Vaka exits Bona Life as new crisis brews
Mbongeni Mguni | Friday January 17, 2020 14:19
The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) had given Bona Life until August 31 last year to comply with its prudential rule on the Prescribed Capital Target (PCT).
The PCT states the minimum amount of assets that an insurer should hold in excess of its liabilities and for Bona Life, the regulator wanted assets one and a half times over its liabilities, as a way of protecting pensioners from adverse events.
With a portfolio of P712 million, Bona Life’s assets would have to be just below P1.1 billion.
Vaka told BusinessWeek that her relations with the majority shareholder in Bona Life had broken down over the need to recapitalise the business and comply with the NBFIRA requirement. Vaka, who founded Bona Life in 2013, holds 25% equity, while the Botswana Public Officers Pension Fund indirectly holds 40% and staff 10%.
Capital Management Botswana, an asset manager under liquidation, held a 25% stake which is expected to revert to the pension fund. “The regulator needed us to put new capital into the company and that’s a shareholder issue,” she said on Wednesday afternoon.
“My role as shareholder was someone to grow the business and make sure the strategy and direction was done accordingly.
“The role of the other shareholder is to fund; that’s the reason to partner because you don’t partner to all bring the same thing.
“When it came to the point of funding the business, we went through board approval, building a good business case, directors approval at an EGM and even the main shareholder was excited. “That excitement changed for reasons we do not know and the funding was delayed and withheld despite engagement.
“I decided to leave so that the majority shareholder could decide whatever plans they wanted to do with the company.” Vaka said NBFIRA was well aware of Bona Life’s troubles and policyholders’ protection was vested in the regulator.
“The regulator has done its bit very well and kept Bona Life supervised. NBFIRA also engaged the BPOPF but you cannot save a company from its owners if they are the ones not saving the value in it. “I believe the future of the company is in the hands of the BPOPF.” BPOPF members account for 85% of Bona Life policyholders.
On Thursday, senior BPOPF officials told BusinessWeek that recapitalising Bona Life was off the table. Instead, pensioners may be forced to take a “haircut” or reduction of their benefits in order to comply with the PCT.
“There is no possibility of recapitalisation by BPOPF,” an official said. “Bona Life will have to give the pensioners a haircut. “It will have to be guided by regulatory requirements.”
Bona Life critics said the firm, the country’s third largest life insurer, had been running on fumes for sometime, having built up its annuity book by allegedly promising pensioners “unachievable returns”.
Bona Life took the fight to Botswana Life, the country’s biggest life insurer, and was able to steal clients away. Botswana Life top executives at some point publicly questioned whether Bona Life could make good on the returns it was promising and queried the aggressive policy pursuit. “The funds from Capital Management Botswana helped keep the firm afloat in 2015, but it has suffered capital issues for a long time,” insiders close to the matter told BusinessWeek.
“Bona Life had hoped to land the Botswana Defence Force account, a major target, but this did not happen.”
Bona Life and the BPOPF fought from the same corner against Capital Management Botswana (CMB) whose directors were accused of misappropriating nearly P500 million from the pension fund. CMB at some point sued Vaka for P650 million as she fought to recover a P133 million investment mandate CMB had taken from Bona Life. Contacted for comment on the latest developments, NBFIRA officials said an official statement was being prepared and would be shared with the public next week. Meanwhile, Vaka has washed her hands of the financial services sector, saying the latest battle was her last.
“Finito, it’s a done deal.
“The financial services landscape has changed and it is not a safe environment. “The way business is done in Botswana has changed and it is not worth my while. “CMB was not the real problem. The real problem is continuing and it’s a concern. It is in our society and our economy and it is about the way of doing business. “It’s scary and this is more evident in the financial services. “It is important to know when your time is up and this is my curtain.”