Financial scam implicating BAI shakes investor confidence in Mauritius.
The island economy is in the red following the financial scam in excess of Rs 25 billion, which has dampened both local and foreign investor confidence leading to the worst stock market performance across Sub-Saharan Africa, besides triggering rupee depreciation and making the dollar more expensive. (Image: silverdollarproduction.com)
The financial scandal in Mauritius implicating the BAI Group has dampened investor sentiment, leading to Mauritius equities being the worst performers in Africa.
Overall market sentiment is determinedly on the downside in the island economy, where local banking major Bramer Bank has gone bankrupt and its largest life insurer, BAI, is also implicated in what is suspected to be one of the biggest Ponzi schemes since Bernie Madoff.
The central bank of Mauritius revoked the licence of Bramer Bank on April 2 and placed its insurance unit BAI into administration.
The financial scandal and its implications threaten to undermine efforts by Mauritius to position itself as a regional hub for financial services, with the financial sector currently contributing around 10% to the island economy’s GDP.
The Stock Exchange of Mauritius’s benchmark index, the Semdex, has dropped for a record six straight months and is down 6.3% this year – which is the maximum drop recorded among the 14 main Sub-Saharan African gauges tracked by Bloomberg.
Besides, the rupee retreated 12% this year against the dollar, the worst performer on the continent after Ghana’s Cedi and the Zambian Kwacha, as foreign investors sold bank stocks and a weak euro hurt exports to the nation’s key trading partners.
The rupee’s slide against the dollar, while staying stable against the euro, is weighing on the Mauritian economy, as most exports are directed toward the euro zone and imports are dollar denominated.
Further update on the situation shows that the Bank of Mauritius (BoM) issued a communiqué to inform the public that the banking licence held by Bramer Bank (in receivership) was surrendered on the 16 April 2015. It may be noted that BoM had issued a banking licence to Bramer Bank (in receivership), then under the control of PwC’s André Bonieux and Mushtaq Oosman in their capacity as receivers, to conduct restricted banking business as from 7 April 2015. With the formation of the National Commercial Bank and issue of a banking licence to it for taking over business erstwhile run by Bramer Bank, the licence granted to the latter to conduct interim banking business was no longer required, and has hence been since surrendered to the central bank.
Finally, on the super cash back gold scheme which concerned a significant chunk of BAI policyholders, the two conservators of the BAI – Mushtaq Oosman and André Bonieux – have come up with a solution, as highlighted in a report submitted to the Financial Services Commission. The way out is that policy holders will need to pay an exit fee, that is determined to be equitable across all single premium policies, if they want to access their capital.