MASERU — Finance Minister Timothy Thahane has dismissed accusations that the government shut down financial services company MKM because it had a vendetta against owner Simon Thebe-ea-khale (pictured right).
Thahane was answering questions at a post-budget meeting on Friday night.
In the morning he had presented the 2010-2011 national budget in parliament.
Thousands of depositors were left stranded in November 2007 when the Central Bank of Lesotho shut down MKM for operating insurance and banking businesses without licences.
Since then depositors have been waiting for their payouts while MKM has been running endless court battles with the central bank which is pushing for its liquidation.
A forensic audit found that MKM could only account for M100 million of the M400 million it had received from depositors.
MKM has however disputed the figures.
“It is not true that the government is fighting Mr Thebe-ea-khale,” Thahane told the audience at the business meeting.
“You must understand that the MKM issue is not easy to resolve,” he said in response to a question from a student who had asked whether the government was committed to supporting local businesses.
“It is not correct to suggest that the government does not want people to become successful in business.
“We only want people to prosper through legal means.”
Thahane said MKM’s troubles started when the company added other businesses to its original funeral scheme.
The trouble was not caused by the funeral business which Thebe-ea-khale has been conducting for years, Thahane explained.
“Had he not combined it with other businesses there would have been no trouble,” he said.
“But he started other unlawful businesses such as the scholarship (scheme) and other investment businesses unlawfully.”
Thahane said although negotiations to facilitate depositors’ payouts outside the court started in 2008 there were misunderstandings between the government and MKM.
He however did not say what the misunderstandings were and what caused them.
“I have already reported to cabinet about the negotiations,” said Thahane.
The MKM saga, the collapse of other pyramid schemes and last year’s global financial crisis seem to have prompted Thahane to start pushing for the tight supervision and monitoring of the financial sector.
“The ongoing global financial crisis confirms the dangers of weak supervision by regulators,” he said in his budget statement.
“It is therefore important to instil prudence in the operations of financial institutions through the review of legislation and regulations to ensure that there are no loopholes and public deposits are well protected and guaranteed.
“This means that government must ensure that the management of financial institutions is well supervised and regulated by the central bank.”
Thahane also said the government will continue reforming and modernising the financial sector with a view to creating a better regulatory and policy environment.
The government also wants to expand financial access to entrepreneurs, small businesses and the poor.
It also intends to continue its support to the Lesotho Post Bank to develop market-led financial products.
“The government, in partnership with IFAD under the Rural Financial Intermediation Programme, will continue to support the Lesotho Post Bank to develop market-led financial products with particular focus on the rural population and the low segment market, and the support for community-based rural savings and credit groups,” Thahane said.
Thahane said the government also intends fighting money laundering.
“With the support of the United States treasury and the East and Southern African Anti-Money Laundering group the government is focusing on the implementation of anti-money laundering and the financing of terrorism,” he said.
“Initial staff have been recruited and are undergoing training to establish the Financial Intelligence Centre.”