In the present BAI/BRAMER BANK saga, if they are some key players/people who feel vindicated, they are the ex-Minister of Financial Services, the ex-CEOs of the Financial Services Commission (FSC) and other high officials of the FSC who were replaced after the 2005 elections. They had initiated a whole set of reforms in policy making and legislation that have supported the development of the financial sector.
But most important of all, they were then prepared to put some order in the insurance business and their investigations had pointed that BAI activities were in contravention of the regulatory regime and were putting at risk the entire financial sector. Some of them had even gone so far as declaring that the insurance company was insolvent based on their findings that there was a significant deficit in the life fund. That was back in 2004.
And in 2007, the IMF alerted us on the unsound activities of BAI, especially on the riskiness of the staggering level of investment in related companies. What was most shocking was that despite these unsound investments, in December 2006, this financial group was granted "approval in principle" to obtain a license under the Banking Act by the Bank of Mauritius . ( Who was the Governor of the Central Bank then ? Not Bheenick!!!).
And in 2012, the IMF reminded us that the issue of the insurance company with a substantial proportion of its assets invested in related companies has not been resolved. Moreover, they also warned us that these issues are potentially serious for the policyholders, depositors and investors and the weaknesses that allowed the problem to remain unresolved for so long, could result in more serious failure of a systemic nature.
Now that the semi ponzi /pyramid schemes are beginning to unravel these events are severely undermining the reputation of our financial centre especially at a time where the international community is putting our global business sector under close scrutiny. Who are the culprits ? They are all accountable as from 2005- starting with the tandem Mansoor-Sithanen followed by the successive finance Ministers and ending up with the Governors and the whole army of regulators.
For a newly elected government, which is still settling down, the systemic effects of the bursting - planned or unplanned- of the BAI semi-ponzi scheme could pose a serious challenge. We thought that the years that the country was tormented by a flood of scams ,scandals and declining rates of growth ,while the leadership remained in a comatose state , was over . The politics of despair has been replaced by audacity but not necessarily by better management of affairs. The sense of expectations has not necessarily meant a government wanting to deliver quickly and meaningfully but rather a government with may be giving the wrong impression of an urgency to settle scores. This may ,however, hamper it in making high quality and effective policy.
The new National Commercial Bank has asked for some time to meet the required ratios . Similarly, why was not more time given to Bramer Bank ? We prefer to put at stake the reputation of our financial centre than do all the necessary to avert a worst case scenario of financial distress for BAI /Bramer Bank. A clear rescue plan could have been devised and implemented by the Ministry of Finance, in coordination with the Financial Services Commission, the Registrar of Companies, the Financial Reporting Council and the Bank of Mauritius. A key objective would have been to establish proper supervisory oversight and enforce corrective action for effective and prudent risk management. Under firm pressure from the supervisory institutions and Government, BAI Co Ltd could have been led into a salvage operation involving new strategic investments and sound professional management. The BAI Group’s well-performing Kenyan businesses which hold substantial assets could have provided a financial underpinning to strengthen BAI Co Ltd. A major source of financial hemorrhage within the BAI Group could have been urgently addressed, namely the Apollo Bramwell Hospital while some degree of public financial support could have been provided to bring health and soundness to BAI Co Ltd.
The impact on the financial sector and the wider economy is likely to be severe. Financial stability could be shaken, and the country’s growth could be adversely affected by the loss of thousands of jobs and the ripple effects of this financial disaster across different economic sectors. Clearly, these huge costs of financial instability in terms of lost growth and foregone welfare , especially that of a tarnished image in a world of cut throat competition to attract investments and businesses, could have been avoided.
