Fears of conflict of interest at NMB

Published: 26 September 2013

There is potential for conflict of interest at NMB arising from the fact that one of the major shareholders sits on its board of directors despite having a vested interest in some of the transactions being conducted by the group.

An NMBZ board member Jonathan Chenevix-Trench own African Century which has an 18,3 percent interest in the banking group.

The issue of this conflict of interest arose after the disposal by NMB Bank, a commercial bank owned by NMBZ of its shares in a leasing company, African Century Limited to Chenevix-Trench who wholly owns the leasing company.

A conflict of interest occurs when an individual or organisation is involved in multiple interests, one of which could possibly corrupt the motivation for an act in another.

The presence of a conflict of interest is independent from the execution of impropriety. Therefore, a conflict of interest can be discovered and voluntarily defused before any corruption occurs.

"The best way to avoid a conflict of interest is to avoid them entirely. Generally, conflicts of interest should be eliminated," an analyst said.

Chenevix-Trench has indicated that he is prepared to step down from the group's board should conflict of interest arise as a result of his interests.

He came in after African Century UK, a London-based private equity fund, acquired a 28 percent interest in NMBZ Holdings through an undersubscribed US$10 million rights issue in which it participated as underwriter.

If there is a conflict of interest I would excuse myself…If the conflict becomes an issue with our shareholders and they want action to be taken, I am prepared to step down from one of the boards locally," he said in a telephone conversation from England.

Chenevix-Trench said, however, that there has never been a conflict of interest so far.

"I have the interests of both companies at heart and will always take decision and actions that would ensure they operate viably. I however do not see any conflict arising," he said.

Presenting the group's financial results for the year to December 2012, group chief executive, James Mushore announced the disposal of the shares in the leasing company so that the group could focus its energies on complying with the then capitalisation levels for commercial banks of US$100 million by June 30, 2014.

He said there was a "non-compete" clause that would only allow NMB to compete in the leasing market after a period of six months.

Analysts are of the opinion that should NMB start leasing in competition to African Century Limited, Chenevix-Trench and James de la Fargue, an African century director who is also on the NMB Bank board, should step down from the bank's board as they would clearly be conflicted.

Ironically, whilst NMB had shares in African Century Limited, Mushore was also a director of the leasing company as an NMB representative. However, he stepped down from the board due to NMB's disposal of its shares signalling its intention to compete with African Century in this market.

Mushore this week confirmed his resignation from African Century Limited board but denied that this was due to a conflict of interest as NMB had not started leasing. He said: "NMB adheres to best practice with regard to corporate governance. NMB has not started leasing as the non-compete period is not yet over. All directors have always declared any interests that they might have at the start of every meeting," he said.

Three strategic foreign investors injected US$14,8 million into the group in exchange for 26,97 percent stake during the first quarter of the year. The investors are Tunisian-based AfricInvest Capital Partners, Dutch Development Bank (FMO) and Norfund which is a Nowergian development finance institution.

FMO was Dutch Development Bank with an investment portfolio of over EUR6 billion making it one of the largest European bilateral private sector development banks.

Norfund is a development financial institution owned by the Norwegian government through its Ministry of Foreign Affairs.

AfricInvest invests jointly with FMO and has over US$700 million of assets under management

This initiative by the board saw the bank raising equity capital of US$14,8 million and a further US$1,4 million in the form of seven year subordinated debt from Norfund, putting the total capital raise to US$16,2 million (The US$1,4 million debt was approved by the Reserve Bank of Zimbabwe as Tier II Capital)

Subsequent to the latest deal, the top five shareholders in NMBZ are African Century NNR (18,3 percent) Old Mutual (14,79 percent), AfricInvest, Norfund and FMO each holding 8,38 percent respectively.
- fingaz

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