Economic experts says Malawi govt should dismiss  FDH demands of K1.1bn refund on MSB deal – Report

Economic experts have urged Malawi government to dismiss FDH Holdings Limited demand of K1.1 billion to be paid back from the amount it paid for Malawi Savings Bank (MSB) shares on grounds that the company was overvalued.

A local paper, Weekend Nation, reported that Treasury spokesperson Nations Msowoya confirmed that government has written FDH Holdings rejecting to take liability of their K1 133 950 000 claim.

But FDH Holdings Limited group chief executive officer Thom Mpinganjira refused to comment.

But the paper reported that Professor James Kamwachale Khomba of the Polytechnic —a constituent college of the University of Malawi- said government should not entertain FDH’s warranty and indemnity claim.

“MSB was sold on as is basis, so there is no need for FDH to claim any refund. The deal is closed; government should not tolerate such a claim now,” said Khomba as quoted by the paper.

Khomba, who is professor of finance and corporate strategy, pointed out that there is no economic condition to justify FDH claim.

The paper also quoted another economics lecturer at the Polytechnic, Abel Mwanyungwe, who said it was surprising that FDH is seeking a refund; a year after the controversial deal was sealed.

“Was the sale agreement not binding? Did it have clauses to be changed? Did it provide for re-valuation? And what economic conditions have changed now that were not factored in the initial valuation? quizzed Mwanyungwe.

He said FDH’s request for a refund raises questions because due diligence was carried out before the MSB was sold.

Mwanyungwe said for FDH to claim the bank was overvalued today, is surprising as even using any pricing model, the K5.4 billion that was quoted for MSB was an under-valuation and it was of no value to the shareholder.

In selling MSB, government had gone against recommendations of the Budget and Finance Committee of Parliament whose resolution, adopted during a session mid last year, was that government should recapitalize the bank to enable it meet regulatory requirements.

The paper reported the background to MSB sale, saying chief among reasons that forced government to sell the financial institution was its serious capital and liquidity shortfalls that could have seen the Reserve Bank of Malawi (RBM), as regulator of financial institutions, closing the bank.

Before MSB was sold, government in April last year issued K6 billion promissory notes to clear toxic assets off the bank’s books prop up its value to attract buyers.

Government then established a Special Purpose Vehicle to recover the debts, but there has been little movement in that regard, according to people tasked with the debt collection.

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