A report filed with the High Court on Tuesday has revealed that more than 170 000 Public Officer Pensioners whose pension entitlements are being managed by Capital Management Botswana (CMB) may have lost P230 million of their pension money.
This is contained in an interim report compiled Statutory Manager, Peter Collins. The former judge was appointed by the Non Bank Financial Institutions Regulatory Authority (NBFIRA) as a Statutory Manager to CMB.
CMB opposes the appointment of Collins as the Statutory Manager to the company and has denied him access to the company’s records. Despite this, Collins said he received good cooperation from third parties connected to CMB who assisted him in compiling the report.
“Nevertheless, at this early stage and even without access to CMB’s books and records which I desperately need, I habour grave concern based upon the qualified audit of Bona Life Limited (Pty) Ltd (BLIL) for the March 2017 year end. According to Collins, “the auditors were unable to verify the carrying value of investments said to amount to P230 million comprising unlisted equity investments and unlisted investments in corporate bonds.”
CMB is also a fund manager and General Partner (GP) in the private equity company called Botswana Opportunity Partnership which has, until recently also listed the Botswana Public Officers Pension Fund (BPOPF) as its Limited Partner (LP).
The two companies have over the years been made to share a dinner table through a private equity company known as Botswana Opportunity Partnership (BOP) which is owned by CMB. BOP in turn has shareholding in Bona Life which is an insurance life company. BLIL’s policy holders are predominantly members of the BPOPF.
Collins said he was informed by BLIL CEO that CM B, through its subsidiary Capital Management Botswana 1 (Pty) Ltd (CMBF1) is holding investment assets to its order as its earmarked asset manager.
“My understanding of this explanation is that CMB is BLIL’s asset manager for the purposes of identifying and acquiring suitable investment assets to cover the insurance contract liabilities (overwhelming the annuity portfolio) and that CMB’s wholly owned subsidiary, CMBF 1 is then to hold these assets as a segregated SPV (special purpose vehicle), to the exclusive order of Bona Life. An SPV is a subsidiary company with an asset/liability structure and legal status that makes its obligations secure even if the parent company goes bankrupt.
Collins said he has misgivings about this arrangement for the following reasons;
CMB is an equity stakeholder in BLIL through its 25 percent shareholding in the latter’s parent, Foudello (Pty) Ltd, CMB is General Partner in BOP which has a 40 percent shareholding in Foudelo.
The former judge also expressed concern that CMB is delegated manager of BOP in terms of management service dated 3 November 2014 and that CMF1 has appointed its parent, CMB, to manage assets it acquires in terms of an agreement signed sometime in 2017 signed by each of CMB’s directors-one for CMB and for MBF-and there is no mention it at all about CMBF1 being a vehicle assets of BLIL.
“It follows that CMBF1 must be a vehicle for assets purchased by CMB generally. CMB is at one an owner and manager of investment assets which in the case of BLIL should, I believe, be brought to book on BLIL’s Balance Sheet in order to cover the latter’s annuity portfolio liability,” said Collins.
Instead, he said, CMB appears to be acquiring investment assets in their own names making use of either drawdown from the BOP Fund or perhaps from the annuity portfolio cash reserves of BLIL.
“The CEO of BLIL has pointed to the acquisition by CMBF1 of the entire shareholding of the Storage Solutions land and business (through the acquisition of share in two companies called Wood world (Pty) Ltd and Mr. Car Wash (Pty) Ltd ) for a price of P54 million, representing fair value ,” he said.. Collins added that “if CMBF1 is holding such a fiduciary asset of this nature for BLIL, while the former escapes the responsibility of being regulated as a ‘security business’ under the provisions of the Act, BLIL is perilously exposed.”
Although these agreements are indeed in the name of CMBF1, the resolution authorizing the transaction is by CMB which raises the question as to whether CMBF1 was acting as agent of CMB.
“The CEO also points to Lot 226 Gaborone as one of its investment assets under management by CMB. This acquisition was of the actual asset rather that the shareholding in the assets and it registered in the name of CMB, not CMBF1. Why CMB is holding a physical asset contrary to its agreement with CMBF1 I’m unable to say. Absent any specific agreement between BLIL and CMB/CMBF1 for management and custodial services in respect of BLIL’s own investment assets, BLIL’s exposure here is manifest.”
He added that “the CEO then points to a residential property development in Ballito Durban RSA, apparently called “Manor Squad” which has been represented to her by the previous managers and directors of CMB/CNBF1 as an investment assets of BLIL.
Collins said a value of P66 million has been mentioned but neither the CEO of BLIL nor has he seen any evidence of this.
“This whole situation is fraught with potential danger for the annuity policy holders of BLIL who I understand are predominantly members of the BPOPF. Their investment in these annuities is, it appears at risk,” he said.
According to Collins “The matter is crying out for urgent forensic investigation which am unable to undertake for so long as I’m prevented by the previous directors and managers from having access to records, documents, communications bank accounts \, financials etc of CMB and related parties.”
He added that “I urge you and your lawyers to demonstrate to the High Court that this debacle is not about the interests of those managing and owning the many millions involved but about interests of ordinary civil servants, whose honestly earned Pula, invested in annuity policies for their future well being, is possibly being imperiled by intermediaries in the investment management cycle.”
According to the report, on 31 March 2016, CMB submitted a drawdown notice to BPOPF requesting P150 million to invest in Wilderness Holdings, a dual listed BSE/JSE counter.
“Having discovered that these shares remained on the register in the name of “Stanbic Nominees Botswana re CMB BOP” I naturally perceived a danger that they may be traded. All necessary steps were taken to ensure that no trading could take place.
He said he engaged the services of Transition Management Service to assist him with not only the lockdown of these shares but also to track historical movement of them on both JSE and BSE including divided declaration, withholding tax issues.
The report further shows that on 13 June 216, CMB sent a drawdown notice to BPOPF advising the latter that the funds-P150 million “are to be used to acquires the operations of Shereto Investments (sic) with is the 100percent owner of Kawena SA, which in turn holds 100percent of Kwena Services (Pty) Ltd.
“In the absence of any court-backed enforceable power allowing me or other enforcement officers, free rein to follow the trail of money allocated to this investment proposition, I take the pessimistic view that this sum of P150 million is most likely unrecorded on the balance sheets (or bank statements) of BOP, CMB, CMBF1 or elsewhere. I suspect it has found itself into South Africa (perhaps also Mozambique) through various unauthorized transactions. I will be delighted to be proved wrong.
“For the purpose of this interim report I fear that the value of BOP’s investment in Kawena maybe zero,” said Collins.
He said no drawdown notice for Mukuba Airlines Ltd was presented to BPOPF for this intended investment assets in Zambia.
“I’m informed, but without access to CMB records I’m unable to verify, that P568 000.00 expended came from the Drawdown of the P150 million for Kawena Holdings,” he said.
On 22 June 2016, CMB sent a drawdown notice to BPOPF advising the latter that the funds ÔÇôP50 million “are to be used to underwrite the establishment of African Graduate Institute of Leadership and Enterprise (AGILE) with a view of acquiring 75 percent of AGILE.”
Collins said those who were present at this investment committee were Rasoava Rijamampianina, Martin Makgatlhe, Tim Marsland and Rapula Okaile.
On 22 June 2016 CMB sent a drawdown notice to BPOPF advising the latter that the funds-P50 million “are to be used to acquire 50percent of Cell City (Pty) Ltd.
The motivation for this investment was made to the same BOP Investment Committee that negotiated AGILE deal.
He concluded that “As will be seen, with the exception of Wilderness Holdings Ltd and Goldwing Pty ltd/Cell City, I’m pessimistic about any recovery at all in respect of all the other investments assets. Excluding Foudellio (Pty) Ltd, I’m not even confident that the other investments were actually made or that they were genuine investable assets in the first place.”
He added that “BOP portfolio, managed by CMB, is only capable of revealing assets less than P200 million at this time. I believe it is common cause that some P480 million was drawn down by CMB from BPOPF to the credit of BOP during 2015 and 2016. I am unable to identify the shortfall.”
