Fo­cus Life placed un­der Liq­ui­da­tion

Zambian Business Times - - FRONT PAGE -

Fo­cus Life As­sur­ance Lim­ited (FLA), a lo­cally owned and reg­is­tered life as­sur­ance com­pany reg­u­lated by Pen­sions and In­sur­ance Author­ity – PIA of Zam­bia has been placed un­der com­pul­sory liq­ui­da­tion. In a no­tice to stake­hold­ers made avail­able to the Zam­bian Busi­ness Times signed by Board Sec­re­tary D. Mu­denda, the reg­u­la­tor PIA stated that it has ex­er­cised its pow­ers un­der the In­sur­ance Act and the Bank­ing and Fi­nan­cial Ser­vices Act to place the in­surer on com­pul­sory liq­ui­da­tion.

Fo­cus Life As­sur­ance which is li­censed to pro­vide life as­sur­ance prod­ucts to both in­di­vid­u­als and cor­po­rates is part of the Fo­cus Iron­clad Group Lim­ited which pro­vides short term work­ing cap­i­tal fi­nance, life as­sur­ance, gen­eral in­sur­ance, in­vest­ment bank­ing, and leas­ing so­lu­tions. The com­pany was founded in 2010 and is based head of­fices are in Lusaka, Zam­bia.

The Fo­cus Iron­clad group is also renowned for its lo­cally friendly work­ing cap­i­tal fi­nance so­lu­tions that it had man­aged to tai­lor that in­clude in­voice dis­count­ing, pay­ment guar­an­tees, or­der fi­nance, bridg­ing fi­nance, bills dis­count­ing, stock fi­nance, and con­struc­tion fi­nance. The group had es­tab­lished it­self as a vi­able al­ter­na­tive and a go to fi­nan­cial ser­vices provider for most lo­cal busi­nesses when turned away by con­ven­tional banks which in Zam­bia’s case are mostly for­eign owned and con­trolled.

In an ex­clu­sive in­ter­view to­day with Zam­bia Busi­ness Times- ZBT, Doreen Kam­ban­ganji Silungwe who is Pen­sions and In­sur­ance Author­ity’s Com­mu­ni­ca­tion Man­ager said Fo­cus Life As­sur­ance Lim­ited was be­ing put un­der com­pul­sory Liq­ui­da­tion be­cause it bal­ance sheet was as­sessed and that its li­a­bil­i­ties out­weighed its as­sets, that the en­tity is ac­tu­ally in­sol­vent, mean­ing that fo­cus life as­sur­ance ltd is not able to hon­our its obli­ga­tions as they fall due be­cause it li­a­bil­i­ties are more than its as­sets.

Ac­cord­ing to the in­sur­ance Act, the Author­ity can­not al­low an in­sol­vent com­pany to con­tinue op­er­at­ing, Silungwe told ZBT. “it is not pru­dent for us to al­low an in­sur­ance com­pany to carry on when we know that it will not be able to pay its obli­ga­tions. In as much as we aim and have the in­ten­tion to grow the in­dus­try, we also want to en­sure that the in­sur­ance com­pany’s are able to pay or hon­our its pol­icy hold­ers when it is time to make a claim,”

She fur­ther said that ac­cord­ing to the law, fo­cus life as­sur­ance has 30 days in which it should file in any ob­jec­tion and af­ter the 30 days as elapsed, PIA will then ad­vise pol­icy hold­ers and other en­ti­ties which are held by this com­pany (Fo­cus Life) on the way for­ward and will en­sure that we to fol­low what is in the Bank­ing and Fi­nan­cial Ser­vice Act Cap 387 when it comes to liq­ui­da­tion.

Silungwe fur­ther ad­vised Fo­cus Life As­sur­ance pol­icy hold­ers not to de­posit any more money but wait for the Author­ity to give guid­ance. ‘ The author­ity will keep the pub­lic posted’ she stated. The PIA has also placed an­other in­surer un­der com­pul­sory liq­ui­da­tion, A-plus Life As­sur­ance com­pany Lim­ited. The de­ci­sion was ar­rived at by the reg­is­trar at the board meet­ing held on 24 May 2018.

The threat on the iron­clad group comes from the ex­pec­ta­tion that the fo­cus group com­pa­nies would have come in to aid the life as­sur­ance busi­ness with some in­ter­nal loans or some form of par­ent fi­nan­cial sup­port to pro­vide re­lief and avoid this sit­u­a­tion. This clearly did not hap­pen and that is where the ques­tions are com­ing from. Ef­forts by ZBT to get a com­ment from the Fo­cus group ex­ec­u­tives proved fu­tile by press time.

Some stake­hold­ers and lo­cal busi­ness houses spo­ken to by ZBT have in­di­cated that the gov­ern­ment will need to look at ways it can sup­port lo­cal busi­nesses in times of dif­fi­culty. Some coun­tries have bank­ruptcy pro­tec­tion laws or mech­a­nism to pre­vent failures of lo­cal com­pa­nies were the cir­cum­stances re­sult­ing in bal­ance sheet ero­sion are deemed to be down to gen­eral eco­nomic and at times cur­rency man­age­ment failures by state eco­nomic ac­tors. Even tem­po­rar­ily reg­u­la­tory takeover and later sell­ing to new lo­cal own­ers are all op­tions that can be ex­er­cised to give lo­cally owned firms a chance of sur­vival and growth.

The is­sue of gov­ern­ment ar­rears will need to be ad­dressed with the ur­gency it de­serves as its mostly the lo­cal up­com­ing busi­nesses that are mostly hit. The ma­jor­ity small and medium com­pa­nies have lim­ited op­tions and end up with bor­rowed funds at very high in­ter­est rates.

These ar­rears have strained the lo­cal busi­nesses as they do not have the same ad­van­tage as other busi­nesses that are able to bor­row ex­ter­nally and in USD at lower in­ter­est rates.

There is need for the reg­u­la­tor like PIA to not just look at ap­ply­ing the let­ter of the law but fo­cus on the sub­stance of wider eco­nomic vari­ables. A good ex­am­ple is the lo­cal cur­rency to­day, which is trad­ing at ZMW10 per USD when in 2013/2014, the same cur­rency was trad­ing for ZMW5 per USD. For for­eign ex­change de­nom­i­nated re­pay­ments, the re­quire twice the re­quired amount of Kwacha to fund the same obli­ga­tions. There ex­ist widened ex­change rate risk fac­tors which is one rea­son why lo­cally based firms hav­ing op­er­a­tional chal­lenges be­cause of ris­ing fi­nance costs.

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