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MPs want MKM bail-out

by Lesotho Times

MASERU — Three MPs yesterday handed a petition to Finance Minister Timothy Thahane urging the government to bail out the beleaguered MKM.

The MPs’ petition comes three weeks after a senior High Court judge urged the government to bail out MKM depositors.

MKM was shut down by the Central Bank of Lesotho (CBL) in November 2007 for allegedly running a money multiplication scheme and operating banking and insurance businesses without a licence.

An audit carried out by a South African firm, PricewaterhouseCoopers (PWC), declared MKM insolvent because it could not account for M300 million of the M400 million it had collected from depositors.

The central bank has since then been pushing to liquidate MKM after it was declared insolvent.

But the petitioners yesterday said liquidation would not be the best option for MKM.

The petitioners were led by opposition All Basotho Convention (ABC) MP and youth leader, Libe Moremoholo.

The other MPs who were part of the delegation that met Thahane were Moseme Makhele, the ABC MP for Hlotse constituency and ‘Makalle Makara a Lesotho Workers Party MP.

They were accompanied by two others whose names could not be immediately verified.

The petitioners said the government should bail out MKM.

“The intention to liquidate MKM through the courts must be stayed and the government should be encouraged to bail out the company’s depositors.

“We want a bail out solution. A bail-out authorised by the parliament of Lesotho can ensure the Basotho people can receive their invested monies in full.

“Pursuing of liquidation is not in favour of investors at all. It will be in favour of liquidator and the buyer of the property not the masses of our people (depositors),” the petition said.

The petitioners also rejected the central bank’s argument that liquidation would provide the best solution to the MKM saga.

“It is not true that liquidation, on the other hand, would provide a legal, uncriticiseable and transparent solution,” the petition said.

Petitioners also argued that the MKM issue required a political solution instead of a legal one.

“This is a classical case that requires a political solution involving the executive (government) and legislature (parliament) and not the judicial mechanism of liquidation.”

They also said they were worried that the central bank had elected to defy a cabinet directive that MKM should be allowed to pay out its depositors.

The petitioners said the cabinet directive should have been obeyed because it was made at the highest level of state administration.

“We are worried about the central bank defying a government directive.

“The question is: between the central bank and the government who is administering the state? Is it central bank or government?

“Why is it that the CBL is insisting that MKM should not be allowed to pay out its depositors?” the petition read.

The petitioners also accused the government of heavy-handedness in dealing with the MKM saga.

The petitioners also suggested that the finance ministry should review the approved recurrent expenditure for this financial year.

They said the expenditure for at least eight ministries amounting to M54 million could be used to bail out MKM.

“For instance eight ministries will use around M54 million for food and beverages,” they said.

They say the government should have bailed out MKM as it did with a textile factory last year.

“Some people are given a grace period to sort out their financial problems without being harsh by relevant authorities.

“There are some ministers (mentors) and members of parliament who have not repaid Block Farming funds.

“Government decided to bail out a foreign firm known as CGM. Why should it fail to bail out MKM?

“We are expecting that the minister (Thahane) will be giving a response within two weeks after consulting with the cabinet.

“It is our belief that the response will focus on a bailing out system as a political mechanism,” the petitioners said.

They also criticised the establishment of the depositors’ trust which seeks to protect the MKM depositors’ interest.

Speaking after receiving the petition Thahane said MKM depositors had ignored his warnings not to invest with unregistered schemes.

“A year before MKM was shut down I made a speech in parliament in which I warned the public against investing in unregistered schemes.

“I even called Ntate (Simon) Thebe-ea-khale to parliament to listen to my speech.

“The central bank also advised him to register his businesses but there was no co-operation between him and the central bank,” Thahane said.

Thebe-ea-khale is the MKM’s managing director.

Thahane said a report which was submitted in court showed that MKM’s assets amounted to M100 million.

He said even if MKM is liquidated the assets will not equal the MKM’s total liability.

“The question is where to get the remaining M300 million. The problem is that MKM says it owes its depositors less than M400 million.

“Now we are in the process of comparing the MKM report and the report submitted by the PWC.

“The agreement that will be reached will be placed in court to be made an order of the court,” Thahane said.

But Thahane said the ongoing assessment of figures will not mean that the liquidation cases which are currently before the courts will be withdrawn.

“The government cannot instruct courts of law.

“But if there is an agreement we can only place it before court to be made an order of court,” Thahane said.

Thahane said if parliament insists that the government should bail out MKM it (parliament) should also suggest where to cut the budget.

“If the government is required to bail out MKM parliament will have to tell me where to cut the budget,” Thahane said.

Thahane said he will hand over the petition to cabinet.

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