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 Africa Report - - COUNTRY FOCUS MAURITIUS - Kervin Victor in Port Louis

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.

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