Lessons from the Kalahari: Ethics will take centre stage

In my recent interactions with BRPs, it has become clear that there are various legislative loopholes in the business rescue profession. Unfortunately, certain BRPs are taking advantage of these loopholes, which has led to a crisis of trust in the industry.

In an effort to address the challenges found in their profession – which will only benefit it in the long term – the Government of Namibia has identified the important role that business rescue can play in the economic development of the country. Namibian President Hage Geingob set up a task force to conduct a full audit of the industry. The task force also made recommendations to the President on the necessary interventions to address the industry’s challenges.

Like South Africa, ethics was earmarked as a key challenge.  The interventions to address this was discussed in a report presented to the President.

Appointment based on metrics
The report points out that the appointment (and remuneration) of Business Rescue Practitioners and Chief Restructuring Officers should be based on key business metrics (i.e., revenue, number of employees, asset base etc.) to ensure cost efficiencies.

It is important for a Regulatory body to be established to oversee amongst others accreditation and qualification of Business Rescue Practitioners (BRPs), Chief Restructuring Officers (CROs), restructuring plans and the implementation thereof and the overall performance of BRPs and CROs. The positioning and governance of such a body to be considered.

Avoiding the cost burden
The report points out that, to avoid creating additional cost in the system it is recommended to consider leveraging existing professional bodies with strong codes of ethics such as the Institute of the Chartered Accountants in Namibia (ICAN), the Law Society of Namibia (LSN), the Public Accountants and Auditors Board (PAAB), or others. Accreditation of the first round of BRPs and CROs should initially be outsourced to other regional and international accreditation bodies, while capacity is being developed by identified professional bodies with strong codes of ethics such as the Institute of the Chartered Accountants in Namibia (ICAN) or Turnaround Management Association.

Provision must be made to deal appropriately with under-performing or unethical behaviour by BRPs and/or CROs. Since the topic of Business Rescue is new to Namibia, there will be capacity constraints to deal with the business rescue process end-to-end and the following gaps have been identified:

• Qualified Business Rescue practitioners, Chief Restructuring Officers and Debt Councillors;
• Qualified Assessment bodies to assess Business Rescue and Debt Counselling applications;
• A National Credit Regulator to be enacted as part of consumer protection bill.
• Understanding of the broader Business Rescue concept under the broader public, private sector
• (including banks and non-banking financial institutions) and regulators, including the Competition
• Commission;
• An enabling business rescue culture to afford entities and individuals a second chance;
• Technical expertise in Asset Management; and
• Valuation of businesses and assets under stress.

The value of a proper education
The report points out that a curriculum must be developed to provide academic qualifications to interested BRPs, CROs and Debt Counsellors for formal accreditation. Training should initially be outsourced to other regional and international educational centres, while capacity is being developed by local centres such as the University of Namibia, and the Namibia University of Science and Technology (among others).

In conversations with the Business School at the University of Namibia, they expressed an interest to develop and offer such training as part of their curriculum for business studies. In addition, Namibia should be allowed to insource qualified Business Rescue Practitioners from neighbouring countries for a period up to 10 years to deal with the initial expected high number of Business Rescue applications, while the required skills and experience are developed by qualifying Namibians.

A formalised regulator
Appendix 7 in the report suggests a process flow for Business Rescue Process and provides an indicative training curriculum for Business Rescue Practitioners. To exercise proper control, good corporate governance, and ethical behaviour, it is recommended that Business and Intellectual Property Authority (BIPA) takes on the responsibility for regulation and be resourced (through an additional budget) accordingly. Furthermore, BIPA should be enabled to enforce compliance, while operating control be entrusted to ONE professional Association and one Code of Conduct to which all Business Rescue Practitioners and CROs should be affiliated. A procedure framework should be established to ensure compliance through the compulsory and timeous submission of control returns.

Ongoing awareness to the broader public must be done through educational drives. It is recommended to obtain the assistance and support from technical experts from outside of Namibia to assist with the initial set-up and establishment of such a framework. In that regard, it might be required to provide for work permits to allow such experts to relocate to Namibia with a view to set up the required infrastructure and facilitate much needed skills transfer during the above-mentioned period of up to 10 years.

Opportunities on the horizon
It seems as if there will be a 10 year opportunity horizon for South African BRPs to gain access to the Namibian market where they will find work opportunities and opportunities to shape the future of a neighbouring industry.

Additionally, South African BRPs will be exposed to challenges that are outside of those found in the South African market. either way you look at it, South African BRPs can only benefit from Namibia’s future ambitions.