NO DIRECTIVE TO LIQUIDATE SWEET MICRO FINANCE - FSRA

MBABANE - Much against expectations, the Financial Services Regulatory Authority (FSRA) has said that it did not get a directive to liquidate the Swaziland Women Economic Empowerment Trust’s (SWEET) sister company, SWEET Micro Finance (SMF).

With the Central Bank of Eswatini (CBE) having acted speedily in implementing liquidation proceedings of the Trust, the assumption was that the FSRA would do same with the Micro Finance. Some of the interested investors have enquired about whether a liquidation of the Micro Finance would happen anytime soon, as they were made to believe that both entities had to undergo the process. Some of the investors argued that the FSRA needed to initiate the liquidation of the Micro Finance since it was the one that licenced it. “The FSRA licenced the SWEET Micro Finance so the expectation was that it was the one that should initiate its liquidation but instead, all that we have seen is the revoking of a licence,” one of the investors said. A questionnaire was sent to the FSRA Chief Executive Officer Ncamiso Ntshalintshali by this publication, where he was asked if there was any directive issued to the effect that the entity should initiate the liquidation. A response which came via the General Manager Corporate Services Sebenzile Ginindza was that there was no instruction to liquidate the entity.

explained

It was explained that the entry and exit of a financial services provider were premised on the regulatory framework guided the Financial Services Regulatory Authority Act, 2010. A follow-up question was posed to ascertain if there will ever be a liquidation of the entity in question. The response given was that as per the regulatory framework, a regulator led-liquidation was informed by the risk assessment respective to the entity in consideration. It was explained that the class of small sized credit providers were considered less risk in the financial services space to be guided out of the landscape. “The decision by the entity not to renew its license exited itself out of the regulatory ambit. A micro finance service provider typically uses their own funds to on lend to its customers, if there are any creditors they would be of an institutional nature and they should be able to force liquidation as per the company’s act, if they had claims against the micro finance service provider,” it was stated in the response.

It should be noted that on October 11, 2021, a joint statement was issued by the CBE and FSRA, which informed the nation that the two entities had acted jointly and carried out an investigation into the circumstances leading to the closure of the two entities (SWEET and SWEET Micro Finance). It was mentioned that reports were compiled and presented to the appropriate authorities for consideration and attention. At the time, it was mentioned that the reports were still being reviewed by the appropriate authorities and therefore, remained confidential. The statement also mentioned that in order to dispel certain incorrect conclusions, it wished to advise the general public on certain aspects that to on the issue. One of the aspects mentioned was that SWEET and SMF were corporate entities, with a governing structure and management. The governing structure, it was highlighted, did not include the Queen Mother and that her association with these entities, was purely ceremonial. Another aspect highlighted was that whilst the idea behind the establishment of these two entities was noble and well‐intended, regrettably, there were serious administrative failures in the operations.

It was said that by and large, the failures were attributable to weaknesses in governance structures, lack of controls and other short comings. The CBE advised in the statement that to compare the operations of the two entities to a ponzi scheme would be incredulous and singularly improper. Also mentioned was that the reports made various recommendations, which included holding those responsible for the demise of the schemes accountable through appropriate avenues. This included determining whether the two entities needed to be placed under curatorship (with a view of resuscitating them) or liquidation. It was then advised that all stakeholders that invested in SWEET should remain at ease and allow the regulators to complete their work and that the priority was mainly to ensure that investors were protected. On November 24, 2021, another joint statement was issued whereby the nation was informed that the investigations into the activities of the entities and report thereof had been completed.

It was highlighted that the findings and conclusions showed that there were signs of criminal activities and that dishonesty and deliberate non‐observance of corporate governance among board management and agents of the organisation and related stakeholders. The statement mentioned that following the finalisation of the investigations and adoption of the contents of the report thereof, some actions were to be taken by the regulators, effective immediately.

institutions

“A liquidator is to be engaged to commence a liquidation process of the two institutions, i.e.  SWEET Trust and SWEET Micro Finance. The liquidator will also undertake an exercise to conclusively identify genuine creditors of the institutions. It is anticipated that this process should be concluded within a period of, at most, six calendar months from the date of commencement of work by the liquidator and the investigation report and all relevant supporting documents shall be handed over to the relevant law enforcement agencies for consideration and further appropriate action with regards to the elements of criminality observed during the investigation,” it was mentioned. In addition, it was mentioned that the process of appointment of the liquidator was to be undertaken shortly and the appointed liquidator announced to the public.

Indeed, on April 13, 2022, the CBE informed investors and stakeholders of the appointment of the Sakimo Group (Pty) Ltd as liquidators of the SWEET in terms of Section 21 of Part III of the schedule of the Financial Institutions Act 2005. The Sakimo Group was introduced as a South Africa-based independent consulting firm specialising in forensic accounting and fraud examination. It was mentioned that the firm would, working in conjunction with a dedicated internal team from the CBE, commence proceedings that would lead to the liquidation of SWEET in line with the pertinent provisions of the Financial Institutions Act 2005 and other applicable insolvency laws.

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