BSE threatens to de-list Blue

MONKAGEDI GAOTLHOBOGWE
Staff Writer | Friday July 9, 2010 00:00

The Botswana Stock Exchange (BSE) threatened to de-list South African micro-lender, Blue, on Wednesday, almost two weeks after the Johannesburg Stock Exchange (JSE) made a similar move. Several individuals and corporations in Botswana are estimated to have invested hundreds of millions in the company which has a primary listing on JSE. There will be no dividends for the investors after Blue announced nearly P1.2 bilion in losses, attributed to harsh market conditions in South Africa.

The threat to de-list Blue followed a disclaimer by the auditors on the group's financial report for the year ending  February 2010. The auditors doubted the company's ability to turn its fortunes around.

The group's corporate affairs executive, Morne  Reinders, would not immediately give the list of  high profile shareholders in Botswana yesterday.

Blue's transfer secretaries, Link Market Services in Johannesburg declined to give details about Botswana shareholders. Their exchanges manager, Jenny Van Den Heuvel said they had nothing to do with  Botswana shares.

It is understood that a couple of local companies have also bought bonds issued by Blue. Price Water House Coopers Botswana confirmed this week that  they have the share register for the bonds but would not release details because  Blue would not allow them to.

Dudu Garekwe of the BSE told Mmegi on Wednesday that appropriate action is being taken against Blue. 'You will realise that in our daily market report, Blue has been tagged with a 'D' to indicate the auditor's 'Disclaimer of Conclusion' on the reviewed financials for the year ended 28 February 2010.'

The latest step by the BSE comes as interested parties in Botswana are wondering why the local bourse seems to be turning a blind eye to the company's woes. Garekwe  said  dual-listed companies are not easy to scrutinise and in the case of Blue, efforts to contact their officials in South Africa have not borne fruit.

She said they expected the JSE to have alerted them when  they tagged  Blue with a 'D' towards the end of June, so that the BSE  may take appropriate action.

Garekwe said Blue should have communicated their  situation with the BSE so that  their  shareholders are made aware of the goings on in the company. She is concerned that  Blue had not even posted their financials on the JSE or the BSE for the benefit of the shareholders.

However Reinders told Mmegi yesterday that they have not communicated their problems to the BSE because they expected their brokers Motswedi Securities and Stock Brokers Botswana to update the BSE. 'We update them( the two brokers) as much as we can, and we are not aware that the BSE are lacking any information (regarding this matter),' the spokesman said.

Auditors, Deloitte and Touche have issued a disclaimer of conclusion on the accompanying financial information. The auditors said Blue's total liabilities exceeded its total assets, net controlling interests by about P28 million and that the group is  in breach  of a number of  loan covenants and terms. The auditors said there are uncertainties which may cast significant doubt on Blue's viability. Therefore Blue may be unable to realise its assets and discharge its liabilities in the normal course of business.

However the spokesman for Blue, whose stock tumbled to nine thebe per share on the BSE on Wednesday told Mmegi that they are close to finalising some of the conditions that would take them back to profitability. He said they hope to update the JSE about the latest development very soon.

Meanwhile, Reinders says the group experienced losses when they failed to provide finance for customers at newly acquired 90 branches in  South Africa.  The new branches opened up with the acquisition of  another micro-lender, but Reinders said  the group  failed to raise funds through borrowings especially in 2008, owing to the global financial recession.

He said the group aims to save over P100 million through massive cost saving measures at the head office. Already they have already closed down over 20 of their 300 branches. Reinders said they expect a black empowerment company, Mayibuye to buy a 65 percent shareholding in the group by September this year.

This would inject about P163 million and provide the group with nearly P300 million-debt facility. However the move is yet to be approved by shareholders who will vote in August Reinders said.