Arise B.V., an investment company based in Cape Town, also intends to quit DFCU Bank following reports that Britain’s Commonwealth Development Corporation Group (CDC) was secretly looking for a buyer of its 10 percent stake in the bank that controversially bought its rival Crane Bank in January last year.
Reports indicate that CDC is looking for another offshore company to buy its shares after reaping huge profits in the year 2017/18.
Arise B.V.acquired a majority stake in DFCU Limited, the holding company of DFCU Bank after lending US$50 million in February 2017 to the bank to help it meet short-term capitalisation needs after it controversially took over Crane Bank in January 2017.
Arise B.V acquired the stake in DFCU Bank from two previous largest shareholders of DFCU Bank-Rabo Development B.V and Norfinance AS (Norfund) which had a 27.54 percent stake each.
Arise B.V.was to support DFCU Limited via long-term investment in the bank’s growth ambitions, especially to enable the bank to improve its market position and efficiencies.
Arise B.V’s plans to quit DFCU has surprised many in the industry but the company has not given reasons that have forced it to take that option.
Insiders however say the company’s shareholders are not happy with the way in which DFCU’s local managers executed the Crane Bank deal that has become suspicious. DFCU Bank is said to have paid Shs200 billion for Crane Bank’s assets even as the Ugandan taxpayer had paid the similar amount to recapitalise Crane Bank before it was sold off by the Bank of Uganda.
Meanwhile, sources say CDC’s Investment Director Irina Grigorenko wrote a confidential letter to DFCU Bank Chairman, Elly Karuhanga announcing CDC’s desire to exit the now messy and turbulent Uganda banking economy which is faced with a low value shilling, increase on excise duty from 10 percent to 15 percent, 0.5 percent tax on mobile money transactions and poor savings culture.
Reports indicate that CDC wants to evade taxes on profits accrued as a shareholder in DFCU Bank and silently floating another foreign financial shareholder in CranemerebAfrica Limited and responsiAbility Investment AG to become the strategic investors to replace CDC and allow it to exit the market minus paying taxes to the Uganda Revenue Authority (URA).
CDC said in its letter to DFCU that with the knowledge of the company and Arise B.V., “we have held preliminary discussions with a small number of potential investors” which include Cranemere Africa Limited and responsAbility Investments AG.
Cranemere is a holding company for major businesses in the United States and Europe. Its shareholders are major families and institutions from the United States, Europe, the United Kingdom, Latin America, and the Middle East.
However Sources at URA say CDC has not written to them of its intention to sell off its shares to a third party 6 or expressed any obligations to pay the necessary taxes on dividends.
Financial analysts say this development will most likely affect DFCU’s core capital and it will further complicate DFCU’s legal status as the bank is still struggling with a buttress of court cases which arose out of out of Bank of Uganda’s decision to close several banks such as Crane Bank and National Bank of Commerce among others.
Grigorenko, said it was “undertaking a review of its investment in DFCU Limited which may lead to the disposal or some of some or all of its shares in DFCU over the short to medium term.”
DFCU is accused of conniving with some top Bank of Uganda executives to takeover Crane Bank at a throw away price and this has resulted into legal battles as CBL shareholders insist that the transaction wasn’t transparent.
DFCU’s total assets increased to a record Shs3 trillion, up from Shs1.7 trillion in 2016, like explained the boost in assets was a result of the acquisition of its rival Crane Bank. There is a pending case in court where former owners of Crane Bank are seeking recovery of assets, more so fixed assets.
The statement shows that DFCU’s core capital increased to Shs362 billion in 2017, up from Shs188 billion in 2016.
Records show that DFCU made an impressive Shs127.6 billion net profit in the year ended December 2017, up from Shs46.2 billion earned in 2016, which was an increase of 176.2 per cent.
The bank’s shareholders of CDC of Britain and others from Norway, Netherlands made abnormal profits when proposed dividends increased to Shs51 billion in 2017, up from Shs18.5 billion in 2016. It is suspected that CDC wants to pull out to avoid paying taxes or avoid losses in case Uganda’s economy continues to fail as the shillings weakens further against foreign currencies.
DFCU Shareholding percentages
Arise BV 58.71 per cent
CDC Group of the United Kingdom 9.97 per cent
National Social Security Fund (Uganda) 7.69 per cent
Kimberlite Frontier Africa Naster Fund 6.15 per cent
2 undisclosed Institutional Investors 3.22 per cent
SSB-Conrad N. Hilton Foundation 0.98 per cent
Vanderbilt University 0.87 per cent
Blakeney Management 0.63 per cent
Retail investors 11.19 per cent
BoU staff retirement benefit scheme is 0.59 per cent