Non-Bank Financial Institutions Regulatory Authority (NBFIRA) Chief Executive Officer, Oaitse Ramasedi has stated that the troubled Bona Life has been placed under Statutory Management in terms of Section 47 of the Insurance Industry Act, 2016, effective January 20.
The act stipulates that an inspector may at any time check whether the institution is complying or has complied with the financial services laws and the conditions of its license. Ramasedi stated that Paul Masie has therefore been appointed the Statutory Manager for Bona Life. “By virtue of his appointment the Statutory Manager is in full control, management and authority of Bona Life forthwith, ” said Ramasedi.
Last week Bona Life Founder and Chief Executive Officer, Regina Vaka-Sikalesele resigned from the position. Bona Life stakeholders are therefore advised to refer all queries, complaints and/or claims pertaining to Bona Life to the Statutory Manager at the offices of Bona Life. Vaka-Sikalesele holds 25 percent equity, while the Botswana Public Officers Pension Fund indirectly holds 40 percent and staff 10 percent.BPOPF members account for 85 percent of Bona Life and are owed up to P700 million.
Bona Life’s misery started in October 2017 when Capital Management Botswana (CMB) and Botswana Public Officers Pension Fund (BPOPF) fought over its shares. The two own 40 percent shares in Bona Life through an investment vehicle named Botswana Opportunity Partnership (BOP). This led to a trail of developments such as relationship breakdown between the CEO and CMB.
In a statement late Wednesday, NBFIRA said Bona Life’s financial position as per the latest records available with NBFIRA based on value of assets at that time, indicate it’s ability to meet its financial obligations to its annuitants and policy holders. The Authority said insurers are required to hold the greater of the Minimum Capital Target (MCT) or Prescribed Capital Target (PCT).Bona Life presently meets the MCT, which is the lowest amount of capital in absolute currency terms that an insurer is required to hold for licensing and ongoing operation.
“On the other hand, with regard to the PCT the Authority has previously requested Bona Life to seek a capital injection in order to meet the PCT. The PCT is the amount of assets in excess of liabilities that an insurer must hold to cushion against negative business experience that could result in premiums and technical reserves not being sufficient to cover the losses suffered. PCT also serves as a regulatory warning system,” said NBFIRA.
‘To date Bona Life has not secured the required additional capital to meet the PCT. However, in spite of this, Bona Life’s position as mentioned above appears to enable it to meet its financial obligations to its annuitants and policyholders. This may however not be sustainable in due course should the asset values change and the risk exposure continue to grow without a corresponding capital injection’.
The country’s Financial Stability Council is now in operation, paving way for the consolidation of all information within the financial sector which will be handy when it comes to the regulation of the sector.
The Council was officially launched this Tuesday after months of consultations between senior officials of the finance and economic development ministry, Bank of Botswana and Non-Bank financial Institutions Regulatory Authority, Financial Intelligence Agency (FIA). Moses Pelaelo BoB Governor is thrilled that the Council, which its secretariat will be housed at the central bank is now up and running.
He made it clear, the Council is not taking any role which is being played by Financial Intelligence Agency, NBFIRA, finance ministry or the central bank itself. “It is acknowledged that the respective institutions have unique statutory mandates, objectives, oversight frameworks and operational spheres, albeit mostly related. In this regard, the Financial Stability Council is not established to usurp or dilute the role of the respective institutions, which is neither feasible nor desirable. Rather it is to share information and where, desirable, facilitate collective and coordinated approach to financial sector monitoring frameworks and crisis resolution,” said Pelaelo during the launch of the Council this week.
Speaking at the launch ceremony, FIA Director, Dr Abraham Sethibe, said the Council will further complement their role, which among others ensures financial transactions do not undermine the country’s fiunancial system. He stated FIA is more than happy that they will now be in a position to share more information with other regulators, a development which will further strengthen the country’s financial system at large. NBFIRA Chief Executive Officer, Oaitse Ramasedi , whose regulatory roles among others ensures he manages companies whose assets are over P120 billion, stated that, it has over the years become clear that they cannot manage their respective role alone ‘without collaborations’. The Council has just provided a perfect opportunity for the non-bank financial institutions’ regulatory body to cast wide open its roles for the benefit of the entire financial system.
In the coming months, the Council will be in a position to publish the Financial Stability Report, an anchor publication, providing accountability in the areas of assessment of financial stability risks and mitigation measures. “Second is agreement on a Macro prudential Policy Framework that is relevant for Botswana, in terms of risk mitigation, as well as recognising the gaps in financial inclusion and development,” said the BoB Governor in a prepared speech.
Pelaelo also noted that there is a specific need to address the challenges arising from implementation of the Anti-Money laundering and Combating the Financing of Terrorism protocols and requirements. “Fourth and related, thereto, is the requirement to decisively address the incipient misconduct and governance challenges in the financial sector, deriving from greed and/or misunderstanding or incompetence with respect to fiduciary responsibilities, as well as opportunistic crime and fraud.
There is need for a country to have a deposit protection scheme which will guarantee access to deposits up to a specified threshold. “Lastly, cooperation and collaboration among the Council members would be critical in the timely update and renewal of legislation and policies to retain and improve effectiveness of supervision, monitoring and guidance for the financial sector,” added Pelaelo.
The Non-bank Financial Institutions Regulatory Authority (NBFIRA) has lifted the temporary closure on Bona Life. Regina Sikalesele-Vaka, the founder and Chief Executive Officer (CEO) told media that a lot of what has been troubling the company in 2018 has been resolved.“We have gone through a year of turmoil and that has failed to stop us,” said Sikalesele-Vaka, adding that the company has attended to the bulk of issues that lead to the company being dysfunctional.
Last July, the non-bank financial institutions regulator temporarily shutdown Bona Life due to shareholder fights. The development lead to Bona Life accounts being closed and banned from advertising and selling new insurance products to the public, threatening the life of the company.
With aspiration to become a leading financial institution, Bona Life’s misery started in October 2017 when Capital Management Botswana (CMB) and Botswana Public Officers Pension Fund (BPOPF) fought over shares. The two own 40 percent shares in Bona Life through an investment vehicle named Botswana Opportunity Partnership (BOP), this lead to a trail of developments such as relationship breakdown between CEO and CMB.
In addition, Bona Life board could not quorate following the dispute. The current status is that CMB has been expelled from BOP, resolving the ownership dispute and CMB will no longer be a shareholder in Bona Life after its liquidation. Meanwhile, Bona Life has embarked on a restructuring of its portifolio which is expected to be concluded by March and Sikalesele-Vaka remains optimistic and intends to list the company on the local bourse.“Listing has always been a primary thing for us to achieve,” said Sikalesele-Vaka.Bona Life is the first local citizen owned insurance company and according to Sikalesele-Vaka the company was this year facing a sophisticated coup attempt by CMB.
The High Court has dismissed with costs a case in which Alpha Direct Insurance Company (Pty) Ltd was challenging decisions by Non-Bank Financial Institutions Regulatory Authority (NBFIRA) instructing the company to pay two of its clients who had submitted claims.
Alpha Direct Insurance Company (Pty) Ltd, a company incorporated in accordance with the laws of Botswana and carrying out business of an insurer as a short-term insurer under the Insurance Industry Act took NBFIRA to court praying for the decisions to be set aside. Tumelo Issacs Motlhala and Arsh Investments (Pty) Ltd had taken Alpha Direct Insurance Company to NBFIRA for refusing to honour their legitimate claims. According to the history of the case on or about April 2015, Alpha Direct and Motlhala entered into a written contract of insurance in terms of which Alpha Direct undertook to insure vehicles Land Rover Discovery with registration number B300 AXR and a Mercedes-Benz C 200K with registration number B 209 APL against the risks described in the contract.
On or about the 2nd of December 2015, Motlhala submitted a claim to the company in respect of a loss allegedly suffered as a result of the theft of the Land Rover. On the 11th of May 2016, after assessing his claim, Alpha Direct repudiated the claim.
The repudiation was on the basis that Motlhala had failed to comply with the provisions of the policy by failing to ensure that reasonable steps were taken to prevent the loss of the insured vehicle. Dissatisfied with the repudiation, Motlhala thereafter raised a complaint with NBFIRA, which subsequently wrote to Alpha Direct requesting reasons for the repudiation and after assessing the complaint and the reasons advanced by the company, then directed Alpha Direct on 19 August 2016, to pay Motlhala’s claim, on the basis that it was not justified to repudiate his claim.
On the other hand Arsh Investments (Pty) Ltd entered in a contract with Alpha Direct on or about 21st May 2015, in terms of which Alpha Direct undertook to insure the buildings located at the Arsh Investment business address against the risks described in the contract. In March 2016, Arsh Investments (Pty) Ltd submitted a claim in respect of a loss allegedly suffered due to damage to the swimming pool at the insured address. After commissioning assessment of the damages to the swimming pool, Alpha Direct repudiated the claim on the basis of an assessment report, indicating that the cause of the loss may have been a landslide and not due to heavy rainfall and based on an assessor’s report that the insured had not been totally truthful in submitting the claim. Arsh Investment then complained to NBFIRA which later directed Alpha Direct to pay the claim. Alpha Direct argued in court that NBFIRA’s power to issue a Directive under Section 53 of the NBFIRA Act does not empower the institution to determine parties’ rights and obligations under a contract of insurance.
It was further submitted that the said Directives were ultra vires and null and void because none of the jurisdictional facts that trigger into operation Section 53(1) of the Act were present and lastly that by issuing the said Directive to pay, NBFIRA purported to determine the rights and obligations between two contracting parties to an insurance contract, as if it were a court or a statutory adjudicating authority.
Dismissing the case on Wednesday this week, High Court Judge Michael Leburu stated that under insurance law, the insurer is enjoined to honour all legitimate claims from the insured. Such insurance law, Justice Leburu said is Financial Services Law. He explained that if the regulator is satisfied that there has been unlawful repudiation of an insurance claim, which will be a violation of a Financial Services Law, then the regulator, in terms of Section 53, has the jurisdictional competence to join the fray and issue a written direction, in order to protect the interests of the clients of the insurance company.
“The trigger or jurisdictional fact would thus be a violation of financial services law (insurance), as envisaged by Section 53(1) (a). The other jurisdictional factor, as envisaged by Section 53(1) (c) is when the non-bank financial institution conducts its affairs in an improper way. The other pertinent factor that may trigger the issuance of a Directive is when it is necessary to protect the clients of the non-bank financial institution, in terms of Section 53(1)(f) of the Act,” the Judge pointed out.He explained that the two written Directives, issued within the present context, came about after the Regulator, determined that Alpha Direct was not conducting its affairs in a proper way, through unlawful and unfair repudiation of legitimate insurance claims by clients of an insurance company. Payment and honouring of legitimate insurance claims by an insurance company is an integral part of its affairs, he said.
Justice Leburu indicated that put differently, it is part of the affairs of an insurance company, that it renders to the insured, a sum of money, on the happening of a specified uncertain event, in which the insured has some insurable interest.
“Insurance companies are enjoined to consider claims fairly and not to unnecessarily repudiate or delay legitimate claims of its customers, and in terms of paragraph 3(b) of the Schedule 2 of the Insurance Industry Regulations, insurance companies are required to do ‘everything to satisfy, as quickly as possible, the legitimate needs of claimants.
“The legitimate need of claimants is that the lodged valid claims ought to be honoured and not to be repudiated, unlawfully. NBFIRA is thus entitled to intervene and issue directives, if it considers that such obligation has not been discharged,” said Justice Leburu indicating that Alpha Direct has thus failed to make out a case for judicial review.
Old Mutual has officially launched its subsidiary Old Mutual Botswana Life Insurance Company with a goal to participate more meaningfully in growing the local economy and improve the lives of Batswana. Headed by the youthful Thebe Modikwa as Managing Director, Old Mutual Botswana Life will work to shift public perception of life insurance from a simple funeral policy and short-term goal, to a holistic tool that can be used to preserve wealth and give the next generation a better start in life.
As he walks up the stage to give his address at the launch held at the Phakalane Golf Estate in the Phakalane suburb recently, Modikwa starts of by putting this question before the audience “Does Botswana need another life insurance company?” With a population of as little as over 2 million served by the current eight life insurance companies, can that be more than enough?
Modikwa says that numbers can be deceiving and further elaborates that taking a closer look at the life insurance market today, it can be described as an oligopoly. Oligopoly is a market structure in which a small number of firms has the large majority of market share. An oligopoly is similar to a monopoly, except that rather than one firm, two or more firms dominate the market.
In its latest annual report, NBFIRA, the insurance industry’s regulators says that of the eight life insurers the top two life insurers share a chunk of 87.5 percent of the market share. Modikwa says this shows that clearly there is no real competition. Based on these statistics Old Mutual Life Botswana believes life insurance is not just about funeral expenses and the elaborate send-off for loved ones. As he explains and share his life experience at Varsity days, Modikwa says, “Life insurance is a tool for preserving wealth and giving the next generation a better start in life than the previous one.
“When I was at university I had a friend, who stayed in his own flat. I stayed in a flat too. I paid rent. He owned his flat! Given that we were both young and none of us were working, how did he get to own his own flat and avoid paying rent? On closer inspection, it was revealed that this flat was made possible by funds arising from a life insurance policy for one of his grandparents. This friend of mine clearly had a leg up in life over me.”
The youthful MD says what stops a lot of people is not the lack of a good idea, it is the lack of capital and/or a sufficient safety net. As the eldest sibling of three, when he started working like many people he had to help with the education of his youngest sibling. Starting a business at an early age meant a few more difficult calculations than he would have liked. “Many Batswana dream of viable businesses and even with the commendabl
e assistance from government, for the people who are most likely to succeed in the more technical businesses currently dominated by foreign companies e.g. banking and even insurance,” he says.
He elaborates further that those people who are well educated, and have work experience, the leap of faith is often too big. A culture of purchasing life insurance policies is an effective mechanism for ensuring that the generations following us can be more daring than we as a generation could be.
“If life insurance is so good, why is it that only a few people have more than a simple funeral policy? Are we only concerned about short term goals?” Modikwa paints the insurance industry as one that has failed to come up with suitable products that can be distributed to the underserved particularly in villages, who also want a better life for their children.
He says the failures for the industry is also sometimes, regrettably, caused by own greed. For example, he admits that as insurance companies, “we take advantage of people looking for credit by loading the life insurance premiums they are compelled to take with all sorts of fees and commissions which are not commensurate with the services we offer or the risk we are taking.”
This he said must change and Old Mutual Life hopes to take the lead and believes that more affordable credit insurance will allow more people to take up credit and participate more meaningfully in growing the economy and living happier lives. It is for these reasons that by enabling positive futures, Modikwa says the Botswana market needs another life insurance, hence Old Mutual Life.
No stranger to the Botswana landscape, Old Mutual has been present in the country since 1994 having originally opened its doors as Mutual & Federal, before rebranding in 2004 as Old Mutual Botswana. Jonas Mushosho, Chief Executive Officer for Old Mutual Africa, says that the rebrand formed part of Old Mutual’s five-billion rand expansion plan into Africa so that is could effectively service the continent’s growth and its people.
He says that the short-term insurance business originally entered the Botswana market when the need became apparent that household and
Botswana Stock Exchange and the Central Securities Depository Botswana have suspended Stockbrokers Botswana firm from trading for an indefinite period of time. BSE Chief Executive, Thapelo Tsheole broke the news to the media after calling an impromptu meeting on Wednesday at the regulator head office, Exchange House.
Stockbrokers is the company which prides ‘as having been involved in every main board equity listing on the BSE since inception’ in 1989. The BSE boss said the regulator has the powers to suspend any stockbrokers found contravening regulations which can range from compliance, operational and governance. “We suspend pending further action in assistance with the Non Bank Financial Regulatory Authority (NBFIRA) who are our regulator,” shared Tsheole. Upon completion of investigations, regulators can decide what further action can be taken for the said company. Botswana Guardian understands that, if the violation is serious, such company’s licence can be revoked.
“On a normal basis, brokers always have several breaches but they may not be those that can lead to suspensions. As for SBB, it is an issue that we have been closely looking at then yesterday (Tuesday) we took a decision to suspend them,” he revealed. However, at the time of the briefing the Stock Exchange was unable to share on the details that led to this suspension until the investigations are complete. Stock Brokers is one of Botswana’s four broking firms, namely; Motswedi Securities, Imara and African Alliance.
Contacted for comment, Stockbrokers Botswana (SBB)’s Managing Director, Tito Tibone said it is pertinent to note that SBB approached the BSE to suspend its trading operations.
“SBB has no Finance Manager for the past six months. The candidate we have recruited is awaiting vetting by the Regulator. Meanwhile a backlog has built up in the processing of the company's accounts. Our consultant Accountants have been engaged to bring the accounts up to date. This has however taken longer than originally expected,” reads Tibone’s response. Botswana Guardian has established that, for this reason, accordingly SBB has approached the BSE to suspend trading activities until the situation is normalized.
Tibone has rest assured his clients that, “the company business is otherwise robust and sound as it should get over the hurdle within a short time.” The shares of the clients, Tsheole said are in the BSE capture system and can continue to trade at anytime and clients are at liberty to engage whichever broker is available from the other three. He said, “those who have placed orders and are not yet executed will be refunded so that they place them elsewhere.”
Micro lender Blue Employee Benefits Botswana (BEBB) finds itself on the wrong side with the tax agency, Botswana Unified Revenue Service (BURS) and the industry regulator, Non-Banking Financial Institutions Regulatory Authority (NBFIRA), it has been established.
BEBB is a micro lender with government employees as its clientele. This publication has seen strong worded documents from the two compliance organisations to BEBB. Information gathered by Botswana Guardian suggests that poor working relations between the Chief Executive Officer (CEO), Financial Manager and some of the senior managers have contributed to the company failing to pay tax between 2012 and 2015 and not submitting audited financial results with NBFIRA.
The company is now paying about P500 000.00 each month to clear the debt after its request for a payment model was approved. Some industry players are dissatisfied with the ‘soft’ treatment BEBB got from both BURS and NBFIRA.“It seems the two organisations are lenient with BEBB. The micro lender is having its own internal problems. We are told the finance manager is not working well with his other junior who assists him to prepare the financial reports and be able to submit to NBFIRA and to update with tax payment. It has been the case even with the past finance managers,” said an industry player who did not want to be mentioned.
An employee at BEBB also revealed that things are not run properly at the company hence its failure to abide. The employee who cannot be named for fear of victimization told this publication that staff morale is low at the company as the finance manager and the CEO are not taking the whole team on board in running the company.However, Botswana Guardian can reveal that the company has been subjected to forensic auditing for the past two weeks. In one of the letters dated November 9th 2015 from NBFIRA in which BEBB was fined P35 000.00, the authority explained that the mitigation by the micro lender regarding failure to comply were not satisfactory. The letter from NBFIRA Acting Compliance Director Motsisi Sebonape further states that the micro lender has failed to submit audited financial statements timeously in previous years “and is thus not a first time offender”.
She further warned that the notice of fine does not limit the authority’s right to take further regulatory action.When contacted, BEBB CEO, Favour Marebole dismissed claims of low staff morale and poor working relation between his office, finance manager and other senior staff members. He said the audited financials for the year ending 2014 were signed and sent to NBFIRA on the 15th January 2016. Regarding withholding of tax, the CEO explained, “indeed the company has an outstanding Tax liability which was communicated to BURS as part of a voluntary tax disclosure process in 2014 and was facilitated by one of the major tax audit companies. The total Principal Tax owing as per the latest statements is just over P1m (P1, 025,873.93 to be exact) as at May 2016,” he said, adding that the company has an existing payment plan with BURS that it has been honouring throughout this period since the disclosure. “It is important to note that the efforts shown by the company towards settling its tax liability were at some point commended by BURS to the extent that a waiver of penalty interest was also secured.”
A letter from BURS seen by this publication dated 29th January 2016 informed the company that its tax returns for 2012, 2013, 2014, and 2015 have been selected for audit. Marebole confirmed the ongoing forensic review but rubbished claims that there is mismanagement of funds. “It is company policy that all issues be investigated and until the report is out, we are not able to comment,” he said. He said the company is currently up-to date with its compliance for the Audited Financials of December 2014 and currently working through the Financials of up-to December 2015.
“The current audit for the year ending 31st December 2015 is still on-going. The delay was caused by the fact that the company has recently changed its Loan Management System in August 2015, and there is a process which is on-going to confirm the core asset, being the loan book. The whole of the Finance team is new, having recently joined the department during the last quarter of 2015,” he stated. Said Marebole, “As a result, it is expected that since they joined the company at the end of the financial year and they have to deal with auditors for the financial year they were not there, certain delays will be experienced. An audit process is not an easy and straight forward process and it requires preparation.”
Matshediso Pule of BURS said they are constrained to make any comments on “your questionnaire because we cannot divulge taxpayers information to third parties on consideration of our taxpayer confidentiality policies and laws.”Communications and Public Affairs Manager at NBFIRA, Tapologo Kwapa said as part of their regulatory process they are at liberty to afford entities audit or any form of extension given prevailing circumstances as long as there are no regulatory contraventions. “On the point of charges we are compelled by the Act and our internal policies to make a final determination on penalties by ensuring compliance with the Financial Services Laws,” explained Kwapa.