The move by the apex bank comes amid accusations that the BoN Governor, Ipumbu Shiimi, could have overplayed his regulatory role, by firing the bank’s board - powers which the SME Bank board is challenging in the High Court.
The decision by Shiimi this week has also been viewed as a major concession by some legal experts, after his letter to the SME Bank board members noted that the Bank of Namibia board meeting held on 24 February had not ordered their removal, raising questions as to why he had acted in the manner that he did.
“[The] Bank of Namibia board meeting held on the 24th of February did not resolve to order your removal as director. In as far as the earlier correspondence may have alluded to this, same was erroneous,’’ Governor Ipumbu Shiimi wrote on 29 March, in a letter addressed to one of the former board members of SME Bank, seen by the Windhoek Observer.
SME Bank’s previous board was made up of Stanley Simataa (chair), Petrina Nakale, Theofelus Mberirua, Milka Mungunda, Enock Kamushinda and Ozias Bvute.
Lawyers, who refused to be named, said the case could now hinge on a legal argument about whether the directors were ‘removed’ or ‘disempowered’.
A source familiar with legal dispute said, ‘removed’ would mean the board was found guilty, even before the investigation by the central bank, into the affairs of SME Bank, had been completed.
The board members are represented by prominent Windhoek-based lawyer, Sisa Namandje.
When reached for comment, Namandje said he could not comment on the matter, as it was before the courts.
‘’We are going ahead with the case and the Bank of Namibia is opposing the matter in court,’’ was all he could say.
In the letter from Shiimi, he explained that the director had only been “disempowered” and not removed.
“Given [that] the Bank of Namibia, in terms of Section 56 (2) (b) of the Banking Institutions Act, 1998 (Act 2 of 1998), has assumed control of the entire property, business and affairs of the SME Bank Limited, and has appointed certain persons (in terms of Section 56 (2) (b) to so conduct the business and affairs of the SME Bank Limited, you have been disempowered as a director of the board of directors of the SME Bank Limited.
‘’The Bank of Namibia will revert to you, in due course, in regard to your position as director of the SME Bank Limited,’’ Shiimi wrote to one of the directors.
Another person familiar with the court case, who refused to speak on record, since the matter was sub judice, said the clarification by Shiimi came because of the SME Bank board members’ argument in court that they were removed based only on one section of the Bank of Namibia Act, and not the Act read in its entirety.
‘’The argument is whether they were removed or disempowered. There is no change in the situation.’’
On 1 March, Shiimi announced that the central bank was not satisfied with certain investments made by the SME Bank, questioning whether they conformed to sound investment principles.
Using this as a basis, the BoN governor announced that the central bank had assumed control of the operations of the bank.
The investments with little known financial institutions in South Africa are close to N$200 million, according to estimates by the central bank.
Together with the board, the Chief Executive Officer, Manager of Finance and General Manager of Treasury were also removed unilaterally, with questions also being raised whether the central bank should have suspended, rather than fire them, until its investigations were complete.
The bank is currently being headed by an interim board, made up of Advocate Dennis Khama, Melani Sophie Tjijenda, Ali Iipinge, Fanuel Kisting and Benustus Herunga, who was appointed as acting CEO.
The SME Bank is a joint venture between the Namibian Government, the Metropolitan Bank of Zimbabwe and Zimbabwean businessman, Enock Kamushinda.