BBS demutualisation passes first hurdle
Brian Benza | Wednesday September 3, 2014 15:36
Through demutualisation, BBS will convert into a shareholder owned company allowing the organisation to apply for a commercial banking licence. At a special general meeting held last Friday, BBS shareholders unanimously passed resolutions allowing for foundation work on the intended demutualisation to be done. The resolution gave the BBS board and executive management the nod to undertake investigations that would assist them to decide whether BBS should commercialise. At the meeting shareholders also ratified the appointment of PricewaterhouseCoopers as the demutualisation Project consultants.
Once the preparatory work has been carried, a draft Prospectus on the demutualisation of BBS will be compiled for the consideration and approval of Shareholders at a second Special General Meeting to be held in early 2015.
“It is at the second Special General Meeting that it will be proposed to Shareholders, having fully considered the Prospectus, to approve the conversion of the business from a building society to a company leading to its subsequent registration as a commercial bank,” said head of marketing and communications, Sipho Showa.
BBS’s biggest shareholders include MVA Fund, Botswana Privatisation Asset Holdings and the Botswana Police Service Staff Fund. The Society has also set up a demutualisation committee consisting of prominent captains of industry such as Tsetsele Fantan, James Kamyuka, Gerald Thipe and CEO Pius Molefe.
After experiencing declining profits in recent years due to legislative restrictions on its operating model, BBS is pinning hopes on the pending demutualisation process to boost its earnings.
While BBS has been restricted by law to mortgage lending and deposit-taking activities only, it has faced stiff competition in the market from commercial banks, which can offer many other lines of products.
However, legislation enabling BBS to demutualise and make its entrance into commercial banking has recently been passed by Parliament making the 37–year old organisation bullish about its prospects. According to the results for the year ended March 31, 2014, BBS recorded a four percent decline in profits from P71million in the previous year to P68 million. In a statement accompanying the results, BBS board chairman Cross Kgosidiile attributed the decline in profits to the constraints placed on the Society by the restrictive Building Societies Act.
Kgosidiile said BBS has been pushing for demutualisation in order to better compete with commercial banks, which have aggressively encroached into its mortgage-lending mainstay. “The motivation for the transformation is precisely because of our current model which is becoming more increasingly unsustainable as the results have shown,” Kgosidiile said.