Trustco, the Namibia-based investment group that last week announced a planned R950 million cash-for-shares injection, had an 18.1% average net asset value growth since listing, but faces litigation and other uncertainties in the new financial year.
Writing in the company’s latest annual report, chairman and advocate Raymond Heathcote said the JSE had issued a directive for Trustco to restate its annual financial statements that had resulted in a legal dispute.
“During the previous reporting period, Trustco complied under protest with the JSE’s directive, although this matter remains under appeal and Trustco was granted leave to appeal against the judgment, delivered by the High Court of South Africa, by the Supreme Court of Appeal in Bloemfontein,” the chairman said.
He said there was also legal action with the Namibian Revenue Agency (Namra) and a constitutional challenge by the company against it.
“Trustco took legal action, filing an urgent review application and constitutional challenge against Namra following Namra’s directive to freeze both Trustco’s and its investees’ bank accounts. Subsequently, Namra retracted the issued notices to freeze the accounts.”
The chairman said the constitutional challenge related to Namra’s authority to unilaterally “sweep” funds from an entity’s bank account without due legal process, “instructing the transfer of funds without notice until the last cent… .”
In a property related issue, Trustco and Helios were in dispute over a facility agreement. Helios demanded payment of an outstanding amount and Trustco counter claimed for mala fide misrepresentation.
Meanwhile, Trustco Bank Namibia was in the process of seeking a commercial resolution to the suspension of Trustco Bank’s banking licence by the Namibia government – commercial banking represents 0.1% of the invested portfolio of Trustco.
“Trustco initiated a review application against Bank of Namibia (BoN) and the government of the Republic of Namibia, specifically challenging certain legislation granting BoN unchecked authority to issue directives without due process.
In response, BoN countered with a liquidation application against Trustco Bank and sought suspension of Trustco Bank’s banking license. BoN amended the Banking Institutions Act in 2023, rectifying various of the issues raised by Trustco in its review application launched against BoN. While Trustco is actively pursuing a commercial resolution,“ the chairman said.
“Upholding the highest standards of corporate governance stands as a fundamental pillar of Trustco’s success,” he said in the report
Trustco also held a 19.5% interest in diamond mining in the Sierra Leone-based Meya mining licence area in pursuit of “extraordinary returns”.
This “early stage investment” venture where Trustco had an interest was being brought into “commercial production”, Trustco said in its annual report.
“Ongoing exploration and resource development across the license area over the next 10 to 15 years are expected to yield significant growth potential,” the company’s directors said in the report.
On Trustco’s insurance operations, a key income earner for the company, the annual report said the deceleration of organic growth “poses challenges to cash flow sustainability”.
The mitigating strategy for this was to introduce new products to cultivate a fresh client base and additional revenue streams, and to implement a 10% premium increase, the first increase after a five=year period.
Trustco’s property interests, which include four significant property developments, comprising residential estates with room for commercial expansion and industrial parks, experienced challenges last year due to lower-than-expected property sales volumes, attributed to several factors, including the rapid rise in interest rates, insufficient funding for prospective homeowners and overall economic conditions in Namibia.