NBFIRA steps into Bona Life crisis
Mbongeni Mguni | Friday January 24, 2020 15:45
Veteran retirement fund administrator, Paul Masie has been appointed Bona Life statutory manager, tasked with assessing the firm’s challenges and potentially recommending solutions. Alternatively, Masie could also recommend the firm’s liquidation should his assessments point that way.
The firm, which is the country’s third largest life insurer, is steeped in a fresh crisis after falling short of the regulator’s Prescribed Capital Target (PCT). The PCT is a prudential rule enforced by NBFIRA and designed to protect policyholders from adverse events.
A shareholder stalemate over recapitalisation of the business, saw the firm’s founder, Regina Vaka throwing in the towel on January 10, a move that has shaken policyholders who are owed up to P700 million.
On Wednesday morning, NBFIRA CEO, Oaitse Ramasedi told BusinessWeek that Masie was effectively taking over control of Bona Life.
“The law prescribes what the statutory manager does, which is to go in there and take over the running of the business from both the management and the board,” Ramasedi said.
“In simple terms, the statutory manager is both the management and the board. He looks into the affairs and the status of the company and takes it from there.
“He could say ‘the firm is fine and meeting its minimum capital target and while it is not meeting the PCT, the situation can be normalised’.
“Alternatively, he could say ‘I’m on the ground and it appears the next payments could dip into the capital targets,’ and suggest what action to take.”
Ramasedi stressed that the statutory manager’s appointment was not equivalent to Bona Life being liquidated. He also added that NBFIRA believes Bona Life is solvent and during the period of the statutory management, the firm will continue to meet its obligations to life insurance claims and annuities payments.
“Statutory management is not liquidation. The statutory manager goes in there to take over the running of the organisation and will take decisions that he believes are in the best interests of the stakeholders, chief of whom are the policyholders.
“As NBFIRA, we are committed to making sure there is stability, soundness and safety in the sectors that we regulate.
“All the steps we take are for financial stability,” he said.
Although no period has been set for Masie’s management of Bona Life, NBFIRA generally says it does not want the statutory manager in place “longer than he needs to be”.
At the end of the period of statutory management, Masie will make recommendations to NBFIRA on Bona Life’s fate.
Ramasedi said NBFIRA had been keeping an eye on developments at Bona Life, but had not expected Vaka’s resignation. He said the regulator would not be drawn into shareholder conflicts in its intervention.
“Bona Life is the third largest life insurance company in the country and we take a keen interest in it.
“We do risk rating and we are close to all the insurance companies; we were close to what was happening.
“However, we don’t go into sibling or shareholder rivalry. Our interest is only when this starts to impact on the regulatory side and that’s why we appointed the statutory manager so quickly.”
While Bona Life is under statutory management, it is understood its shareholders, to an extent, have room to dispose of their interests. Vaka still holds 25% and last week told BusinessWeek her continued stake would be determined by the majority shareholder, the Botswana Public Officers Pension Fund (BPOPF).
“They can buy me out. If they (BPOPF) inject more money into the business, then I expect my stake to be diluted,” she said.
Ditshetsa Makepe, NBFIRA’s director of legal and enforcement told BusinessWeek that any transactions involving shareholders would have to go through the statutory manager.
“The statutory manager would take a view on whether it is the right time to conduct such a transaction and assess the Ts and Cs involved,” she said.
Bona Life has experienced several existential challenges since its establishment in 2013, ranging from the exit of a founding shareholder to entanglement in the Capital Management Botswana scandal in 2017.
Despite the troubles, the firm is held up as an example of citizen success in the cut-throat and foreign dominated financial services sector.