When it rains, it pours for Trustco Bank Namibia as the entity is fighting to keep its doors open after the Bank of Namibia last week ordered an immediate suspension of its operations. 

The central bank temporarily suspended Trustco Bank, a subsidiary of Trustco Group Holdings (TGH), with immediate effect for six months on condition that the local bank rectifies stipulated conditions.

In an urgent application filed on Tuesday, TBN is asking for an interim court interdict against BoN’s directive. Also, it wants the court to order the central bank to withdraw and/or reverse all instructions emanating from the suspension given to the Payments Association of Namibia (PAN) and Namclear.

The interim interdict remains in force
until the court pronounces itself on the
review application. 

Review application

TBN contends BoN’s decision is unlawful, unfair and unreasonable.

The TGH subsidiary claims the central bank’s conduct undermines both the Constitution and principles of natural justice.

In court documents, TGH CEO Quinton van Rooyen claims the company and members of the public will suffer if BoN’s directive remains in force. 

“… any suspension would significantly prejudice thousands of members of the
public who hold insurance policies that would be deducted, given the failure to collect the debit orders,” said Van Rooyen. 

He added that the suspension would further preclude TGH from concluding a transaction pursuant to which it would gain access to a N$1.25 billion facility, which would enable it to extend credit to the public once it is again authorised to do so.

According to Van Rooyen, more than 27 800 people will default on their life and legal insurance payments, and over 1 300 people with active court cases will lose legal representation as a result.

Furthermore, TBN contents that 2 650 people will default on monthly micro-loan payments. Van Rooyen argues that BoN’s directive must be reviewed and set aside as the grounds on which the decision is based are subject to ongoing litigation. He also claims TGH was not engaged before BoN took the drastic decision.

“To impose the suspension without any engagement amounts to an abuse of power and process, which renders the suspension notice irrational, unfair, unreasonable and arbitrary,” he stated.

BoN’s response

Yesterday, BoN lawyer Loini Shikale informed the court that the central bank was not in a position to properly respond to TBN or the allegations contained in their application. 

She said BoN was not afforded enough time to prepare a well-constructed response. 

“There was not enough time to get instructions and prepare a response because the papers were served late. Also, the team that would make submissions on behalf of the respondents is in South Africa, and they would need to apply for work permits – which will take time,” said Shikale. 

So, she asserts, it would be prejudicial to BoN for the court to grant the interim interdict without hearing their side of the case.

High Court Judge Boas Usiku agreed with BoN, and ordered the central bank to file an answering affidavit no later than on 28 August, and for TBN to respond no later than 29 August.

He further ordered the parties to file their heads of arguments on or before 30 August.

Usiku postponed the matter to 31 August for a hearing.

Liquidation application

In November 2022, BoN approached the High Court for an order to liquidate TBN, claiming the bank is insolvent and has failed with the order to re-capitalise the institution. This, the central bank argued, would improve a “precarious” financial position for TBN.

In court documents, BoN governor Johannes !Gawaxab accused TBN of poor liquidity risk management. He said Trustco Bank had failed to comply with seven of 25 BoN directives made in December 2020 to re-capitalise with a cash injection of at least N$100 million. 

This substantial amount, which was to be paid in three portions over a period of three years, was to ensure TBN’s liquidity, with the first payment of N$33.3 million due on 31 March 2021.

However, !Gawaxab alleges TBN merely created the illusion of having paid the first payment of N$33.3 million. 

Right after the money was deposited to TBN, it was immediately channelled to TGH.

Furthermore, BoN asserts TBN has not made any payments since September 2021
to a N$10 million Development Bank of Namibia loan.  BoN further claims TBN owes the taxman N$17.4 million. The tax debt arises from the sale of an intangible asset as well
as TBN employees’ pay as you earn (PAYE) tax, withholding tax, and value-added tax as of 30 June. BoN further made an assessment on whether Trustco Group had the financial strength to support TBN.

!Gawaxab’s prognosis revealed that Trustco Group made losses amounting to N$988 million, the value and volume of shares on stock exchanges were dwindling, no dividend payments were made since 2018, and the operations were not generating enough money as the net cash used in operations was N$841 000. 

The assessment further revealed total assets exceed the total liabilities by N$2.3 billion due to the transfers and acquisitions noted in the investment property
balance.

It is BoN’s stance that TBN is both
factually and commercially insolvent, and thus unable to pay its debts.

The case will be in court on 2 October for a recusal application hearing. 

-mamakali@nepc.com.na