BLOW FOR FARMERS BANK AS LICENCE REVOKED

MBABANE – Chances of the Farmers Bank eventually opening to the public continue to be hampered.

The latest development is that the Central Bank of Eswatini (CBE) has reportedly revoked the annual licence and this has put to doubt plans that the Farmers Bank will get the commercial one and finally open for business in January next year. Even though the revocation has not been gazetted yet, the reports are already being discussed in certain quarters, with some questioning the decision, while others are already pre-empting that this could have dire consequences for government and the local banking sector.

The reported revocation means that there is a possibility that certain processes will follow as per the provisions of the Financial Institutions Act, 2005, which is the legal instrument that provides for regulation and supervision of financial institutions and for matters incidental hereto. Section 16 of the Act stipulates that the CBE may revoke the licence of any financial institution, if the holder fails to commence operations within a period of one year, following the grant of the licence of if they exceed the terms of his licence or fails to comply with any conditions imposed or with any measures required by the CBE.

The licence, according to the legislation, may also be revoked if the holder ceases to carry on the business for which he is licensed or is in breach of any other of the provisions of the Act.
It is mentioned in the Act that before revoking the licence of any financial institution, the CBE shall consult with the minister and give such institution notice of its intentions to do so, and shall afford it a reasonable opportunity to show cause why such licence should not be revoked. It is stipulated that if the CBE has revoked a licence, it shall as soon as possible publish a notice of the revocation in the gazette and in a newspaper of general circulation in the country and shall in addition cause a sufficiently large enough notice to be posted in a conspicuous place in each place of business of the financial institution.

The Act also states that any decisions taken by the CBE including any refusal or revocation of a licence, shall be subject to appeal to the minister.The latest decision, the Times SUNDAY has gathered, comes after the Farmers Bank was issued with what is known as known as a notice of revocation at the end of September this year. In a letter dated September 27, 2024, the CBE wrote to the Farmers Bank investor, Alexandre Francis Asfar and this was a correspondence to an action plan the Farmers Bank had submitted.

The letter was informing the Farmers Bank about a notice of revocation of the banking licence in terms of Section 16 of the Financial Institutions Act, 2005. The CBE said following a letter dated September 25, 2024, whereby it had advised the Farmers Bank on the advanced assessment and evaluation of the latter’s action plan, inclusive of consultations that were being undertaken, it had concluded the exercise. “Following a holistic and careful consideration of the submissions, in the context of the meetings with yourself on August 13 and August 26, 2024, regrettably, the action plan is considered not to meet regulatory requirements and expectations,” the CBE said in the letter, which served as a notice of revocation.

The CBE cited certain aspects it claimed the Farmers Bank had not met, one of them is in relation to capital and liquidity. According to the letter, the CBE cited that there has been no clear and satisfactory plan with timelines and demonstrating capacity and desire to capitalise and provide liquidity to the bank-in organisation in compliance with relevant regulatory requirements. In terms of corporate governance and related matters, the CBE said the submitted plan has not provided any information and or timelines when the Farmers Bank will constitute a new Board and appoint competent senior management to evidence his commitment to remedy the corporate governance issues.

“The plan remains highly promissory in form and nature with no traceable action items on your part. This is despite the critical nature of having these structures in place to assist develop and execute any strategy and plan to operationalise the bank,” reads part of the CBE letter of notice of revocation. The CBE also lamented that the Farmers Bank core banking system still requires critical areas of improvement and provision of assurance to attain full business application preparedness. “Your submitted plan on this area is shallow and indicates a lack of appreciation on the nature and magnitude of specifications, resources and quality required. Farmers Bank has an open-source banking system and was advised to source a competent and convincingly experienced team of software engineers and be stringent hard done by the decision.

The Farmers Bank management, it has been gathered, feels hard done by the decision as they are of the belief that they did everything to meet the requirements as contained in their action plan. The management, through its consultant, is said to have heeded to a directive that they should compile and submit an action plan to the CBE. The action, which this publication has seen, was compiled and is dated August 13 to August 31, 2004. The sources have confided that the ongoing behind-the-scenes engagements could lead to what is known as abatement and a possible withdrawal of the revocation.

“In order to manage the situation, the Farmers Bank should be allowed to appeal and the minister of Finance should set up a tribunal, made up of three people to look into the matter. Otherwise if the revocation is final, chances are high that the Farmers Bank will take the legal route, since they have invested a lot of money in the country,” said one of the sources. When sought for comment, Minister of Finance Neal Rijkenberg, did not deny nor confirm the reported revocation, but said his office is currently working on the issue. “It is my job as the minister of Finance to encourage banks to open in Eswatini. At the same time, it is the Central Bank’s job as a regulator to look into the operations of banks and ensure that everything is done in a proper manner. As the Central Bank has its own rulebook and plays by the rules, I have to do my job. Like I am doing for the Building Society to become a bank, I am working hard to help Farmers Bank. For that reason, I am trying to manage the situation as the minister,” said Rijkenberg.

Meanwhile, Investment Consultant and Farmers Bank Technical Advisor said: “Our position is that we are optimistic about the situation  and are doing everything we can possibly do to ensure that we address all the concerns, which were stated by the regulator based on the notice of revocation. We are cooperating with the Central Bank in terms of putting everything in place”. Early this year, it was reported that an onsite inspection report that was to be compiled by CBE would determine the fate of the Farmers Bank. The commencing of operations for the Farmers Bank has for more than three years been delayed as it has been argued that this was due to that it had still not yet complied with certain procedures as per the provisions of the Financial Institutions Act, 2005.

Members of Parliament (MPs) have in recent months sought answers from the Ministry of Finance on the status of the bank and what was currently being done. In a response, the ministry said the Farmers Bank remained a licenced bank under the aforementioned Act. According to the ministry, the CBE last reviewed the Farmers Bank’s licence in September 2023 for a one-year period. The ministry said the bank was, however, considered a ‘bank in organisation’ since it has not commenced operations or opened doors to the public.Also mentioned was that the CBE meets the Farmers Bank on a monthly basis to discuss progress and that it recently conducted an on-site inspection as part of the requirements before commencing operations.
The Farmers Bank is the one that has reportedly invested over E100 million in the country to focus on water and food security after being granted a licence in 2018 which was however, revoked.

With its plan being to invest in agriculture, one sector which remains a major contributor to the country’s gross domestic product (GDP), many were of the belief that hosting such a bank was ideal for the Kingdom of Eswatini. In some countries in the African continent, there is what is known as agriculture banks, which have played a role in the provision of agricultural credit facilities to support all agricultural value chain activities, provide non-agricultural micro credit, savings mobilisation and capacity development. Since last year, the Farmers Bank has been running notices detailing its pricing guide.

The guide includes prices for retail banking, corporate and business banking, withdrawals on automated teller machines (ATMs), payments and transfers plus card fees. Also included in the guide are penalty fees, prices for value-added services, deposits and point of sale fees among others. It was in October 2018 when the CBE issued a banking licence to Farmers Bank Pty Ltd. At the time, it was said that the licence will allow Farmers Bank to conduct banking business in the Kingdom of Eswatini as a commercial bank. “Pursuant to the dictates of section 7 of the Financial Institutions Act of 2005, the licensing of this new bank has been published in the government gazette through legal notice number 180 of 2018,” the letter of approval issued by CBE read in part.

The granting of the licence was confirmed by the then CBE Governor, Majozi Sithole, who stated that such a decision had been taken after thorough interrogation and determination of the incoming bank and its directors. The governor mentioned that as a bank, they continue to be strongly of the view that the Eswatini economy has room to absorb more banks. At the time, the Board of Directors of the Farmers Bank said plans were underway to start operating in the country in October or early November at the latest.However, things changed in October 2020, when an announcement was made to the effect that the CBE, in exercise of the powers bestowed upon it by Section 16 of the Financial Institutions Act, 2005, had revoked the commercial banking licence issued to Farmers Bank (Pty) Ltd with immediate effect. CBE explained stated that the revocation followed a due enquiry as outlined by Section 16 of the Financial Institutions Act 2005.

Thereafter, the Farmers Bank filed a notice to appeal the CBE’s decision to revoke their banking license hardly 24 hours, after the banking industry regulator decided to revoke their legal powers to operate in the Kingdom of Eswatini from October 1. The CBE has since December 2018 been waiting for the Farmers Bank to fully comply with the licensing conditions, which include jealousy safeguarding the deposits taken from members, among others. The Farmers Bank is said to have invested over E120 million in the country with over E30 million used in infrastructure, systems, licence fees and other ground work costs. Its main focus will be water and food security. It directors are on record having said that they considered investing in the country because after a strong analysis, they had uncovered that there was an opportunity to empower emaSwati by reducing the volume of imports, which account for about 70 per cent of locally consumed food produce.

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