How Munga got Sh135m for Britam shares he didn’t own

Billionaire businessman Peter Munga in 2016 pocketed Sh135.7 million worth of dividends from Britam #ticker:BRIT shares he did not own, an inquiry report shows.

The tycoon inked a secret deal with top officials of Mauritius government giving up the rights to earn dividends on the shares before Mr Munga acquired the stock.

The insurance firm declared a dividend of Sh0.3 per share for the year ended December 2015.

The book closure date — the day when the company’s share registrar determined who would be eligible for the dividends — was June 9, 2016.

Mr Munga through his investment vehicle Plum LLP signed an agreement to buy 452.5 million Britam shares from the government of Mauritius a day later on June 10, 2016.

This meant that the island nation qualified for the dividend, which was paid soon after the Nairobi Securities Exchange-listed firm held its annual general meeting on June 24, 2016.

But Mauritius officials agreed to certain clauses in the agreement with Mr Munga that saw the island nation surrender its right to the dividend, marking one of the lopsided arrangements that triggered an investigation in Port Louis.

Mauritius was to receive the dividend through the National Property Fund Limited (NPFL), which was created to manage the Britam shares that were part of assets seized from its citizen Dawood Rawat, whose Sh71 billion ponzi scheme exploded in 2015.

The loss of the accrued dividend is among the major issues that were investigated by the commission of inquiry besides the sale of the Britam shares to Mr Munga for Sh7.1 billion in disregard of higher offers of Sh11 billion each from South Africa’s MMI Holdings and Barclays Bank (now Absa Group).

This left the government of Mauritius with a Sh3.9 billion loss, prompting an inquiry that Kenyan officials were reportedly reluctant to support.

“As per these clauses, the NPFL would never be entitled to the 2015 dividend. This is not usual or good practice,” the inquiry report says.

“The commissioner therefore considers that NPFL had been unfairly deprived of an amount of approximately R43 million [Sh135.7 million] representing dividend calculated on the basis of Sh0.30 yield per share for the year ending 2015 in view of the fact that the completion date referred to at clause 6.2 of the special purchase agreement is well after the June 10, 2015.”

Britam’s 2016 accounts confirm that the dividend of Sh0.3 per share declared for the year ended December 2015 was paid in full amounting to an aggregate of Sh581.5 million.

The dividend Mr Munga earned on his new shares raised his total dividend income from Britam that year to Sh234.5 million.

His other direct and indirect stakes in the insurer – including his interest in investment vehicles Equity Holdings Limited and Filimbi Limited — raked in Sh98.7 million.

The commission of inquiry says it was shocked that NPFL conservators and Mauritian officials did not push back against the overly generous terms Mr Munga was demanding, including the dividend forfeiture.

“This is not usual or good practice. The commission notes with utmost concern that such clauses do not seem to have been questioned by the NPFL or even the special administrator,” the report says.

“It is also not clear whether this special purchase agreement (SPA) had been duly vetted by the legal advisers of the NPFL.”

The Munga deal ran against the standard practice in sale of major stakes in companies. Sellers typically retain the right to receive the dividends declared close to the transaction date.

Alternatively, the dividend declared or anticipated is incorporated into the purchase price.

This means that the buyers pay an additional amount equivalent to the dividend to the sellers and will recoup the same later through actual dividend distribution on their newly acquired shares.

This, for instance, is what happened when Equity Group acquired a controlling 66.53 percent in DRC’s Banque Commerciale Du Congo last year.

The bank paid a total of $105 million (Sh11.4 billion), equivalent to $167.9 (Sh18,242) per share.

This included an amount of $2.6 million (Sh289 million) or $4.2 (Sh462) per share that the sellers were anticipating in the form of dividend.

“The agreement specifies that Equity will pay a cash consideration … for the 625,354 ordinary shares of BCDC to be purchased inclusive of dividends declared after 1st January 2020 in respect of the financial year ended 31st December 2019,” Equity said in a circular ahead of the conclusion of the deal.

Mr Munga’s large purchase discount and dividend takeover are some of the most generous terms a Kenyan acquirer has ever extracted in international transactions that have been made public.

The commission of inquiry, however, made scathing remarks on Mauritian officials’ apparent conflict of interest, sloppiness and unethical practices.

“The Mauritian side got it wrong altogether. Mr Peter Munga was a business tycoon and all the Mauritian professionals involved put together were no match for him singly alone,” the commission said.

“He was able to dictate both time and terms, price and party. That the Mauritians enjoyed the trip Mr Peter Munga gave them is evident from the public statements made on it in Mauritius and in Kenya.”

The former Minister of Financial Services, Good Governance and Institutional Reforms Roshi Bhadain was criticised heavily for helping the Kenyan businessman close the lopsided deal in secret.

• The Lancet Commission on Global Surgery estimates that 98 percent of people residing in emerging countries, including Kenya, lack access to multi-specialty surgical services.
• The commission further describes this access to the services as including timeliness, safety, affordability for patients and an adequate capacity by providers.
• This gap forms a good starting point for pursuing the implementation of a multi-specialty growth strategy by clinics and hospitals.

It is an inherent ambition for most healthcare facilities to, over time, increase their scope of services in order to serve a wider catchment population whilst providing a broader array of clinical services.

However, the conundrum that most healthcare managers grapple with is on how, where and what specific activities to pursue in order to actualize this desire in a cost effective and, ultimately, productive manner.

The Lancet Commission on Global Surgery estimates that 98 percent of people residing in emerging countries, including Kenya, lack access to multi-specialty surgical services.

The commission further describes this access to the services as including timeliness, safety, affordability for patients and an adequate capacity by providers. This gap forms a good starting point for pursuing the implementation of a multi-specialty growth strategy by clinics and hospitals.

It is important for healthcare managers to digest available datasets in order to elucidate the characteristics of the disease burden surrounding their health facilities. Such datasets are available both internally and externally.

Internally, records of disease profiles attended to in the facility will be of use; especially of cases that eventually required referral to another center due to non-existence of the needed clinical services.

Externally, the Kenya Health Information System is a freely available online database that contains information on disease burden by type and location in the country. Also, there are specialty-wise medical journal publications that bear extensive information on various disease burdens.

As an example, one may establish that a general outpatient clinic in a hospital setting saw many patients with backaches and of these, the MRIs done showed that most of the patients had spinal compressions but were not definitively attended to due to the unavailability of a neurosurgeon or an orthopedic surgeon specializing on the spine.

The next step would be to consider setting up a spine clinic running on specific days wherein patients presenting with such back problems can be booked into. At this stage, a consideration may be made to invite a visiting specialist doctor to run the clinic on those specified days.

It is worthwhile that during this introductory phase, patients are informed on the need to subscribe to a health insurance scheme so as to limit their need for out-of-pocket expenditure and increase the affordability of such highly-specialized care.

As these occur, the healthcare manager should be forecasting on the supportive services that are required along this specialty line and making plans for the accompanying capital and operational expenditure.

If these cases require surgical interventions, this planning should be around ancillary requirements such as the availability of surgical instruments and implants, staffing cadre, rehabilitative services such as physiotherapy and so on. It helps a great deal to involve input from a specialist in the particular field.

Whereas this example covers a surgical specialty, the same data - driven approach can be applied in all other facets of medical specialties to ensure that an iterative and productive growth approach is undertaken.

The writer is a healthcare leader and geospatial epidemiologist

• The High Court has dismissed a suit filed by minority owner of Bluebird Aviation who accused his partners of siphoning more than $1 billion (Sh108 billion) from the airline through tax evasion, fraud and money laundering.
• Justice Alfred Mabeya brought to an end the five-year court battle pitting Adan Abdi Yussuf against three other owners of the 29-year-old airline.
• The judgment came after the Director of Criminal Investigations (DCI) cleared three shareholders and executives of Bluebird — Hussein Farah, Unshur Mohamed and Mohamed Abdikadir — from financial malpractices after a nine-month investigation.

The High Court has dismissed a suit filed by minority owner of Bluebird Aviation who accused his partners of siphoning more than $1 billion (Sh108 billion) from the airline through tax evasion, fraud and money laundering.

Justice Alfred Mabeya brought to an end the five-year court battle pitting Adan Abdi Yussuf against three other owners of the 29-year-old airline.

The judgment came after the Director of Criminal Investigations (DCI) cleared three shareholders and executives of Bluebird — Hussein Farah, Unshur Mohamed and Mohamed Abdikadir — from financial malpractices after a nine-month investigation.

The investigation followed a criminal complaint from Mr Yussuf against his fellow shareholders, accusing them of fraudulently channelling massive funds out of the company as part of a money laundering scheme.

Justice Mabeya dismissed Mr Yusuf’s allegations, saying he failed to prove claims of fraudulent accounting, tax evasion, fraud and money laundering.

“In the present case, all that the plaintiff did was to make sweeping allegations without any backing by way of evidence. He only stated that he had carried out investigations and made discovery of the allegations he made,” said the judge.

“The documents that were produced were not authenticated to prove any of the allegations made against the defendants.”

Mr Yussuf, who claims to own 25 percent of the charter airline, argued that more $1 billion (about Sh108 billion) has been stolen and put in offshore accounts and investments in Western capitals after being transported physically out of the country without declaration. He said the three directors were using the airport passes granted for restricted areas in airports to move the billions.

The DCI dismissed the secret movement of cash at the airports, arguing its investigation and probe by Kenya Airports Authority (KAA) found no evidence of money laundering.

The Financial Reporting Centre through the DCI said it failed to detect breaches while tracking the flow of cash in and outside Blue Bird Aviation.

Mr Yussuf claimed that his partners were stashing proceeds from the airline in international banks under Amazon International FZE. But Justice Mabeya said his partners had sufficiently showed that their relationship with Amazon was purely commercial.

“That the plaintiff had failed to demonstrate the directorship or shareholding of the defendants at Amazon or that they had stolen money from the Company and deposited the same at Amazon’s accounts,” he said.

“No faithful director exercising independent judgment would take any of the said measures, none of which are beneficial to the Company. In fact, all the steps taken by the plaintiff were contrary to the success of the Company. They were meant to sound a death knell on the company,” he added.