On Tuesday, September 21^st, 2008, the Governor of the Central Bank of Lesotho held a Press Conference to provide developments on the issue of the MKM/Star Lion Group.  The Governor impressed upon the media the bank’s sensitivity about the public anxiety which has been invoked by the Bank’s intervention in the operations of the MKM, noting that people had invested their hard-earned money with the Group.  He however, reminded the media that since November-end 2007, when this saga began, the Bank’s engagement with MKM had been characterised by protracted litigations and counter-litigations, which had directly stalled the earlier-envisaged progress, and deadlines.  Furthermore, the Bank took a decision to avoid engagement in debates about this matter while it was still before the courts, lest it could be misinterpreted. 

The Governor proceeded to inform the Press that PricewaterhouseCoopers, which had been tasked with undertaking an investigation on the activities of the MKM/Star Lion Group, had submitted a comprehensive report to the Bank, and that the same report had since been submitted to the Minister of Finance, to inform himself and accordingly table it before Government.  Similarly, the same report had also been tabled before the High Court, in accordance with the Court Order that had been granted.

While the Governor did not divulge the full details of the Report, pending its consideration by Government, he however, highlighted some of its aspects, such as (i) that the total amount of people who had invested in all MKM schemes was around 100 000; (ii) the total amount of money invested in the schemes was M400 Million, while the expected payout was M1.02 billion.

He went further to explain that depositors’ money was used to purchase among others, commercial properties, residential properties, vehicles, and was also utilized towards the running of the MKM burial society.  All in all, the total amount of these assets, which include some cash, is M100 Million.  This means therefore that, on against a total of M400 Million (in all schemes), and total assets of M100 Million, the MKM/Star Lion Group has a shortfall of M300 Million, and therefore declared as insolvent. It will not be able to pay back the minimum of investments, let alone the promised returns.

 DELIBERATIONS

During the question and answer session, the following were discussed:

1.                   Request for the Bank to prepare a chronological  order of the Court Cases, and their rulings, including their dates

The Central Bank of Lesotho will endeavour to compile all rulings of the Court and transmit them to the media as soon as possible. 

2.                   How big is MKM’s estate?

MKM’s estate includes a total of 198 vehicles, 48 commercial and residential properties, and sites, as well as a mortuary.  There are 23 other properties that have been identified, which have still not been transferred into Mr. Thebe-ea-Khale’s name.

3.                   What does the CBL intend to recommend to Government in dealing with the shortfall? Is the recommendation going to imply that depositors will be compensated with taxpayers’ money?

The issue of compensation is at the heart of this problem.  While a definite answer cannot be provided immediately, options for dealing with it will be tabled before the Minister of Finance.  Having said so, what is clear is that the response to this problem will be based on political and social considerations, and not an economic basis alone.

4.                   Considering the shortfall of M300 Million; how is the process of compensation to depositors going to be prioritized?

There are a number of factors to take into account in the process of ensuring that debtors are repaid, and this includes the fact that there may also be other creditors who will be in the line to be paid. The PWC investigations and report are based only on investors.  Having said that, it is important to reiterate that the ultimate decision regarding the conclusion of the MKM matter will be based on political and not an economic basis alone.

5.                   At the end of this exercise, what does the Bank make of its public image?

The Central Bank of Lesotho is not insensitive to the impact that its decision to intervene in the operations of the MKM has had on all those who invested with it.  However, it is important for people not to lose sight of the damning findings on the MKM, which the PWC has made on our behalf, and the fact that the High Court has, in the related cases, always ruled in the Bank’s favour. 

We further recognize that we have may have thwarted people’s dreams, but the situation could have been worse, if it were left unabated.

6.                   On the issue of bail out, is the Bank going to advise Government to compensate depositors?

The Bank will think over a number of possibilities to approach this matter, and then present them to Government for consideration.

7.                   Has the MKM been presented with the PWC report?

The MKM has duly been presented with the report.

8.                   Doesn’t the presentation of the report to the Minister of Finance jeopardise the Court proceedings?

The report is now a public document which can be accessed from the Office of the Registrar of the High Court.  There is no way that its presentation can jeopardise the Court proceedings.

9.                   Does the Central Bank of Lesotho have interest to pursue the illegally operating institutions which may have come before MKM, including those that could perhaps be in operation currently?

The Bank will always deal decisive with the illegally operating financial institutions, when it knows about them, though it is always difficult to detect them on time.  Under the circumstances therefore, the Bank relies on public tip-off to pursue them.  What is disheartening is that people invariably never volunteer to provide such tip-off until such time that they experience problems with these institutions.

10.                The declaration that MKM is now insolvent; is it a Court ruling or just a PWC conclusion?

The PWC report is based on MKM documents, and proceedings in Court, whereat Mr. Thebe-ea-Khale was given an opportunity to explain himself.  On the basis of these, it has been established that in fact he is insolvent.  Mr. Thebe-ea-Khale himself mentioned in Court that his bank accounts, held anywhere in the world, do not have any money.

Public Relations Division - Central Bank of Lesotho 23 September, 2008