'Conflict of interest issue is under control,' says NMB

Published: 03 October 2013

AFRICAN Century Limited Chairman and sole shareholder Jonathan Chenevix- Trench, who is also a major shareholder of NMBZ Holdings and sits on the NMB Bank board said he was prepared to step down from one of the boards' if there was a conflict of interest.

He said he would do so to maintain the perception of strong corporate governance that NMBZ Holdings has always prided itself in. Chenevix-Trench has an 18,3 percent shareholding in NMBZ Holding's. He came in after African Century UK, a London-based private equity fund, acquired a 28 percent interest in NMBZ Holdings through an undersubscribed $10 million rights issue in which it participated as underwriter.

The issue of this conflict of interest arose after the recent disposal by NMB Bank of its shares in a leasing company, African Century Limited to Chenevix-Trench who now owns the leasing company 100 percent thereby also giving rise to indigenisation concerns.

"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 from England this week. Chenevix –Trench's view, however, was 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 $100 million by 30 June 2014.

He also made reference to a "non-compete" clause that would only allow NMB itself to compete in the leasing market after a period of six months. At the analysts briefing last month where NMB released its results for the half year ended 30 June 2013, Mushore stated that the non-compete period would expire at the end of September 2013 and that this was a market that they were keen to get involved in once the right funding was in place.

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.

"Chenevix-Trench is fishing from the same pond with other shareholders and his interests are likely to be biased toward African Century where he is a sole shareholder and since he has not stepped down from the NMB board it appears likely that he has not declared his interest," said an insider. 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 signaling its intention to compete with African Century in this market.

A conflict of interest occurs when an individual or organization 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. 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.

- Big Law IR

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