the government is contemplating a possible Maubank sale. However, the collapse of BAI is still the subject of legal proceedings as BAI owner Dawood Rawat is seeking damages, arguing that the government’ s activities have been illegal, which could complicate things further.